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[2007] VSCA 158
Court of Appeal (Vic)
2007-08-08
MAXWELL P and WHELAN AJA
Original judgment source is linked above.
LEGAL PROFESSION - Dispute between client and practitioner - Claim of pecuniary loss - Application by practitioner for dismissal of dispute on ground that more appropriately dealt with by court - Whether client would face limitation defence if proceedings commenced in court - Whether open to Tribunal to find subject matter of dispute more appropriately dealt with by court - Finding not open - Legal Practice Act 1996 (Vic), ss 122(1)(b), 136A, 167.
LIMITATION OF ACTIONS - Contract - Action for breach of contract - When cause of action accrues - Whether common law altered by provisions of Legal Practice Act 1996 (Vic) - Whether "pecuniary losses" an element of cause of action.
**1 The fact that we are delivering judgment so soon after the conclusion of oral argument is in no way to be taken as an indication that we have ignored the argument. On the contrary, we have benefited greatly from the assistance counsel for the respondent has given us, all the more so because we had been able to read his written submissions in advance.
2 We indicated at the commencement of the hearing that we considered Mr Louis should be granted leave to appeal from the Tribunal's decision. We had earlier given notice to counsel for the respondent that we would wish the appeal to be argued in full and he informed the Court that he was in a position to do so. Counsel has made full and helpful submissions orally, as he had already done in writing. A determination has been made under s 11(1A) of the Supreme Court Act 1986 that, for the purposes of this appeal, the Court be constituted by two judges.**
**3 Mr Louis was an employee of Myer Emporium in the period 1968-1972. He worked as a storeman. As a result of being required to work in a dusty environment, so he alleged, he contracted allergic asthma. Mr Louis commenced common law proceedings in May 1974 for damages with one firm of solicitors and then retained another firm (S) to act for him in connection with his injuries. S assumed the conduct of the common law proceedings and commenced separate proceedings under the Workers Compensation Act on 11 March 1978. The workers compensation proceedings were ultimately settled by the firm that succeeded S. The common law proceedings, however, were allowed to languish to the point where they were ultimately dismissed for want of prosecution.
4 In 1988, Mr Louis sued S for the loss of opportunity to pursue his claim for damages at common law. That proceeding was commenced by one firm of solicitors, transferred to a second firm and then ultimately settled on 4 February 1994 by a third firm (M). Mr Louis was represented by M and by counsel (B) in that proceeding. Mr Louis asserted that M did not have instructions to settle and that B had failed to consider a head of damages for loss of use of monies.
5 Mr Louis complained to the Solicitors' Board regarding the conduct of M in settling without instructions, and sought compensation for his loss. The Solicitors' Board awarded him the maximum amount of compensation ($2,500 and $1,800 costs) after counsel for M announced that the firm (whilst maintaining its denial of liability) was not proposing to contest the claim.
6 Mr Louis then retained Galbally & O'Bryan in June 1997 in order to institute proceedings against M and B for damages for professional negligence. A writ was issued in the County Court of Victoria on 7 December 1998. A mediation took place on 9 March 2000 and the defendants made a joint offer of $20,000 inclusive of costs. Mr Louis instructed Galbally & O'Bryan and counsel to reject the offer. Mr Louis instructed Galbally & O'Bryan that he wanted the maximum amount under the County Court jurisdiction. The matter was not resolved.
7 On 16 March 2000, Galbally & O'Bryan ceased to act on behalf of Mr Louis. On 21 June 2001, on the eve of the trial, Mr Louis settled his claim against M and B for $20,000 inclusive of costs. Mr Louis then complained to the Legal Ombudsman about Galbally & O'Bryan, alleging that the firm had been guilty of misconduct or unsatisfactory conduct in ceasing to act for him and in failing to comply with directions made by the County Court. The complaint was dismissed pursuant to s 141 of the Legal Practice Act 1996 ("the LPA") on the grounds that it was misconceived and lacking in substance.
8 Mr Louis then invoked the dispute resolution procedure under Division 1 of Part 5 of the LPA. Following unsuccessful attempts to resolve the dispute, the Law Institute gave notice under s 128(1) of the LPA within the 60 day limit imposed by s 128(2) of that Act. Mr Louis referred the dispute to the Legal Profession Tribunal for resolution. His claim in the Tribunal was for the maximum amount of compensation ($15,000) and was based on allegations of breach of retainer/breach of duty in ceasing to act and in failing to comply with directions made by the County Court. Following the dissolution of the Legal Profession Tribunal, Mr Louis' matter was transferred to VCAT, though it continued to be procedurally and substantively governed by the provisions of the LPA.
