FEV Mono Constructions Pty Ltd v Beattie

Supreme Court of NSW|2020-04-28|Before: Fagan J

Judgment

In these proceedings the plaintiffs claim damages for negligence on the part of a firm of solicitors. The defendants acted for the first plaintiff from 2012 in a building dispute that commenced in the Consumer Trader and Tenancy Tribunal ("CTTT") in June of that year and continued in the Civil and Administrative Tribunal ("NCAT") when that body assumed the jurisdiction from 1 January 2014. I will refer to the dispute as "the Tribunal proceedings". On 28 April 2020 I heard a notice of motion filed by the defendants seeking orders that the second, third and fourth plaintiffs be removed from the proceedings and that a substantial part of the amended statement of claim be struck out on the basis that it pleads allegations in respect of which the defendants have advocates' immunity.
At the same time I heard a notice of motion filed by the plaintiffs seeking further and better particulars of the defence and an order for delivery up of the defendants' file in relation to the building dispute. At the conclusion of the hearing of the notices of motion on 28 April 2020 I made orders substantially as sought by the defendants and dismissed the plaintiffs' notice of motion, with reasons reserved. These are the reasons.
The four plaintiffs are as follows: 1. FEV Mono Constructions Pty Ltd ("Mono Constructions"), a building contractor. 2. FEV Mono Pty Ltd ("FEV Mono"), a developer and the sole shareholder in Mono Constructions. 3. Ms Eleni Monovasios, a director of both companies and a shareholder in FEV Mono. 4. Ms Vicki Monovasios, also a director of both companies and a shareholder in FEV Mono.
The Tribunal proceedings concerned two applications brought by Mr Giovas claiming damages for allegedly defective work performed by Mono Constructions under a contract for home building dated 4 November 2010. Mono Constructions was the sole building contractor and it was the sole respondent in the Tribunal. The defendants advised Mono Constructions and acted for it during interlocutory stages but did not represent the company at the hearing, which commenced on 9 December 2013. The hearing continued on 10 December 2013, 18 and 19 August 2014 and 11 December 2014. Ms Eleni Monovasios and her brother Mr Fotios Monovasios represented the company on all hearing days. On 3 February 2015 NCAT determined the dispute by ordering that Mono Constructions pay Mr Giovas $55,955.80: Giovas v FEV Mono Constructions Pty Ltd [2015] NSWCATCD 16. On 11 August 2015 it was further ordered that Mono Constructions pay Mr Giovas' costs. The plaintiffs allege that those costs were later assessed at $137,656.92.

Removal of three plaintiffs; first plaintiff to appoint a solicitor

Paragraph 7 of the amended statement of claim is as follows: 7 The first plaintiff, second plaintiff, third plaintiff and fourth plaintiff are interrelated for the purposes of funding and finances. The hearing of the notices of motion before me was conducted on behalf of all plaintiffs by Ms Eleni Monovasios and by Mr Fotios Monovasios, in his capacity as general manager of Mono Constructions. Ms Eleni Monovasios and Mr Monovasios stated that the inter-relationship between the plaintiffs consists in the individuals' shareholdings in FEV Mono; FEV Mono's shareholding in Mono Constructions; guarantees provided by the individual plaintiffs in support of Mono Constructions' obligations to satisfy statutory warranties in respect of home building work; loans between the companies and loans between the individuals and the companies.
In the amended statement of claim there is no cause of action pleaded on behalf of the second, third or fourth plaintiffs in their own right. Ms Eleni Monovasios and Ms Vicki Monovasios are conducting the proceedings in their own names as self-represented litigants. They purport to have commenced and to conduct the proceedings in the names of the two companies, without legal representation. This they cannot do.
Rule 7.1 of the Uniform Civil Procedure Rules ("UCPR") provides as follows (extracted so far as relevant): 7.1 By whom proceedings may be commenced and carried on (1) A natural person may commence and carry on proceedings in any court, either by a solicitor acting on his or her behalf or in person. [...] (2) A company within the meaning of the Corporations Act 2001 of the Commonwealth - (a) may commence and carry on proceedings in any court by a solicitor or by a director of the company, and (b) [...] (3) In the case of proceedings in the Supreme Court, subrule (2)(a) authorises a company to commence proceedings by a director only if the director is also a plaintiff in the proceedings.
It is well settled that in this Court sub-r (3) is only satisfied if the director who seeks to commence or carry on proceedings in the name of the company is a plaintiff who is litigating a cause of action in the proceedings in his or her own right. The sub-rule is not satisfied by having a director joined in the proceedings as a plaintiff solely for the purpose of conducting the company's case, without litigating any claim of his or her own: JSBG Developments Pty Ltd v Kozlowski (2009) 75 NSWLR 745; [2009] NSWSC 1128; Connectland Pty Ltd v Porthaven Pty Ltd [2011] NSWSC 616 at [17]-[20] (White J); DB Mahaffy and Associates Pty Ltd v Mahaffy [2011] NSWSC 673 at [27] (White J); In the Matter of DB Mahaffy & Associates Pty Limited [2012] NSWSC 776 at [2] (Brereton J); In the Matter of DB Mahaffy & Co Pty Limited [2012] NSWSC 1286 at [2]-[3] (Brereton J); Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2013] NSWSC 36 at [90]-[119] (Halllen J); Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2013] NSWCA 266 at [12]-[16] (Basten JA, Sackville AJA agreeing).
As none of the second, third or fourth plaintiffs pleads any cause of action in her or its own right, those plaintiffs must be removed from the proceedings and the remaining first plaintiff must appoint a solicitor.

The pleading of Mono Constructions' claim in negligence

In pars 8-11 and 14 of the amended statement of claim the plaintiffs plead that Mono Constructions retained the defendants in relation to the Tribunal proceedings and that orders for the payment of money and costs were made against the company. In par 14 the retainer is alleged in composite terms, embracing advice regarding both the Tribunal and District Court proceedings, conduct of both proceedings "and associated matters". In par 15 it is alleged that a duty to exercise reasonable care and skill and a duty of good faith were owed by the defendants as incidents of their retainer.
The particulars set out under par 15 of the pleading invoke both the common law of negligence and the law of contract as two sources of the defendants' duties of care and good faith. They also cite Pt 6, Div 1 of the Civil Procedure Act 2005 (NSW) (ss 56-60). It is unnecessary and inapt to refer to those provisions as they are concerned with the court's objective of efficiency in the conduct of litigation and with the duties of parties and solicitors to co-operate with the court in achieving that objective. The sections are not concerned with the duties of solicitors to their clients.
The particulars under par 15 cite Ch 3, Pt 3.2, Div 3 of the Legal Profession Act 2004 (NSW)(rep) as a further source of the defendants' alleged duties of care and good faith. That Act was in force until 30 June 2015. The Division referred to, comprising ss 309-318A, was concerned with legal practitioners' disclosure to their clients of costs to be incurred. The sections provided for progress reports to be furnished to clients. Consequences of non-disclosure were prescribed. The plaintiffs' citation of that legislation has nothing to do with the duty of care owed by solicitors to their clients. This aspect of the particulars suggests that Mono Constructions may wish to litigate some issue about its liability to the defendants for professional charges. The Court is informed that Mono Constructions paid the defendants approximately $84,000 for work in connection with the Giovas dispute. If Mono Constructions has any cause of action based upon contested liability for these costs, the elements of such a cause have not been recognisably pleaded.
Lastly, the particulars under par 15 cite s 18 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth), which prohibits misleading or deceptive conduct in trade or commerce. Pleading of a complete cause of action for damages under s 236 of the Australian Consumer Law would require allegations and particulars of conduct infringing s 18 and an allegation of causation of damage, usually through the mechanism of reliance. Section 18 is not of itself a source of the duties of care, skill and good faith alleged by the plaintiffs in par 15. The amended statement of claim does not plead essential elements of a cause of action for damages under these provisions.
In par 16 the plaintiffs allege that the defendants breached their duty to exercise reasonable care and skill in numerous respects that are detailed in sub-pars a-y. The defendants' strike out application is directed to sub-pars a-o and t-v. The defendants submit, correctly in my view, that these contested sub-paragraphs are all concerned with the defendants' conduct of the Tribunal litigation. The following extracts from the pleading are examples: a Failing to follow the first plaintiff's written and verbal instructions on but not limited to the following dates: [20 separate dates, spanning September 2012 to June 2015 are specified]. b Breaching the terms of the retainer/contract. ii Failing to follow the plaintiffs reasonable instructions iii Failing to execute instructions in a timely manner iv Not perform legal duties to the standard of a competent lawyer experienced in construction disputes vi Failed to adequately instruct counsel in a timely manner vii Failed to identify the contract and thus instruct the experts appropriately c Failing to identify the contract documents in a competent and timely way. The incorrect use of the contract documents were [sic] not brought to the CTTT's attention until September 2013 […]. d Failing to act when the first plaintiff first brought to the defendant's attention that there were discrepancies with the experts determinations on but not limited to the following dates: [three dates in September and October 2012 are specified]. e Failing to retain an expert that was experienced and qualified to inspect and determine and therefore provide an opinion as to whether defects existed.
Mono Constructions has obtained an expert report from Mr Shaun Bailey, a solicitor with extensive experience in the litigation of construction disputes. This report, dated 12 November 2019, has been served. It expands and confirms the particulars of negligence that are alleged against the defendants in the pleading. Mr Bailey explains the subject of his report, as follows: FEV Mono Constructions Pty Ltd has requested a statement of the writer's professional opinion as to whether the lawyers retained by [the company] in relation to the [Tribunal proceedings] conducted the proceedings on [the company's] behalf to the standard of a competent lawyer experienced in construction disputes. In light of the regulatory environment in NSW in relation to legal practice and in relation to residential building work, I have interpreted that question as relating to the standard of a competent lawyer experienced in residential construction disputes in NSW.
Mr Bailey's report responds to this instruction with opinions to the effect that, during the interlocutory stages of the Tribunal proceedings, the defendants failed adequately to identify the documents comprising the home building contract; failed to ensure that the construction expert retained by Mono Constructions, Mr Austin, was aware of the correct contract documents; filed a report of Mr Austin and a response to a Scott schedule both containing "admissions in relation to matters that were properly contestable"; failed adequately to brief Mr Austin with respect to assumptions of fact that could have been established through the client's evidence; failed adequately to identify particular questions on which Mr Austin's opinion was required; failed adequately to brief Mr Austin in preparation for a second conclave of construction experts.
In par 17 of the amended statement of claim it is alleged that "by virtue of the breaches pleaded", the plaintiffs have suffered loss and damage. The particulars given are the $55,955.80 ordered by NCAT in favour of Mr Giovas, the costs payable to Mr Giovas of $137,656.92 and the $2,500 agreed to be paid to Mr Giovas upon withdrawal of the District Court appeal. As to the first two of these, Mono Constructions' case against the defendants necessarily involves that if they had conducted the proceedings differently through interlocutory stages, the Tribunal's decision would have been more favourable. Mono Constructions' proof of damage inherently calls into question the correctness of the Tribunal's resolution of the Giovas dispute.

The advocate's immunity

In Attwells v Jackson Lalic Lawyers Pty Limited [2016] HCA 16 at [2]-[3] French CJ, Kiefel, Bell, Gageler and Keane JJ made the following observations concerning application of the advocate's immunity to the work of solicitors (some citations omitted): [2] In D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12 this Court held that the advocate's immunity from suit under the common law of Australia in respect of his or her participation in the judicial process extends to protect a solicitor involved in the conduct of litigation in court. In reaching that conclusion, the Court declined to reconsider its earlier decision in Giannarelli v Wraith (1988) 165 CLR 543; [1988] HCA 52, in which it was held that the advocate's immunity extends to "work done out of court which leads to a decision affecting the conduct of the case in court". That extension of the scope of the immunity was justified by the view that, as Mason CJ said: "it would be artificial in the extreme to draw the line at the courtroom door". But the immunity was not extended to all work in any way connected to litigation. Mason CJ explained: "Preparation of a case out of court cannot be divorced from presentation in court. The two are inextricably interwoven so that the immunity must extend to work done out of court which leads to a decision affecting the conduct of the case in court. But to take the immunity any further would entail a risk of taking the protection beyond the boundaries of the public policy considerations which sustain the immunity. I would agree with McCarthy P in Rees v Sinclair [1974] 1 NZLR 180 at 187 where his Honour said: '... the protection exists only where the particular work is so intimately connected with the conduct of the cause in Court that it can fairly be said to be a preliminary decision affecting the way that cause is to be conducted when it comes to a hearing.'" [3] This statement of the scope of the immunity by Mason CJ was confirmed in D'Orta, in which Gleeson CJ, Gummow, Hayne and Heydon JJ said of the boundary of the immunity: "there is no reason to depart from the test described in Giannarelli as work done in court or 'work done out of court which leads to a decision affecting the conduct of the case in court' or ... 'work intimately connected with' work in a court. (We do not consider the two statements of the test differ in any significant way.)"
From their Honours' explanation of the public policy basis of this immunity, in subsequent passages of the joint judgment quoted below, it is apparent that the immunity attaches to any work of a solicitor in connection with a court case that is alleged to have affected the court's decision. Where damages are identified and quantified as the excessive amount of a court order adverse to the plaintiff, it necessarily follows that the allegedly negligent legal work in respect of which the damages are claimed must have been work that affected the court's determination of the case. That is the very class of work for which solicitors have immunity from liability in negligence.
The following partial extracts from [5]-[6], [34]-[35] and [52] of the majority judgment in Attwells v Jackson Lalic Lawyers Pty Limited make this clear (some citations omitted): [5] […] [T]he intimate connection required to attract the immunity is a functional connection between the advocate's work and the judge's decision. As Mason CJ said in Giannarelli, the required connection is between the work in question and the manner in which the case is conducted in court. Both D'Orta and Giannarelli were concerned with claims which impugned a judicial determination to which the allegedly negligent work of the advocate contributed. As will be seen from a closer consideration of the reasoning in D'Orta, the public policy, protective of finality, which justifies the immunity at the same time limits its scope so that its protection can only be invoked where the advocate's work has contributed to the judicial determination of the litigation. [6] In short, in order to attract the immunity, advice given out of court must affect the conduct of the case in court and the resolution of the case by that court. […] [34] [T]he immunity is not justified by a general concern that disputes should be brought to an end, but by the specific concern that once a controversy has been finally resolved by the exercise of the judicial power of the State, the controversy should not be reopened by a collateral attack which seeks to demonstrate that that judicial determination was wrong. [The plurality in D'Orta-Ekenaike v Victoria Legal Aid] said [at [48]]: "[T]he central justification for the advocate's immunity is the principle that controversies, once resolved, are not to be reopened except in a few narrowly defined circumstances. This is a fundamental and pervading tenet of the judicial system, reflecting the role played by the judicial process in the government of society." [35] Their Honours explained that, where a final order has been made resolving litigation, a claim that "but for the advocate's conduct, there would have been a different result" is objectionable as a matter of public policy. That is because the consequences of the decision about which the claimant wishes to complain are "consequences flowing from ... a lawful result ... lawfully reached". The advocate's immunity is, therefore, justified as an aspect of the protection of the public interest in the finality and certainty of judicial decisions by precluding a contention that the decisions were not reached lawfully. [52] […] The advocate's immunity is grounded in the necessity of ensuring that the certainty and finality of judicial decisions, values at the heart of the rule of law, are not undermined by subsequent collateral attack.[…]
Their Honours described limitations on the scope of the immunity in the following passages: [46] Once it is appreciated that the basis of the immunity is the protection of the finality and certainty of judicial determinations, it can be more clearly understood that the "intimate connection" between the advocate's work and "the conduct of the case in court" must be such that the work affects the way the case is to be conducted so as to affect its outcome by judicial decision. The notion of an "intimate connection" between the work the subject of the claim by the disappointed client and the conduct of the case does not encompass any plausible historical connection between the advocate's work and the client's loss; rather, it is concerned only with work by the advocate that bears upon the judge's determination of the case. [49] […] [I]t is a functional connection between the work of the advocate and the determination of the case by the court which is necessary to engage the immunity. […] [50] The insufficiency of a mere historical connection between an advocate's work and a litigious event may be illustrated by reference to negligent advice to commence proceedings which are doomed to fail. No one suggests that the immunity is available in such a case. Likewise, advice to cease litigating or to continue litigating does not itself affect the judicial determination of a case.
In this case pars 16 and 17 of the amended statement of claim clearly plead that the defendants' allegedly negligent work on Mono Constructions' case in the Tribunal had "a functional connection" with the determination of the dispute by NCAT. Mono Constructions' claim in respect of this negligent work is therefore defeated by the advocate's immunity. There are some remnants of the sub-paragraphs of par 16 that allege failings to which the immunity would not attach. These appear to be limited to sub-par p concerning failure to advise that a cross-claim be filed against Mr Giovas and sub-pars r and s concerning advice with respect to withdrawal of the District Court appeal. As to each of these sub-paragraphs, see [50] of the majority judgment in Attwells v Jackson Lalic Lawyers Pty Limited.
Insofar as Mono Constructions may wish to pursue the allegation of negligence in failing to advise upon a cross-claim, its present pleading is inadequate because there is no assertion that damage was caused. For a complete cause of action on this account Mono Constructions would have to allege what cross-claim it could have mounted against Mr Giovas, what sum might have been expected to be recovered and what value is said to be placed on the loss of the chance to pursue this. In relation to withdrawal of the District Court appeal, Mono Constructions would have to allege and particularise its prospects of success on such an appeal and what reduction of NCAT's order could have been expected. Again, this would be an allegation of damages in the nature of a lost chance.

