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[2012] NSWDC 73
District Court of NSW
2012-04-19
Original judgment source is linked above.
A. Introduction 1The plaintiff, Mr Peter Everett, a solicitor, commenced proceedings in 2011, claiming that in 1994 he paid $100,000 to his then client, Mr James Neale, the defendant, in respect of a debt incurred in 1987. The plaintiff asserts that he made the 1994 payment in the mistaken belief that the debt was still outstanding. He alleges that he had earlier repaid the debt in 1989, but that he had forgotten about that payment. 2The defendant has filed a defence. He alleges that the debt had not been repaid but remained outstanding prior to the payment in 1994, that the claim is statute-barred, that the plaintiff in 1994 owed the defendant further monies in excess of the amount repaid in 1994, and that a deed of release signed by the parties in 2009 precludes the plaintiff's claim. 3The defendant has filed a notice of motion seeking: "1. That the Plaintiff's claim be dismissed pursuant to UCPR ["Uniform Civil Procedure Rules 2005"] 13.4 (1) (b). 2. That Dibbs Barker disqualify themselves from acting for the Plaintiff. 3. Indemnity costs and interest in favour of the Defendant." The notice of motion is the subject of this judgment.
B. Background 4Both parties gave evidence by way of affidavit and a bundle of documents referred to in one of the affidavits was also tendered, all largely without objection. The following history appears from this evidence. 5The plaintiff and the defendant were once close friends. They met in 1959 whilst working for Dibbs Crowther Osborne, a law firm now known as DibbsBarker ("DibbsBarker"). The plaintiff was a solicitor at DibbsBarker and acted for the defendant from 1962 until at least 2001 and perhaps until 2008. 6According to a deed executed by the plaintiff, the defendant and others in 2009, the defendant and his company acquired property in Avon Road, Pymble in about 1979. 7The deed records at recital E: On or about the 25th October 1983 Enterprise [Deveraux Pty Limited, a company associated with the plaintiff, hereafter called "Enterprise"] and a company of which Everett is a director and shareholder borrowed $100,000 from Neale and/or Ms Carol Neale [the defendant's wife] to invest $100,000 in the Avon Road project and Everett guaranteed this loan". 8This recital largely reflects the contents of a letter on Enterprise letterhead dated October 25th, 1983 handwritten by the plaintiff to the defendant. The terms of the letter are as follows: Dear Jim, This is to confirm that as from 1st September this company has borrowed $100,000.00 from Carol J Neale at Bank Bill rate plus costs expenses stamps etc. The moneys will be invested as referred to hereunder but subject to those arrangements will be repayable on demand. As discussed I will make arrangements to service interest ASAP but on current projections this will not be before May 1984. You will arrange to roll bills at best rates and terms and advise me. The funds are to be invested in the Avon Rd property on terms identical to those entered into with Donna Aldridge recently except that the $100,000 shall represent 5.5% of the site. For purpose of determination of profit interest will be deemed to have run since 1 July 1983. Naturally I personally guarantee the Company's obligations under this arrangement. Thanks for the opportunity to participate. Yours truly, Peter Everett 9In an affidavit read on the application the defendant asserted that only a "small fraction" of the interest on that loan was paid. 10The defendant also tendered without objection an account in respect of this loan, which indicated that as at November 1987 an amount of approximately $83,000 interest remained outstanding, one payment of $5,750 having been made in about January 1986. No dispute to this material was raised by the plaintiff in his subsequent affidavit read on the application, and Mr Colquhoun of counsel, appearing for the plaintiff, did not contest that a significant amount of interest remained unpaid in the years following the loan. A letter from the plaintiff dated 15 November 1989 as set out below conceded that the plaintiff "did not service adequately" this loan. 11In 1987 a further amount of $40,000 was borrowed by the plaintiff from the defendant. The defendant recorded this loan in his accounts as a further drawdown on the existing loan balance. The evidence before the Court included five letters from the plaintiff confirming this debt, two in 1988, one in 1989 and two in about early 1992. 12The first 1988 letter was dated 27 June 1988 and stated: James, Apologies for delay - this is to confirm $40,000.00 which I borrowed from Neale associated entities as at 1st November repayable on demand at interest you see as appropriate. Regards & thanks, Peter Everett [underlining in original] 13On 6 December 1988 the plaintiff again wrote to the defendant as follows: Dear Jim, The dates we were talking about. We agreed on $100,000 at 1 September 1983 on the same terms as Donna Aldridge. On two separate cash transactions on 28 June 1984 and 2 July 1984, I paid $11,000. I in fact drew more but my recollection is that I kept the balance over $11,000 on my cash cheques for other purposes. 9 December 1984 I drew a cheque to you for $7,500. If I recall our discussions, that covered payment of interest to 31 December 1984. On 15 December 1987 I drew $40,000 from your account by arrangement by way of advance. Could you please put the numbers through in accordance with my letter of 21 October and let me get at least that bit of my affairs straightened out. 14This letter indicates that the $40,000 was a further advance on the earlier loan. 15In 1989 DibbsBarker sought from the defendant payment of some legal fees. The "trust statement" in evidence shows that a bank cheque for $46,000 was paid on 15 November 1989 into the DibbsBarker trust account. It was that same day transferred out of the trust account into the firm account in two tranches: the first to pay an account dated 15 August 1989 and the second to pay part of the costs and disbursements from accounts outstanding at 15 August 1989. It is common ground that the plaintiff or his associated entities made this payment. 16That same day, 15 November 1989, the plaintiff sent a letter to the defendant, in the following terms: In October 1983, I took up an interest in Avon Road which, because of intervening circumstances, I did not service adequately although various payments were made on account of interest. In November 1987, you were good enough to advance me $40,000 to cover some problems and in September 1988, I asked if you could set one off against the other and let me know how the balances came up so that I could settle it completely. I have given you all the information I have in my cashbooks regarding payments and we discussed the matter on several occasions. Last week, you suggested that accounts outstanding to Dibbs Crowther & Osborne should be paid out of the money I owed you, and I must confess I was surprised as I had considered (on the basis of your rough calculations on the back of a ticket at lunch) that the two balances between you and I were fairly close to cancelling out each other and on my part I expected that there might be a few thousand dollars either way to be settled to finalise the whole thing. However, as a friend who you have helped in many different ways over 30 years, I welcomed the opportunity to return the compliment and, having regard to your current cash bind, I have drawn $46,000 which has been paid in to your account with the firm in respect of fees rendered for the period to July 1989. However, you will appreciate that, having regard to my blood pressure and other associated ills, fund on deposit are something of a security blanket for me and I would like to get the matters canvassed in my letter of 12 September 1988 finally resolved before too long. I know you have a lot on your plate but you are not Robinson Crusoe in that regard. I have advised my partners that after the account was sent in August 19 89 you indicated to me in September that I had authority to draw on your "call funds" but with the pressure of work and other problems I overlooked this until the matter was (somewhat improperly bluntly) raised by the recent correspondence to you from the firm. 17The plaintiff submitted that the reference in the second paragraph to a request in September 1988 to "set one off against the other" was a request to set off the 1989 payment of $46,000 against the 1987 loan of $40,000 plus interest. However, that interpretation cannot be correct as the $46,000 payment was not made in "September 1988". Plainly enough the request is to set off the value of the plaintiff's interest in the Avon Road project (net of loan, capital and interest) against the loan of $40,000 plus interest made by the defendant in 1987. Although the defendant did not agree to credit the plaintiff's value in the Avon Road project, he did treat all the transactions as one borrowing and kept an updated balance according to the account referred to above. 