9 Galbally & O'Bryan made application to the Tribunal to have the dispute dismissed pursuant to s 136A LPA on the grounds that, due to its estimated length and complexity, the size of the claim and the resources that would need to be devoted to its determination, the subject-matter of the dispute would more appropriately be dealt with by a court.**
**10 Mr Louis' claim in the Tribunal is set out in detailed particulars. These particulars were prepared on his behalf by the legal practitioner assisting the Legal Practice List in the Tribunal. We have found them of great assistance.
11 The relevant parts of the particulars are as follows:**
12 On 25 May 2006, the Tribunal constituted by a Senior Member acceded to the application by Galbally & O'Bryan under s 136A LPA and ordered that the dispute be dismissed. The ex tempore reasons given by the Senior Member were transcribed and are in evidence before this Court. The Senior Member said that he had read the particulars of Mr Louis' claim against the solicitors. He said:**
"It is likely that VCAT could make a decision about negligence relatively easily. The problem is not negligence but working out what loss has been suffered by Mr Louis if there was negligence. To work out loss it would be necessary for the Tribunal to consider probably almost everything that has happened in your case going back to 1971."
13 The Senior Member said that he regarded the history of the matter as complex and that it would be -
"a costly matter to VCAT to engage counsel to assist the Tribunal to effectively present your case. It is also likely that preparation of your case would be very time consuming. There have been estimates this morning ranging from five days to fifteen days as to the length of the case. I have no information other than the particulars, but I can see that it could easily be a case of about ten days."
**14 The Senior Member noted Mr Louis' stated intention to call evidence from four witnesses. In the case of two who were deceased, the evidence would be by the tender of statements. The Senior Member anticipated that in order to prove his loss Mr Louis would need to call other witnesses, and the solicitors themselves would undoubtedly wish to call a number of witnesses.
15 In addition to the complexity of the matter, the Senior Member identified another factor which he described as being "of great importance". He said:**
"The additional factor is that Mr Louis, if I allow the matter to proceed at VCAT, intends to go to a court to seek compensation over and above any compensation that he receives from VCAT. The problem with that is that there would be two lengthy hearings and a considerable number of witnesses would need to give evidence twice. It is just simply a duplication of effort and it is likely that those two hearings would take place some considerable time apart. It would be far better in all respects for the matter to simply start in a court and be done with."
16 The Senior Member expressed his ultimate conclusion in these terms:
"I am almost certain that this matter would be more appropriately dealt with by a court and I will dismiss the matter at VCAT, which is what the Act requires me to do, what the Act in Parliament requires me to do, but that does not prevent you from going to the court."
17 With respect, it was not correct to say that the LPA required dismissal of the dispute. The power of dismissal is discretionary, even where it appears that court proceedings would be more appropriate.
**18 Mr Louis then exercised his right of appeal to the Full Tribunal under s 167 LPA. As noted by this Court in He v Aloe,[1] an appeal to the Full Tribunal is by way of rehearing: see s 169(1)(a). Counsel who appeared to assist the Full Tribunal erroneously submitted that it was a matter for the Full Tribunal whether it conducted an appeal by way of rehearing or an appeal as a hearing de novo.
(a) the Full Tribunal is to hear an appeal by way of a rehearing;
(4) For the avoidance of doubt, it is declared that an appeal to the Full Tribunal is not required to be conducted as a hearing de novo."
20 The submissions of counsel assisting appear to have read sub-s (4) as if it said that although a hearing de novo was not required, it was nevertheless permissible. That was wholly incorrect. The unambiguous command of the legislature under s 169(1)(a) is that an appeal is by way of rehearing, with a right under s 169(3)(b) to receive fresh evidence. The Full Tribunal is in exactly the same position as this Court is when it hears an appeal by way of rehearing from the decision of a trial judge. A hearing de novo is a quite different kind of appeal.[2]
Whether Mr Louis' contract and negligence claims are statute barred
21 In his opening submission to the Full Tribunal, counsel assisting identified the issue for the Tribunal's consideration as being whether, as at the date of the decision at first instance (25 May 2006), Mr Louis' claims at law were statute barred. Counsel's submission was in these terms:
"It is impossible to say that the subject matter of the dispute is more appropriately dealt with by a court and at the same time acknowledge and say, 'But you can't go to court because you are statute barred.' I think there is a contradiction in terms there and it is impossible to say that it is more appropriately dealt with in a court, but you can't go there. So if at 25 May 2006 this matter was statute barred, and if it was dismissed according to s 136A, there is a strong argument that there was an error in that decision. So the question then becomes was it statute barred or not."
