Iverson v Howen & Anor

Michael Iverson (plaintiff) PARTIES : Alexander Howen (1st defendant) Francis Vouroudis t/a Photios Vouroudis & Co (2nd defendant)

G B Evans (plaintiff) COUNSEL : G O' L Reynolds SC & N R Murray (1st defendant) D Davies SC (2nd defendant)

Champion Legal (plaintiff) SOLICITORS : McCabe Terrill Lawyers Pty Ltd (1st defendant) Yeldham Price O'Brien Lusk (2nd defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

2007/20163 Michael Iverson v Alexander Howen & Anor

JUDGMENT 1 HIS HONOUR: By statement of claim filed on 31 May 2007, the plaintiff commenced proceedings against the first defendant, a barrister, and the second defendant, a solicitor, arising out of their conduct of a dispute between him and his employer, Qantas Airways Limited. He had been working for Qantas for many years, first as a flight attendant and later as flight services director, until his employment was suspended in November 1998. The suspension was the result of certain allegations made against him, the nature of which are not material for present purposes. He maintained that the suspension was without justification, and shortly afterwards he instructed the defendants to act for him in the dispute. 2 At the end of 1998 and in the early months of 1999, there was communication between the plaintiff and Qantas through his solicitor, the second defendant. However, on 28 April 1999 Qantas terminated his employment. The statement of claim recites that two days later he conferred with both defendants about avenues of redress which might be available to him, including an application for relief in respect of the termination to the Industrial Relations Commission under s170CE of the Workplace Relations Act 1996 (as amended) (Cth). 3 As it stood at the time, s170CE(7) provided that such an application must be lodged within 21 days after the day on which the termination took effect. The plaintiff's employment having been terminated on 28 April 1999, that period expired on 19 May 1999. Such an application was lodged by the second defendant, but not until 23 November 1999, roughly seven months out of time. 4 It is the plaintiff's case that he did not become aware of that time limitation until late in August 1999, and then from a source other than the defendants. However, on 30 August he was told by the first defendant that he would have the benefit of a provision for extension of time. That provision was to be found in s170CE(8), enabling the Commission to accept an application out of time if it considered "that it would be unfair not to do so". 5 The application was heard by Commissioner Raffaelli on 22 December 1999 and 18 February 2000. The Commissioner reserved his decision. The parties then embarked on negotiation and the Commission was asked not to give a decision while they were in progress. That course took some time but was ultimately unsuccessful, and Commissioner Raffaelli delivered his decision 31 May 2001. He declined to accept the application because it was out of time and he found that there was not an acceptable explanation for the delay. Accordingly, the application was dismissed. 6 The application had been conducted on the basis that the failure to lodge it within time was the result of the plaintiff's inactivity because of his mental and emotional state. A psychiatric report had been tendered, disclosing that after his dismissal the plaintiff was in a state of extreme anxiety which deteriorated into a major depression. The plaintiff instructed the defendants to lodge an appeal against the Commissioner's decision to the Full Bench of the Industrial Relations Commission. The statement of claim recites that, in the course of a conference with senior counsel on 6 July 2001, he was advised that there had been "representative error" on the part of the defendants, that is, that they were responsible for late lodgement of the application. 7 The plaintiff pursued the appeal with different representation, and was allowed to amend the grounds in the notice of appeal accordingly. The Full Bench received further evidence bearing upon this question, and on 10 August 2001 gave judgment allowing the appeal on the basis that representative error had been "the substantive reason" for the lodgement of the application out of time. In the event, on 25 March 2002 he settled the claim against Qantas on the basis of monetary compensation rather than reinstatement of his employment. 8 The statement of claim seeks damages from the defendants for breach of duty, sounding both in contract and in tort. The focus of the claim for damages is the loss of the plaintiff's opportunity to secure his reinstatement.

The present applications 9 The defendants seek orders that the plaintiff's claim be dismissed under Pt 13, r4 of the Uniform Civil Procedure Rules 2005, or struck out under Pt 14, r28. It is said that the claim is statute barred by s14 of the Limitation Act 1969. Their fall-back position is that certain particulars of breach of duty should be struck out in the light of the principle of advocate's immunity. 10 Mr Davies SC, for the second defendant, provided written submissions and developed them orally. Mr Reynolds SC, who appeared with Mr Murray for the first defendant, presented oral argument but otherwise adopted Mr Davies' submissions. Counsel for the plaintiff, Mr Evans, presented written and oral submissions. In the course of the hearing, he also sought leave to re-plead and, by agreement, that matter was dealt with by written submissions furnished subsequently.

