Golovanov v McGrath Property Management Pty Ltd

Supreme Court of NSW|2021-11-11|Before: Ierace J

Solicitors: Clyde & Co (First Defendant) File Number(s): 2021/229075

Judgment

HIS HONOUR: By notice of motion filed on 27 August 2021, the first defendant, McGrath Property Management Pty Ltd, seeks an order that certain proceedings be dismissed pursuant to r 13.4(1)(b) of the Uniform Civil Procedure Rules 2005 (NSW) ("the UCPR") or, alternatively, that a statement of claim filed on 9 June 2021 by the plaintiff, Alexander Golovanov, be struck out pursuant to rr 14.28(1)(a) or (b) of the UCPR. The first defendant also seeks an order that the plaintiff pay the defendant's costs of the proceedings, as well as the costs of this notice of motion.
The basis of the orders sought, as outlined by the first defendant, is that the plaintiff's claim for relief fails to disclose a reasonable cause of action.

The background to the motion and subsequent filings

At the core of the dispute between the parties is the interpretation of a residential lease that the plaintiff entered into, by which he rented a unit in Rushcutters Bay ("the property"). The first defendant was identified in the lease as the landlord's agent. A copy of the lease, which is styled a "Standard Form Residential Tenancy Agreement", is attached to an affidavit affirmed on 6 September 2021 by Alexandra Nieuwenhuyze. Ms Nieuwenhuyze is an employee of a subsidiary of McGrath Ltd, of which the first defendant is also a subsidiary. The lease named the landlord as Kevin Tu ("the landlord") and the first defendant as the landlord's agent. The lease bears the plaintiff's signature and, alongside the words "landlord or landlords agent on behalf of the landlord", apparently the signature of an officer of the first defendant. It is expressed to be for a period of 12 months, commencing on 25 August 2017. It appears that the plaintiff continued to reside in the property until 30 May 2019.
The background to the litigation and the history of filings is partly set out in an affidavit affirmed by Daniel McCarthy on 3 September 2021 in support of the notice of motion. Mr McCarthy is a solicitor employed by Clyde & Co, the firm that represents the first defendant. The affidavit was read at the hearing of the motion without objection.
By statement of claim filed on 9 June 2021 and served on the first defendant on 25 June 2021, the plaintiff sought compensation of $20,000,000 from "McGrath Property Management Edgecliff" as the first defendant and "McGrath Estate Agents Head Office" as the second defendant. There were no pleadings in the document as filed, although it is apparent from Mr McCarthy's affidavit that the version served upon them included pleadings.
On 27 July 2021, in anticipation of a directions hearing, Mr McCarthy wrote to the plaintiff by email attaching a proposed set of orders and advising him of certain matters. One was that "McGrath Property Management Edgecliff" did not exist and that the statement of claim should be corrected by agreement to the first defendant.
Another matter concerned the sufficiency of the pleadings in the statement of claim. Mr McCarthy explained that r 13.4(1) of the UCPR permitted the court to dismiss proceedings if no reasonable cause of action is disclosed and that, in his opinion, the statement of claim did not disclose one. He continued: "… we suggest that you agree an order is made that you amend your statement of claim to disclose a cause of action. If you fail to provide an amended statement of claim, we put you on notice that our client reserves the right to apply for dismissal of your claim under rule 13.4(1) UCPR."
The plaintiff attended the directions hearing. By email dated 5 August 2011, a partner of Clyde & Co, Jacques Jacobs, forwarded a letter in which he encouraged the plaintiff to "seek legal advice including from a community legal centre". Mr Jacobs continued: "As foreshadowed in our email correspondence and at the directions hearing, we write to explain the issues with your statement of claim filed 9 June 2021."