**22 Counsel correctly identified the critical issue. It is the issue on which Mr Louis now contends that the Full Tribunal fell into error. For reasons which follow, we consider that Mr Louis' submission in that regard must be upheld.
23 Counsel assisting correctly pointed out to the Tribunal that, if Mr Louis had to bring his proceeding in a court, he would have two potential causes of action on which to sue: breach of contract and negligence. Counsel for the respondent (who also appeared in the Tribunal) acknowledged that this analysis was correct. So far as the potential claim in contract was concerned, counsel assisting submitted - again correctly - that the cause of action accrued when the breach occurred.[3] Counsel for the respondent takes no issue with that proposition.
24 It is common ground that the contract of retainer between Mr Louis and Galbally & O'Bryan came to an end on 16 March 2000. That being so, there could have been no actionable breach of contract after that date. Thus, any cause of action in contract which Mr Louis may have against Galbally & O'Bryan accrued not later than 16 March 2000. Counsel for the respondent conceded - properly, in our view - that this was so.
25 In the Full Tribunal, counsel assisting submitted that, if the cause of action had accrued in March 2000, then it was -**
"not open [to the Tribunal] to find that it is more appropriate for the matter to be dealt with by a court."
Unfortunately, that submission - which was clearly correct - was followed by an erroneous alternative submission, in the following terms. What Mr Louis was prosecuting before the Tribunal was a "dispute", as defined by s 122(1)(b) of the LPA. That is, he was claiming that he had suffered pecuniary losses as a result of acts or omissions by Galbally & O'Bryan in the provision of legal services to him. Counsel assisting submitted to the Tribunal that the effect of s 122(1)(b) was that:
"there must be a pecuniary loss before a dispute can be initiated, so that the client can't rely on a breach of retainer as a cause of action without also establishing that there must be some loss because otherwise it is not a dispute under the Act."
**26 In essence, the alternative submission was that, because the claim of pecuniary loss was of the essence of a dispute under the Act, this would somehow have the effect of altering the date at which the action for breach of contract accrued, for the purposes of a court proceeding in respect of the "subject-matter of the dispute". That submission was erroneous. The definition of "dispute" is relevant only to proceedings under Part 5 of the Act. Once again, counsel for the respondent conceded - properly, in our view - that this was so.
27 What the Tribunal had to consider under s 136A was whether "the subject matter of the dispute" would more appropriately be dealt with in a court. Plainly enough, that enquiry had to focus on the nature of the allegations made by Mr Louis and on the nature of the legal claims which he would have to bring in a court in order to prosecute the subject matter of the dispute. The relevant claim was a claim for breach of contract. The accrual of that cause of action was governed by the established rule to which we have referred.
28 Counsel for the solicitors had submitted to the Full Tribunal that to decide at a preliminary hearing stage whether or not a case was statute barred was fraught with difficulty. The courts have said time and time again, he submitted, that lower courts should be very reluctant to strike out proceedings on the basis of a perceived statute of limitations problem and that a proper investigation of whether or not a case was statute barred required a full examination of the factual matrix.
29 Counsel doubtless had in mind decisions such as Wardley Australia Ltd v State of Western Australia,[4] concerning the difficulty of ascertaining when a cause of action in tort - or, in that case, under Part V of the Trade Practices Act 1974 (Cth) - accrues, because of uncertainties about when damage occurs. Those issues had no application to a case such as the present, where the relevant cause of action was in contract. As we have already pointed out, it was clear beyond argument that the latest date on which the contract cause of action accrued was 16 March 2000.
30 We would add that, on the case as articulated in the particulars for Mr Louis, the loss was said to have been suffered on 9 March 2000, that being the day when (Mr Louis claims) he lost the opportunity to settle the proceeding then being mediated for an amount in excess of $20,000. On that basis, the cause of action in tort had also accrued in March 2000.
31 Even if the position had been otherwise, and there had been real uncertainty about whether or not the limitation period on either claim had expired, such uncertainty must surely have militated powerfully against the dismissal of the LPA dispute. Counsel assisting having submitted that there was a real likelihood that the limitation period had expired, the Full Tribunal could not in our view properly have concluded that Mr Louis' VCAT proceeding should be dismissed, leaving him to be confronted by a limitation defence when he commenced his proceeding in court.