Limitation 11 The defendants' case is that the claim is clearly statute barred so that, for the purpose of the two rules relied upon, no reasonable cause of action is disclosed: Gordon v NSW Insurance Ministerial Corporation [2006] NSWSC 350 at [14] (Grove J). The all too familiar s14 of the Limitation Act provides that an action is not maintainable if brought after the expiration of six years "from the date on which the cause of action first accrues to the plaintiff …". The plaintiff's action is founded upon the defendants' breach of duty in failing to lodge the application to the Industrial Relations Commission within the time limited by the legislation which, as I have said, expired on 19 May 1999. It was not until a little over eight years later, on 31 May 2007, that the proceedings in this Court were instituted. 12 It seems clear enough that the claim in contract is statute barred because that cause of action accrued to him when the breach occurred. However, as damage is an essential element of the cause of action in tort, the limitation period for that claim does not commence to run until damage is first suffered. There is a body of authority dealing with this matter, but it is sufficient to refer to the examination of the principles by Giles JA in Wilson v Rigg [2002] NSWCA 246. His Honour said at [21] and [23]: Damage is an element of a cause of action in tort for negligence, and the cause of action is not complete until damage is sustained but is then complete even though further damage is later sustained (see for example, Hawkins v Clayton (1988) 164 CLR 539 at 556-7,559,587; Cheney & Wilson v Duncan [2001] NSWCA 197 at [26].) … There must be actual damage, as distinct from the risk or prospect of damage or contingent damage ( Wardley v Australia Ltd v The State of Western Australia (1992) 175 CLR 514 at 527; Registrar General v Cleaver (1996) 41 NSWLR 713 at 719; Cheney & Wilson v Duncan at [24]), and the damage must be measurable or beyond what can be regarded as negligible ( Cartledge v E Jopling & Sons Ltd (1963) AC 758 at 771; Wardley Australia Ltd v The State of Western Australia at 531; Scarcella v Lettice (2000) 51 NSWLR 302 at 306; Cheney & Wilson v Duncan at [25]). Within these guides, however, whether and when damage is suffered is a matter of fact. 13 It was submitted by the defendants that the plaintiff first suffered damage immediately upon the expiration of the time limited for filing the application to the Industrial Relations Commission. For the plaintiff, it was argued that he did not suffer measurable damage until his claim against Qantas was settled on 25 March 2002. If that is so, of course, the present proceedings were instituted within the six year limitation period. 14 In Wilson v Rigg, Mr Wilson brought proceedings in this Court against a solicitor whom he had engaged to represent him in a claim for damages arising from a motor vehicle accident. The solicitor had failed to commence proceedings in respect of the claim within the period of three years limited by s52(4) of the Motor Accidents Act 1988. That subsection provided that a claimant was not entitled to commence such proceedings after that period "except with the leave of the court in which the proceedings are to be taken". The period expired on 1 July 1992 and the proceedings against the solicitor were not instituted until 24 September 1998, a matter of months after the expiry of the six year limitation period.

