Jeandin v Tzovaras

Argyle Lawyers (Plaintiff) No appearance (First, Second and Third Defendants) HWL Ebsworth (Fourth Defendant) File Number(s): 2009/322343

Judgment - EX TEMPORE 1HIS HONOUR: I set out the nature of these proceedings at [1] to [4] of my reasons given on 4 November 2011 ([2011] NSWSC 1254). I will not repeat what I there said. 2I concluded that the plaintiff was entitled to judgment against the first two defendants (to whom I referred as "the brothers"), pursuant to guarantees given by them of the obligations of Country Landmark Pty Limited, in the sum of $1,500,000 plus interest. I concluded, further, that the plaintiff was entitled to judgment against the third defendant (and against the first defendant in his capacity as a solicitor) for breach of a contract of retainer. Finally, for present purposes, I concluded that the plaintiff was entitled to a charge on the indemnity policy issued by the fourth defendant (Lawcover) to the third defendant. 3There is now a dispute between the plaintiff and the only active defendant, Lawcover, as to the precise orders that should be made. 4The limit of indemnity under the Lawcover policy was $2 million, including what the policy referred to as "claimant's costs" and "defence costs". Defence costs can be put to one side, because Lawcover did not undertake the defence of the proceedings on behalf of the third defendant, the incorporated legal practice. 5Claimant's costs are defined as: "legal costs you [the third defendant] have to pay to the person making the claim against you." 6Further, there is an excess of $7,500 including claimant's costs applicable to the obligation to indemnify. As to this excess, it is now common ground that any recovery against Lawcover should be limited to $1,992,500.00. 7The first issue raised by Lawcover relates to the amount of damages in respect of which the charge that had been sought under s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) should attach. In this context, it was, by the time of the hearing at least, common ground that the plaintiff had no prospects of recovery from the principal debtor, Country Landmark. I mention that because in its list response, Lawcover had raised, among other things, failure to mitigate as an issue. The particulars of that alleged failure of mitigation were that the plaintiff had not taken any steps to recover from Country Landmark. No reference was made to steps against the first and second defendants as guarantors: presumably because they were being sued on their guarantees. 8Be that as it may, in circumstances where the first and second defendants did not appear at the hearing, the hearing proceeded on the at least tacit assumption, that the first and second defendants had no capacity to meet any judgment made against them. It was never suggested, by "pleadings", particulars, written submissions, oral submissions or otherwise that any judgment recovered against the first and second defendants pursuant to their guarantees might have any value. Not having been warned of the possibility that this argument might be raised, the plaintiff did not put any evidence on as to the worth of those guarantees. 9Nonetheless, Lawcover now takes the point that the plaintiff is required to prove that it can recover nothing under those guarantees. 10It seems to me that there are a number of answers to this contention. It is not necessary to go to them all. Two will suffice. One is that the evidence admitted without objection and without limitation in the proceedings included a letter from the third defendant to the plaintiff's solicitors dated 1 September 2009. That letter was written by the first defendant in his capacity as principal of the third defendant. It included the following statement: In the interest of your client as well as those of the borrower, my brother George and myself, I propose that we resume without prejudice discussions with you and, if practicable, your client (whether in person or on a telephone conference), with a view to formulating a resolution of the current predicament. I am keen to formulate with you and your client a means by which your client may recover the full amount of its principle [sic] and accrued interest, bearing in mind that the borrower is currently insolvent and neither my brother nor I have now any means to make any contribution towards to repayment obligations of the borrower. Regrettably, in the past 12 months, my assets have progressively diminished in value and the actual and contingent liabilities have increased substantially to the point where I find myself in a very precarious financial position. 11Mr Darke of Senior Counsel, who appeared for the plaintiff, together with Mr Dawson of counsel, stated that the letter had been added to the Court Book (in Exhibit PX2, behind tab 85A, and together with the documents behind tabs 85B, 85C, 85D and other tabs) by Lawcover. Although Mr Arblaster of counsel, who appeared for Lawcover on this occasion with Mr Newton of counsel, could not recollect that, the statement by Mr Darke does accord clearly with my own recollection that the Court Book had been prepared by the plaintiff without a great deal of input from the defendants, and that at the hearing, Mr Curtin of Senior Counsel (who then appeared for Lawcover with Mr Arblaster) did add certain documents to the Court Book, including those that I have described. 12I cannot now recall why Mr Curtin did ask for the insertion of the documents to which I have referred. Presumably, they were seen to serve some legitimate forensic purpose. However, in circumstances where the documents were in evidence without limitation, and in particular where their introduction into evidence was sought by Lawcover, I see no reason why I cannot take into account, on this point, the statement made by the first defendant not just for himself but also for "my brother George" - the second defendant. Presumably, having regard to the fact that the brothers were engaged in a joint venture which had gone spectacularly wrong, the first defendant would have more than a passing acquaintance with the financial position of his brother, the second defendant. 13Thus, such evidence as there is supports the conclusion that the judgment recovered by the plaintiff against the first and second defendants pursuant to their guarantees will be worthless. 14Mr Arblaster sought to play down that letter, submitting that it was exactly the sort of letter that one would expect a guarantor to write and that it should be given no weight. I do not agree. Where the document has gone into evidence, it is to be given such weight as, on the face of things, it would bear. On the face of things, it appears to be part of a proposal put in good faith by the first defendant to seek to ensure that the plaintiff recovers as much as possible of the loss that he suffered. I see no reason why the first defendant would not make an honest statement in that context; although I do accept that one would not expect the first defendant to overstate the prospects of recovery from himself and his brother. 15Be that as it may, in circumstances where the particular point is raised unflagged and after the delivery of judgment, the only evidence available is that to which I have referred and it does not support the point. 16The other of the multiple reasons for rejecting this aspect of Lawcover's submissions is, as I have said, that the point should have been brought to the attention of the plaintiff earlier than it was. 17For those reasons I conclude that the first challenge to the orders proposed by the plaintiff fails. 18The next challenge relates to the question of costs. The plaintiff proposes that it should have orders that the first and second defendants pay its costs. That seems to be correct. It seeks orders that the third defendant pay its costs from 11 June 2010 but excluding costs of the claims brought against the first and second defendants pursuant to their guarantees. The reference to 11 June 2010 is a reference to the date when the third defendant was joined to the proceedings. With that explanation, the costs order sought against the third defendant appears to be appropriate. I note that costs payable pursuant to that order would amount to "claimant's costs" for the purposes of the Lawcover policy. 19Against Lawcover the following orders are sought: