Malvina Park Pty Limited trading as Firths the Superannuation Lawyers v Pegios

District Court of NSW|2021-05-19|Before: Mr P

The application before the Court

The defendant/cross-claimant in these proceedings, by Notice of Motion dated 25 November 2020 and filed 26 November 2020, seeks the following orders: 1. Grant leave to the cross-claimant to file and serve the amended cross-claim annexed to this notice of motion, on or before 18 December 2020. 2. The cross-claimant pay the first cross-defendants costs thrown away because of the amendment. 3. Grant leave to the defendant to file and serve the amended defence annexed to this notice of motion, on or before 18 December 2020. 4. The defendant pay the plaintiff's costs thrown away because of the amendment. 5. These proceedings be transferred to the Professional Negligence List. 6. The plaintiff to pay the defendant's costs of the motion as agreed or assessed on an indemnity basis or alternatively on the ordinary basis. 7. Proceedings to be listed for further directions. 8. The defendant to notify the additional cross-defendants of these orders and the date in order (g) above.
The defendant relies upon the affidavit of Mr Eiden Havas sworn 25 November 2020.
The application is opposed by the plaintiff. The plaintiff relies upon the affidavit of Stephen Paul Firth sworn 11 February 2021.
The two proposed cross-defendants sought and were granted leave to intervene. The first of these, Mr Gollan, relied on tender an affidavit of Mr William Madani sworn on 18 May 2021.There was no application to cross-examine any of the witnesses.
Mr Doyle Gray, for the defendant, objected to the whole of the affidavit material relied upon by the plaintiff and the two proposed cross-defendants, on the grounds of relevance. Balancing the factors referred to by Thawley J in Dyer v Chrysanthou [2021] FCA 578, I allowed their tender; the contents of these affidavits are "central to the critical issues dividing the parties" as to the history of forensic decisions taken by the parties and "not in the interests of the administration of justice for the application to be determined in the absence of this evidence given its importance to the proper determination of the issues" (Dyer v Chrysanthou at [4]); in addition, these affidavits explain the relevant prejudice complained of by the deponents as resulting from the application. I also took into account s 75 of the Evidence Act 1995 (NSW).

Firths bring a claim for their costs for acting for Dr Pegios

The background to this application is as follows. Dr Pegios, the defendant, is a former dentist. Following disciplinary proceedings brought against him by the Health Care Complaints Commission ("HCCC") in 2009, his registration to practice as a dentist was first suspended and then cancelled. Dr Pegios was ordered to pay the costs of the tribunal proceedings, in the amount of $416,523. He did not do so. Instead, he moved to Singapore in 2010, as is set out in his affidavit sworn on 19 April 2018 (annexed to the affidavit of Mr Firth), where, once registered in that country, he took a job as a dentist.
In paragraph 5 of that affidavit Dr Pegios states: "In the course of applying for registration with the [Singapore Dental Council], I failed to disclose the Dental Tribunal proceedings and the cancellation of my NSW registration to the SBC. I represented to the SBC that there was no issue with my registration in NSW."
What Dr Pegios in fact "represented" was the representations as set out in a forged letter, on the letterhead of the Dental Board of New South Wales, purporting to have been authored (and signed) by its Registrar. This letter dated 18 May 2010, was addressed to the defendant, and stated: "I am pleased to confirm that your registration with the Dental Board of New South Wales is current and that you are in good standing."
Caution must be exercised when considering admissions made in other litigation: s 91 of the Evidence Act may apply. There is need for particular caution here as, in the course of these proceedings, Dr Pegios has responded to the plaintiff's Notice to Admit Facts by disputing the facts and authenticity of both the forged letter and the affidavit of 19 April 2018. Inconsistently, however, as is set out in more detail below, the proposed cross-claim admits the forgery and the signing of the affidavit.
Dr Pegios later abandoned his Singapore practice and returned to Australia, where he consulted Firths about two legal matters.
The first of these, in February 2016, was in relation to his dispute about income protection insurance effected for him by TAL Life Insurance ("TAL"). This claim went to mediation on 6 April 2017. Dr Pegios was represented by senior and junior counsel; that junior counsel was Mr Gollan, one of the proposed cross-defendants. An unpleasant discovery awaited him at the mediation; the forged letter was produced by TAL to his legal representatives. Mr Gollan showed the letter to Dr Pegios and asked for instructions. According to paragraph 24 of the proposed amended cross-claim, Dr Pegios admitted: 1. The letter was a forgery. 2. Dr Pegios was the forger. 3. He had forged that letter in 2010 to help him gain registration as a dentist in Singapore.
The dispute with TAL settled on 6 April 2017.
In July 2017, Dr Pegios again consulted Firths, because he wanted to apply for re-registration as a dentist. A costs agreement was entered into by the parties on 14 November 2017 and was signed on 24 November 2017. Mr Gollan was again briefed as counsel. Proceedings in NCAT were commenced in January 2018.
On 19 February 2018, the HCCC served a bill of costs for $416,523.75, being the unpaid costs of the 2010 Dental Tribunal proceedings, noting in covering correspondence that this was a matter which the HCCC considered to be relevant in the NCAT proceedings. This sum was negotiated down to $250,000 in March 2018, and this reduced amount was then paid by Dr Pegios.
Dr Pegios and his solicitors prepared material, including the affidavit sworn on 19 April 2018 referred to above. This evidence was designed to demonstrate to the court that he accepted that the findings of professional misconduct and unsatisfactory professional conduct made against him in 2009 were entirely justified, adding that he was a significantly different person to the one who had flouted the previous conditions. He admitted he had "failed to disclose" the 2009 Dental Tribunal proceedings (paragraph 5) but did not, however, refer to the forged letter. He explained that his mental health had deteriorated significantly during the period in which he conducted himself in a manner sufficient to merit cancellation of the registration, but said that his mental health was now good, and that he had been helped by making a clean breast of everything to his psychiatrist.
Unfortunately, when Dr Pegios's application came on for hearing on 17 December 2018, the forged letter was produced by the HCCC. Dr Pegios confessed that he had forged the document on the letterhead of the New South Wales Dental Board referred to above and that he had used it in support of an application for registration as a dentist in Singapore.
As Mr Firth sets out in paragraph 7 of his affidavit of 11 February 2021, he endeavoured to persevere with the application on Dr Pegios's behalf until it became apparent that, as a result of his failure to disclose this forgery to his psychiatrist, the likelihood was that, not only would this application be unsuccessful, but he may be permanently banned from ever reapplying for registration as a dentist in the future. Instructions were sought and obtained from Dr Pegios to discontinue the application and to pay the HCCC costs, for the agreed sum of $75,000.
Firths' memorandum of costs for the NCAT hearing, dated 4 February 2019, was then sent to Dr Pegios. The sums sought were $44,000 inclusive of GST in professional costs and $96,200 for disbursements, including $81,260 in Counsel's fees. Mr Firth offered to waive the professional costs if the disbursements were paid, but this never occurred. The defendant part paid $10,232 but still owed $129,967. After the relevant 12-month period had passed, and no challenge to the account dated 4 February 2019 had been made, Firths commenced proceedings for recovery of the amount claimed in that invoice.

The procedural history of the plaintiff's claim

The plaintiff commenced proceedings on 30 April 2020. The defence filed on 29 May 2020 consisted of non-admissions or denials, apart from an admission of the contents of paragraph 1 of the statement of claim. Nothing in the defence took issue with asserted non-compliance with the Legal Profession Uniform Law 2014 (NSW), although the defence also included claims that the plaintiff had breached its duty to the defendant of the kind that would be expected to be pleaded in a cross-claim.
A cross-claim was filed on 29 May 2020, in which these allegations of negligence were repeated. In order to demonstrate the far-reaching nature of the changes to the cross-claim, I set out the text of this cross-claim in full: "1 In or about 2010 the Dental Tribunal of New South Wales decided to cancel the Cross-Claimant's name from the Dental Register. 2 The Cross-Claimant sought the services and assistance of the Cross-Defendant to advise and represent the Cross-Claimant in respect of an application for re-registration as a dentist on the Dental Register (the Application). 3 An agreement was formed for the provision of legal services between the parties. 4 It was a term of the agreement between the parties that the Cross-Defendant would: a. advise in respect of the Cross-Claimant's application for re-registration as a dentist on the Dental Register (the Application); b. use its best endeavours to protect the Cross-Claimant's interest; and c. exercise reasonable care and skill in carrying out, by all proper means the Cross-Claimant's instructions. 5 Further, the Cross-Defendant owed the Cross-Claimant a duty of care at common law to: a. advise in respect of the Application; b. use its best endeavours to protect the Cross-Claimant's interest; c. exercise reasonable care and skill in carrying out, by all proper means the Cross-Claimant's instructions; d. avoid foreseeable risks of loss sustainable by the Cross-Claimant; e. advise the Cross-Claimant of risks in pursuing the Application including costs risk of the proceedings, and previous proceedings; f. advise the Cross-Claimant in a timely manner of such risks. Negligence and Breach 6 The Cross-Defendant failed to consider and advise the Cross-Claimant in respect of the risk of costs including outstanding any extant costs orders being sought from earlier proceedings before the Tribunal by the respondent Health Care Complaints Commission. 7 The Cross-Defendant failed to properly consider and advise on the Cross-Claimant's prospects of success in respect of the Application, in light of evidence adduced in the earlier Dental Tribunal proceedings: a. Prior to the institution of the Application proceedings; or b. In a timely manner after the commencement of the Application proceedings. 8 The Cross-Claimant commenced the Application proceedings on advice of the Cross-Defendant. 9 The Cross-Defendant advised the Cross-Claimant to withdraw the proceedings during the hearing of the Application proceedings. 10 The Application was withdrawn by consent of the Cross-Claimant and the Respondent in those proceedings. 11 The Cross-Claimant was ordered to pay $75,000 in costs to the Respondent in those proceedings. 12 The conduct set out in the premises above (the Breach) amounts to a breach of the duty owed by the Cross-Defendant to the Cross-Claimant at common law. Particulars The Cross-Defendant failed to: a. advise in respect of the Application; b. use its best endeavours to protect the Cross-Claimant's interest; c. exercise reasonable care and skill in carrying out, by all proper means the Cross-Claimant's instructions; d. avoid foreseeable risks of loss sustainable by the Cross-Claimant; e. advise the Cross-Claimant of risks in pursuing the Application including costs risk of the proceedings, and previous proceedings; f. advise the Cross-Claimant in a timely manner of such risks. 13 Further and in the alternative, the Breach amounts to a breach of the contract between the Cross-Defendant and the Cross-Claimant. Causation and Loss 14 The Cross-Claimant suffered loss in the following amounts as a result of the Breach: $250,000.00 $75,000.00 $24,280.95 15 The Cross-Claimant claims the amount of $349,280.95 plus interest and costs."
The plaintiff filed a Reply and a defence to the cross-claim, on 2 July 2020 and 26 June 2020 respectively.
At the pre-trial conference on 29 July 2020, as pleadings had closed, the Court made orders for the plaintiff to serve its evidence by 4 September 2020 and for the defendant to serve its evidence by 2 October 2020. The plaintiff served an expert report from a costs consultant (not a costs assessor, an important distinction in this case) on 21 August 2020, conformably with this timetable, but the defendant/cross-claimant failed to comply.
There was a status conference on 12 October 2020 where amended pleadings were foreshadowed by Dr Pegios's solicitor, Mr Havas. On 20 October 2020, Mr Havas served a proposed amended defence and amended cross-claim and sought the plaintiff's consent to these documents being filed. When this was not forthcoming, the defendant filed a Notice of Motion on 25 November 2020.

