Marshall v Fleming

Judgment 1HIS HONOUR: The defendants are attorneys practising law in the State of New York in the United States of America. Margaret Marshall is the widow and executor of the estate of the late Neil Marshall under the terms of his will dated 23 December 1992. Kim Marshall is their only son. The deceased was killed in an aircraft accident at Spencer Gulf in South Australia on 31 May 2000. There were no survivors. 2The defendants represented the plaintiffs as participants in proceedings conducted in Pennsylvania on their behalf and on behalf of others seeking damages for negligence from the manufacturer of the aircraft that crashed. The proceedings were compromised on 21 February 2003 and the plaintiffs became entitled to the sum of USD 481, 250, representing 8.75 percent of the gross settlement amount of USD 5.5M. From that sum the defendants were entitled to a 22.222 percent contingency fee in accordance with the terms of their retainer. 3Before the defendants had accounted to the plaintiffs for the net proceeds of the settlement, they received notice of a claim by a third party to an entitlement to the balance of the net proceeds held by them. In those circumstances the defendants informed the plaintiffs that they were not prepared to account for the net settlement amount unless either an agreement was reached between the plaintiffs and the third party claimant as to their respective entitlements to the fund or the plaintiffs obtained an order from a court of competent jurisdiction as to their entitlement to it. In circumstances to which it is presently unnecessary to set forth in detail, the plaintiffs commenced a series of proceedings in this Court in order to establish their rights to the fund in the face of an insistence by the defendants that they would not release it without resolution of the third party's claims. 4The plaintiffs were successful in those third party proceedings. However, as a consequence of taking these other proceedings, the plaintiffs incurred substantial costs, which they were not able completely to recover from the third parties. A shortfall of approximately $350,000 remained. The plaintiffs allege in these proceedings that those and related losses were caused or occasioned to them as the direct result of breaches by the defendants. The precise formulation of the plaintiffs' claims lies at the heart of the current dispute. 5The present proceedings were commenced in February 2009 pleading causes of action in contract and in tort pursuant to the law of New South Wales. Later in that year the defendants sought to stay the proceedings on the grounds of forum non conveniens. That application was refused by Rothman J at first instance and effectively affirmed by the Court of Appeal. However, that Court made a provisional finding that the proper law of the defendants' retainer was the law of New York: see Fleming v Marshall [2011] NSWCA 86 at [81]. 6The plaintiffs thereafter in January 2012 filed an amended statement of claim in which all previously pleaded causes of action were abandoned in favour of a new case pleaded as "a common law or equitable duty to indemnify" under New York law. On 23 August 2012 the plaintiffs served a foreign law notice in compliance with UCPR 6.43 together with an expert report from William Holm. On 6 September 2012 the defendants filed their defence to the amended pleading raising a series of defences under New York law. They later served a report from Mr Joseph Bellacosa that disputed the existence under New York law of the cause of action upon which they perceive the plaintiffs to rely. 7On 18 October 2012 the defendants served a notice of dispute and foreign law notice and on 3 December 2012 served a proposed amended notice of dispute as to foreign law. It is the defendants' position that the facts and matters pleaded by the plaintiffs disclose no cause of action that can be characterised as an action for indemnity that is available under New York law. They contend that the plaintiffs' claims are actions for the reimbursement of legal fees incurred by them, which properly considered constitute damages for professional negligence rather than claims for indemnity. The former is now time barred by New York limitation provisions. A money claim would also be out of time in New York. The plaintiffs' reformulated case is presumably not vulnerable to the prospect of a limitation defence. 8It is not presently necessary for me to resolve the question of the correct characterisation of the plaintiffs' claims about the existence and therefore the viability of the case that the plaintiffs now seek to mount. It is, however, obvious that the early resolution of that dispute is of central importance to the further conduct of, and ultimately the final outcome in, the proceedings. 9The proceedings came before me in these circumstances for the determination of two notices of motion. The plaintiffs' notice of motion filed 7 November 2012 seeks the following relief: