LEE -v- LAWFIRST PTY LTD [2023] WASCA 59 (18 April 2023)

[80] ... Generally, leave should not be granted unless the decision below is plainly wrong or is attended by sufficient doubt to justify the grant of leave and a substantial injustice would be done if it remains undisturbed[.]

[81] As Martin CJ noted in Waller,[40] the requirement for leave to appeal against an interlocutory decision is no mere technicality or procedural nicety. Rather it is a substantive restriction which advances the administration of justice by preventing procedural disputes distracting the court and the parties from the determination of contested substantive rights. I agree with the following observations made in Waller:

'The grant of leave to appeal from an interlocutory determination is therefore restricted to those exceptional cases in which the decision in question is not only plainly wrong or attended with sufficient doubt to justify the grant of leave, but also in which a substantial injustice would be done if the decision remains in place. It would defeat the purpose of the restriction upon interlocutory appeals if there were to be any departure from the strict satisfaction of these requirements.

In particular, the injustice that must be demonstrated must be properly characterised as 'substantial'. If every infraction of a party's procedural rights were to be regarded as a 'substantial injustice', this aspect of the requirements for the grant of leave would become meaningless, as virtually every erroneous interlocutory decision will involve an infraction of a party's procedural rights. Accordingly, the notion of 'substantial injustice' looks to the substantive rights of the party adversely affected by the order under review, and requires that party to demonstrate that the effect of the order will go beyond mere inconvenience and procedural disadvantage.'

1. Special restraint must be exercised when the interlocutory order under appeal, as here, is one concerning practice and procedure.[41]

1. By this appeal, Mr Lee in his appellant's case essentially contends that the master erred in striking out paragraphs or parts of the amended statement of claim which were reasonably arguable or otherwise properly open to be pleaded or claimed. Although his appellant's case might be thought to be lacking somewhat in clarity, a consideration of the grounds of appeal read with the appellant's submissions indicates that by this appeal Mr Lee seeks to reinstate within the amended statement of claim (by having this court reverse the strike-out orders as reproduced at [19] above):
   1. A claim for breach of contract, breach of a tortious duty of care and breach of fiduciary duty so far as Lawfirst entered into the retainer with Mr Lee when Lawfirst (1) was incapable of discharging the retainer with reasonable skill, care and diligence, and (2) thereby put its own interests before the interests of Mr Lee,[42] causing financial loss to Mr Lee,[43] for which he was entitled to recover damages and/or equitable compensation.[44]
   2. A claim for exemplary damages.[45]
   3. Damages for the head of loss described as 'personal injury to credit and reputation'.[46]
2. In oral submissions Mr Lee confirmed with the court that the subject-matter of the appeal was that he was trying to 're-insert' these three matters back into his amended statement of claim so that they could be pursued at trial.[47]

Claims that Lawfirst entered into the retainer when it was incapable of discharging its terms

1. In relation to the claims referred to in [36.1], Mr Lee submitted, in effect, that advocates' immunity had no application to such claims, in that they arose as a result of Lawfirst's conduct in accepting the retainer in the f[48]st place.48
2. On a fair reading of the amended statement of claim, claims of the kind summarised in [36.1] above were not pleaded in the amended statement of claim. Although Mr Lee submitted that such claims were evident in particulars 89A.7 ‑&#[49]89A.10,49 those particulars did not purport to be particulars of any pleaded material facts to the effect that, upon entering the retainer, Lawfirst lacked the capacity to conduct the defamation proceedings with reasonable care and skill. Mr Lee also referred to the plea in p[50] 73,50 to the effect that Lawfirst's principal said that he should not have taken on the defamation proceedings. Whilst this might, arguably, be said to be evidence, as an admission, that Lawfirst had no capacity to discharge the retainer with reasonable care and skill when it was entered into, it is not the pleading of material facts of a claim of the kind referred to in [36.1] above. The most that can be said is that the master struck out various factual narrative pleas which might be consistent with a case of the kind referred to in [36.1] if it were pleaded.
3. As this aspect of the claim Mr Lee wishes to propound was not commenced by Mr Lee before he became a bankrupt, s 60(4) of the Bankruptcy Act could have no potential application to it. More fundamentally, two things arise from the circumstance that the appeal is, in large part, grounded on a cause of action that was not part of Mr Lee's amended statement of claim:
   1. The appeal is not required for Mr Lee to advance the matters in [36.1] above in the primary proceedings. Ignoring, for present purposes, Mr Lee's bankruptcy, the master's decision does not preclude Mr Lee seeking to advance that kind of claim by amending the statement of claim to include it (whether the claim is potentially barred by limitation or laches is a matter on which we express no conclusion). This is a significant factor against the grant of leave to appeal insofar as, in this respect, the decision under appeal has not adversely affected any substantive rights.
   2. The appeal cannot succeed to the extent that this is the character of the appeal - the master cannot have erred by striking out a cause of action that was never pleaded (or narrative facts potentially going to a cause of action which was never pleaded).
4. There should, however, also be consideration of the impact of Mr Lee's bankruptcy on the posited claim that grounds this aspect of the appeal. Even if, properly construed, the amended statement of claim contained the claims in [36.1] above, the financial loss claimed by Mr Lee was, in substance, the difference between (1) having judgment entered against him after trial, ie, dismissal of his actions, plus costs awarded against him and his own costs of the proceedings, and (2) the judgment that he could and should have obtained by settlement before trial, being dismissal of his actions with no order as to costs and at a time when he had not incurred any material liability in respect of his own costs to[51]awfirst.51 The claims at common law and in equity for financial loss caused by the alleged defaults of Lawfirst in their engagement as his solicitors were claims in respect of the diminution of his assets. They were not claims in respect of any personal injury or wrong done to Mr Lee. To this extent, the appeal cannot be characterised as an action within the meaning of s 60(4) of the Bankruptcy Act.
5. Mr Lee's reliance on the authority of Moss is, in our opinion, misplaced. In Moss, the former client's action was against his solicitors for damages for loss of a chance in succeeding in a defamation claim which his solicitors had failed to make. In this case, the substance of Mr Lee's pleaded complaint was that Lawfirst caused him loss by prosecuting the defamation proceedings to trial, when the proceedings had no real prospect of success, ie, there was no real prospect of establishing that he had been defamed in the first place.[52] Mr Lee's characterisation of the appeal as an action for, in effect, the lost opportunity to settle the defamation proceedings is only accurate to this extent: the lost opportunity to settle the defamation proceedings, on the pleadings, was a lost opportunity to have judgment entered against him with no order as to costs, at a time when his own costs were limited. The appeal cannot be characterised as an action seeking to vindicate a claim against his former solicitors for the loss of a chance to recover damages for defamation. The predicate for such a proposition is that his claims in defamation constituted valuable causes of action. That is not, and was not, Mr Lee's case against Lawfirst.
6. Similarly, the decision of Rogers v Roche (No 1),[53] to which Mr Lee referred in his appellant's case, provides no analogy. Rogers concerned a pleading dispute in litigation between a client (as plaintiff) and his former solicitors (as defendants) in relation to a personal injury matter conducted on behalf of the client by his former solicitors. Amongst other things, the plaintiff client alleged (1) breach of fiduciary duty in the formation and continuance of his retainer,[54] and (2) alleged failures by the former solicitors in a statutory 'pre‑litigation regime'.[55] The Queensland Court of Appeal found that these particular claims (unlike others) were not precluded by advocates' immunity.[56] The plaintiff client alleged that as a result of the solicitors' defaults, he ultimately recovered only a small part of the (allegedly) true value of his claim for economic loss.[57] The claim against his solicitors was for the difference between the primary judgment and the (alleged) true value of his claim for economic loss.[58] It was, in Rogers, 'an aspect of all parts of the [plaintiff's] claim that he was deprived of a full opportunity of obtaining the entire amount of his economic loss by the wrongful conduct of [the solicitors]'.[59]
7. That is not the character of the proceeding below or this appeal. Mr Lee was not seeking to vindicate, via a derivative action against his solicitors, a personal right of action for defamation of character which had vested in him but recourse to which had been lost by the negligence of his solicitors.[60] Rather, the effect of the pleaded claim was to contend that he had no actionable case for defamation of character, and he should have been so advised. Mr Lee's appeal in respect of his claims for financial loss in relation to costs paid to the defendant and to his solicitors in the defamation proceedings, are deemed abandoned, pursuant to s 60(3) of the Bankruptcy Act.

1. Turning next to the claim for exemplary damages (see [36.2] above), this is the subject of ground 4. A claim for exemplary damages must be specifically pleaded together with the facts on which the party pleading [61] relies.61 No material facts were pleaded.
2. As explained by Mr Lee in oral submissions,[62] his claim for exemplary damages was not in relation to negligence in the conduct of the defamation proceedings. Rather, it was on the basis that '[at] the beginning of the action [Lawfirst] didn't have the capacity to actually deal with the matter [and] they never informed [Mr Lee] of that and allowed [him] to continue on down that path'. Accordingly, this aspect of the appeal again, in substance, relates to claims of the kind referred to in [36.1] above. As indicated earlier in [39] ‑ [40] above, this cause of action was not pleaded.
3. Accordingly, leave to appeal in this regard ought not be granted. This aspect of the master's decision is not attended with sufficient doubt to warrant the grant of leave, and, or alternatively, substantial injustice would not be occasioned if this aspect of the master's decision was left undisturbed.

1. As to the third matter raised by the appeal, Mr Lee's pleaded head of loss for 'personal injury to credit and reputation' (see [36.3] above), this was the subject of one part of ground 3 of the appeal (ground 3.1b(iii)). Although not part of ground 4, Mr Lee's written submissions in relation to ground 4 also refer to the striking out of the claim for loss of credit and r[63]utation.63
2. There were two pleas which arguably appeared to be relevant to the pleaded claim for loss of credit and reputation, both of which were struck out by the master. First, Mr Lee pleaded that his counsel at trial failed to take an objection which 'severely damaged' his credibility (par 87 of the amended statement of claim). Secondly, Mr Lee, in his particulars of negligence and breach of the implied term to take reasonable care, alleged that '[Lawfirst] caused [Mr Lee] to be harmed in [his] credit standing or repute by the entry of judgment against [him]' (par 89.11 of the amended statement of claim).
3. Although this second plea appeared to be a plea of causation rather than breach, Mr Lee, at the hearing of this matter, submitted, in effect, that the plea was to be understood on the basis that Lawfirst's conduct in not advising him to settle resulted in judgment being entered against him and harming his credit, standing and reputation.[64] So understood, it would appear that Mr Lee's real complaint is that the master, having left intact Mr Lee's claims to recover the costs paid to the defendant and his solicitors in consequence of the alleged failure to advise him to settle on the basis that he had no real prospects of success, wrongly struck out Mr Lee's additional claim for the harm to his credit and reputation as a result of judgment being publicly entered against him. In this regard, it might be inferred that it is the public entry of judgment against him which Mr Lee contends resulted in this particular form of harm. That is because, on Mr Lee's case, had he been given the correct advice and accepted the offer by the defendant in the defamation proceedings, he still would have had judgment entered against him in the form of the formal dismissal of his action, but that it would have occurred without the publicity of a trial and the publication of reasons for judgment.
4. The claim on the basis of the first plea referred to in [49] above may be shortly disposed of. Insofar as the claim for loss of credit and reputation is said to derive from the first of those pleas, the master's decision is not attended by any real doubt. Any negligent failure to object during the course of the trial is the subject of advocates[65]immunity.65
5. The second plea, relating to both his common law claims, requires further consideration as to the nature of the injury to 'credit and reputation' claimed by Mr Lee.
6. Damages for injury to 'credit and reputation' were allowed in Wilson v United Counties Bank Ltd.[66] In that case, the bank of a trading customer agreed to supervise the financial side of his business whilst he was absent on military service, and to take all reasonable steps to maintain his credit and reputation. The bank breached the contract and, by its negligence, caused the bankruptcy of the customer. The customer and his trustee in bankruptcy brought an action against the bank. The court at first instance awarded £45,000 for loss occasioned to the trader's business, which was recoverable by the trustee in bankruptcy, and £7,500 for injury caused to the bankrupt's credit and reputation recoverable by the customer. The Court of Appeal overturned the first instance decision and ordered a new trial. An appeal to the House of Lords was allowed. The issues included whether injury to credit and reputation was a proper head of damage and, if so, whether the damages of £7,500 were recoverable by the customer personally.
7. As to the former issue, it was held that it was a proper head of damage as the bank expressly undertook, for consideration, to sustain the credit of the customer. It was analogous to cases where a bank wrongly dishonours a cheque when a trader is in funds, where the inference is drawn that the breach is injurious to the credit of the trader without allegation or proof of special damage.[67] Lord Birkenhead expressly stated, however, that he did not lay down a rule of general law - he instead dealt with the 'exceptional language of an exceptional contract'.[68] As to the latter issue, it was held that the right of action was personal to the bankrupt and did not pass to the trustee in bankruptcy. Lord Birkenhead said, in effect, that this was because the damages were to be estimated by reference to the 'mind, or character' of the bankrupt and 'without immediate reference to his rights of property'.[69] Lord Atkinson's judgment was to similar effect.[70]
8. These observations in Wilson were cited by Dixon J in Cox (No 2) in the passage referred to in [[29 The second item is the unfavourable outcome of the divorce suit. She lost when she might have won. What damages should be obtainable? That depends on what were the prospects of a successful outcome. The judge said that even if the case had been fought, the probabilities were that the husband would still have got a divorce on the ground of desertion. That may be true. But there was quite a chance that both might have got decrees; the husband on the ground of the wife's desertion; the wife on the ground of the husband's adultery. There was an outside possibility of the wife herself getting a decree. She is entitled to general damages for the loss of the chance of a more favourable outcome. For the simple reason that it does affect a person's standing to be found the guilty party [in divorce] instead of the innocent party. The judge assessed the damages on this loss at £200. That was essentially a matter for him. I do not think we should interfere with the figure of £200. (emphasis added)