The explanation for the delay

As Order 3 made by the Judicial Registrar on 8 October 2020 demonstrates, at the time that these amendments were first proposed, the matter was otherwise ready to take a hearing date. A party seeking to amend in such circumstances is required to set out an explanation of the delay: Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 at [102]: "The objectives stated in r 21 do not require that every application for amendment should be refused because it involves the waste of some costs and some degree of delay, as it inevitably will. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked. Whilst r 21 assumes some ill‑effects will flow from the fact of a delay, that will not prevent the parties dealing with its particular effects in their case in more detail. It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment." [Emphasis added]
The explanation for delay is set out in the affidavit of Mr Havas sworn on 25 November 2020 and may be summarised as follows: 1. Mr Havas usually practices in criminal law and relies on counsel with proficiency in professional negligence. He briefed a barrister who provided advice, including advice in writing on 11 September 2020. Mr Havas decided, on 11 September 2020, that these proceedings were "both factually and legally complex" and that he should brief another barrister with expertise in costs issues as well as negligence. This led him to Mr Doyle Gray, who was unavailable until 6 October 2020, and who then gave advice which caused Mr Havas to decide that "it would be crucial to bring a claim against the barristers whom Firths claim to be concurrent wrongdoers". This is incorrect; there is no concurrent wrongdoer claim. In addition, this does not amount to an explanation as to why the case against the existing plaintiff/cross-defendant needed to be so extensively repleaded. 2. The proposed amended defence and cross-claim were prepared and served on 20 October 2020. Mr Havas sought the agreement of the plaintiff to the proposed amended pleadings but instead of agreeing, Firths sent a request for particulars on 22 October 2020. Mr Havas decided to answer this, despite considering the request "irrelevant and inappropriate". However, he found it to be "a more prolonged and demanding exercise that I imagined" and by 17 November 2020 had not finished the answers. He did, however, send an amended draft defence on 17 November 2020. He continued to send correspondence demanding that the plaintiff consent to the amendments, adding, in one email, that "resistance is futile". 3. Orders were made in the online court on 19 November 2020 and the defendant's Notice of Motion was filed on 26 November 2020. It was listed for hearing on 5 March 2021 but on 4 March 2021 this date was changed by the Judicial Registrar to 19 May 2021. There is no complaint about delay over this period.
The principal explanation for the delay is that Mr Havas belatedly realised that a barrister with expertise in costs issues was required. I do not accept this explanation. At all relevant times, the defendant was advised not only by Mr Havas but also by an experienced barrister. Although Mr Doyle Gray is an expert in costs as well as professional negligence issues, some degree of expertise in costs issues should be expected from all solicitors and barristers, as the relevant legislation and regulations govern how they prepare and enforce the memoranda of fees they send to their clients. Furthermore, the costs issues raised in the amended defence do not identify any difficult legal issue; they are little more than a recital of the relevant provisions of the Legal Profession Uniform Law 2014 (NSW) ("LPUL").
The delay by the defendant/cross-claimant in the cross-claim is difficult to justify, particularly in circumstances where Firths had complied with the timetable by filing expert evidence from a costs consultant. It is common ground that the considerable amount of work contained in this affidavit will be wasted if leave to amend the defence is granted, as a costs assessor (not a costs consultant) would then have to prepare a bill in assessable form.
The explanation for delay in relation to the proposed amended cross-claim is similarly unsatisfactory. It is also more factually complex, as Dr Pegios has served notices disputing the following facts: 1. He now disputes that the letter of 18 May 2010, set out Dental Board of New South Wales letterhead and purportedly signed by the registrar, which falsely states that the defendant is currently registered and in good standing, is a forgery (but see paragraphs 24, 70 and 74 of the proposed cross-claim). 2. He now claims that he complied with the order made by the Dental Tribunal or that he refunded the sum of $38,445 to "Patient B", contrary to the affidavit of 19 April 2018 he swore in the proceedings before the NCAT. 3. He now claimant disputes the authenticity of the affidavit sworn by him on 19 April 2018 in proceedings 2018/00031166 in the NCAT. I note however that this is the affidavit about which he complains he should have been given proper advice (see paragraphs 36, 37 and 76 of the proposed cross-claim).
Mr Doyle Gray's explanation for these surprising answers to the Notices to Admit Facts is that they are responses to the questions asked; by inference, the plaintiff has asked the wrong questions in order to elicit the necessary admission. The precise nature of the error was not identified. Even if it had been, it is clear from these answers that the amended cross-claim seeks to put in issue conduct of the cross-claimant going back to 2009, in circumstances where the prejudice in terms of meeting this new case, if factual issues of this kind are in dispute, would be considerable.
The unsatisfactorily explained late amendment of the cross-claim and the refusal to admit matters about which admissions are sought (while inconsistently purporting to put a case forward on the basis of the matters in those documents) create real difficulties in relation to compliance with sections 56 and 58 of the Civil Procedure Act 2005 (NSW). This is further complicated by the addition of two cross-defendants, namely the two barristers retained successively in the proceedings before the NCAT.

An overview of the amendments to the defence and cross-claim

The amendments in question are extensive. They may be summarised as follows: 1. The defence denies the matters in paragraphs 2 and 3 of the statement of claim (which were matters Dr Pegios had previously not admitted, repeats paragraph 6 and omits paragraphs 8 to 21. The defence then adds a further 18 paragraphs, raising issues for the first time in relation to the LPUL, including failure to give a reasonable estimate in writing of the amount of legal costs payable or of any contribution is likely to be received from another party, failure to have the costs assessed, waiver and estoppel, breaches of sections 174, 175, 177 and 178 of the LPUL as well as breaches of rule 74 of the Legal Profession Uniform General Rules. Although not pleaded, it is acknowledged that the defendant had not, during the time period is necessary under the legislation, given any notice as required under the LPUL of the kind that would have commenced the assessment process. 2. The cross-claim omits paragraphs 1 to 15 set out above and pleads a further 66 paragraphs purporting to set out the basis on which a new claim is brought for professional negligence, on a series of alternative grounds. In addition, the pleading joins two additional parties, namely two counsel who were retained by the plaintiff at different times.

The relevant principles of law

As a general rule, where proceedings have not been set down for hearing, leave to amend is granted. However, where the amendment is opposed on the basis that the proposed amendment is futile or prejudicial, or there has been unacceptable delay, the court must exercise its discretion conformably with ss 56 - 62 of the Civil Procedure Act 2005 (NSW).
The most common reason for refusing leave to amend occurs where the proposed amended pleading fails to comply with the relevant provisions of the Civil Procedure Act and its cognate Rules and/or statutory requirements for pleading necessary to comply with statutory provisions, such as ss 5B and 5D of the Civil Liability Act 2002 (NSW). As to the latter, an example referred to by Mr Lloyd SC is the requirement for the risk of harm to be precisely identified: Garzo v Liverpool/Campbelltown Christian School Limited & Anor [2011] NSWSC 292 at [59] to [64]. The same is the case in relation to the identification of the duty owed and the breach of that duty it is asserted to have been pleaded.
Problems also arise where the form and presentation of the pleading are so prolix and argumentative that the opposing party cannot understand the case that is to be met. Where the pleading is deficient, in that it does not identify the connection between allegations of fact and causes of action, or contains a discursive narrative, or makes generalised allegations which could not sensibly be the subject of a response, it cannot be allowed to stand if objection is taken: Dickens v State of New South Wales (No 3) [2018] NSWSC 485. Until the claim is properly articulated, not only the opposing party, but also the court cannot know the case to be met.

The plaintiff's challenge to the proposed amended defence

Mr Lloyd SC submits that Firths brought a straightforward debt claim, complied with the timetable for service of expert evidence and is ready to take a hearing date. Now the defendant wishes to put into issue technical defences under the LPUL, the effect of which would be to require to have the costs assessed in circumstances where the defendant failed to seek an assessment before the commencement of proceedings. Leave should not be granted but if it were, the costs thrown away would have to include the full costs of the costs consultant's report and attendant preparation.
Mr Doyle Gray submits that, until he was briefed in October 2020, the plaintiff had not had the benefit of having an expert in costs issues draft the defence to the claim. He submits that the conduct of the plaintiff amounts to a serious and sustained breach of the LPUL provisions as set out in the proposed amended defence and that these issues must be canvassed as part of the hearing of the plaintiff's liquidated claim for costs.

Should leave to amend the defence be granted?

The proposed amendments disclose a completely new case, in that no previous challenge based on the LPUL was raised.
The explanation of delay is unacceptable. However, the placing of limits upon a party's ability to effect changes to pleadings tends to be greatest when the litigation is "advanced" (Aon at [112]). These proceedings were being case managed by the Judicial Registrar and while they were at the stage where compliance with the timetable by the defendant would have resulted in the matter being set down for hearing, it was not too late for an amendment to be made, provided that the delay and prejudice caused by the late amendment can be compensated by an appropriate order for costs thrown away.
Cost play an important role in applications to amend. Mr Doyle Gray acknowledges this in terms of agreeing to the payment of the costs thrown away.
There is, however, a very important factor to take into account when determining what the costs thrown away would be. Mr Doyle Gray very properly pointed out that the costs consultant retained by Firths was erroneously described in Mr Lloyd's submissions as a "costs assessor" when she has not in fact been appointed to this role by the Chief Justice. It is common ground that the report she prepared pursuant to the order for exchange of evidence would be rendered surplusage by the amendments, which would require assessment of costs. The difficulty is that a costs assessor would have to be brought into the litigation by Firths, because the author of the report would not, as I understand Mr Doyle Gray's submission, be able to perform this task herself. Even if that were not the case, the practical result of granting leave to amend is that the expert report is no longer of any assistance in the litigation. Taking these factors into account, I consider that the costs thrown away by reason of the amendment should include the costs of this report.
Should this cost be the subject of any special costs orders, such as payment forthwith pursuant to Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 42.7 or indemnity costs? I was not addressed as to when these costs would be assessable and consider an order under UCPR r 42.7 would be unduly onerous.
However, an order for indemnity costs may be appropriate. Dr Pegios seeks an order for indemnity costs in relation to his own application, as his Notice of Motion makes clear, so he is hardly in a position to complain if an order for costs on an indemnity basis in relation to costs thrown away by reason of the late amendment, including in particular the expert report, were to be made.
Are the amendments hopeless? Unlike the challenges to the proposed amended cross-claim, I was not addressed as to whether or not the claims set out in the proposed amended defence were hopeless. Mr Doyle Gray stated from the bar table that the relevant time periods had not been complied with and that in those circumstances it was open to his client to seek assessment of the costs as well as raise the LPUL issues set out in the proposed new pleading. Even if that were not the case, the circumstances in which issues of that nature may be raised in response to costs issues are helpfully set out in Branson v Tucker [2012] NSWCA 310 and I also note Robb J's observations to this effect in Madanat v David [2020] NSWSC 284 at [71].
Orders for indemnity costs should be made sparingly and not used as a punishment. They are intended to compensate a party fully for costs incurred, which party and party costs could not be expected to do, where the Court forms the view that it was unreasonable for the party in whose favour the order is made to be subjected to a costs expenditure; there must usually also be some special circumstances or unusual feature for such an order to be made. The entitlement of a party to amend pleadings subject to paying the costs thrown away should not be undercut by indemnity costs orders unless these factors are also present.
The circumstances in which the plaintiff will have to abandon its expert report and face an assessment of costs by a costs assessor in my view amount to special circumstances, even if the costs consultant were able to perform this work herself. Although Mr Doyle Gray put to me that the essential evidence in the plaintiff's claim would have to come from the solicitor with the conduct of the matter (namely to establish the existence of the fee agreement), Dr Pegios's part payment of the fees means that very little in the way of factual evidence other than costs assessment issues will be required. As a result of the complete recasting of Dr Pegios's claim, all this work will have to be redone, at a time when the plaintiff was ready to take a hearing date rather than dealing with these further delays.
Accordingly, I grant leave to the defendant to file and serve the amended Defence annexed to his notice of motion, conditional upon the defendant paying the plaintiff's costs thrown away because of the amendment, including the costs of the costs consultant's report, on an indemnity basis.