Mr Jacobs then referred to paragraphs of the pleadings in the statement of claim as apparently served on 25 June 2019.
On 24 August 2021 the plaintiff served on the first defendant a document titled "statement of claim" which has not been filed ("the 24 August 2021 document"). It correctly named the first defendant and contained "pleadings and particulars" which were apparently in the same terms as those that had been in the statement of claim as served on 25 June 2021. The relief claimed was compensation in the same amount, being $20,000,000. At the hearing the plaintiff explained that he had difficulty in complying with filing requirements. The plaintiff also served a document titled "statement". It was agreed that both documents should be discarded for the purposes of the hearing of the motion.
On 3 September 2021, the plaintiff filed and served an amended statement of claim ("the ASoC") which correctly described the first defendant. The "pleadings and particulars", which were in the same terms as in the 24 August 2021 document, were simply stated: "1. McGrath Estate Agents were in breach of the terms of plaintiff's contract for the lease of [the property]. 2. Plaintiff had lung cancer diagnosed in November 2016. It was cured and plaintiff didn't feel any symptoms during the first half of 2018. 3. The defendant, as a result of the breach, improper performance of their obligations under the contract, caused irreparable harm to plaintiff's mental and physical health by their inaction, during the period from July 2018 to May 2019. 4. The defendant failed to eliminate the mould in [the property]. Their elimination of the hot water leak was untimely, thus causing plaintiff severe physical, psychiatric and mental suffering and mental disorders (nervous shock). 5. As a result of the above during this period plaintiff's body was weakened and for the second time his lung cancer came back as well as the psychological trauma which progressed into more severe forms in the subsequent period of my life to the present." The copy of the filed ASoC that was served upon the first respondent was accompanied by a document titled "amended statement" that differed from that served on 24 August 2021 in one respect, being that a reference to "McGrath Property Management Edgecliff" was crossed out and replaced with the name of the first defendant ("the Amended Statement"). The Amended Statement had not been filed with the ASoC.
Although the notice of motion identified only the statement of claim filed on 9 June 2021, the hearing proceeded on the basis that the ASoC filed on 3 September 2021 was to be regarded as the subject of the motion, which I note occasioned no disadvantage to the plaintiff, since it was the only filed version that had pleadings.
On 10 September 2021, in response to the notice of motion and the supporting affidavit of Mr McCarthy, the plaintiff filed a "Reply" ("the first reply"). On 1 October 2021, the first defendant filed written submissions. On 6 October 2021, the plaintiff filed a further document titled "Reply", which was significantly different in context from the first reply ("the second reply").
The plaintiff also filed a lever-arch folder, coloured purple, of 368 pages of documentation ("the purple folder"). The contents include a transcript of the plaintiff's academic record at TAFE NSW; correspondence concerning his attempts to gain employment with the assistance of the Commonwealth government's Disability Employment Services; documentation concerning his medical condition and treatment; and correspondence and photographs concerning the state of the property.
I allowed the contents of the purple folder into evidence, indicating that the attribution of appropriate weight would remain a critical consideration.

