Neale v Mahony

The present application

1. The present application is one by notice of motion filed 9 March 2018 by the defendant to strike out the statement of claim pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 14.28. However, it became apparent from the defendant's submissions that he was seeking that the whole of the proceedings be dismissed, with a strike-out of the pleadings being sought as alternative relief. I enquired of Mr Neale if he understood that the defendant was trying to bring the proceedings to an end by his motion, and Mr Neale said that he did. In those circumstances, I gave leave to the defendant to amend his notice of motion to rely on r 13.4 UCPR.
2. In the statement of claim Mr Neale pleads that he retained the defendant in January 2012 to represent him in the proceedings brought by the Bank. The statement of claim pleads that it was an implied term that the defendant would exercise all due professional skill, care and attention in acting for Mr Neale in those proceedings. There were said to be further express terms and conditions in a costs agreement of 14 July 2012. They were not set out. The statement of claim pleaded that the defendant took over matters already on foot in the Supreme Court, being the proceedings brought by the Bank and another set of proceedings.
3. The statement of claim pleads the breaches in these terms: 8. In breach of conditions alleged in paragraphs 5 and 6 hereof, the Defendant failed to exercise all due professional skill care and attention as aforesaid and was negligent. At all material times the defendant was a statutory entity liable to sue and be sued in its corporate name and style. PARTICULARS OF NEGLIGENCE (a) Failing to plead the undervalue sale of real property, the Yatala Rd Industrial site in particular, when the Defendant knew, having been advised by counsel, that this was the most significant issue in the case and an issue of which he had specific and extensive knowledge having met the Plaintiff in relation to a class action proposed by the Defendant against these same mortgagees, Bankwest and CBA. (b) Filing the wrong, obsolete, documents instead of the amended documents after many hours had been spent by the Plaintiff, the Defendant and Counsel to amend the pleadings so as to properly plead the undervalue sale. (c) Having admitted that error and promising to "fix it", failing to file the correct documents or any further documents relating to that plea. (d) Failing to lodge caveats when strongly advised by Ralphed Notley of Counsel and the Plaintiff to do so. (e) Failing to repay $5,000 lent by the Plaintiff to the Defendant. (f) Advising the Plaintiff that the Defendant had been discharged from bankruptcy and that moneys could be paid to the Defendant when ASIC records, the Plaintiff's solicitor and the Defendant's Receivers and Managers, Hall Chadwick and Blair Peach, say that those moneys should have been paid to the receivers. (g) Failing to amend the pleadings in any way. (h) Failing to advise the Plaintiff that the Defendant believed that the costs agreement on Mahony Taren letterhead with the Plaintiff had ceased to apply and failed to offer any alternative agreement. Alternatively, the Defendant was under a duty of care to the Plaintiff to exercise all due professional skill care and attention as a Solicitor and was negligent in his conduct and management of the proceedings on behalf of the Plaintiff PARTICULARS The Plaintiff repeats the particulars set out in paragraph 8 hereof.
4. The loss and damage is pleaded as follows: 9. As a result of the Defendant's negligence and/or breach of contract, the Plaintiff suffered and will continue to suffer loss and damage. PARTICULARS OF LOSS AND DAMAGE To be supplied in detail. The subject property was sold for $635,000 when a sworn valuation, after the sale and with the valuer knowing the sale price, was in the sum of $3,580,000.