The cross-claim

The cross-claim is an extraordinary document. Its structure is as follows: 1. Paragraphs 1 to 15, the original cross-claim, are deleted. 2. Paragraphs 16 to 41 and paragraph 43 set out the factual background. 3. Paragraph 42 asserts that, when the proposed cross-defendants gave Dr Pegios advised to withdraw his application and pay the cost of the respondent, they failed to give a reasonable estimate in writing of the amount of legal costs payable to Firths if the application was withdrawn, or of "any contributions towards those costs likely to be received from another party". Is Dr Pegios asserting that he had a "no win no fee agreement, or an arrangement with a third-party payer? The cross-claim does not elaborate. 4. Paragraphs 44 to 47 set out the duties owed by Firths. 5. Paragraphs 48 to 50 set out the duties owed by Mr Gollan. 6. Paragraphs 51 to 57 set out duties owed by Mr Coombes. This is a cut and paste of the duties is said to be owed by Mr Gollan (in fact, his name and not that of Mr Coombes appears in paragraph 54). 7. Paragraph 58 sets out the duties owed by Mr Gollan in relation to the affidavit of 19 April 2018 (this is the affidavit the authenticity of which Dr Pegios denies). 8. Paragraph 59 sets out the duties owed by Firths in relation to the affidavit of 19 April 2018. 9. Paragraph 60 to 69 set out the plaintiff's claim of breach as a series of alternative claims where Mr Doyle Gray told me that the key is the time at which any advice was given. The precise number of alternatives is unclear, but there are at least six. In addition to the timing, the alternatives are that if advice was given it was given "in such a way that Dr Pegios could not understand relevant legal issues and could not make informed choices about action to be taken during the course of a matter" (paragraph 61 is an example of this pleading). 10. Paragraphs 70 to 72 set out that when Firths briefed Mr Gollan of counsel, they did not remind him about Dr Pegios's forgery of the letter of good standing which had been produced in the course of the TAG insurance claim the previous year or, alternatively, if they did so, they did so "inadequately". The claim in relation to Mr Coombes is that he was either not informed or informed "inadequately". Paragraph 75 asserts that Mr Gollan did not consult with Mr Coombes on this issue "adequately". 11. Paragraphs 76 and 77 set out that Mr Gollan failed to advise Dr Pegios about the failure to comply with the orders of the Dental Tribunal on 8 June 2020 or, alternatively, advised him in such a way that he could not understand the issues of the case, including instructions about any compromise or withdrawal of the case. A similar claim is made against Firths at paragraph 78 and 79. 12. Paragraph 80 sets out that, by reason of the above matters, each of the proposed cross-defendants breached the duties owed to Dr Pegios. 13. Paragraph 81, which sets out the particulars of causation and loss, complains in paragraphs(a) to (g) that by commencing proceedings, the HCCC was "alerted" to Dr Pegios's "whereabouts", which meant they were able to serve the costs for $416,523.75 owed for the 2010 proceedings. This meant that he incurred the expense of instructing Firths to settle those costs, as well as being obliged to pay them, and "lost the opportunity of avoiding the expenses and avoiding paying the agreed amount". In other words, Dr Pegios had been counting on continuing to avoid these expenses, even though these were debts that he owed. 14. Paragraphs (h) to (j) complain that having commenced proceedings which he was obliged to withdraw because of the forgery, Dr Pegios incurred not only the costs of prosecuting the proceedings but also of paying the HCCC the $75,000 legal costs they claimed because he "lost the opportunity of avoiding that expense".
The first problem is to identify what duty, if any, the cross-defendants owed to a litigant who wanted to avoid paying his debts and was hoping the HCCC did not know about the letter he had forged to enable him to continue in practice in Singapore after being struck from the registry in New South Wales. Mr Lloyd SC has helpfully summarised the duties that the defendant/cross-claimant asserts the plaintiff and the proposed second and third cross-defendants owed as being generally a duty to "advise" and specifically to advise on the following: 1. Dr Pegios was not advised (or advised inadequately) that compliance, or lack thereof, with the 2010 orders made by the Dental Tribunal was a relevant matter for NCAT to consider in the NCAT proceedings when considering what, if any, final orders were to be made; 2. Dr Pegios was not, or not adequately, told that non-compliance with 2010 orders would affect Dr Pegios's prospects of success adversely; 3. Dr Pegios should have been told to carefully consider his instructions to Firths and inform them of any matter which potentially amounted to non-compliance with the 2010 order; 4. If Dr Pegios failed to instruct Firths of any matter which potentially amounted to non-compliance with the 2010 orders, then it was possible the HCCC, as respondent in the NCAT Proceedings, might know such matters and might introduce such matters into evidence, and if so, then that would affect Dr Pegios's prospects of success adversely; 5. Dr Pegios was not warned that his conduct at any time, other than the conduct which was the subject of the disciplinary proceedings leading to the 2010 Orders made by the Dental Tribunal, was a relevant matter for NCAT to consider in the NCAT proceedings when considering what, if any, final orders were to be made - if such conduct came within the meaning of "unsatisfactory professional conduct" or "professional misconduct"; 6. Dr Pegios was not advised about the meaning of "unsatisfactory professional conduct" and "professional misconduct" as they are defined in ss.139B and 139R of the Health Practitioner Regulation National Law (NSW); 7. Dr Pegios was not advised that conduct which fell within those definitions of "unsatisfactory professional conduct" and "professional misconduct" would affect Dr Pegios's prospects of success adversely; 8. Dr Pegios was not advised he should carefully consider his instructions to Firths and inform them of any matter which potentially fell within those definition of "unsatisfactory professional conduct" and "professional misconduct"; 9. Dr Pegios should have been told that if he failed to instruct Firths of any matter which potentially fell within those definitions of "unsatisfactory professional conduct" and "professional misconduct", then it was possible the HCCC might know such matters and might introduce such matters into evidence, and if so, then that would affect Dr Pegios's prospects of success adversely; 10. Dr Pegios should have been told his forgery of the letter of good standing referred to in paragraphs 23 and 24 was capable of being conduct amounting to "unsatisfactory professional conduct" or "professional misconduct" within the meaning of ss.139B and 139E of the Health Practitioner Regulation National Law (NSW); 11. Absent a compelling reason to explain his conduct, Dr Pegios's forging of that letter would likely result in his application failing with an order to pay the HCCC's costs, and he should have been told this.