The Lease and the Agency Agreement

I note that the Lease contains a number of "Standard Terms of Agreement". Clause 18 is titled "Landlords General Obligations for Residential Premises", and includes the following obligations: "18 The landlord agrees 18 1 to make sure that the residential premises are reasonably clean and fit to live in and … 18 3 to keep the residential premises in a reasonable state of repair considering the age of the rent paid for and the prospective life of the premises … 18 5 to comply with all statutory obligations relating to the health or safety of the residential premises"
Ms Nieuwenhuyze also annexed to her affidavit a copy of an "Exclusive Residential Management Agency Agreement" between the first defendant and the landlord in respect of the subject apartment, signed by the parties on 28 November 2016 and expressed to commence the same date ("the agency agreement"). Clauses that were relevant to the parties' submissions are as follows.
Clause 1 of the Agency Agreement states that the landlord "authorise[s] [the first defendant] to lease and manage my property".
Clause 5, titled "Repairs and Maintenance" states that: "[The first defendant] is authorised to arrange repairs and maintenance in accordance with my legal obligations, and to engage appropriately qualified trades people to carry out repairs and maintenance, provided that expenditure in excess of $500 for any one item shall not be incurred without my prior approval, except where it is [the first defendant's] opinion that because of an emergency, repairs are necessary for the protection of the premises or the supply of essential services to tenants."
Clause 7, titled "Administration" states that: "[The first defendant] is authorised to carry out the following duties on my behalf: a) Enter into and sign Tenancy Agreements for the property …"
Clauses 9 and 10 are in the following terms: "9. Warranty I warrant that the Property and the fittings and fixtures at the Property are not in dangerous condition and that if: 1. Any dangerous condition comes to my knowledge; I will notify [the first defendant] immediately of such dangerous condition; 2. If any damage occurs to any person because of the dangerous condition of the Property, I will indemnify [the first defendant] and any sub-contractors against all legal claims and proceedings which may arise because of such dangerous condition. 10. Agent's Indemnity and Liability I will hold and keep [the first defendant] indemnified against all actions, suits, proceedings, claims, demands, costs and expenses whatsoever which may be taken or made against them in the course of, or arising out of the proper performance or exercise of any of the powers, duties or authorities of [the first defendant] pursuant to this Agreement."
Clause 17, titled "Premises for Residence" states that: "The Landlord warrants that there is no legal impediment to occupations of the Premises as a residence at the time of entering this agreement and will notify the Agent immediately if any legal impediment to the occupations of the Premises arises during the term of this agreement."

The NCAT proceedings

The purple folder includes a copy of a judgment of the New South Wales Civil and Administrative Tribunal (Consumer and Commercial Division) ("NCAT") dated 19 December 2019 ("the NCAT judgment"), in which the plaintiff was partially successful in a claim against the landlord, based on the lease, for compensation due to there being mould throughout the property which had affected his health.
The NCAT judgment discloses that, at the hearing on 2 October 2019, the plaintiff sought compensation for the "reduction or withdrawal of goods, services or facilities" due to the emergence of the mould and the failure to remove it. The plaintiff had originally nominated McGrath Edgecliff as the respondent but, consequent to orders made on 2 August 2019, the respondent's name was amended to that of the landlord.
In the reasons for decision, General Member Sutherland concluded: "In my view, having considered the mould throughout the property, the health risk to [the plaintiff], the additional tenants occupying the property and the reduction of the facility due to mould … [the plaintiff] is to be [compensated] for 20% of the rent paid for a period from 1 July, 2018 to 27 May, 2019, being 40 weeks … The total payable by the landlord to [the plaintiff] is $3,971.20."
The first defendant was neither named as a party to the proceedings in the decision nor subject to any order of the Tribunal.