15 Mr Wilson's claim against the solicitor, like the present claim, pleaded causes of action in contract and in tort arising from the solicitor's failure to commence proceedings within time. (There was also a claim arising from the solicitor's conduct of an unsuccessful application for leave under s52(4), but that is not relevant for present purposes.) Giles JA (with whom Santow JA and Foster AJA agreed) noted at [20] that the claim in contract was statute barred because that cause of action accrued immediately upon the breach, that is, upon the expiry of the period prescribed by the Motor Accidents Act. 16 As to the claim in tort, Giles JA upheld the finding of the primary judge that it was also statute barred because time commenced to run from the expiry of the prescribed period. Giles JA said that Mr Wilson's cause of action was a valuable asset, the value of which was diminished once the solicitor had failed to commence proceedings by 1 July 1992. It was diminished because it was likely that the defendant in the claim for personal injury would rely upon the time bar, that Mr Wilson would have to apply for leave under s52(4) and that he might not obtain it. His Honour rejected an argument that he did not suffer damage until the defendant pleaded the time bar and he failed in an application for leave. 17 At [28] Giles JA found, as a matter of fact, that there had been a diminution in the value of Mr Wilson's asset and that "it was more than negligible". His Honour continued at [29]: This was more than a risk or prospect of damage, or contingent damage. It was actual damage, albeit that by a successful application for leave the appellant could regain his pre-1 July 1992 position. Damage which is suffered but which might or might not be alleviated if some further event occurs is distinct from a risk or prospect of damage which might or might not be suffered or damage which will be suffered only if a contingency is fulfilled (as in cases such as Wardley Australia Ltd v The State of Western Australia ). 18 Mr Davies and Mr Reynolds submitted that the present case is indistinguishable from Wilson v Rigg. Here also, the breach of duty alleged is the defendants' failure to lodge the application to the Industrial Relations Commission within the time limited by legislation which, nevertheless, conferred upon the Commission a discretion to extend that time. As Mr Davies put it in oral argument, upon the expiry of the limited time "there was a diminution in the value of the asset" which the plaintiff had, that is, "his right to approach the Commission for reinstatement and/or compensation". 19 At first blush, the argument appears to be consistent with the principles expounded in Wilson v Rigg and with the general approach expressed by Ipp AJA in Cheney & Wilson v Duncan [2001] NSWCA 197 at [28], that is, where a client's cause of action becomes statute barred through the negligence of solicitors, "the client's right of action in negligence against those solicitors accrues at the time the action becomes statute barred, and damages are to be assessed at that time …". However, as Giles JA pointed out in Wilson v Rigg, when damage is first suffered in any particular case is a question of fact. The general approach is founded upon the typical case in which it may be assumed that the defendant to the statute barred claim would have pleaded the bar in defence and, if there were provision for an application for an extension of time, that application could not be assured of success. 20 However, as Mr Evans pointed out, the present case is not of that kind. In my view, the defendants' submission does not withstand close scrutiny. The time limit for the application to the Industrial Relations Commission which the applicant sought to make was expressed in weeks, not years. As I have said, the legislation conferred upon the Commission a discretion to accept the application out of time if it considered that it would not be unfair to do so. If the Commission had been asked to take that course shortly after the expiry of the 21 day period, it may have been clear that Qantas was not prejudiced and that no unfairness could have been occasioned. In particular, if the defendants at that early stage had acknowledged to the Commission that it was through their default that the application was not lodged in time, it might have been virtually inevitable that it would have been allowed to proceed. 21 If that were so, it might be arguable that any damage that the plaintiff suffered immediately upon the expiry of the 21 day period was no more than negligible. Whether it is so is not a matter which I could decide on the limited material before me. That may well require closer examination of the procedure in the Industrial Relations Commission and the issues which the Commission would have had to determine in the plaintiff's application. Accordingly, the limitation question is not one appropriate for decision in an application for the summary dismissal, or striking out, of this claim. 22 One of the cases cited by Giles JA in the first passage from Wilson v Rigg quoted above was Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514. Although the factual background to that case is very different from the present case, the admonition at the conclusion of the joint judgment at 533 is apposite: 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. 23 Mr Evans' principal submission was that the plaintiff's cause of action in tort did not crystallise until 25 March 2002 when, as a result of the compromise of the proceedings against Qantas, he effectively abandoned his claim for reinstatement. As I have said, the focus of his claim for damages is the loss of his opportunity for reinstatement. Mr Evans argued, accordingly, that the cause of action did not accrue until that opportunity was lost through the compromise. Until then, he said, any damage was no more than contingent or prospective and was not, in the relevant sense, measurable. He relied upon Commonwealth of Australia v Cornwell [2007] HCA 16, 234 ALR 148, and the cases referred to in that decision. 24 I would question whether there is a true analogy between the situation in the present case and those considered in Cornwell, Hawkins v Clayton (1988) 164 CLR 539 and Wardley v Western Australia. This issue is not an easy one to resolve but, in the event, I do not need to express a concluded view about it. The defendants' application was squarely based upon the proposition that the cause of action accrued immediately upon the expiry of the 21 day period prescribed by the Workplace Relations Act. For the reasons I have given, that is far from clear. In the absence of further material, it is not possible to reach a firm conclusion about when it accrued - whether at the date of the compromise or at some earlier time. 25 It is also unnecessary to decide Mr Evans' final argument, based upon the view expressed by Deane J in Hawkins v Clayton at 590, that there should be excluded from the limitation period any period during which the wrongful acts of the defendants "effectively precluded the institution of the proceedings". That view was not supported by the other members of the Court, and has not since been adopted by this Court: see, for example, Sampson v Zucker [1996] NSWCA 465, per Gleeson CJ at p 3. 26 In the result, it appears that the claim in contract is statute barred. I do not understand Mr Evans to have argued the contrary. The claim in tort, however, should be allowed to proceed.

