F.E. V Mono Constructions Pty Ltd v Beattie

Supreme Court of NSW|2020-08-17|Before: Campbell J, Fagan J

Solicitors: Plaintiffs self-represented GC Legal (Defendants) File Number(s): 2020/23322

Judgment

I am dealing with two notices of motion filed in these proceedings in the Professional Negligence List. The remaining plaintiff corporation, which is unrepresented, is suing the law practice defendants for professional negligence in the performance of legal work and the provision of legal advice in a home building dispute brought against the plaintiff by former customers, originally in the Consumer Trader and Tenancy Tribunal, and continued in the Civil and Administrative Tribunal (NCAT). The defendants did not conduct the proceedings throughout. The plaintiff represented itself, as is permissible for a corporation in NCAT, unsuccessfully as it transpired at the hearing and incurring a liability of $55,955.80 by way of damages and, ultimately, legal costs assessed in the sum of $137,656.92.
After the loss the plaintiff sought advice from the law practice on its prospects of successfully prosecuting the District Court Appeal it had initiated. As a result the appeal was discontinued on terms that the plaintiff pay the customer an additional $2,500 in legal costs.

The decision of Justice Fagan

The law practice successfully moved the Court for orders removing named second to fourth plaintiffs from the proceedings and the striking out of a substantial part of the plaintiff's claim (effectively summarily dismissal) on the ground of advocate's immunity.
The motion was heard by Fagan J on 28 April 2020, on which day his Honour made orders, publishing his reasons on 30 April 2020 ([2020] NSWSC 467). My reasons assume familiarity with Fagan J's reasons which, in any event, were before me as an annexure to an affidavit read on behalf of the plaintiff.
Fagan J's orders were: 1. The second, third and fourth defendants be removed from the proceedings. 2. Pursuant to rule 14.28 of the Uniform Civil Procedure Rules the Amended Statement of Claim filed 6 February 2020 be struck out. 3. The proceedings are stayed unless and until the first plaintiff appoints a solicitor and that solicitor files and serves a notice of his/her appointment pursuant to rule 7.28 of the Uniform Civil Procedure Rules. 4. Provided that a solicitor appointed by the first plaintiff files and serves a Notice of Appointment, the first plaintiff is granted leave to file a further Amended Statement of Claim within 21 days thereafter. 5. Leave is granted to the defendants to apply to have the proceedings dismissed if Notice of Appointment of a solicitor for the first plaintiff is not filed within 28 days or if a further Amended Statement of Claim is not filed within the 21 days limited under Order 4. A costs order was made and a Notice of Motion filed on behalf of the plaintiff, not presently relevant, was dismissed.
Before moving on to the current controversy, I should record that at the hearing before Fagan J, Mr Griscti of counsel for the law practice, who also appeared before me, acknowledged that there were "three of the alleged breaches (of duty or retainer) that we thought did not, to use your Honour's phrase, fall foul" (of advocate's immunity) (28/4/20, 16.35 - .43T). His Honour identified the matters not caught by the immunity as a failure to advise that a cross-claim be brought against the customer and the advice given with respect to the withdrawal of the District Court Appeal (Judgment [23]). However, his Honour considered the pleading in relation to those matters was defective because not all necessary elements of the cause of action and material facts were pleaded as required by the rules (Judgment [24]). His Honour was also of the view that any available case relating to a failure to make costs disclosures, contrary to the Legal Profession Act 2004 (NSW) (Repealed) or for misleading or deceptive conduct would require extensive additional pleading. For this reason his Honour decided that the whole of the Amended Statement of Claim should be struck out with liberty to the plaintiff to re-plead. Effectively, and by necessary implication, as is so often the case, his Honour considered there was a better chance of producing a coherent, compliant pleading if the plaintiff was required to re-plead from scratch.