18A month later in December 1989 the plaintiff wrote to the defendant about the procedure to redeem the "investment in Avon Road" of a third person. The plaintiff also wrote "I'll also need to get my funds back", which appears to relate to his investment in Avon Road. 19In his affidavit read on the application the plaintiff referred to a letter confirming the advance in 1987 of $40,000 and its purposes. That letter is an undated fax and reads as follows: Dear Jim Re: Loan This will confirm my debt to you in an amount of $40 000.00 with interest at market rates presently accumulated from Dec '87. I will make arrangements for this ASAP to clear hopefully by 30/6/92. Regards Peter 20It is apparent from the contents of this facsimile and the composition of the DibbsBarker firm shown at the foot of the document (when compared with the 1990 documents in the evidence) that the fax was sent after 1990, and probably early in 1992. Mr Colquhoun, for the plaintiff, accepted that this was a reasonable inference. 21Perhaps at about the same time, but in any event on 2 March 1992, the plaintiff sent another letter to the defendant. Again the plaintiff referred to his request to set off his "interest in the Avon Road project less serviced interest against the $40,000" that had been borrowed "in December 1987". The relevant parts of the letter are as follows: Dear Jim, ... I did not attend to repaying money I owed you in a timely fashion simply because I did not think I owed you any money; or, if so, that it was of such small amount that you could hardly spare the time to calculate it. It was not until your extraordinary outburst that I appreciated for the first time that you rejected the concept of my "cashing in" my interest in the Avon Road project less unserviced interest against the $40,000 I had borrowed from you in December 1987. Your view, I believe, is that unless I am prepared to bring all interest on the original $100,000 (?) purchase price for 5.5% of the original Avon Road up to date, and pay you the $40,000 plus interest, then we ignore the original Avon Road transaction in 1983 and settle accounts between us as if Avon Road and any capital gain therein had never existed. Not a particularly sound legal proposition but eminently understandable to one who knows you as well as I do. I have had Tom Dock do the calculations. The payments I had made ($11,00 and $7,500) accumulated interest up to the date of drawing the $40,000 in December 1987. I have set one off against the other and accumulated interest on the balance from that date and it appears that I now owe you $20,000 approximately, as per Tom's figures, enclosed. ... Yours truly, Dictated by Mr Everett; sent at his request in his absence. 22The letter prompted a near immediate but lengthy response from the defendant. A letter four days later from the defendant to the plaintiff included the following paragraphs: ... You know how I hate writing things down when a phone call will do but I have no option. I will take your letter of 2/3/92 para by para. ... My position is much worse than yours was when you expected me to believe you needed money and borrowed $40,000 from me unsecured and "repayable on demand". You also had $millions in assets and a massive income (mine is negative). Although I have already demanded repayment verbally which should be sufficient between friends, I now demand repayment formally in case I have failed to comply with a legal technicality... ... I believed you when, at the same time as you were charging me $200 odd per hour for dozens of matters concurrently, you said you needed to borrow $40,000 urgently to pay bills. You gave no serious reason for not approaching the Bank. I recall saying I would do it and then refraining from a protest when you simply removed the money from my account. That $40,000 does not relate, and never has related to anything else - and if you had suggested at the outset that it did you would not have got the money. I have always totally rejected the proposal that I buy you out and allow you to realise your capital gain ahead of myself and every other investor while I pay the income tax on the interest which you haven't paid, and for which you get a deduction. Further I wind up with an asset, previously a non capital gain asset, back in my ownership stripped of this desirable status. While I don't want to escalate this any more than necessary, I have said so every time the matter has been raised, and given compelling reasons with which you did not disagree. ... ...If I thought you borrowed the $40,000 from me with the intention of withholding repayment of it until I agreed to offset it as above against Avon Rd, I would happily sell the family home and devote the rest of my days to pursuing the matter through the courts. I have suffered real stress, for the first time in my life I think, and financial loss from this. I need your reassurance, it makes me sick. Although I had no obligation to do so under the agreement you yourself drew, I did, as a friend and on no commercial basis, suggest that if you really couldn't pay the interest, it might be possible to forget that the investment had been made and treat the interest you paid as a loan to me; on the same basis as the loans I have made regularly to you and your friends. You have never proceeded with that. To do so you would have needed to give up your rights under the written agreement. Given my willingness to ensure that you couldn't lose, you actually had a free option - if Avon Rd bombed out you could rely on my assurance, whereas if Mr. Webster lets us build 200 units on it, as he well may, you could rely on your document. I would feel better if you assured me that you didn't plan it. When we were last at lunch, you agreed with me that it would be crazy to give up your position of very substantial capital gain and your tax deductions. You confirmed your previously foreshadowed intention to proceed and said you would get Tom Dock to work out the interest owing to me and that you would pay the interest soon and leave the capital unreduced. You said the payment would mean you couldn't invest in the other projects we discussed. Your suggestion that the interest on compounded at the rates I pay for 9 years might come to $120,000 (instead of $300,000) upset me and coloured my later reactions. I am always amazed at the fact that your terrible maths always err in your favour. I accepted this idea and have always accepted the tax liability - I did expect to be able to use the money on which I would have to pay tax - and there is a huge difference between my buying from you and a third party doing so. I have found such a third party if you want to sell out - the situation now is urgent - he has waited a long time for you to return my calls. ... 23In 1993 the defendant provided to the plaintiff a calculation of the outstanding amount payable on the 1987 loan of $40,000. It totalled $105,477.40 as at July 1993. 24In about June 1994 the plaintiff paid the sum of $95,000 (according to the defendant's accounts) or "approximately $100,000" according to the plaintiff's recent affidavit, in repayment (of the whole or part) of this debt. At that stage the $40,000 loan plus interest calculation had reached almost $116,000. The defendant credited $95,000 to the loan account. The plaintiff alleges in the statement of claim that these amounts were paid from the account of Enterprise and paid at the direction of the defendant to Carol Joan Neale, the defendant and to McCaughan Futures, a company presumably connected to the defendant. 25The evidence does not disclose any further matter of significance until 2005. On 1 June 2005 the plaintiff wrote to the defendant, which omitting the irrelevant first and last paragraphs, reads as follows: ... In 1987 you advanced me $40,000 to cover some rather pressing problems which, I think, had to do with Anthony's health, etc. In 1988I [sic] asked you if we could settle up Avon Road, set one off against the other and call it quits, but you refused. In 1989 Geoff Sutherland wrote and told you that if you did not pay the costs and disbursements owing to the firm, he would sue you. You said I owed you money personally, so why did the firm chase you for costs you owed. By arrangement with my partners, I then paid $46,002.89 to the firm which was credited against your outstanding fees account. I enclose a copy of my letter to you of 15 November 1989. I have checked and the accounting records show that this sum was paid by me to DCO on your behalf. Five years later you dunned me for payment of the $40,000. Although I had a feeling I had attended to it, I could not find the evidence because, of course, I was looking for a cheque payable to you rather than a cheque payable to DCO. To give you the benefit of the doubt (although I do not know why), you would have had no record of receiving a cheque from me, simply a receipt from DCO for the $46,002.89 worth of accounts I had paid for you. Nonetheless, you proceeded again to mix up personal affairs with DCO matters, and you approached Jan Osborne and Geoff Sutherland to tell them I owed you a considerable sum of money and refused to pay it. This whole nasty business culminated in my borrowing at bank overdraft rates enough money to pay you $97,091, being a figure calculated by Tom Dock as having accrued since the original advance in November 1987. You will recall Tom making the calculation, my being appalled by the amount and you saying it should have been more. In May and June, 1994, this amount was paid by various cheques at your direction to JWN, CJN & JWN and to McCaughan Futures. The total in fact was $99,400 (the extra being interest which you accrued from the time of Tom's original calculation to the time of payment.) This was obviously a gross error. You had already had your loan repaid in 1989. Therefore, you owe me $94,000 plus interest from July 1994 to date at bank rate of interest - and I rather think you are better qualified than I to calculate the amount involved. ... 26The following year on 23 October 2006, the defendant commenced proceedings in the Supreme Court against the plaintiff, DibbsBarker and Enterprise seeking, amongst other things, $653,359 for interest payable upon the 1983 loan for $100,000 guaranteed by the plaintiff. The claim refers to a 2001 deed and a release which were not in evidence. 27Almost two years passed. On 13 March 2008, whilst the 2006 proceedings remained on foot, the plaintiff sent the defendant an email repeating the claim that the 1994 payment was made by the plaintiff because he "could not trace the earlier payment" as he had "forgotten" that it was paid to DibbsBarker: ... - In November 1987 you lent me $40K to sort out a problem of Anthony's motor accident when insurance was refused. In September 1988 I asked you to wind up any interest I might have in Avon Rd. and net everything out; you refused. At lunch in November '89 you pointed out that you were being dunned for costs owing to DC&O. by GHS. and that, with interest added, my debt to you was $46K which was just about the amount of the costs outstanding. You asked me to pay what I owed you, to DC&O. to clear the account and we would speak about Avon Rd. later. I transferred $46K. to your account with the firm, clearing your indebtedness up to the end of July that year, advised you by letter 15/11/89 and asked if we could sort out Avon Rd. You declined. In early 1994 you asked me to repay the $40K. and I could not trace the earlier payment as I had forgotten that I paid it to DC&O not direct to you. I said it was a perfect opportunity to clear everything up in one hit but you insisted that you would not consider any netting off and you wanted your debt with interest. You then spoke with Ian Osborne and Geoff Sutherland saying that I was refusing to repay to a client of the firm a just debt and that you would take it as far as necessary; I was prevailed upon to have Tom Dock make the interest calcs. which he cleared with you, compounding interest at Bank rate on $40K from the original date of November 1987. The amount came to @$97K, which I borrowed at bank rates, and disbursed in accordance with your directions in May/June 1994 to McCaughan futures, yourself and your joint acc. with Carol adding up in all to $99400.(the extra being% you accrued on and from Tom's calcs.) The $40K debt was obviously paid twice and each time with a slug of interest at commercial rates; I have all the Bank Statements and my cash Book entries which evidence these facts, copies of Tom's calcs and my correspondence with you. The facts are incontrovertible: -I have paid you $99400. in error and I request that it be repaid to me with interest which should represent a figure in excess of $200,000 now due and owing. I do not want any commission if we proceed to obtain your finance, the firm does not want to represent you in anything other than this transaction and I only want what I am owed paid out of the proceeds. ... 28On 13 July 2009 the parties to the Supreme Court proceedings signed a deed of release. The final recital reads as follows: J. Without admission of liability the parties have agreed to settle their differences and all claims on the terms set out in this deed". Recital D reads: D. Neale has informed Everett, DCO and the subsequent firms by this Deed that Mrs. Carole Neale transferred the whole of her benefit or interest in the Avon Road project and the causes of action in the proceedings, if any, to him on or about 13th June, 2007. 29Amongst the releases in the deed is clause 4, which provided a release by the plaintiff: 4. Everett releases and forever discharges Neale and JW Neale from all Claims he may now have or at any time may have had, or which, but for the execution of this deed, he might have had in connection with or incidental to the provision of Legal Services, the Loan, the Avon Road project, the Proceedings and the recitals to this Deed. 30Other relevant provisions of the deed are as follows: Covenant not to sue 7. The parties covenant not to sue in any jurisdiction any other person, entity or corporation not a party to this deed in respect of any Claims which they have or may have in connection with or incidental to the provision of Legal Services, the Loan, the Avon Road project or the Proceedings. Dismissal of proceedings 8. The parties agree to the dismissal of the Proceedings with an order that each party bear their own costs in accordance with the Short minutes of order attached. Definitions 9. In this deed: 9.1 Claim means any past, present or future action, arbitration, award, cause of action, claim, damages, declaration, cross claim, demand, judgment, proceedings, litigation, loss, suit, third party proceedings or verdict whatsoever at law or In equity or pursuant to the provisions of statute Including any legal costs or associated expense; 9.2 Loan means the loan made on about the 1 September 1983 and confirmed by letter Of the 25th October 1983; 9.3 Avon Road project means the property particularised at paragraph 3,2 and as otherwise described In the Statement of claim In the proceedings. 9.4 Legal Services means actual or alleged legal services provided by DCO and the subsequent firms to Neale, JW Neale and Mrs. Carol Neale In connection with investors in the Avon Road project, borrowings an the Avon Road project and in particular the ANZ Bank and the affairs of Neale and JW Neale In any other matters; 9.5 Proceedings means the Supreme Court of NSW proceedings commenced by Neale given court file number 20420 of 2006, Miscellaneous Bar to proceedings 10. A party may plead this Deed, as a complete bar to any Claim in connection with any of the matters in this Deed commenced or continued by or on behalf of another party,
C. Pleadings and affidavits 31On 30 May 2011 the plaintiff commenced proceedings to recover the 1994 payment plus interest. The terms of the statement of claim are as follows:
D. UCPR 13.4 41UCPR 13.4 is as follows: 13.4 Frivolous and vexatious proceedings ... (1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings: (a) the proceedings are frivolous or vexatious, or (b) no reasonable cause of action is disclosed, or (c) the proceedings are an abuse of the process of the court, the court may order that the proceedings be dismissed generally or in relation to that claim. (2) The court may receive evidence on the hearing of an application for an order under subrule (1). 42The circumstances for the application of an order under rule 13.4 have been considered on many occasions. The most quoted decision in the area is General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 where Barwick CJ held that a lack of a cause of action needed to be clearly demonstrated. In that case the Chief Justice was specifically dealing with paragraphs (a) and (c), but the principles stated have commonly been applied to UCPR 13.4(1)(b) also. In General Steel, the Chief Justice countenanced the possibility of extensive argument to demonstrate whether the plaintiff's case is sufficiently untenable. 43Assistance may also be derived from the judgment of Dixon J, as he then was, in Cox v Journeaux (No 2) (1935) 52 CLR 713, who decided in an application under the equivalent provision to UCPR 13.4(1)(b) that the Court: "...may consider the undisputed facts. Further, it is not limited to cases where there is no dispute of fact." 44In the present matter, evidence has been received on the factual matters in accordance with subrule 13.4(2). 45Section 56 of the Civil Procedure Act 2005 ("CPA") may also have some application. It provides: 56 Overriding purpose ... (1) The overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. ... 