Advocate's immunity 27 It is necessary, then, to consider the defendants' fallback position. They contend that certain particulars of breach of duty pleaded in the statement of claim should be struck out because they clearly fall within the principle of the advocate's immunity from suit affirmed by the High Court in D' Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12, 233 CLR 1. These are the particulars (n)-(q) in par 51 of the statement of claim. It is necessary to set them out: (n) failing to advise the Plaintiff to adduce evidence to the Commission or to rely on such evidence as was then known to the defendants, showing the material acts or omissions on the part of the First and, or the Second Defendant, or both of them, relating to the reasons, facts and circumstances going to the Plaintiff's failure to lodge the application within the 21 day period as provided for in the legislation; (o) advising the plaintiff to rely in making such Application upon reasons for delay and to adduce evidence in relation thereto, other than such acts and omissions on the part of the Defendants, or either of them; (p) advising the Plaintiff to request the Commission to stay delivery of its decision so as to permit the Defendants to engage in further discussions with the Plaintiff's former employer; (q) failing to include in the grounds of appeal against the Commission's decision of 31 May, 2001, any ground reliant upon the acts or omissions of the First, and, or Second Defendant. 28 Mr Davies, again supported by Mr Reynolds, submitted that those paragraphs allege conduct falling within the immunity because they are concerned with the out of court preparation of the plaintiff's application to the Commission. In Giannarelli v Wraith (1998) 165 CLR 543, Mason CJ said at 559-60: 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. 29 That principle was applied in Keefe v Marks (1989) 16 NSWLR 713. It was adopted in the joint judgment in D' Orta-Ekenaike at [86]. At [89]-[91] their Honours confirmed that, where a barrister is instructed by a solicitor, the immunity extends to the solicitor engaged in preparatory work of that kind. 30 Put shortly, Mr Evans' response was that these particulars are inextricably connected to the failure of the defendants to lodge the application to the Commission within time, and that it is beyond question that that failure could not be the subject of the immunity. In oral submissions he developed an argument that the present case was different from the usual case of negligence on the part of legal representatives, and involved "a course of conduct either deliberately or accidentally, either consciously or subconsciously, … of keeping from the client that which would assist the client by frank and candid advice … and presentation to the court". He added that such "absence of candour" would not attract the policy upon which the immunity is based. 31 Of course, the failure of the defendants to lodge the application in time, which is the subject of the other particulars in par 51, is not covered by the immunity. The question is whether these four particulars are. While the decisions on the immunity to which I was referred might be characterised as cases of negligence in the more familiar sense, I do not understand the immunity to be confined to cases of that kind: see D' Orta-Ekenaike at [25]. It seems to me that the policy considerations leading to the immunity would apply to the particulars in the present case touching upon the preparation of the application for hearing. However, this case raises a question about the scope of the immunity which was not developed in submissions, and I cannot say that the matter is beyond argument. In any event, given that the case is to proceed, there seems little utility in striking out those particulars.