Submissions

1. As to the relief sought under r 14.28, the defendant submitted that no material facts are pleaded to say what the defendant's negligence consisted of. Nor are material facts pleaded in aid of the alleged breach of contract. The defendant pointed to the pleading where Mr Neale alleges that the defendant was a statutory entity, the meaning of which, the defendant submitted, was not made clear.
2. The defendant submitted that the pleading is at such a level of generality that he does not know in advance the precise case he is obliged to meet.
3. The defendant pointed to the failure to particularise the loss and damage despite what appears in the particulars under paragraph 9 of the statement of claim. Further, he submitted that it is not clear how the alleged loss and damage arises as a consequence of any negligence or breach of contract on his part.
4. As to the relief sought under r 13.4, the defendant submitted that any alleged negligence in failing to plead matters relating to an undervalue sale has no merit and no prospects of success. First, the defendant submitted, the defendant was not Mr Neale's solicitor at the time of the hearing before Hammerschlag J. Secondly, the Court of Appeal's determination means that the complaint about a failure to plead an undervalue sale cannot constitute a reasonable cause of action. In any event, the defendant submitted, a failure to plead a claim comes within advocate's immunity.
5. Mr Neale drew attention to the transcript of the proceedings before Hammerschlag J in support of his assertion that there had been a failure to plead the undervalue sale and that it was on that basis that he was deprived of pursuing that claim. He submitted that the judgment of the Court of Appeal was wrong in holding that it was his failure to call Mr Lupton, the valuer, which meant the sale at undervalue claim was not heard and determined by Hammerschlag J.
6. Mr Neale submitted that the real issue was not a matter between himself and Mr Mahony; the real issue was with the Commonwealth Bank and what he described as a $20 billion fraud on him and 850 people.
7. Mr Neale submitted that if the proceedings are dismissed he will be made bankrupt on a judgment obtained by Mr Mahony in the Local Court for some $25,000. If he is made bankrupt he will not be able to continue to prosecute his claim against the Bank.