The current controversy

Because it is aggrieved by the orders of Fagan J, the plaintiff did not take steps under Orders 3 and 4 of the Orders made on 28 April 2020. Instead a Notice of Intention to Appeal was filed and served on the law practice's solicitors on 28 May 2020 and a Notice of Appeal (arguably out of time) was filed on 30 July 2020 purporting to "appeal the whole of the decision below" (Exhibit A, p.2). Though it is not for me to say, I did point out to Ms E Monovasios, a director of the remaining plaintiff who appeared before me without objection that Fagan J's orders were almost certainly interlocutory and leave to appeal sought by way of proceedings instituted by the filing of a summons would be required (17/8/20, 5.8 - .16T).
In the meantime, on 2 June 2020 the law practice, by Notice of Motion sought an order for the summary dismissal of the residuum of the proceeding under r 13.4 Uniform Civil Procedure Rules 2005 (NSW) or the inherent jurisdiction of the Court. A specified gross sum costs order on an indemnity basis was also sought under s 98(4) Civil Procedure Act 2005 (NSW). In response, the plaintiff filed a Notice of Motion on 9 June 2020 seeking a stay of Fagan J's orders and a stay of the Notice of Motion of 2 June 2020. An extension of time to file and serve "their appeal in the Court of Appeal … by 30 July 2020" was also sought.
At the hearing before me, the law practice read an affidavit of its solicitor, Mr Paul Boleslaw Kozub sworn on 2 June 2020, and Ms Eleni Monovasios read her affidavits of 9 June and 9 July 2020.
Written submissions were also exchanged.

The submissions of the parties

The parties agreed that it may be logical to deal with the plaintiff's application for a stay first before considering the defendants application for summary dismissal. However, effectively I heard both motions together. Essentially, Ms E Monovasios argued that as the plaintiff and the former plaintiffs, wished to challenge the "whole" of Fagan J's decision it would be unfair, and perhaps otiose to consider the law practice's motion for summary judgment.
Though in argument, Ms E Monovasios put, specifically, that the plaintiff was seeking to appeal from each of, Order 1 removing the second to fourth plaintiffs, his Honour's ruling on the applicability of advocate's immunity, in the alternative, Order 2 striking out the whole of the Amended Statement of Claim, rather than just those portions affected by his Honour's ruling, and his Honour's failure to adjourn the hearing of the matter until the plaintiffs could appear in person in the court room, her written submissions like the Notice of Intention to Appeal only complained about his Honour's refusal of an adjournment and the striking out of the whole of the Amended Statement of Claim. Both basal complaints were founded upon an asserted denial of natural justice. I pointed out to Ms Monovasios that her grounds of appeal in Exhibit A did not make the breadth of the plaintiff's complaint crystal clear. Making allowances for the disadvantages of not being legally represented, there appeared to be no specific ground asserting his Honour erred in his ruling on advocate's immunity or was wrong to remove the second to fourth plaintiffs other than by the very general ground three complaint about "not permitting the plaintiffs to prosecute their claim in the normal way resulting in a denial of procedural fairness and natural justice"; a ground of such generality that it could cover many sins.
However, in oral argument Ms Monovasios indicated by reference to Hadley v Baxendale [1854] 156 E.R 145; (1854) 9 Ex 341 that it should have been within the contemplation of the law practice that each of the second to fourth former plaintiffs, as well as the first plaintiff, was likely to suffer loss if the work done and advice given fell short of the ordinary standards of legal professionals experienced in home building litigation. She also took me to two different versions of the Costs Disclosure Notice provided by the law practice which she said was indicative of a breach of duty. Like Fagan J I had difficulty following that aspect of the plaintiff's case (Judgment [13]).
Mr Griscti reminded me of the principles governing a stay of proceedings pending an appeal by reference to Alexander v Cambridge Corporation Ltd (1985) 2 NSWLR 685 at 694 and Penrith Whitewater Stadium Limited v Lesvos Pty Ltd [2007] NSWCA 103 at [18] - [19]. He argued it had not been shown that the plaintiff had a fairly arguable case on appeal. Indeed he submitted the prospects were poor. He also submitted that if proceedings were summarily dismissed the plaintiff would have the opportunity to amend its appeal to include an appeal from my decision in that regard. To this extent the appeal would not be stultified or rendered nugatory, and the defendant law practice had the benefit of compulsory professional indemnity insurance, which would mean that any costs paid on dismissal would be repayable readily with interest, and the plaintiff would not be prejudiced if its appeal was successful.
So far as the law practice's application for summary dismissal was concerned, he submitted that, overlooking that the Amended Statement of Claim had been struck out, looking at what remained of the plaintiff's case "outside the scope of advocate's immunity" did not disclose a reasonable cause of action.
So far as costs were concerned, he relied principally upon a letter in the Calderbank form of 12 February 2020 as founding an order for costs on an indemnity basis. And referred to various decisions of the Court of Appeal and at first instance in the Supreme Court showing a greater readiness than in the past on the part of the Court "to fix costs in a gross sum in very short and relatively simple matters where the mechanism provides a more convenient alternative to assessment": Cardinal Group Pty Ltd (in liquidation) [2018] NSWSC 895 at [6], (Gleeson JA) (sitting at first instance). He relied on the reasonableness of the costs set out in Mr Kozub's affidavit.
In reply Ms Monovasios argued that if the proceedings were dismissed, costs should be assessed on an ordinary basis. She argued that as the costs claimed by the law practice had not yet been assessed she was in no position to make any meaningful submissions about their reasonableness.

