Marshall v Prescott

Judgment 1These proceedings were brought by the plaintiffs, Ms Marshall and her son, against their former solicitor Mr Prescott, in 2009. In Marshall v Prescott; Marshall v Fleming [2012] NSWSC 188, I explained the background to these proceedings, when dealing with motions earlier filed in the proceedings (at [1] - [3]): "1 In 2009, the plaintiffs brought two sets of proceedings in this Court. The first, against an Australian solicitor, Mr Michael Prescott and the second, against the eleven members of a New York firm of solicitors, Kreindler & Kreindler. They had each acted for Mrs Marshall, the first plaintiff, (in Mr Prescott's case only for a certain period), in relation to proceedings which Mrs Marshall and a number of others pursued in the United States (in Pennsylvania), against the manufacturer of certain parts of an aircraft. That aircraft had been involved in an accident in South Australia in 2001. Mrs Marshall's husband was one of those killed in the accident. Mrs Marshall brought the Pennsylvanian proceedings in her own right, as executor of her husband's estate and on behalf of her son, the second plaintiff. Those proceedings were settled, with the result that the New York firm held settlement moneys in its trust account. 2 Mrs Marshall then brought proceedings in this Court against her husband's former de facto partner, Ms Carruthers, in relation to a dispute over their respective entitlements to the settlement monies held by the New York firm. It appears that this litigation was resolved in Mrs Marshall's favour, in circumstances where it transpired that Ms Carruthers, who had not been a party to the Pennsylvanian proceedings, had no standing under Pennsylvanian law, to pursue a claim of the kind that those proceedings were concerned with. 3 The plaintiffs brought the two sets of proceedings now before the Court, seeking to recover, by way of damages, the legal costs which Mrs Marshall did not recover from Ms Carruthers and in Mr Prescott's case, exemplary damages. Amongst other things, it is alleged that Mr Prescott conspired with Kreindler & Kreindler, with the intention of harming the plaintiffs' financial interests. That claim is advanced in circumstances where Mr Prescott had not only initially acted for Mrs Marshall in relation to her claim against the aircraft parts manufacturer, but where he later acted for Ms Carruthers, including in the proceedings which Mrs Marshall brought against Ms Carruthers in this Court. In those proceedings, Mr Prescott was injuncted from continuing to act for Ms Carruthers." 2The parties' pleadings have since been amended, other interlocutory matters dealt with and the matter listed for hearing in August 2013 for seven days. 3By a judgment given by Garling J on 17 October 2012, the plaintiffs were refused an order under s 67 of the Civil Procedure Act 2005, staying the proceedings pending the final determination of proceedings in the Court of Appeal and any resulting appeal to the High Court from that decision. 4The appeal was given expedition and a decision is now reserved. It concerns five documents which the plaintiffs had sought be produced by Mr Prescott's insurer, the GIO, in circumstances where privilege had been claimed in the documents. Judgment has been reserved on the appeal. It was contemplated by Garling J that if the Court of Appeal's decision was not given in sufficient time, the August hearing might have to be to be adjourned. 5In December 2012, the plaintiffs filed an amended statement of claim and Mr Prescott filed an amended defence which raised two estoppel defences. These latter amendments were not in contemplation when the matter was before Garling J in October. His Honour was then informed for Mr Prescott that the matter was ready to be given a date. There was a disagreement between the parties as to whether or not Mr Prescott was entitled so to amend his defence, in circumstances where subsequently, the plaintiffs had amended their statement of claim to provide further particulars of the damages claimed. At the hearing on 29 April 2013 an amended motion was filed by the plaintiffs, by which they sought an order striking out the amended defence filed on 21 December 2012 and in the alternative, an order that the trial date be vacated. 6One aspect of the parties' dispute was resolved by Mr Prescott agreeing that he should seek leave to file the amended defence. The plaintiffs did not oppose the amendment made to paragraph 18 of the defence, in respect of which the leave sought should thus be granted, accepting that it was a proper response to the amendment to the statement of claim. What remained in issue was whether Mr Prescott should be given leave to amend in terms of paragraph 17 of the amended defence, whereby he raised the two estoppel defences. Those defences rest on costs orders made in earlier proceedings in this Court by consent. 7Mr Prescott accepted that at the trial the onus would fall upon him to establish the estoppels which he wishes to plead. His position was that he did not need to lead any further evidence to support his estoppel cases, other than two documents on which he sought to rely, the consent orders made by this Court in the earlier proceedings, to which the plaintiffs were parties. He accepted that the plaintiffs must have the opportunity to put on any evidence on which they wished to rely to defend the estoppel arguments, but disputed the nature and difficulty of putting on such evidence. He also accepted that in the event that they were granted access to the documents the subject of the appeal, the plaintiffs should also have the opportunity to put on further evidence as to those documents, if they wished and that in the result, the August hearing might have to be vacated. 8For Mr Prescott it was submitted that the plaintiffs had been put on notice of the estoppel arguments which he wished to pursue in November 2012, some 8 months before the hearing. In the circumstances, there was no real prejudice in the leave which he sought being granted. Even now there was sufficient time for the plaintiffs to put on any evidence on which they wished to rely before the hearing. 