Claim of sale at an under-value

1. The principal claim made by Mr Neale concerns the failure by Mr Mahony to plead the undervalue sale of the Yatala Road property.
2. In his judgment in the Court of Appeal Leeming JA said this: [91] Ground 1(f) complains of a failure by the primary judge to find that the loss sustained by the sale of Yatala Road had been pleaded. Ground 1(g) is, alternatively, a challenge to the refusal by the primary judge to allow an amendment to plead that Yatala Road had been sold at undervalue. Ground 1(h) is a challenge to the refusal by the primary judge to determine the undervalued sale of Yatala Road. Ground 2(a) claims that there was a substantial miscarriage of justice by reasons of ground 1. Grounds 1(d)-(e) and (i)-(m) and 2(b) were formally abandoned. Ground 1(c) was a complaint about being refused leave to amend, which was not formally abandoned (possibly by oversight, having regard to paragraph 32 of the submissions in reply filed on 11 August 2015), but in any event was not advanced separately, and will be dealt with below. [92] One theme in the submissions on these grounds was that Mr Neale's pleading in the form it took going to trial, although deficient, should have been treated as extending to the alleged improper exercise of a power of sale. Another was that although much of what Mr Neale wished to submit at trial was unfounded in the evidence, the claimed improper sale of Yatala Road was in a different category, and should have been treated differently by the primary judge. A third was that the reasons given by the primary judge for refusing leave to amend, when application was made on the ninth day of the trial, focussed on the "deliberate destruction strategy" and failed to consider the possibility of permitting the much more modest amendment challenging the exercise of the power of sale. A fourth was that the assurances given by the primary judge that he would seek to deal with the case according to its substance were not carried through. [93] These grounds must be rejected. The reason I have reproduced so much of the transcript earlier in these reasons is that it is perfectly clear that the primary judge did not determine the undervalue sale of Yatala Road because, for reasons which were and remain unexplained by any evidence, Mr Neale provided no admissible evidence of its value. It was emphatically not the state of the pleadings but the failure to call Mr Lupton that caused the claims about Yatala Road not to be determined. [94] True it is that when the appeal was heard, Mr Altan [counsel for Mr Neale on the appeal] was given the opportunity to take instructions on this issue, and advised that: "My instructions are that Mr Lupton was ready and willing and able to attend throughout the hearing but then ultimately the decision was made not to allow this issue to be raised and it was for that reason that he wasn't called" (transcript 27 August 2015, p 17). [95] Although I do not doubt that those were Mr Altan's instructions from Mr Neale in August 2015, the record precludes my acceptance that that had been the position 18 months earlier. It will be recalled that: 1. Mr Neale's pleading at the beginning of 2012 had advanced a claim for an undervalued sale, as had the draft claim which was not pressed on 11 November 2013; 2. Mr Jacobs had referred to the need for further valuation evidence on 11 November 2013, in the presence of Mr Neale; 3. On the first day of the hearing, when the paragraphs of Mr Neale's affidavit dealing with Yatala Road were objected to and struck out, the primary judge explained, "But you're not calling the valuer", and made it clear that it would be necessary for Mr Lupton to give evidence if that aspect of the claim was to be advanced. The primary judge said, "You'd have to bring a valuer to give evidence", to which Mr Neale replied, "I'm happy to do that. Vic Lupton is quite happy to come here and give evidence". His Honour advised Mr Neale emphatically: "if you've got Mr Lupton who says he'll come and give evidence, bring him". 4. The repeated statements of the need to provide Mr Lupton, and the absence of any need to make an amendment, could have left no doubt in Mr Neale's mind at the end of the first day of the hearing as to what was required in order for his claims about Yatala Road to be determined. 5. As much was demonstrated by the document handed to the court at the beginning of the second day, which was said to reflect a brief conversation Mr Neale had had with Mr Lupton and what Mr Neale hoped he would say. Whether or not MFI1 and MFI2 were the documents handed to the court on that occasion, it is plain from what Mr Neale said at the time that he understood what the primary judge had said about Mr Lupton and was taking steps to obtain a report from him. 6. At the conclusion of the second day, when Mr Neale had been under cross-examination, the primary judge expressly advised that he was free to talk with Mr Lupton. 7. Mr Neale failed to provide any expert evidence of value. His amendment was refused on the fourth day of the hearing, but with the "indulgence" given by the primary judge to "have another look at it, to speak to Mr Lupton, and [to] deal with this application on Monday". 8. Even so, no expert evidence was produced at any time in the hearing. Nor was any produced by way of fresh evidence on appeal as to what would have been tendered had the amendment been allowed. 9. When an amendment was pressed on the ninth day of the hearing, which included but went substantially beyond the claim that Yatala Road had been sold at an undervalue in breach of duty, it was rejected, precisely as the primary judge had indicated on the fourth day of the hearing. [96] In short, Mr Neale was told clearly and unambiguously that he needed to procure Mr Lupton's attendance for cross-examination. How else was the stark disparity between Mr Lupton's valuation and the price obtained by Bankwest's receivers to be resolved by the court? The only conclusion available from the record is that Mr Neale well understood what was required of him, and was unable to provide Mr Lupton. Mr Neale obviously has a different view of the position now, 18 months later, but that cannot displace what he said and did at the time. (emphasis added)
3. In Reichel v Magrath (1889) 14 App Cas 665 Lord Halsbury SC said (at 668) that it would be: … a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceeding to set up the same case again. … It surely must be in the jurisdiction of the Court of Justice to prevent the defeated litigant raising the very same question which the Court has decided in a separate action.