32 The Full Tribunal gave short ex tempore reasons for dismissing Mr Louis' appeal. The relevant part of the reasons was as follows:**
"The case is clearly one in our view that fits the criteria in relation to complexity, duration and the like. The only argument of any substance relates to the Limitation of Actions Act. It is not up to us to determine that, and it has not been demonstrated that the matter is statute barred. We simply fail to see any error on the part of the Tribunal, and indeed Mr Louis has stated that he thought in fact that he had won because he wanted to go to another court."[5]
**33 With respect, the Full Tribunal here fell into error. First, the Tribunal did need to decide, to the extent that it could, whether Mr Louis' causes of action were already statute barred. Secondly, had the question of the accrual of the contract cause of action been correctly addressed, in accordance with the first submission of counsel assisting, no other conclusion was open but that that cause of action was statute barred. As we have indicated, there was also a strong argument (based on the particulars) that the putative tort claim was also statute barred.
34 In those circumstances, it was simply not open to the Tribunal at first instance - or to the Full Tribunal on an appeal by way of rehearing - to reach the view that it was more appropriate for the subject matter of Mr Louis' dispute to be dealt with by a court. In our view, no reasonable Tribunal could have come to that view in those circumstances. That, in substance, was what counsel assisting had submitted to the Tribunal at the outset: that it was not open to dismiss the dispute if there was a problem with the statute of limitations.
35 It follows that the Full Tribunal's decision, upholding the decision at first instance, must be set aside for error of law. This Court on an appeal from VCAT has power to make an order that the Tribunal could have made in the proceeding.[6] There being only one possible answer to the solicitors' application to dismiss, we would substitute for the Full Tribunal's order dismissing Mr Louis' appeal an order allowing the appeal and dismissing the application brought by Galbally & O'Bryan under s 136A.
36 Before parting with the matter, we need to deal with certain other proceedings which have been either instituted or foreshadowed by Mr Louis, as they were the subject of submissions to us by counsel for the respondent. The Tribunal at first instance referred to Mr Louis' avowed intention to sue at law, having (as he hoped he would) obtained the maximum compensation of $15,000 from the Tribunal in its determination of his LPA dispute. Counsel for the respondent helpfully pointed out to us that s 133(2) LPA expressly permits two bites at the compensation cherry.**
(2) A compensation order does not affect the right of a client to recover damages for pecuniary loss, but a court in making an award of damages must take the compensation order into account."
**37 The learned Member took the view - understandably - that it would be most unfortunate to have the same issues of fact litigated in full twice, in order for Mr Louis to pursue compensation in excess of $15,000. Plainly enough, the LPA permits such duality of proceedings. Whether that is good policy or not, given the desirability of finality in litigation, is a matter for the legislature. It does seem an odd thing that what amounts to the same action against the solicitors could be prosecuted in full on two separate occasions. It would seem preferable if a person in Mr Louis' position were required to make an election - whether to go to the Tribunal for an informal, speedy process or to court for a longer, more formal process. In the present case, the prospect of double litigation was undoubtedly a relevant factor, though once the limitation issue was properly understood the likelihood of subsequent court litigation ought to have been assessed as rather remote.
38 Between the first Tribunal decision and the second, Mr Louis had commenced a proceeding in VCAT under the Fair Trading Act 1999. Counsel for the respondent helpfully explained that VCAT now has jurisdiction to deal with matters under that Act, in the way the Small Claims Tribunal used to do, and that what Mr Louis issued in June this year was a proceeding in the nature of a consumer-trader dispute.
39 Counsel for the respondent pointed out that s 124 of the LPA prohibits the commencement of another proceeding in respect of the subject matter of a dispute while the dispute proceeding is itself on foot. Sub-s (3) would indicate that there ought to be a stay of the second matter while the first remains on foot. That is a matter for the Tribunal and we say nothing about it.
40 The Full Tribunal appears to have regarded it as significant that the Fair Trading Act proceeding was on foot. But once the limitation point was properly addressed, there was only one answer to the 136A application. The existence of the later VCAT process could not have affected that outcome. Because of s 124 of the LPA, Mr Louis was then and will now be faced with the reality that, so long as he is pursuing the dispute under the LPA, no other proceeding may be pursued.
41 Finally, we note the comment by the Senior Member at first instance, that the negligence question could be dealt with by VCAT quickly. That being so, it does seem to us (and counsel for the respondent solicitors appeared to embrace this) that there would be much to be said for the Tribunal dealing with liability first, and separately from quantum. We have not heard from Mr Louis about this idea and it is, of course, entirely a matter for the Tribunal, as master of its own procedure.**
[2] See, generally, the recent decision in Applicants A1 & A2 v Brouwer & Anor [2007] VSCA 139.
[3] See Commonwealth v Cornwell [2007] HCA 16; (2007) 234 ALR 148, [4]-[5].
Louis
Galbally & O'Bryan
(2007) 234 ALR 148
(1992) 175 CLR 514