46These provisions raise the question of whether the discretion in rule 13.4(1), or the proper interpretation of rule 13.4(1)(b), is affected by the overriding purpose of facilitating the just, cheap and quick resolution of the real issues in the dispute. 47In State of NSW v Mulcahy [2006] NSWCA 303, a case referred to with apparent approval by the High Court of Australia in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27 at [91], the Court of Appeal determined that section 64 of the CPA now controlled the power of amendment. The Court also referred to sections 56 to 58 of the CPA, and concluded at [29]: 29 When regard is paid to all these provisions of the Civil Procedure Act the relative importance of changes in the way the action was conducted at earlier stages ...is significantly altered. 48Mulcahy differs from the present case in that it was a case involving a proposed amendment. In Shaw v State of New South Wales [2012] NSWCA 102 the Court of Appeal considered whether the General Steel test required revision or reappraisal in the light of sections 56 and 58 of the CPA. That question was not ultimately decided by the Court, which found in that case that: "134...it is not shown that the Civil Procedure Act provisions warrant any result different from that indicated by the General Steel test." 49In Spencer v The Commonwealth [2010] HCA 28 the High Court, speaking of a related but differently worded provision under the Federal Court Rules granting to the Court a power of dismissal if the proceedings had "no reasonable prospect", stated in a judgment of Hayne, Crennan, Kiefel and Bell JJ that the provision: 53 ...departs radically from the basis upon which earlier forms of provision permitting the entry of summary judgment have been understood and administered. Those earlier provisions were understood as requiring formation of a certain and concluded determination that a proceeding would necessarily fail. That this was the basis of earlier decisions may be illustrated by reference to two decisions of this Court often cited in connection with questions of summary judgment: Dey v Victorian Railways Commissioners and General Steel Industries Inc v Commissioner for Railways (NSW). 54 In Dey, the defendants moved for summary judgment on the grounds that the action was frivolous, vexatious and an abuse of process. In a passage often later cited, Dixon J said that "[a] case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury". What Dixon J meant by "very clear" was identified by his observation that "once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process". And there would be a "real question" unless the defendant could "show that it was so certain that [the question] must be answered in the [defendant's] favour that it would amount to an abuse of the process of the court to allow the action to go forward for determination according to the appointed modes of procedure". The test identified by Dixon J in Dey can thus be seen to be a test requiring certain demonstration of the outcome of the litigation, not an assessment of the prospect of its success. 55 In General Steel Industries, Barwick CJ pointed out that previous decisions about summary termination of actions on the motion of a defendant had been given in cases in which the so-called "inherent" jurisdiction of a court to protect itself and its processes from abuse had been invoked, and in cases where the defendant had relied upon a particular rule of court permitting the court to strike out pleadings or dismiss an action on it being shown that a pleading "does not disclose a reasonable cause of action" or the action "being shown by the pleadings to be frivolous or vexatious". The material available to the court might differ, depending upon which power was invoked, but all the cases emphasised the need for "exceptional caution" in exercising a power to dismiss an action summarily. As Barwick CJ also pointed out in General Steel Industries, the test to be applied was expressed in many different ways, but in the end amounted to different ways of saying "that the case of the plaintiff is so clearly untenable that it cannot possibly succeed". As that formulation shows, the test to be applied was one of demonstrated certainty of outcome. 56 Because s 31A(3) provides that certainty of failure ("hopeless" or "bound to fail") need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different enquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression "no reasonable prospect of successfully prosecuting the proceeding" by reference to what is said in those earlier cases. 57 Likewise, it is dangerous to apply directly what has been said in the United Kingdom about the application of a test of "no real prospect" or what has been said in United States decisions about summary judgment. The United Kingdom cases are directed to a different test. The controversies in the United States about what is sufficient to resist a motion for summary judgment, reflected in the recent decisions of the Supreme Court of the United States in Ashcroft v Iqbal and Bell Atlantic Corp v Twombly and in that Court's earlier decision in Conley v Gibson, turn upon the requirements of the Federal Rules of Civil Procedure applied to a system of "notice" pleading. The notion of what is not a "plausible" claim, discussed in Iqbal and Twombly, may in some cases overlap, but does not coincide, with the notion of "no reasonable prospect". 58 How then should the expression "no reasonable prospect" be understood? No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is "no reasonable prospect". The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like "no reasonable prospect" is to be avoided. Consideration of the difficulties that bedevilled the proviso to common form criminal appeal statutes, as a result of judicial glossing of the relevant statutory expression, provides the clearest example of the dangers that attend any such attempt. 59 In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like "clearly", "manifestly" or "obviously") as "frivolous", "untenable", "groundless" or "faulty". But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word "reasonable", in the phrase "no reasonable prospect", be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a "frivolous", "untenable", "groundless" or "faulty" claim. 60 Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is "no reasonable prospect" of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to "no reasonable prospect" can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase "just and equitable" when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes. [emphasis added in Spencer] 50The relevant power relied on in the present case involves an assessment of whether the cause of action is "reasonable", a different test from whether the cause of action "has reasonable prospects of success". Yet as is recorded by the author of Ritchie's Civil Procedure Rules at [13.4.15], when commenting on rule 13.4(1)(b) and referring to Spencer: " ...it is at least arguable that the criterion of reasonableness introduces a permissive qualification that is not found in the terms of the summary judgment [Rule 13.1] power". 51It appears to me that the requirement in section 56(2) of the CPA that the Court must seek to give effect to facilitating just, quick and cheap resolution of proceedings when exercising any power under the Rules and when interpreting any provision of the rule, must apply to the power given to the Court under rule 13.4(1)(b) and to the construction of that rule (see also the decision of the England and Wales Court of Appeal: Jameel (Yousef) v Dow Jones & Co Inc [2005] EWCA Civ 75 at [57] to [58]). Further, rather than the "judicial glossing" condemned by Spencer at [58] the Court should attempt to determine whether the cause of action disclosed by the plaintiff is reasonable, whilst noting that "the power to dismiss an action summarily is not to be exercised lightly" (Spencer at [60]). 52It should be noted that the plaintiff claims the specific sum of $100,000 mistakenly paid plus interest, and does not claim damages. This feature of the proceedings explains the absence of any certification by the plaintiff's solicitor that the claim has reasonable prospects of success and takes the proceedings outside the requirements of sections 345, 347(2) and 348 of the Legal Profession Act 2005 which deal with the need for claims for damages to have reasonable prospects of success. I assume without deciding that section 347(1) of the Act, although it makes no specific reference to damages, or even a claim, would properly be construed as applying only to claims for damages.
E. The issues 53I have identified earlier in these reasons the four bases advanced by the defendant as to why the plaintiff's proceedings must fail. 54These bases are independent, in that each alone, if established, is sufficient to empower the Court to dismiss the claim. Accordingly, each basis warrants separate consideration.