1. In Ruxley, a contractor was engaged by a homeowner to construct a swimming pool in his garden to a specified diving depth. It was short by about 18 inches. The contractor failed to build it to the specified depth. The building owner sued for damages for the reinstatement of the pool to the correct depth and also for loss of amenity. The House of Lords held that the owner could not recover for the cost of reinstatement, which was out of all proportion to the benefit to be obtained. Relevantly for present purposes, the trial judge awarded £2,500 under the head of damage of loss of amenity. This was not disturbed on appeal to the House of Lords. In Ruxley, Lord Lloyd of Berwick (with whom the other law lords agreed) said:[82]

Addis v Gramophone Co Ltd [[1909] AC 488]] established the general rule that in claims for breach of contract, the plaintiff cannot recover damages for his injured feelings. But the rule, like most rules, is subject to exceptions. One of the well established exceptions is when the object of the contract is to afford pleasure, as, for example, where the plaintiff has booked a holiday with a tour operator. If the tour operator is in breach of contract by failing to provide what the contract called for, the plaintiff may recover damages for his disappointment: see Jarvis v Swans Tours Ltd [1972] EWCA Civ 8; [1973] QB 233 and Jackson v Horizon Holidays Ltd [1974] EWCA Civ 12; [1975] 1 WLR 1468.

This was, as I understand it, the principle which Judge Diamond applied in the present case. He took the view that the contract was one 'for the provision of a pleasurable amenity.' In the event, Mr Forsyth's pleasure was not so great as it would have been if the swimming pool had been 7 feet 6 inches deep. This was a view which the judge was entitled to take. If it involves a further inroad on the rule in Addis ..., then so be it. But I prefer to regard it as a logical application or adaptation of the existing exception to a new situation.

1. Insofar as Mr Lee, by this appeal, seeks to contend that his claim for non‑financial loss in respect of harm to his credit and reputation is reasonably arguable for pleading purposes,[83] the appeal in that respect would come within s 60(4) of the Bankruptcy Act. If such a claim were reasonably arguable, the damages would, in our view, be estimated 'by immediate reference to pain felt by the bankrupt in respect of his mind ... or character and without reference to his rights of property'.[84]
2. As to whether the master's decision to strike out this aspect of the claim is attended with sufficient doubt to justify the grant of leave (ie, whether such a claim ought to have been held as being reasonably arguable), the point received scant attention at the hearing of this matter on 24 March 2023 and neither party engaged in any meaningful way with the issue. Nor was the point addressed in any meaningful way in the master's reasons for decision. The authorities are such that, in our view, the court would benefit from hearing fuller argument on the point before coming to a conclusion either way. Among other things there needs to be fuller consideration of the authorities as to recovery of damages for mental distress and social discredit and the application of those authorities to a contract for the provision of legal services of the kind created by Lawfirst's retainer to act for Mr Lee in the defamation proceedings. For this reason, we are of the view that the question of leave to appeal in respect of this aspect of the appeal should be referred to the hearing of the appeal.
3. The overall result is that, in relation to grounds 1 ‑ 4 of the appeal, other than in respect of the claim for non‑financial loss for harm to Mr Lee's credit and reputation, leave to appeal should be refused.
4. Ground 5 seeks to overturn the costs order made by the master and is consequential upon the success of the appeal otherwise.

1. For the foregoing reasons, the orders should be:
   1. Leave to appeal in relation to grounds 1 ‑ 4 is refused, other than:

(a) in relation to ground 3.1(a) insofar as ground 3.1(a) alleges that the master wrongly struck out par 89.11 of the amended statement of claim; and
>
> (b) in relation to ground 3.1(b)(iii) with respect to the striking out of the head of damage for 'personal injury to credit and reputation' in the particulars to par 93 of the amended statement of claim.

2. The question of leave to appeal in relation to the matters referred to in subpars (a) and (b) of order 1, and ground 5, is referred to the hearing of the appeal.
3. The parties should be heard on the question of costs. The parties should also be heard on whether the parties should be given leave to file supplementary submissions in the appeal to more fully address the matters identified in [62] above.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

Research Associate to the Honourable Justice Murphy and the Honourable Justice Mazza

[1] Kingsfield Holdings Pty Ltd v Lawfirst Pty Ltd [2022] WASC 161.