9For the plaintiffs it was submitted that the amendment would be refused. In an earlier defence an estoppel argument had been raised. That defence had been objected to and a strikeout application foreshadowed. In a later defence the estoppel argument had not been pursued. In those circumstances, a procedural estoppel arose (see Commonwealth v Verwayen ("Voyager case") [1990] HCA 39; (1990) 170 CLR 394). 10Further, it was relevant that Mr Prescott was the plaintiffs' former solicitor. In order to resist the estoppel arguments, it would be necessary for Mrs Marshall and another former solicitor, to put on affidavits as to the circumstances in which the other two proceedings had been brought and concluded. Mrs Marshall resides in the UK and the former solicitor interstate. Mr Prescott's file was no longer in existence. There was not sufficient time in the circumstances for the necessary evidence to be put on before the hearing in August. The difficulties were exacerbated by the outstanding question to be resolved in the appeal. 11Rule 14.4(2)(a) of the Uniform Civil Procedure Rules 2005 provides that a defence must plead any matter "that, if not pleaded specifically, may take the opposite party by surprise". Rule 14.5 provides that "a party to proceedings may not file any pleading subsequent to a reply" without leave. 12The plaintiffs' amendment to their statement of claim provided new particulars of damage in paragraph 108. There was no amendment to paragraph 109, which pleaded that Mr Prescott was liable for the causes of action earlier pleaded. It follows that Mr Prescott properly accepted that in accordance with Rule 14.5, he ought to have sought the Court's leave, before amending his defence to include the estoppel claims. If correct, he says those defences provide a complete answer to the plaintiffs' claims. That they do provide such an answer, is not conceded by the plaintiffs, who wish to put on further evidence to meet the estoppel arguments, if the leave sought is granted. 13The Court's discretions must be exercised in accordance with the requirements of s 56 of the Civil Procedure Act 2005, namely to "facilitate the just, quick and cheap resolution of the real issues in the proceedings". Section 64(1) permits the amendment of documents at any stage of the proceedings. Section 64(2) provides: "(2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings." 14Section 58(1) requires that in exercising its powers the Court act in accordance with the dictates of justice. Subsection (2) provides: "(2) For the purpose of determining what are the dictates of justice in a particular case, the court: (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant: (i) the degree of difficulty or complexity to which the issues in the proceedings give rise, (ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, (iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties, (iv) the degree to which the respective parties have fulfilled their duties under section 56 (3), (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case." 15The real issues in the proceedings are those which the parties raise by their pleadings and pursue at trial. In Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175, it was observed at [102] - [103]: "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. 103 The fact that an explanation had been offered for the delay in raising the defence was regarded as a relevant consideration in J L Holdings[174]. Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case." 16In this case it was Mr Prescott who, in October last year, sought to have the matter listed for hearing and the plaintiffs who opposed that course. That was even before Mr Prescott took steps to amend his defence to raise the estoppel arguments. They relate to the plaintiffs' damages claim, calculated on the difference between costs ordered in their favour on a party/party basis, as opposed to being calculated on a solicitor/client basis, in two sets of proceedings to which they were parties. 17On the evidence the explanation for the amendment of the defence was a change in Mr Prescott's legal representation and advice by new counsel, that the estoppel arguments available to Mr Prescott on the facts ought, in accordance with the requirements of the Rules, be specifically pleaded, rather than the plaintiffs' claims simply being denied. Given the obligations imposed by Rule 14.14, that advice was plainly sound. 18That the estoppel arguments which Mr Prescott wishes to rely on are ones which might result in the plaintiffs' claim failing is not, of itself, a basis for refusing leave to amend. In November 2012, some 8 months before the hearing, that there was any significant prejudice to the plaintiffs in the amendment of the defence by the proposed clause 17, is difficult to see. 19There was then plainly sufficient time for relevant evidence to be put on by the plaintiffs. Given the explanation advanced at the hearing as to the evidence which the plaintiffs wish to lead as to the circumstances in which they did not pursue costs on a solicitor and client basis, at the time that the costs orders were made, notwithstanding that Mrs Marshall and the solicitor from whom evidence would have to be called are not resident in New South Wales, the time even now available before the commencement of the hearing, it seems to me, is sufficient to enable them to put on that evidence. 20The outstanding Court of Appeal judgment is a complicating factor, but, also to be considered is that there in issue are only five documents. It has already been envisaged that the time of the delivery of that decision might have the result that the August hearing will have to be vacated. Given that it was the plaintiffs who last October were resisting the matter then being listed for hearing, that does not seem to be a proper reason for refusing the leave to amend the defence which Mr Prescott now presses. 