(a) $40,000 loan not repaid in 1989 55This assertion in the defence is the foundation of the uncontroversial proposition that if the loan was not repaid by the 1989 payment, but remained unpaid, then there could be no subsequent "mistake" in repaying it. 56The plaintiff's correspondence with the defendant dated 27 June 1988, 6 December 1988, 15 November 1989, March 1992 and the undated confirmation of the debt presumably in early 1992 all confirm that throughout this period the debt remained owing, and had not been repaid. 57Of particular significance is: (i)the plaintiff's letter of 15 November 1989 - the precise date of the $46,000 payment - which does not assert that the $46,000 payment was a repayment of the $40,000 loan; (ii)the facsimile presumably in the 1992 financial year confirming the debt was outstanding in 1992; and (iii)the 2 March 1992 letter that confirms that the $40,000 debt remained outstanding. 58The effect of this correspondence is that the plaintiff has continued to assert, on three separate occasions at and after the 1989 payment of $46,000, that the 1987 loan for $40,000 remains unpaid. The plaintiff does not dispute this correspondence; indeed, two of the three items of correspondence were annexed to the plaintiff's affidavit. 59The plaintiff's claim depends upon the 1987 loan for $40,000 being repaid in 1989. Thus each of these three letters from the plaintiff confirming the existence of the loan at or after this date must also manifest a similar mistake. Yet the plaintiff does not allege that he was mistaken in 1989 when the $46,000 payment was made, nor does he allege that he was mistaken in 1992. The allegation was that he was mistaken "in May and June 1994". 60The specific nature of the mistake is relevant. The plaintiff has sworn an affidavit dated 29 February 2012 deposing to having reviewed some old paperwork on 1 June 2005 and thereupon becoming "aware of the mistaken payment" [i.e. the 1994 payment]. Similarly, the statement of claim asserts that the plaintiff on 1 June 2005 became aware of the mistaken payment (the 1994 payment) and sought prompt repayment. 61This evidence can be contrasted with the allegation in the statement of claim that on 1 June 2005 the plaintiff became aware of the "mistake" in June 1994, namely that he had believed, at the time of the mistaken payment, that the $40,000 loan plus interest remained owing. The plaintiff also deposed to not recalling in 1994 having made the 1989 payment in satisfaction of the loan. 62A third possibility is that the mistake is about the location of the evidence proving the 1989 payment. 63In his 2005 letter, the plaintiff described the "mistake" in these terms: "Although I had a feeling I had attended to it, I could not find the evidence because, of course, I was looking for a cheque payable to you rather than a cheque payable to [DibbsBarker]". And in 2008 the plaintiff wrote: "...I could not trace the earlier payment as I had forgotten that I paid it to [DibbsBarker] not direct to you..." 64In these circumstances, there remains a real question of the precise nature of the mistake, if any, made by the plaintiff. Although the defendant urged me to find that there was no mistake (in the sense that the plaintiff in 1994 had not forgotten about the 1989 payment of $46,000), I am of the view that the mental state of the plaintiff in 1994 cannot be the subject of a finding on this application. 65On an application for summary dismissal it is appropriate that I make assumptions on genuinely contested matters in favour of the plaintiff. Accordingly, although the precise mistake is not clearly revealed either in the statement of claim or in the plaintiff's affidavit, I assume on this application that the mistake made in 1994 was that the plaintiff did not recall making the 1989 payment, and that the plaintiff became aware of this mistake on 1 June 2005. 66However, the evidence before me, unchallenged and authored by the plaintiff, seems overwhelmingly to compel the conclusion that the $40,000 loan remained unpaid until 1994. In that event, whatever may have been the belief of the plaintiff in 1994, the amounts paid in respect of the 1987 loan were properly payable. 67The plaintiff, however, submitted that the plaintiff's claim must be "so clearly untenable that it cannot possibly succeed" and that "fatal defects in the plaintiff's case must be very clear" before it will be summarily dismissed. So much may be accepted. It does not controvert the findings in the previous paragraph. 68The only evidence dealing with the purpose of the 1989 payment for $46,000, apart from the correspondence to which I have referred, is the affidavit evidence of the parties. The defendant's evidence is relevantly consistent with that correspondence. The plaintiff, however, deposes: "14. I was advised by Mr Geoff Sutherland, the managing partner of DibbsBarker at that time that Mr Neale had refused to pay his account because I owed the [1987] loan to him. 15. I agreed to pay Mr Neale's account with DibbsBarker in satisfaction of the [1987] loan. I paid DibbsBarker $46,002.89 on or about 15 November 1989 (1989 payment). 16. I had not discussed a specific rate of interest on the loan with Mr Neale, however I considered approximately $6000 to be reasonable interest". 69The evidence included a schedule of interest rates, admitted without objection, showing that interest rates peaked late 1989 at 22.5%. The interest rate allegedly paid by the plaintiff ($6,000 over 2 years on $40,000), were it to be full payment of interest, equates at 7.5% simple interest. 70Nevertheless, despite its deficiencies the question remains as to whether the plaintiff's evidence, coupled with the assertion in the statement of claim that the 1989 payment of $46,000 to DibbsBaker was "by way of repayment of the [1987] loan", is sufficient to raise a genuine factual dispute such that summary dismissal is inappropriate. 71I do not regard paragraph 14 of the plaintiff's affidavit as being of significance. The reason stated by the defendant to a third party for refusing to pay legal costs is immaterial to the effect of the later payment by the plaintiff to the defendant. 72Paragraph 15 and the assertion in the statement of claim are in a different category. They involve an assertion by the plaintiff that he was intending to repay the 1987 loan by the 1989 payment. They do not evidence any agreement between the plaintiff and the defendant: the assertion in paragraph 15 that "I agreed to pay Mr Neale's account" must be read as an agreement between the plaintiff and Mr Sutherland with whom he was conversing, and a conversation with the defendant about the matter is apparently rejected by the plaintiff in paragraph 16 of his affidavit. 73Further, in circumstances where the defendant is self-represented and has not taken objection to an objectionable paragraph, I do not think I should give the paragraphs a generously wide reading, when the literal words convey something less. 74The allegations in the statement of claim of an "arrangement" must be read against the plaintiff's own affidavit which provides sworn evidence of the content of that arrangement. 75There may also arise a question as to whether any of this material is privileged and whether the failure by a self-represented defendant to take objection to that material may constitute a waiver of privilege. No submissions were put on this issue. I think it best not to express a conclusion about it. 76Accordingly, the outstanding issue is whether: (a)evidence of a belief in the plaintiff some 25 years ago that he was discharging the 1987 loan by the 1989 payment, (b)when that belief is inconsistent with the contemporaneous and relatively contemporaneous documentary evidence created by the plaintiff (including the letters tendered by the plaintiff in this application) is sufficient to establish a genuine factual dispute not merely about the plaintiff's belief, but about whether the 1987 loan was discharged by the 1989 payment. 77In my view, rule 13.4(1)(b) (construed in accordance with the "overriding purpose" pronounced by CPA section 56) does not require this Court to suspend common sense and reason to simply focus on whether as a hypothetical possibility, however extreme, the plaintiff may have an argument. In my view, the plaintiff's case is so weak, and the defendant's case so strong that a trial would be futile. Certainly it is impossible to describe the plaintiff's cause of action, relying upon his recollection of his belief 23 years earlier when that recollection is inconsistent with his own contemporaneous notes, as a "reasonable cause of action". 78Moreover, a belief by the plaintiff as to the purpose of the payment is not sufficient to render the payment to have the quality believed. In the absence of an agreement between the plaintiff and the defendant, the payment of $46,000 would be credited against the oldest debt, namely the outstanding interest on the 1983 loan, which on the evidence had reached approximately $85,000 by the time of the 1987 loan (see Devaynes v Noble (also known as Clayton's case) [1814-23] All ER Rep 1). 79There are three additional issues in relation to this aspect of the defence. 80First, it appears that, as a matter of law, the mistake did not cause the payment. 81According to the plaintiff's affidavit in 1994 the defendant "demanded payment of the [1987] loan" plus interest (at [18]) and that "[a]lthough I had a feeling I had attended to it, I could not find the evidence" (at Annexure "D"). 82The necessary element of causation is absent in circumstances where there is a voluntary payment to settle a dispute. The High Court in David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48 at [33] noted the principle of voluntary submission, referring to the judgment of Latham CJ in Werrin v The Commonwealth [1983] HCA 3, (1938) 59 CLR 150 at 159: "...if a person, instead of contesting a claim, elects to pay money in order to discharge it, he cannot thereafter, because he finds out that he might have successfully contested the claim, recover the money which he so paid merely on the ground that he made a mistake of law." 83In David Securities the judgment of the plurality at [36] records: ". ...The payment is voluntary or there is an election if the plaintiff chooses to make the payment even though he or she ... is not concerned to query whether payment is legally required; he or she is prepared to assume the validity of the obligation, or is prepared to make the payment irrespective of the validity or invalidity of the obligation, rather than contest the claim for payment. We use the term "voluntary" therefore to refer to a payment made in satisfaction of an honest claim..." (underlining added) 84Secondly, David Securities at [59] recognizes a defence of change of position. In the present case, the defendant entered a "Release" on 11 September 2000 (and indeed a deed of release in 2008) with the plaintiff. However, I am unable to determine on this application whether the 1994 payment was an operative cause of the defendant entering the release or the deed and therefore this second issue does not constitute an additional reason why the plaintiff's claim must fail. 85Thirdly, the plaintiff has submitted with some force that the parties to the 1983 loan were different to the parties to the 1987 loan. That much must be accepted. However, this is not a case where the defendant is seeking to enforce the 1983 loan against the plaintiff. Rather, the proceedings involve determining the true nature of the 1989 payment. 86It is clear that the plaintiff, by virtue of his guarantee of the 1983 repayments and by virtue of being the borrower of the 1987 loan, was obliged under both loans to make repayments. The correspondence from the plaintiff dated 6 December 1988, 15 November 1989 and 2 March 1992 show that the plaintiff regarded himself as obliged to make payments under both loans, and that to some extent he did so. 87Nor, to the extent that they were made, were repayments always made by the borrower to the lender. In the letter dated 6 December 1988 the plaintiff asserted that he made cash payments in respect of the 1983 loan. The plaintiff gave evidence that the 1989 repayment consisted of a payment to DibbsBarker, and the 1994 repayment was made by Enterprise, the borrower under the 1983 loan but not a party to the 1987 loan. Recitals D and E of the 2009 deed indicate that the parties did not attribute significance to the question of whether the individual or his corporate entity (or, in the case of the defendant, his wife) made or was responsible for the loans or payments. 88In the circumstances, I do not think that the character of the parties named in the 1983 loan can determine the nature of the 1989 payment.