32 As I have said, in the course of the hearing Mr Evans sought leave to re-plead and that question was dealt with by written submissions. Mr Evans supplied a draft of what amounts to an additional claim in fraud against the first defendant only. For the purpose of this application, it was agreed that an affidavit of the plaintiff in certain related proceedings should be read. The proposed amendments would add several paragraphs to the existing statement of claim. 33 Put shortly, the effect of the amendments is as follows: · Between 28 April 1999 and August 99, that is, between the plaintiff's dismissal and the time when he first raised the matter of the three week time limit with the first defendant, the first defendant "purported to exercise personal and individual judgement" inconsistent with the plaintiff's instructions. Having arrived at his own opinion about the state of the plaintiff's mental health, he decided that it was in the plaintiff's best interests not to commence any proceedings to obtain relief and, for the same reason, decided not to advise the second defendant to file an application on the plaintiff's behalf. (par 52) · Notwithstanding the first defendant's professional opinion that an unfair dismissal application was the plaintiff's best option to obtain relief, he made a personal judgement not to advise the second defendant to lodge such an application, not to inform the plaintiff of his decision, and not to inform the plaintiff or the second defendant of his reason for that decision. (par 53) · In behaving in that manner up to the time of the commencement of the proceedings in the Industrial Relations Commission, the first defendant was in breach of his duty as the plaintiff's legal representative and his conduct was fraudulent. (par 54) · In breach of that same duty, the first defendant advised the plaintiff to obtain medical opinion(s) for the purpose of seeking an extension of time without telling him the true reason why proceedings had not been commenced. (par 55) · Prior to and between 22 December 1999 and 18 February 2000, the hearing dates of the application for extension of time, the first defendant failed to convey to the Commission the true reason for proceedings not having been commenced, either in reasons to be advanced to the Commission or in the course of the hearing of the application. (par 56) · Throughout the period between the expiration of the time limited for the application to the Commission to the termination of his retainer, the first defendant fraudulently failed to inform the plaintiff or the Industrial Relations Commission of the true reason for the proceedings not having been commenced. (par 57) · The whole of the first defendant's conduct was deliberate and fraudulent. (par 58). 34 Paragraph 59 asserts that the plaintiff relies upon s55 of the Limitation Act. In par 60 he relies on particulars (n)-(q) in par 51, referred to above, for the purpose of the new claim and in support of the application of s55. Relevantly, that section provides: s 55 Fraud and deceit (1) Subject to subsection (3) where: (a) there is a cause of action based on fraud or deceit, or (b) a cause of action or the identity of a person against whom a cause of action lies is fraudulently concealed, 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 fraud deceit or concealment, as the case may be, 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 against a person answerable for the fraud deceit or concealment. 35 There is no need to refer to subs (3). As it was put by Mr Evans in written submissions, it is the plaintiff's case that he first became aware "of the real effect of the erroneous and false assurances he had previously been given by the first defendant" in July 2001, when he received the advice of senior counsel to which I have referred earlier. As I understand it, he relies on s55(1) in so far as it applies to a cause of action based on fraud or deceit, and does not assert fraudulent concealment of the other causes of action pleaded in the statement of claim. 36 Mr Evans explained in the submissions that, for the purpose of the new claim, reliance is also placed upon the existing allegations that the first defendant assured the plaintiff that he would have the benefit of the provision for the extension of time (par 29) and that he advised the plaintiff to obtain medical opinion to support that application (par 32). 37 In written submissions in response, Mr Reynolds raised several matters in opposition to the application to re-plead. He submitted that this claim also is clearly statute barred, as the terms of s55(1) could not be met. As I have said, the statement of claim was filed on 31 May 2007. By reference to passages in the plaintiff's affidavit, Mr Reynolds argued that he was aware of the alleged fraud prior to 31 May 2001. 38 Mr Reynolds relied on paragraphs of the affidavit from which it appears that, from the middle of May 1999, the plaintiff was anxious to pursue an application in the Commission and was urging the first defendant to get the proceedings underway. The plaintiff deposed that on two occasions, in June and July 1999, the first defendant apologised for the delay, ascribing it to his own commitments. As I have said, it is his case that at the end of August of that year he became aware of the 21 day limit and the provision for an application for extension of time. As to the fact that an application was pursued on medical grounds, Mr Reynolds argued that he must have known that there were no such grounds, his state of health being a matter within his own knowledge. In all these circumstances, it was said, it should be inferred that he was aware by that time that his lawyers were responsible for the delay. 39 This, again, is not a matter which I can determine at this early stage, on the basis of no more than an affidavit which was not directed to the issue at hand. That issue is when it was that the plaintiff first discovered, or could with reasonable diligence have discovered, the fraud alleged on the part of the first defendant. At the very least, the affidavit would have to be fleshed out by oral evidence, and there may well be other relevant evidence. 40 Mr Reynolds also argued that several paragraphs in the proposed amendment relate to steps in preparation of the application to the Commission for extension of time and also fall foul of the advocate's immunity from suit: pars 55 and 56 and, insofar as it alleges a failure to provide relevant information to the Commission, par 57. For the reasons I have given, I am not prepared to decide that matter at this stage either. 41 Otherwise, Mr Reynolds' submissions criticised aspects of the pleading of the claim in fraud, including its particularisation. This application having been dealt with by written submissions after the hearing, I do not have the benefit of Mr Evans' response to those criticisms. Mr Evans may wish to consider recasting the claim in fraud and, if it is to be pursued, the plaintiff should have a reasonable opportunity to do so.

Conclusion 42 It follows, then, that the defendants are not entitled to the relief which they seek. Whether the limitation issue and, perhaps, the issue of advocate's immunity might be appropriate for determination as separate questions under Part 28 of the Rules is a matter the parties may wish to consider. I express no view about that. It is clear from what I have said that I am disposed to grant the plaintiff's application to amend the statement of claim by inserting a claim for fraud, subject to appropriate directions. However, whether that application is pursued may turn upon the determination of the limitation issue. 43 I have said that I do not understand Mr Evans to have contended that the causes of action in contract and negligence were fraudulently concealed, within the meaning of s55(1) of the Limitation Act. However, from the written submissions that is not entirely clear. That being so, while I have said that it seems plain enough that the claim in contract is statute barred, I will refrain from making any formal order about that claim. In any event, once again, little purpose would be served by such an order at this stage as the claim in negligence survives. 44 In these circumstances, it is not desirable that I should make any order or give any direction until the parties have had the opportunity to consider these reasons. That having been done, I would appreciate counsel's assistance as to any formal order which should be made and, if necessary, I shall hear the parties on costs. **********

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