The whole amended summons is to be struck out

Three of the plaintiffs are to be removed from the proceedings; most of the particulars of negligence are unsustainable; the remaining particulars could only be pursued if supported by the pleading of additional facts; any case for failure to make costs disclosure contrary to the Legal Profession Act 2004 (NSW)(rep) or for misleading or deceptive conduct would require extensive additional pleading. In those circumstances the whole of the amended statement of claim must be struck out, with liberty to Mono Constructions to re-plead.

The plaintiffs' notice of motion

Because Mono Constructions is to re-plead, the defence that has been filed is redundant. There is no occasion to determine the plaintiffs' claim for further and better particulars of that defence. With respect to the plaintiffs' application for an order that their file be delivered up, I am satisfied from the affidavits filed on behalf of the defendants that the whole of the file so far as they had control of it, either in hard copy or electronic form, has been handed over to the plaintiffs or at least made available to them for access including copying or printing.
On the hearing of the plaintiffs' motion I was invited to consider particular documents that have been provided, the content of which may suggest the existence of other documents that have not been delivered up. There is no warrant for descending into a factual examination of the possible existence of a small number of additional documents in circumstances where the scope of the allegations to be pursued by the plaintiffs has now been radically narrowed. The question of whether there may be missing documents can be revisited after Mono Constructions has filed a further amended statement of claim and after the defendants have joined issue by way of an amended defence. Such a further enquiry with respect to documents that are part of the file relating to the Tribunal proceedings will be limited to documents that may bear upon the issues that become defined by the amended pleadings.

Orders

During the hearing of the notice of motion Ms Eleni Monovasios and Mr Fotios Monovasios asserted that the second, third and fourth plaintiffs may have a cause of action, albeit not presently pleaded. They were not able to articulate what that might be. They asked that those plaintiffs not be removed from the proceedings until they have explored the possibility that a case may be able to be formulated. However, as no claim by those plaintiffs is presently pleaded and nor can I see any claim that could be constructed upon on the facts alleged, I determined that the removal order should be made. If, upon the first plaintiff obtaining legal advice, it appears to any of the second third and fourth plaintiff's that they can plead a cause of action, then one or more of them may apply to be re-joined.
Despite the relatively small amount of damages alleged in the present statement of claim, I have not at this stage made an order for removal of the proceedings to the District Court. The appropriateness of the proceedings continuing in this Court will need to be reviewed when a further amended statement of claim has been filed.
The orders made on 28 April 2020, for the reasons set out above, were as follows: 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. 6. The plaintiffs pay the defendants' costs of the two notices of motion filed 26 February 2020 and 20 March 2020 including the costs of today's hearing. 7. The plaintiffs' notice of motion filed 20 March 2020 is dismissed.

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: 30 April 2020

Legal Profession Act 2004(NSW)

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