(b) The plaintiff's indebtedness exceeded the 1994 payment 89As mentioned above, the defendant tendered without objection accounts indicating that as at 1994, the plaintiff was indebted, pursuant to the 1983 loan for $100,000 and the 1987 loan for $40,000 and interest, in the amount of $489,634. Although the plaintiff did not concede the precise amounts, it was not in contest that in 1994 the plaintiff was substantially indebted to the defendant. I did not understand it to be in contest that the amount of unpaid interest in 1994 was in excess of $100,000. 90The plaintiff submitted that notwithstanding these debts it was entitled to recover the 1994 payment plus interest, because the 1994 payment was made solely to pay off that 1987 loan. 91It is common ground that the payments in 1994 resulted from the demands of the defendant that the 1987 loan plus interest must be repaid. However, it remains unclear whether the payments were solely for that purpose. In the first place the payments were not made by the plaintiff to the defendant, at least on the plaintiff's case. The statement of claim asserts that the payments were made by Enterprise, at the direction of the defendant, to the defendant, Mrs Neale and another company. As Enterprise was the principal debtor under the 1983 loan and Mrs Neale the principal creditor, this mode of payment indicates a possible connection with the 1983 loan. 92Secondly, the correspondence in evidence indicates that the amount paid - varying from $94,000 (plaintiff's letter of 1 June) to $95,000 (defendant's tendered accounts) to $100,000 (plaintiff's letter dated 3 June 2011 and statement of claim) - was somewhat short of the $116,000 amount owing on the $40,000 loan, according to demands made by the defendant. The defendant's accounts record the payment as a reduction in the total indebtedness arising from the 1983 loan, the 1987 loan, and interest. 93Assuming in the plaintiff's favour that the 1994 payment was solely made in respect of the 1987 loan of $40,000; and that the 1987 loan had been wholly or partly repaid by the 1989 payment of $46,000, the question that remains is whether the plaintiff is entitled to be repaid a sum of money paid in respect of a non-existent debt, if in fact the plaintiff is otherwise indebted to the defendant. 94The foundation for the doctrine of recovery for money paid under a mistake is that the defendant has been unjustly enriched: see David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at [39] and Australia and New Zealand Banking Group Limited v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662 at [11]. The defendant was unjustly enriched by the 1994 payment if he was not entitled to receive it. 95The High Court stated in David Securities at [40]: "...In referring to moneys paid under a mistake of law, we intend to refer to circumstances where the plaintiff pays moneys to a recipient who is not legally entitled to receive them. It would not, for example, extend to a case where the moneys were paid under a mistaken belief that they were legally due and owing under a particular clause of a particular contract when in fact they were legally due and owing to the recipient under another clause or contract (Barclays Bank v W J Simms Ltd (1980) QB 677 per Goff J at 695: "Of course, if the money was due under a contract between the payer and the payee, there can be no recovery on this ground")." 96In the present case there appears to be no dispute that in 1994 the plaintiff owed interest under the 1983 loan for an amount in excess of the amount paid in 1994. Thus, even assuming the 1987 loan had been repaid in 1989, there was no unjust enrichment of the defendant. The monies paid by the plaintiff remained due and owing under another contract, the 1983 loan, and thus were not amenable to recovery by the plaintiff.
(c) The limitation defence 97The defendant has pleaded a limitation defence. In submissions, the plaintiff asserts two matters in support. 98First, the plaintiff submits that section 56 of the Limitation Act 1969 is the applicable provision. Section 56(1) provides: 56 Mistake (1) Subject to subsection (3), where there is a cause of action for relief from the consequences of a mistake, the time which elapses after a limitation period fixed by or under this Act for the cause of action commences to run and before the date on which a person having (either solely or with other persons) the cause of action first discovers, or may with reasonable diligence discover, the mistake does not count in the reckoning of the limitation period for an action on the cause of action by the person or by a person claiming through the person. 99Secondly, the plaintiff submits that "limitation issues" should not ordinarily be determined on an interlocutory basis. 100As to the second point, reliance was placed upon the well known passage in Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at [31], where the plurality stated: 31. We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question... 101However, it is apparent that the limitation issue in the present case is not "of the kind under consideration" in Wardley. The present case does not seek damages, but is a claim for money had and received. 102The time at which the cause of action arose, assuming the plaintiff's claim, must have been in May and June 1994 when the 1994 payment was made. Moreover, the vexed issue present in Wardley - determining the time at which a guarantor suffers damage as a result of a principal debtor's default - is not present here. The existence of a good limitation defence may be sufficient to establish that a reasonable cause of action is not disclosed: see Hillebrand v Penrith Council [2000] NSWSC 1058 at 33. 103As to the first point, it is apparent that the date of discovery of the mistake is significant in the application of section 56 of the Limitation Act 1969. 104I have earlier assumed for the purpose of this application that this mistake was discovered on 1 June 2005. The proceedings were commenced two days short of six years later, on 30 May 2011. Section 56 of the Limitation Act 1969 involves a determination of whether the plaintiff not only did not discover his mistake until after 30 May 2005, but also whether the plaintiff could not, with reasonable diligence, have discovered the mistake until then. 105On 15 November 1989 it is undisputed that the plaintiff: (a)was the solicitor for the defendant; (b)obtained a bank cheque for $46,000 in favour of the defendant; (c)deposited the bank cheque into the plaintiff's trust account, to the credit of the defendant which was recorded on the trust statement; (d)arranged for the withdrawal of two amounts of approximately $32,000 and $14,000 from the trust account to pay the defendant's legal costs to the plaintiff's firm; (e)recorded or arranged for the recording of those withdrawals in the trust account statement; and (f)sent to the defendant a letter explaining that the payment was made to the firm in respect of the fees owed by the defendant. 106I am unable to find any basis on which it can be said that the plaintiff, with reasonable diligence, could not have discovered the mistake of the forgotten payment until 2005. The plaintiff did not advance any possible reason, but relied solely on the date of discovery of the mistake. The mistake, this error of forgetting the 1989 payment, was entirely of the plaintiff's making. Records were kept of the matter, which at all times must have been in the custody of the plaintiff or his firm. Exercising reasonable diligence would have led the plaintiff to discover the 1989 payment in 1989, and in 1994 when he "had a feeling he had attended to it". 107For these reasons, I am of the view that section 56 cannot assist the plaintiff and the cause of action must be statute-barred.