Mr Lloyd SC submits that what the defendant/cross-claimant is asserting is that the proposed cross-defendants owed him a duty to remind him that he had engaged in the unlawful and dishonest act of forging a letter from the Dental Board of New South Wales (see, for example, paragraphs 23, 24 and 45) and to remind him that he had not complied with obligations to pay the cost of the 2010 proceedings (paragraph 59, 63, 81(c)). I note were costs that Dr Pegios complains, in the section of the cross-claim concerning damages, that he lost the opportunity to "avoid". Dr Pegios is effectively stating that Firths and his barristers should have reminded him to be honest with the court.
A solicitor does not owe a duty to advise a client that which he already knows: Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liquidation) [2001] FCA 1628 at [175]: "On the facts as I have found them, the claim must be rejected. The reasons are simple enough. First, cl 9.1.8. reflects the actual intention of the trustee, the manager and those beneficiaries who were involved in the discussions that lead to its introduction. Second, a solicitor is under no obligation to advise his client, or the person to whom he owes a duty of care, what the client or that other person already knows. So much must be obvious. And I have found that Mr Drapac knew exactly how cl 9.1.8 was to operate."
Mr Doyle Gray did not accept that the pleadings complained of a duty to remind Dr Pegios, stating that what was pleaded was that Firths had a duty to remind counsel. While there are references in the proposed cross-claim to the need to remind Mr Gollan of the production of the document in the TAG mediation the previous year, this is one of a series of alternatives in a case where the principal complaint is that Dr Pegios, not his legal advisors, should have been reminded of these events. In additions, Mr Coombes was not briefed in the TAG mediation and was retained only for a narrow period in the NCAT proceedings, so there was nothing to remind him of. (This is one of a number of errors arising from the cut-and-paste nature of the claims against the two barristers.)
The principal difficulty the proposed amended cross-claim faces is its failure to comply with the requirements of sections 5B and 5D of the Civil Liability Act. As a starting point, the plaintiff must identify and articulate the risk of harm in respect of which it is alleged the defendant was obliged to take precautions. The court must be in a position to determine the defendant's knowledge of a specific risk of harm, to assess the probability of that risk occurring, and to evaluate the reasonableness of the defendant's response to that risk. What must also be set out is whether the defendant had actual knowledge, or only ought to have known of the risk. It is only through the correct identification of the risk of harm that an assessment of reasonable response can be made: RTA v Dederer (2007) 234 CLR 330 at [59] - [61].
Mr Lloyd SC points out the failure of the proposed amended cross-claim to identify both the risk of harm and the reasonable precautions it is said that the plaintiff, or the Counsel he retained, ought to have taken to address that risk of harm, or the way in which the asserted failure to take reasonable precautions is asserted to satisfy factual causation for the purpose of s 5D(1). That alone should be sufficient grounds, he submits, for the whole of the proposed amended pleading to fail.
Mr Gollan points to further deficiencies: 1. Paragraph 48: This paragraph alleges Mr Gollan owed a duty "to assist" Dr Pegios "to understand the issues in the case and his possible rights and obligations, sufficiently to permit [Dr Pegios] to give proper instructions, including instructions in connection with any compromise of the case", relying on rule 37 of the Legal Profession Uniform Conduct (Barristers) Rules 2015. The issues, rights and obligations Dr Pegios says he did not understand are not identified, and neither is the point of time at which the duty is said to have been owed. Nor does breach of rule 37 (which in fact says "seek to assist") give rise to a claim in negligence. 2. Paragraph 49(a) - (d): Although these paragraphs allege duties to advise about compliance with the tribunal's 2009 and/or 2010 orders, those orders are not identified. The order in question was for Dr Pegios to refund $38,445 fees to "Patient B", which the Dr Pegios told the NCAT he had complied with. If he had complied, there was no need to address non-compliance. If Dr Pegios is now saying he did not comply, and the money is still owing, he should say so. A party should not be permitted to advance a case known to be incorrect. 3. Paragraph 49(e) - (g): These paragraphs appear to be addressed to Dr Pegios's forgery. They do not identify the point in time at which the duties are said to have been owed. Is the cross-claimant claiming the proceeding should never have been started, or that they should have been conducted differently? 4. Paragraph 49(h): This paragraph asserts that Mr Gollan had a duty to advise Firths that Dr Pegios had forged the letter. However, Firths had an instructing solicitor present at the mediation, and the firm was aware of the letter and of it being a forgery, as the history of the TAG proceedings set out in the proposed cross-claim makes clear. Inconsistently with the assertion that Firths did not know, the proposed amended cross-claim sets out, at paragraph 23, that Firths' solicitor was present at the mediation when the admission of forgery was made. A party should not be permitted to advance a case he knows is incorrect and cannot approbate and reprobate. 5. Paragraph 56, 58, 74 and 76: These paragraphs relate to the affidavit sworn on 19 April 2018 although, as is clear from paragraphs 36 and 37 of the same document, Mr Gollan was not involved in drafting that affidavit or settling it. It is asserted that Mr Gollan owed a duty to consult with Mr Coombes to tell him the letter was a forgery and that the affidavit needed to address it and to advise Dr Pegios of this fact. The circumstances in which counsel who was not briefed to perform a task owes a duty to remind the solicitor and barrister engaged in this task of facts they already knew are hard to imagine. 6. Paragraph 66: This paragraph advances an alternative case that Mr Gollan did advise Dr Pegios, but in such a way that he did not understand what he was being told. There is no identification of what advice was given or what part the plaintiff said he did or did not understand. The pleading also fails to identify the issues, rights and obligations referred to, or the instructions that we have been given if what Mr Gollan said had been understood. 7. Paragraph 81: Mr Gollan points out that this paragraph conflates the breaches of duty said to have been owed by each of the cross-claimants. This means it is not possible to understand what is being claimed from whom and/or on what basis. Nor is there any indication of what different instructions would have been provided if the advice he ought to have received had in fact been given.
Mr Coombes made only brief submissions, essentially pointing to the narrow role he played in the proceedings, which meant that many of the claims set out in the cut and paste repetition of the claim against Mr Gollan required revision. Mr Doyle Gray acknowledged that further work was needed in relation to the claim against Mr Coombes in this regard. This means that the proposed amended cross-claim still requires further revision of a substantial and largely unknown nature.