Should a stay be granted

As distilled by McColl J in Penrith Whitewater the principles established in Alexander v Cambridge Credit are as follows (at [19]): a. Where there is a risk that an appeal will prove abortive if the appellant succeeds and a stay is not granted, the Court will normally exercise its discretion in favour of granting a stay; b. the onus is upon the applicant to demonstrate a proper basis for a stay; c. it is a matter of discretion whether the Court grants a stay and if so as to the terms which would be fair as part of the granting of a stay; d. what is important in considering whether or not a stay ought be granted is the balance of convenience and the competing rights of the parties before it; e. it is not necessary that special or exceptional circumstances should be made out; it is sufficient for the applicant to demonstrate a reason or an appropriate case to warrant the exercise of discretion in its favour.
It is important to bear in mind that the plaintiff's appeal, or proposed appeal, is from an interlocutory judgment of the Court. True, if there is a challenge to Fagan J's ruling on advocate's immunity, the practical effect of the ruling is to bring an end to a substantial part of the plaintiff's case. But the question has to be determined in light of the consideration that the residuum of the plaintiff's case is currently stayed because the plaintiff has not complied with, or taken advantage of the opportunity allowed by, the orders made by Fagan J for the corporation to obtain legal advice and re-plead the available case in accordance with the Rules.
A stay is a remedy granted in aid or facilitation of an appeal. It cannot be said that entertaining a defendant's motion for summary dismissal will stultify the appeal or in any way deprive the plaintiff of the benefit of a successful outcome on appeal if the same is obtained. As Mr Griscti argued, if the residuum of the plaintiff's action is dismissed the appeal is at an early stage and doubtless could be expanded to include an appeal from my order.
Although the plaintiff's claim cannot move forward unless it is successful on appeal (or it complies with Fagan J's orders) I am not satisfied that that consideration provides a good reason for depriving the law practice of the opportunity to have its application for summary dismissal, made, according to its argument, as contemplated and permitted by the orders of Fagan J, determined. There is no evidence of real prejudice to the plaintiff, nor irreversible deprivation of its rights in entertaining the defendant's application. If the defendants are successful, doubtless the plaintiff would have available an application for leave to appeal if so advised.
Moreover, it is difficult for a first instance judge to assess whether the grounds of appeal from Fagan J's orders are fairly arguable. As articulated in the grounds formulated in Exhibit A, they are not of obvious and compelling strength.
I refuse the plaintiff's application for a stay on the defendant's motion of 2 June 2020. Nor is there any reason to otherwise stay Fagan J's orders of 30 April 2020. Other than staying the law practices motion no practical benefit will accrue to the plaintiff from a stay.