The plaintiff's case

I infer from the plaintiff's ASoC pleadings that the essence of his case is that: 1. The plaintiff and the first defendant were parties to the lease. 2. Between July 2018 and May 2019, the first defendant was in breach of its obligations pursuant to the terms of the lease. 3. The alleged breaches were, firstly, a failure by the first defendant to resolve a hot water system leak in a timely fashion. Secondly, the first defendant then failed to "eliminate the mould in [the property]" that grew as a result of the untreated hot water system leak. 4. As a consequence of the breaches, in particular the presence of the mould, the plaintiff suffered serious mental and physical harm, which included a relapse of a pre-existing condition of lung cancer and associated psychological trauma.
It is to be noted that a critical element in the plaintiff's case is his contention that, pursuant to the lease agreement, the first defendant was obliged to repair the hot water system and clean out the mould. In the first reply, the plaintiff submitted: "The first defendant … was responsible for the maintenance of [the property] under [the Lease], so it was their responsibility to remove the mould within established time limits"
The plaintiff contended that he was obliged to remain in the property for a period of 40 weeks while he awaited the availability of social housing. He stated, also in the first reply, that: "The agent was obliged to move me to another safe house for the period of the cleaning, drying and repairing [of the property] from mould, so as not to harm my health."
By the time the plaintiff filed the second reply, he was aware of the nature of the basis of the first defendant's motion, namely, a denial that the lease created a contractual relationship between it and the plaintiff. In his second reply, the plaintiff referred to cll 9 and 10 of the agency agreement and submitted: "4 I'm not familiar with the set of rules on how such an agreement (between the landlord and agent) should be structured and what is allowed in this type of agreement. I genuinely do not understand and do not agree that the landlord is fully responsible for the problem that I faced. I'm not sure if [the first defendant] even contacted [the landlord] in regards to the problem with mould in [the property]. … 12 … If they contacted him and he was responsible for not fixing this problem, then so be it. However, if they didn't contact him, then I think they are responsible for not fixing this problem. If [the landlord] was not aware of the issue, then they were responsible to communicate with him and tell him to fix this problem. 13 I ask the Supreme Court to review if the Exclusive Residential Management Agency Agreement between [the landlord] and [the first defendant] complies with Australian Laws, because I don't understand how they are not responsible for anything in this sort of situation. 14 I ask the defendant to provide any evidence regarding their communication with the landlord … in regards to the mentioned mould problem to find out if he was even aware of the issue. 15 I ask the Supreme Court to decide who is responsible for not fixing mould in [the property] ([the landlord] or [the first defendant]), which led to serious problems with my health and me recommencing my cancer treatment."

The first defendant's submissions

The first defendant submitted that the plaintiff's ASoC did not disclose an underlying cause of action and therefore it could not possibly succeed. The plaintiff's claim is dependent upon the first defendant having contractual obligations to the plaintiff arising from the lease, whereas the lease did not constitute a contract between the parties and therefore it could not have created any such obligation.
The first defendant noted the existence of a general rule to the effect that an agent is not liable on a contract unless it can be shown to be the real principal. The lease disclosed the name of the principal, being the landlord, and identified the first defendant as the principal's agent. The substance of the lease identified the landlord as being responsible for the condition of the property, including its fitness as a residence, cleanliness, repair and compliance with statutory obligations concerning health and safety: cl 18.

The plaintiff's submissions

The plaintiff made oral submissions on two dates. An interpreter in the Russian language had been booked for the first day of the hearing for a period of two hours. Following the first day of the hearing, the plaintiff contacted my Chambers indicating that he had not completed his oral submissions during the period that the interpreter was available. The first defendant did not oppose a second date being allocated for that purpose.
On the first day of the hearing, the plaintiff referred to correspondence to the first defendant from himself and his health care professionals, copies of which were in the purple folder, requesting that the first defendant address the health concerns in the property. Through the interpreter, he said: "I have pleaded with [the first defendant] to help me, but they were not doing anything at all. And now they are saying that the responsible party is [the landlord]."
On the second day of the hearing, the plaintiff stated that the landlord had not visited the property and he did not have contact details for him. The works, visits and inspections were by the first defendant and the agency agreement provided that the landlord would compensate the agent, on the plaintiff's interpretation, "if any damage was done to anyone because of the dangerous state of the premises". He continued: "I do not agree that the landlord should be fully responsible for the actions of the agent, that [the first defendant] has contacted [the landlord] about the problem."
The plaintiff said that NCAT had found the first defendant to be liable, not the landlord: "… the decision of the Tribunal that clearly felt what have been the fault of [the first defendant] and nowhere it state that [the landlord] was responsible; … and how could that person be aware of what has been happening in [the property] if he waived the control of the situation to [the first defendant], and how could he inform [the first defendant] what was happening in [the property] if he gave that control to them?"
The plaintiff stated that he had commenced steps to join the landlord to be added as a third defendant, but maintained that the first defendant was liable. I note that a notice of motion to this effect was filed by the plaintiff on 25 October 2021.