(d) The deed of release 108On 13 July 2009 the plaintiff and defendant, along with unrelated parties, entered a deed of release "to settle their differences and all claims" according to recital J of the deed. 109The plaintiff asserts that this recital is insufficient to preclude his claim for repayment of the 1994 payment plus interest. 110Clause 4 of the deed says: 4. Everett releases and forever discharges Neale and JW Neale from all Claims he may now have or at any time may have had, or which, but for the execution of this deed, he might have had in connection with or incidental to the provision of Legal Services, the Loan, the Avon Road project, the Proceedings and the recitals to this Deed. 111The plaintiff asserts that his claim for repayment of the 1994 payment plus interest has no connection with the provision of Legal Services, with the 1983 loan, the Avon Road project, the proceedings or the recitals to the deed. 112I cannot see how this is so. The claim relies upon the assertion that the Legal Services (defined in the deed as including DibbsBarker legal services for the defendant in any matters in the period 1962 to 2001) were paid for in part by the 1989 payment of $46,000. This supplies a connection between the Legal Services and the plaintiff's claim against the defendant. Accordingly, the claim must fall within clause 4 of the deed, and therefore the plaintiff has released the defendant from the claim. It does not assist the plaintiff's case that he "discovered his mistake" well before this deed was executed. 113In my view, the plaintiff's claim is also connected to the 1983 loan (since both the 1989 and the 1994 payments were credited against the 1983 loan), the Avon Road project (for the same reason, and because of the plaintiff's repeated requests to amalgamate the assets and debts to produce a net result) and the proceedings (which involved recovery in respect of the loan, for the same reason). Perhaps most strongly, the plaintiff's claim must also be connected to the recitals to the deed because recital J refers to "all claims". 114Finally, it would be an entirely uncommercial construction of the deed for it to be construed so as to exclude the 1987 loan, the 1989 payment and the 1994 payment from the releases, in circumstances where the overpayment assertion by the plaintiff was known to both parties and had been the subject of demands in correspondence by the plaintiff on two occasions in 2005 and 2008.
F. Conclusion 115Accordingly, because of each of: (a)the existence of the undisputed debt to the defendant at the time of the 1994 payment; (b)the limitation period; (c)the provisions of the deed; and (d)the fact that the 1987 loan remained outstanding, in my view no reasonable cause of action is disclosed and the proceedings should be dismissed.
G. Disqualification of the plaintiff's solicitors 116Because of the view I have reached on this matter, it may be thought that the possible disqualification of the plaintiff's solicitors is an issue unnecessary to determine. However, in case I am found to be wrong in the application of rule 13.4, and because the parties have argued this matter, and in any case because the proceedings might be the subject of an appeal requiring the involvement of solicitors, I propose to deal with this aspect of the application. 117No issue has been raised by the parties about the jurisdiction of this Court to make an order precluding the plaintiff's solicitors from continuing to act for the plaintiff. In any event, section 46(2) of the District Court Act 1973 appears to grant me the power to make the order sought. 118The law applicable to an application by a former client to restrain a solicitor acting for the other party is conveniently summarised by Brereton J in Kallinicos v Hunt (2005) 64 NSWLR 561 at [76]. After a detailed analysis of the authorities, Brereton J writes (omitting references): "...
(a) Does the proper administration of justice require disqualification of the solicitors 126Assuming I am wrong in summarily dismissing the plaintiff's claim, one step in the plaintiff's journey in establishing his case is to displace his own correspondence in respect of the 1987 debt. As a practical matter, this seems to require oral or affidavit evidence, presumably from the plaintiff and other members of DibbsBarker. 127The defendant has listed nine partners or associates who were involved in giving him advice in relation to the Avon Road project. Further, the defendant asserts that Mr Seisun and Mr Newell, members of the firm "will be subpoenaed as principal witnesses - this matter". The plaintiff did not dispute these assertions. The plaintiff in his affidavit refers to statements by Mr Geoff Sutherland, and in annexures to that affidavit refers to him having "advised his partners" (letter of 15 November 1989) and to conversations between the defendant and "Ian Osborne and Geoff Sutherland" (letter of 1 June 2005). 128Speaking of the solicitor-witnesses, Brereton J in Kallinicos at [86] wrote that the solicitor-witness in that case: "...will owe obligations of loyalty to his present client...he will have an interest in presenting the facts in a manner which exonerates himself, and he will have a duty to the court to be frank." 129His Honour also noted: "[87] It is generally undesirable for a practitioner who is aware that he is likely to be called as a witness, other than in relation to formal or non-contentious issues, to continue to act. If a practitioner's credibility is at stake as a witness, his personal integrity may be put in issue and that may constitute a personal interest inconsistent with the practitioner's duty to the court or to the client. In (2005) 64 NSWLR 561 at 585 those circumstances, it is relevant though far from decisive to note that the Revised Professional Conduct and Practice Rules 1995 provide as follows: "19. Practitioner a material witness in client's case A practitioner must not appear as an advocate and, unless there are exceptional circumstances justifying the practitioner's continuing retainer by the practitioner's client, the practitioner must not act, or continue to act, in a case in which it is known, or becomes apparent, that the practitioner will be required to give evidence material to the determination of contested issues before the court." ... [89] In Holborow, Heenan J remarked that it had long been accepted that a legal practitioner who was likely to be a witness should not act as counsel or continue as counsel if a situation arises where he is unexpected required to give evidence, since the personal integrity of the practitioner may be put in issue if his word or credibility is at stake as a witness, and that will or may constitute a personal interest inconsistent with the practitioner's duty to the court or to the client. Similar conflicts of interest can arise if, for example, the counsel or solicitor had a substantial personal stake in the litigation such as, for example, if he or she were to be a partner in a firm which was a party to the litigation, or a substantial shareholder in a corporation which was a party (Holborow (at [29])). [90] In my opinion a fair-minded, reasonably informed member of the public would conclude that the independent objectivity of Mr Moloney as solicitor (2005) 64 NSWLR 561 at 586 and/or witness was compromised by conflicts between his obligation of loyalty to his client Mr Hunt, his role and knowledge as a witness of material facts, and his potential personal interest. Although I do not think that fair-minded and reasonably informed members of the public conceive that legal representatives are entirely impartial, as most would see them as aligned with the parties whom they represent, and while it needs be borne in mind that the alternative to legal representation is self representation, in which case none of the controls which legal representation imposes on the conduct of litigation would apply, nonetheless, fair-minded and reasonably informed members of the public expect that lawyers will provide advice to their clients, and conduct litigation in which they act, free of and unaffected by any personal interest in the outcome." 130In accordance with this decision, the likely presence of DibbsBarker partners as witnesses in the proceedings should they continue seems to me to be a reason why an order for disqualification should be made.
(b) Risk of disclosure of confidential material 131The defendant referred in correspondence and in submissions to the circumstance where his legal representatives could no longer act for him in a family law dispute with his wife because they had previously acted for his wife. Of course I cannot say in this case whether the withdrawal of his legal representatives in that matter was appropriate. However, even assuming that it was, it seems to me that there is a significant difference between Family Court proceedings, which I must assume may range over the wide expanse of interaction between the married partners, and this relatively narrow commercial dispute. The issue is whether the lawyers are aware of confidential material relevant to the present dispute and the application of that test must differ according to the nature of the dispute. As stated by Lord Millett in Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222 at 237G: "...there was no ground on which the court could properly intervene unless two conditions were satisfied: (i) that the solicitor was in possession of information which was confidential to the former client and (ii) that such information was or might be relevant to the matter on which he was instructed by the second client. This makes the possession of relevant confidential information the test of what is comprehended within the expression 'the same or a connected matter... My Lords, I would affirm this as the basis of the court's jurisdiction to intervene on behalf of a former client." 132The defendant was not able to identify with precision any particular matter of confidence known by DibbsBarker which would be relevant to the litigation, when the defendant was invited to do so during the hearing of the application. However, I do not think that this failure is fatal to his application. It is, of course, difficult for any person to identify with precision what they may have discussed with their legal representatives more than two decades ago. 133I can readily accept that confidential and indeed privileged matters were revealed by the defendant to DibbsBarker in the period 1987 to 1994. The difficulty is in ascertaining whether any of those matters are relevant to the present dispute and at risk of disclosure. In this matter the defendant bears the onus of proof. 134The judgment of Lord Millett in Prince Jefri Bolkiah at 235E, agreed to unanimously by the other members of the House of Lords, dealt with the onus of proof in these words: "...it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious. I do not think that it is necessary to introduce any presumptions, rebuttable or otherwise, in relation to these two matters. But given the basis on which the jurisdiction is exercised, there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case." 135I have indicated that I am prepared to infer the satisfaction of the first condition. With some hesitation, due to the matter being finely balanced, I am also persuaded that I should favour the defendant on the second issue. I can readily foresee that confidential matters concerning the structuring of the various loans, involving at different times, or to different degrees, the defendant, his former wife and his companies, on the one hand, and the plaintiff and his company (and perhaps his firm) on the other, may have been done for taxation and other consequences. These are private and confidential matters, yet they seem to me potentially to be relevant to the case the plaintiff wishes to make about the arrangements in respect of the 1987 loan, the 1989 payment and the 1994 payment. This is not idle speculation, for the plaintiff has argued with some force on this application that the parties to the various loans is a matter of significance. 136For these reasons, I am satisfied on the balance of probabilities that DibbsBarker is possessed of information confidential to the defendant, and that information may be relevant to this matter. 137Once it is established that DibbsBarker were in possession of confidential information, the burden lies on the plaintiff to establish that there was no real risk of disclosure: Prince Jefri Bolkiah at 237G. The plaintiff advanced no evidence or submissions on this issue and I am not persuaded that the risk is non-existent. I refer to the words of Lord Millett in the Prince Jefri Bolkiah decision at 237F: "...In my view no solicitor should, without the consent of his former client, accept instructions unless, viewed objectively, his doing so will not increase the risk that information which is confidential to the former client may come into the possession of a party with an adverse interest." 138It might be thought that there is some inconsistency between the decision to dismiss the proceedings as not disclosing a reasonable cause of action and a finding that the solicitors should not continue to act because they may be witnesses in the proceedings. The latter finding is conditioned on my decision in respect of dismissal being found to be incorrect. If it is incorrect, it seems to me to be likely that it is because, contrary to my findings, the plaintiff and members of his firm can give relevant evidence of conversations some 20 or more years ago to displace the plain meaning of the plaintiff's correspondence. In that event, the evidence of the plaintiff's solicitors becomes relevant and raises the issues canvassed in Prince Jefri Bolkiah and Kallinicos.
(c) Question of costs, inconvenience and impracticality 139As this is at an early stage of proceedings, issues of costs and convenience are not large. It may be that as a consultant of DibbsBarker, the plaintiff is favoured with an economical costs arrangement, although again there is no evidence of this matter. 140However, there is one remaining issue of concern, that of practicality. Does it make a difference that the plaintiff himself was the primary legal representative of the defendant during the relevant time? 141An action by a client against a solicitor may operate as a waiver of privilege. In Benecke v National Australia Bank 35 NSWLR 110 Gleeson CJ stated (at 111E and F): The rule that prevents an unauthorised disclosure of confidential communications between a client and a legal adviser, when such communications are for the purpose of obtaining legal advice, or for use in existing or anticipated litigation, constitutes a restriction upon the capacity of courts to ascertain the truth in certain circumstances. That restriction, however, is regarded as acceptable on the ground that it promotes the public interest, and assists the administration of justice, by facilitating the representation of clients by legal advisers. It does this by encouraging uninhibited communication. Thus, in cases where the rule operates, one aspect of the public interest is preferred against another (discovering the truth). It would be inconsistent with the reason for the existence of the privilege to permit it to operate in the manner for which the appellant contends. But for her own actions, the privilege would have enabled the appellant to insist that nobody should be able to give evidence of the confidential communications between the appellant and her senior counsel about the settlement of the first proceedings, without the consent of the appellant. However, it did not enable the appellant to make public her version of those communications and, at the same time, to enforce silence on the part of others who disagreed with that version. The law permits the search for the truth in legal proceedings to yield, in certain circumstances, to the public interest in preserving the secrecy of communications between lawyer and client. In the present case, however, the appellant herself lifted the veil of secrecy by giving her version of the communications. Thereafter, there was no reason in principle why the pursuit of the truth should not take its course, or why the court should be inhibited in seeking to ascertain the true facts concerning those communications. 142It follows from this passage that the privilege belongs to the client and an action by the solicitor against the client is ineffective to waive it. If disclosure of the privileged material is necessary for the solicitor plaintiff's action to succeed, the action must fail. 143The current proceedings have not been commenced by the defendant. At this stage, neither party has suggested that privilege has been waived. Unless that occurs or has occurred there remains a real prospect that the plaintiff will be limited in the evidence he can disclose. Whilst this may remain a problem potentially of some significance to the plaintiff, I do not see it as a reason for a different order in respect of the solicitors. 144For these reasons, were the proceedings to continue I would grant the injunction sought. I do not, however, think that the injunction should be granted in respect of an appeal made against the decision to dismiss the proceedings or the decision in respect of the disqualification of the plaintiff's solicitor. In such an appeal the members of the firm are not likely to be witnesses, nor is there any real prospect of disclosure of confidential material. Accordingly, no order is necessary in view of the decision I have made in respect of the application under UCPR 13.4(1)(b).
H. Costs 145The defendant also sought an order for "indemnity costs and interest". 146The defendant made no submissions seeking a special costs order, and I do not see any circumstances attaching to the present application that warrant either an order for indemnity costs, or interest. 147UCPR 42.20(1) provides that in the ordinary case of dismissal of proceedings under UCPR 13.4 the plaintiff must pay the costs. However, a "litigant in person who is not a lawyer is not entitled to receive an order for costs to compensate him for time spent in preparing and conducting his case": Preston v Commissioner for Fair Trading [2011] NSWCA 40 at [183], applying Cachia v Hanes [1994] HCA 14; 179 CLR 403. 148During his submissions the defendant made reference to having received some assistance from a solicitor. Whether costs arose from that assistance, and whether they are recoverable, seems to me to be a matter to be determined on an assessment if not otherwise agreed. 149Accordingly, I propose to order that the plaintiff pay the defendant's costs of the proceedings, including the costs of the notice of motion, but that those costs not include any compensation for time spent by the defendant in preparing and conducting his case. 150The orders of the Court shall be: (1)Pursuant to section 136 of the Evidence Act 1995, the use of exhibit 2 be limited so that the documents therein may not be used to determine any contested question of fact. (2)The proceedings be dismissed pursuant to UCPR 13.4(1)(b). (3)The plaintiff pay the defendant's costs of the proceedings including the notice of motion, those costs not to include any compensation for time spent by the defendant in preparing and conducting his case.
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: 22 May 2012
Everett
Neale
(1988) 164 CLR 662
(1935) 52 CLR 713
(1992) 175 CLR 353
(1964) 112 CLR 125
(2005) 64 NSWLR 561
(1992) 175 CLR 514
(1938) 59 CLR 150
[2009] HCA 27