[2] Section 60(1)(f) of the Supreme Court Act 1935 (WA); Re Luck [2003] HCA 70; (2003) 78 ALJR 177.

[3] Allmark v Mossensons (a firm) [2006] WASCA 127 [24].

[4] Kingsfield Holdings Pty Ltd v Rutherford [2016] WASC 117.

[5] Amended statement of claim (SC) 1 - 10.

[14] SC 89.6 - 89.8, 89.10 - 89.11, 89.13.

[23] See 'Defendant's outline Submissions on application for a stay alternatively to strike out' filed 11 February 2022; BB 44 - 56. 'Defendant's Supplementary Submissions on application for a stay alternatively to strike out' filed 22 March 2022; BB 79 ‑ 81.

[24] Kingsfield Holdings Pty Ltd v Sullivan Commercial Pty Ltd [2021] WASC 289.

[25] Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124, 130.

[26] Luck v Secretary of Services Australia [2022] FCAFC 195; (2022) 406 ALR 567 [44].

[27] Re Lofthouse [2001] FCA 25; (2001) 107 FCR 151 [18] ‑ [20].

[28] Duckworth v Water Corporation [2012] WASC 30; (2012) 261 FLR 185 [85].

[32] Cox v Journeaux (No 2) [1935] HCA 48; (1935) 52 CLR 713, 721.

[34] Berryman v Zurich Australia Ltd [2016] WASC 196; (2016) 310 FLR 108.

[35] Manningel v Hewlett Phelps [1991] NSWCA 186.

[36] Rana v Musolino [2010] FCA 476.

[37] Bryant v Commonwealth Bank of Australia [1997] FCA 582; (1997) 75 FCR 545.

[38] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14; (2016) 49 WAR 374.

[40] Waller v Waller [2009] WASCA 61 [9] ‑ [10].

[41] Dodds v Kennedy [2011] WASCA 32 [5].

[42] Appellant's appeal submissions, pars 1, 4 ‑ 10, 15 - 16 (as to ground 1), pars 3, 5 (as to ground 2), par 1 (as to ground 3). See also hearing 24 March 2023, ts 6.

[43] Appellant's appeal submissions, pars 10, 17 - 19 (as to ground 1).

[44] Appellant's appeal submissions, pars 11 - 19 (as to ground 1), pars 1, 6 (as to ground 4).

[45] Appellant's appeal submissions, pars 2 - 5 (as to ground 4).

[46] Ground 3.1(b)(iii); appellant's appeal submissions, pars 13 - 19 (as to ground 3), par 2 (under ground 4).

[48] Appellant's appeal submissions, pars 3 - 5 (ground 2).

[50] Hearing 24 March 2023, ts 8. See also appellant's appeal submissions, par 5 (as to ground 1).

[51] See amended statement of claim, pars 6B, 6C, 89A.10.

[52] This was accepted by Mr Lee in oral submissions: hearing 24 March 2023, ts 18.

[53] Rogers v Roche (No 1) [2016] QCA 340; [2017] 2 Qd R 306.

[56] Rogers [32] - [51], [56] - [60].

[57] Rogers [16] - [18], [28], [34].

[61] Order 20 r 9(3) of the Rules of the Supreme Court 1971 (WA).

[63] Appellant's appeal submissions, par 2 (as to appeal ground 4).

[65] D'Orta‑Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1.

[66] Wilson v United Counties Bank Ltd [1920] AC 102.

[67] Wilson (112), (120), (133 ‑ 134), (140).

[71] Cox (No 2) (721); Wilson (111), (128 - 133).

[72] Duvall v Godfrey Virtue & Co (a firm) [2001] WASCA 105.

[74] Groom v Crocker [1939] 1 KB 194.

[76] Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344; Moore v Scenic Tours Pty Ltd [2020] HCA 17; (2020) 286 CLR 326 [43].

[77] Edelman J, McGregor on Damages (21st ed) [5‑023] ‑ [5‑036].

[79] Cook v Swinfen [1967] 1 WLR 457.

[80] Ruxley Electronics and Constructions Ltd v Forsyth [1996] AC 344.

[83] General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 129; Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62, 91 ‑ 92; Hospitals Contribution Fund of Australia v Hunt [1938] ArgusLawRp 58; (1982) 44 ALR 365, 373 ‑ 374.

[84] Cox (No 2) (721); Wilson (111), (128 - 133).