21Nor does it seem to me that the circumstances here in question are akin to those considered in Verwayen. There the Commonwealth had not only failed to plead a limitation defence, but had earlier advised that such a defence would be waived and had joined in applications for an expedited hearing of damages, on the basis that liability was not in issue in the proceedings. Later, a policy decision was taken without explanation to abandon that approach and to pursue the limitation defence. It was in those circumstances that the respondent claimed that the Commonwealth was estopped from relying on the defence. The High Court held by majority that the Commonwealth was not free to dispute its liability to the plaintiff, its conduct estopping it from doing so. 22As Dawson J observed (at 456), a pleading amendment may be refused because it is made at such a late stage, that neither costs nor an adjournment can compensate the other side for the failure to raise the issue at an earlier stage. The plaintiffs' estoppel claim raises a different consideration. In Verwayen it was a deliberate course of action on the part of the Commonwealth, pursued consistently over a considerable period of time, by which it gave written assurances that it would not insist on its right under the Limitation Act 1969, on which the estoppel there found rested. 23It was there concluded that on the evidence there was an inference that the proceedings would not have been commenced, in the absence of those assurances. The abrupt change in the Commonwealth's policy constituted a breach of a firm assurance, deliberately given on more than one occasion. While an order could have compensated the actual expense incurred as a result of the failure to plead the statute of limitations at the beginning, the real detriment was considered to be that the litigation was induced by the assumption that the Commonwealth would not insist upon the limitation period, which also allowed the litigation to proceed for more than a year, without taking any steps to bring it to a conclusion by way of settlement or if necessary withdrawal. This, together with the stress of litigation between a natural person and the Commonwealth was relevant to consider, as was the prolonged period of stress to which the respondent had been subjected in an action in which the damages claimed were amongst other things, a high level of anxiety and depression. 24The circumstances here are plainly very different. Mr Prescott did not induce the plaintiffs to initiate or pursue the litigation. There was no suggestion that they have taken any step to their detriment, as a result of any representation or inducement offered to them by Mr Prescott in relation to any estoppel defences. To the contrary, when one estoppel defence was earlier specifically pleaded, the plaintiffs objected, foreshadowing a strike out motion. What the basis of such an application might have been, is not apparent. Though the estoppel defence was later removed from the defence, the plaintiffs' claims were still denied. 25True it is that the amendment to the defence to plead the estoppels was only notified after the hearing date had been fixed, but the amendment was notified some 8 months prior to the hearing date. That was the result of legal advice then given to Mr Prescott that the estoppels should be expressly pleaded. In the circumstances, even now, this is not such a late amendment that, in the ordinary course, leave to amend would be refused. To the contrary, it would be granted with an order for costs in favour of the plaintiffs, as the price of the indulgence granted. In my view justice does not dictate that given the earlier procedural history, a different approach should now be taken. 26If the grant of the leave sought results in any wasted costs, so far as the plaintiffs are concerned, that is a matter which might be given further consideration, in due course, on the question of the costs orders to be made in the proceedings. That, however, is not a reason for refusing the leave to amend the defence now sought. 27Nor do I consider that the circumstances are such that the hearing in August should be vacated. The complaint that there is not now sufficient time to put on further necessary evidence, cannot, it seems to me, be properly accepted, given what the estoppel case and its defence necessarily rest on. That is, consent orders to which the plaintiffs agreed in two other sets of proceedings and the circumstances in which those agreements were forthcoming, at a time when they were legally represented. Even if the estoppel defences had not been relied on, it is difficult to see that such matters would not have had to be dealt with in the evidence, if the plaintiffs' claim for damages was to be made good. 28It seems to me that the appropriate orders in circumstances where there is no issue as to the court orders which Mr Prescott wishes to rely on and where he seeks to lead no additional evidence in relation to the estoppel defences are as follows: 1. Mr Prescott be granted leave to file the amended defence. 2. The plaintiffs serve any further evidence on which they wish to rely in relation to the estoppel defences within 6 weeks of today's date. 3. Mr Prescott to file and serve any evidence in reply within a further 3 weeks. 4. The plaintiffs have leave to file any further evidence on which they wish to rely, if given access to the documents the subject of the proceedings in the Court of Appeal. 5. In that event, the parties are directed to confer as to a timetable for the service of any further evidence. 6. In the event of any disagreement as to such evidence, the parties have liberty to approach on 3 days notice. 7. Mr Prescott is to bear the costs of the plaintiffs' motion and the hearing of Mr Prescott's application, as agreed or assessed.