The legislative provisions

This Court has an express discretionary power to dismiss proceedings where it is of the view that no reasonable cause of action has been disclosed in relation to either the proceedings generally or any claim for relief in the proceedings: UCPR, r 13.4(1)(b). This is the order primarily sought by the first defendant. Rule 13.4 provides: "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)."
This Court also has an express discretionary power to strike out a pleading if it discloses no reasonable cause of action, which is the alternative order sought by the first defendant. This is provided for in r 14.28 of the UCPR, as follows: "14.28 Circumstances in which court may strike out pleadings (1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading - (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. (2) The court may receive evidence on the hearing of an application for an order under subrule (1).
The test applied to determine whether no reasonable cause of action is disclosed, which is well known, is derived from the principles set out by Barwick CJ in General Steel Industries v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 at 128-130 ("General Steel Industries"). The Court is to consider whether "the case of the plaintiff is so clearly untenable that it cannot possibly succeed": see at 130.
In General Steel Industries, Barwick CJ, at 128, emphasised the need for a court to be clearly satisfied that there is no reasonable cause of action disclosed. "The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion … the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated."
Rule 13.4(1)(b) of the UCPR was considered by the Court of Appeal in Ugur v Attorney General for New South Wales [2019] NSWCA 86. White JA, at [70], considered the purposes of the power in r 13.4 of the UCPR: "One of the purposes of the power in r 13.4 of the UCPR to dismiss a proceeding summarily as frivolous or vexatious or as disclosing no reasonable cause of action or as being an abuse of the process of the court, is to save the defendant from the cost, delay and vexation in having to defend clearly untenable proceedings which raise no real question of fact or law. Another purpose is the protection of the interests of the public in not having scarce judicial resources wasted in dealing with frivolous applications."
In Leerdam & Anor v Noori & Ors (2009) 227 FLR 210; [2009] NSWCA 90, Macfarlan JA observed that the General Steel Industries principles may more frequently be satisfied where questions of law are in issue. His Honour, at [75], stated that: "Such a course should only be taken in a clear case. Descriptions of the test to be applied have included such phrases as 'so obviously untenable that it cannot possibly succeed' and 'manifestly groundless' (General Steel Industries … at 129). Particular caution is required where factual questions are involved as it is difficult to predict in advance of a final hearing the precise manner in which the evidence will unfold. Whilst caution is also required where, as here, the application turns on questions of law and there is no reasonable prospect that deficiencies in what is pleaded will be able to be cured by amendment, opportunities to summarily dismiss or strike out claims will arise more frequently."
In Seidler v Carrol & O'Dea [2013] NSWSC 338, McCallum J (as her Honour then was) set out a summary of the relevant principles in relation to a strike out application under r 14.28 of the UCPR. As part of this summary, her Honour, at [6]a, alluded to the need to consider such applications in light of s 56 of the Civil Procedure Act 2005 (NSW): "… the position must be considered in light of the requirements of s.56 Civil Procedure Act which obliges the court to exercise its powers to 'facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings: Gangi v Boral Resources (NSW) Pty Ltd [2012] NSWSC 398 per [Schmidt J] at [30]; Pacanowski & Anor v Wakerman & Ors [2009] NSWCA 402 per Tobias JA at [19] …"
As such, the Court must have regard to the overriding purpose of civil litigation contained in s 56 of the Civil Procedure Act, which relevantly provides: "56 Overriding purpose (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the 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. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. (3A) (Repealed) (4) Each of the following persons must not, by their conduct, cause a party to civil proceedings to be put in breach of a duty identified in subsection (3) - (a) any solicitor or barrister representing the party in the proceedings, (b) any person with a relevant interest in the proceedings commenced by the party. (5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs. …"
As Seidler v Carrol & O'Dea concerned pleadings provided by a self-represented litigant, McCallum J also discussed the specific considerations which must be balanced in such a case: "8 Since Ms Seidler represents herself in the proceedings, it may be assumed that she has had to draft the proposed amended pleading either without any, or any substantial, assistance from a lawyer. Views may differ as to the extent to which that is a relevant consideration in determining whether a pleading should be allowed to stand. Access to justice is a fundamental aspect of the administration of justice. The court should be vigilant to guard against the rigid application of principle at the expense of facilitating the just resolution of matters properly brought forward for judicial determination. To that end, a degree of flexibility and even indulgence might appropriately be afforded to a self-represented litigant in a proper case. So much is recognised in the remarks of Kirby J in Attorney-General, Re; Ex parte Skyring [1996] HCA 4; (1996) 135 ALR 29, where his Honour referred to the need for 'vigilance, and not impatience' in the case of an applicant who is not legally represented. 9 The fundamental importance of facilitating equal access to justice warrants the giving of close consideration to the terms of a pleading in order to discern, with an open mind, whether there is a reasonable cause of action nestling within obscure or difficult language used by a self-represented litigant. 10 Conversely, however, a misconceived or poorly-pleaded claim imposes considerable stress on the due administration of justice and ought equally to be guarded against. The same vigilance must accordingly be exercised not to suffer the court to become a forum for the agitation of grievances which lack any juridical foundation."

Consideration

I respectfully concur with her Honour's observations extracted above from Seidler v Carrol & O'Dea. The plaintiff informed me that he had attempted to obtain legal assistance from a number of agencies including community legal centres but was advised that it was unavailable for a matter such as this. I approach the application with particular care in light of the fact that the plaintiff is a self-represented litigant.
I note that the plaintiff's characterisation of the NCAT decision, insofar as he suggested that the first defendant was held to be liable, is at odds with the judgment itself.
The plaintiff's oral submissions substantially echoed the content of his second reply, to the effect that it appeared to him to be self-evident that since the first defendant was the point of contact concerning the maintenance of the apartment, and since he had no contact with the landlord or means of directly contacting him, it followed that the first defendant should be liable.
Regrettably, it appears that the plaintiff has taken a view as to who, in his opinion, should be held accountable for his alleged suffering as opposed to who is responsible at law, if anyone.
The plaintiff's claim presumes that, in due course, he can establish that the terms of the lease render the first defendant liable for necessary repairs to the property which is the subject of the lease. I find that the only parties to the lease are the plaintiff and the landlord and that it expressly provides that the landlord bears the responsibility of carrying out necessary repairs and ensuring that it complies with statutory obligations relating to health and safety. All references in the lease to the first defendant are in the context of it being the landlord's agent and therefore it could not be liable: Railway Commissioners for New South Wales v Orton (1922) 30 CLR 422; [1922] HCA 16 at 426 per Knox CJ, Gavan Duffy and Starke JJ.
Accordingly, I find that the proceedings disclose no reasonable cause of action by the plaintiff against the first defendant. They should be dismissed pursuant to r 13.4(1)(b) of the UCPR.

Costs

The plaintiff was put on notice by the first defendant by email dated 27 July 2021 that his statement of claim was, in the opinion of a solicitor acting for the first defendant, fatally deficient. By letter dated 5 August 2021, the first defendant's solicitors advised the plaintiff in detail of those deficiencies. The tone and content of the letter was, in my view, impressive in its sensitivity to the fact that the plaintiff was seriously unwell, unable to communicate in the English language and without the benefit of legal representation through no fault of his own. The plaintiff was warned that if he did not remedy the flaws in his statement of claim, the first defendant would seek to have it struck out and would seek costs.
In all of those circumstances, I find that an order that the plaintiff pay the first defendant's costs in the proceedings and the costs of the notice of motion is appropriate.

Orders

I make the following orders: (1) Pursuant to r 13.4(1)(b) of the Uniform Civil Procedure Rules 2005 (NSW), dismiss the proceedings against the first defendant. (2) The plaintiff to pay the first defendant's costs of the proceedings and the first defendant's costs of the notice of motion dated 27 August 2021.

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: 02 March 2022

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (13 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (12)

Cited By (2)