Should leave to amend the cross-claim be granted?

The discretion to refuse leave to amend should be exercised only in very clear cases. In the present case, I am satisfied that leave to amend the cross-claim should be refused for the following reasons: 1. There is an insufficiently explained and unacceptable delay in bringing the application. At all relevant times, a barrister skilled in professional negligence had been retained. Not only is the explanation for delay in adequate, but there is no affidavit from Dr Pegios. 2. The proposed amendment is not merely hopeless in terms of the requirement for careful pleading set out in the Civil Procedure Act 2005 (NSW) and cognate Rules, but fails to comply with settled pleading rules for proceedings governed by the Civil Liability Act. 3. There would be potential loss of public confidence in the legal system if leave were granted, given that the amendments introduce allegations centrally based on Dr Pegios's own fraud and unlawful conduct as well as his failure to comply with court orders for payment of costs. In addition, either the case he now wishes to bring is directly contrary to denials of facts put to him as part of the courts process or, alternatively, as these facts are the central plank in his defence to the cross-claim, the cross-claim is hopeless. 4. While the prejudice to the cross-defendant and proposed cross-defendants is presumptive in nature, that prejudice will be considerable, as the claim is sought to be advanced in the proposed amended cross-claim is considerably wider than the existing claim, as well as adding a further two parties. I also note that the events in question go back more than a decade, in terms of the 2009 Dental Tribunal proceedings. 5. The cut-and-paste nature of the claim against Mr Coombes means that there are factual errors requiring substantial repleading of any claim against him, which has been acknowledged as being the case.

Costs

As noted above, I have made an order for indemnity costs in terms of the amendment to the defence.
As I also noted above, the plaintiff sought payment of the defendant's costs on the motion on an indemnity basis, or alternatively on the ordinary basis.
The proposed amended cross-claim is a hopeless pleading and there has been unacceptable delay to the litigation caused by the bringing of the notice of motion. I was not addressed as to indemnity costs by the opposing parties, but I consider that an order that costs follow the event will suffice in the circumstances. If there is further delay by Dr Pegios, this order may be revisited as part of any future costs applications.
The question of entitlement to costs assessable now (in that they are not parties to the litigation), in relation to the two barristers who have not been joined, is one on which I was not addressed. I have made a costs order in their favour, with liberty to apply.

The plaintiff's application to transfer the claim

These proceedings are being case managed by the Judicial Registrar. The plaintiff is claiming a liquidated sum. There is no need to transfer the claim to the Professional Negligence List, despite there being a cross-claim for professional negligence, although one of some inelegance of pleading. The proceedings will continue to be case managed by the Judicial Registrar.

Orders: 1. Grant leave to the defendant to file and serve the amended Defence annexed to his Notice of Motion, conditional upon the defendant paying the plaintiff's costs thrown away by the amendment, including the costs of the costs consultant's report, on an indemnity basis. 2. Refuse leave to the cross-claimant to file and serve the amended cross-claim annexed to the Notice of Motion. 3. Defendant/cross-claimant's Notice of Motion otherwise dismissed, 4. The defendant/cross-claimant is to pay the plaintiff/cross-defendant's costs of the Notice of Motion, other than the costs identified in order 1 above, which are made on an indemnity basis, on the ordinary basis. 5. The defendant/cross-claimant is to pay the costs of the proposed additional cross-defendants on the ordinary basis, with liberty to apply.

Amendments 02 June 2021 - Order 1 and Paragraph 46 changed the Amended Cross-claim to amended Defence 02 June 2021 - typo 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 June 2021

At a glance

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Judgment (14 paragraphs)

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Cases Cited (8)