Summary dismissal

It is important to reiterate that the law practice is seeking summary dismissal, not dismissal for want of due dispatch by reason of the plaintiffs failure to comply with the orders of Fagan J. Of the legion of authorities dealing with the difficulty of securing an order for summary dismissal, it suffices to refer to two. First, in Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 Gaudron, McHugh, Gummow and Hayne JJ said at [57]: It is, of course, well accepted that a court whose jurisdiction is regularly invoked … should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way. Their Honours went on to say at [58]: … It would be wrong to deny a plaintiff resort to the ordinary processes of a court on the basis of a prediction made at the outset of a proceeding if that prediction is to be made simply on a preponderance of probabilities. It is not enough to say that it's "highly" probable that the case will fail.
Secondly, in O'Brien v Bank of Western Australia Limited [2013] NSWCA 71 at [3], Macfarlan JA pointed out, "the real issue is whether there is an underlying cause of action or defence, not simply whether one was pleaded": Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28 at [23]. Ward JA, too pointed out at [68], "the existence (in that case) of such a defence on the one hand, and the pleading of such a defence on the other, are distinct concepts as noted by Lindgren J in White Industries Australia v Federal Commissioner of Taxation (2007) 160 FCR 298 at 309".
Mr Griscti relied largely on the reservations of Fagan J at [13] - [14], and [23] - [24] of his judgment of 30 April 2020. It is clear, however, that notwithstanding his Honour's doubts Fagan J was not convinced to the requisite "high degree of certainty about the ultimate outcome" that there was no underlying claim that could not be elucidated by a complete and compliant re-pleading of such case as may be maintainable after account is taken of advocate's immunity. With respect neither am I.
The plaintiff's position is not assisted by its failure to comply with Orders 3 and 4 made by Fagan J on 28 April 2020. My task is made no easier by the absence of any pleading of these matters now that the defective Amended Statement of Claim has been struck out. Also, one might have thought that his Honour's reservation of leave for the law practice to bring forward an application for dismissal if his orders are not complied with (Order 5) may have related to dismissal for want of due dispatch, rather than necessarily a summary dismissal.
Be that as it may, though the plaintiff's non-compliance with the order permitting it to re-plead should not be treated as strengthening its hand, it does make the law practice's task of demonstrating virtual certainty of outcome on the outstanding matters harder because of the difficulty of demonstrating the absence of an underlying un-pleaded case. I accept that the law practice will continue to be vexed by the proceedings remaining on foot but a degree of protection is afforded by the consideration that the proceedings are stayed by force of his Honour's orders and may not be progressed until they are complied with. This will only occur if the plaintiff obtains representation and brings forward a statement of claim that complies with the Rules. The law practice will then be in a position to adjudge for itself whether a viable case remains.
The plaintiff's embarkation on the process of appeal will doubtless temper the law practice's appetite for a further run over this target in this division until that matter is finalised.
I am not satisfied that summary judgment is justified.

Costs

Given my ruling in relation to summary dismissal, no question of the payment by the plaintiff of the defendants' costs arises, whether indemnity costs should be ordered and whether the appropriate mode for payment is in a fixed gross sum. However, lest my judgment be called into question, I record that had I been persuaded the proceedings should be summarily dismissed, I would have been inclined to order indemnity costs given the Calderbank letter of 12 February 2020 (Exhibit PBK - 1, p.6 - 7), which was proceeded by a letter to the same effect of 10 December 2019 (Exhibit PBK - 1, p.1 - 3).
However I would be unpersuaded that a gross sum costs order should be made. Ms Monovasios's point that it is impossible for her to say whether the charges are reasonable absent an assessment is a good one. This puts her at a disadvantage in attempting to join issue and the Court is deprived of the advantage of an engaged contradictor in relation to the issue. Judges are not always themselves in a good position to adjudge the reasonableness of legal charges.

Orders

My orders are: 1. The defendants Notice of Motion filed 2 June 2020 is dismissed; 2. The plaintiff's Notice of Motion filed on 9 June 2020 is dismissed; 3. Note the proceedings are stayed by force Order 3 pronounced by Fagan J on 28 April 2020.

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: 20 August 2020

Legal Profession Act 2004(NSW)

(Repealed) Uniform Civil Procedure Rules 2005(NSW)r 13.4

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