4. In Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 Hunt CJ at CL, having referred to that quotation and similar sentiments in English and Australian cases, said (at 414): There are obviously limitations to striking out pleadings or causes of action as an abuse of process upon the basis stated in Reichel v Magrath and elaborated in the cases to which I have referred. The issue determined in the earlier case which is sought to be litigated in the later case must be one which the party propounding it in the latter lost in the former. The principle does not work in reverse to enable the party who won the issue in the earlier case to prevent it being litigated in the later proceedings by someone who was not a party in the former. It must be an issue which was necessarily determined in the earlier case, and one of importance to the final result. It must have been properly argued - by which I mean that it is readily apparent from whatever records there are of the earlier case that the tribunal which decided it was an I appropriate one to do so, that the parties were appropriate contradictors and that the issue was regarded by them as one of importance in that case. In normal circumstances, the decision disposing of the issue must have been a final one - by which I mean that it is not subject to appeal. (The filing of a notice of appeal may clearly be seen in some circumstances as merely seeking to delay {the inevitable.) There may also be circumstances in which, notwithstanding the absence of an appeal, it is clear that the earlier decision has overlooked some binding authority, or that it has caused the unsuccessful party a manifest injustice. As most of the cases have emphasised, all the circumstances of the determination in the earlier case may be considered, and there can be no definitive statement of the circumstances which will inevitably lead to a finding of abuse of process.
5. In State Bank of NSW Ltd v Stenhouse Ltd (1997) Aust Torts Reports 81-423 Giles CJ CommD also referred to Reichel as well as to Haines, and went on to say (at 64,089): The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice, and amongst the matters to which regard may be had are - (a) the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or ultimate issue; (b) the opportunity available and taken to fully litigate the issue; (c) the terms and finality of the finding as to the issue; (d) the identity between the relevant issues in the two proceedings; (e) any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceedings; … (f) the extent of the oppression and unfairness to the other party if the issue was relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and (g) an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.
6. Those passages were approved by the Court of Appeal in Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198; [2001] NSWCA 142 at [31] and [32].
7. It is clear from reading the Court of Appeal's judgment in Neale v Commonwealth Bank of Australia that the issue of whether or not Mr Neale's loss flowed from a failure to plead the undervalue sale of Yatala Road was litigated as an essential point. The issue was determined against him. In those circumstances, the attempt to re-litigate it against Mr Mahony in the present proceedings amounts to an abuse of process.
8. There is a further reason why this claim should not be permitted to be litigated.
9. In Keefe v Marks (1989) 16 NSWLR 713 a barrister briefed to draft a statement of claim failed to claim interest on the judgment in the statement of claim. When sued, the barrister relied on advocate's immunity to demonstrate that there was no reasonable cause of action brought against him. It was held by Gleeson CJ and Meagher JA that the failure to make the claim for interest in the statement of claim was conduct necessarily inseparable from the conduct of the case itself. In that way the primary judge was correct in striking out the statement of claim (see at 720 and 729).
10. The decision in D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12 made clear that no distinction can be drawn in that regard between a barrister or a solicitor.
11. Moreover, the High Court has recently explained that the rationale behind advocate's immunity is the avoidance of re-litigation, in collateral proceedings for negligence or other civil causes of action, of issues determined in the principal proceedings: Attwells v Jackson Lalic Lawyers Pty Ltd (2016) 259 CLR 1; [2016] HCA 16 (see the majority at [32]-[37], Nettle J at [66] and Gordon J at [106]-[110]).
12. If, contrary to the Court of Appeal's decision, the loss sustained by Mr Neale came from the failure of Mr Mahony to plead the undervalue case, Mr Mahony's failure in that regard would be protected by the principle of advocate's immunity.
13. The particulars in paragraph 8 which relate to the sale at undervalue are particulars (a), (b), (c) and (g). The defendant establishes that Mr Neale has no reasonable cause of action in relation to those matters because the claim is an abuse of process and/or because advocates' immunity operates to prevent the claim being brought.

Loan to Mr Mahony

1. Particular (e) cannot be pleaded as a particular of negligence. What it disguises is a claim, as Mr Neale explained, that he lent Mr Mahony the sum of $5,000. However, that $5,000 was to enable the payment of the barrister Wayne Muddle's fees.
2. Mr Mahony brought proceedings against Mr Neale in the Local Court for fees that were said to be owing to him. He obtained a judgment on 14 June 2016 for $29,963.46 plus costs. The claim by Mr Neale for repayment of a $5,000 loan which was paid on account of the barrister's fees was a matter so inextricably linked with the claim made by Mr Mahony that it ought to have been raised as either a defence or a cross-claim or both. It would have been unreasonable not to raise that claim in the Local Court proceedings and then to attempt to re-litigate it in separate proceedings. An Anshun estoppel is raised to prevent this claim being made: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.

Wrong advice by Mr Mahony

1. In relation to particular (f), Mr Neale conceded that he did not pay any money to Mr Mahony at a time when Mr Mahony wrongly advised him that monies could be paid to Mr Mahony in lieu of Mr Mahony's trustees in bankruptcy. When I enquired of Mr Neale how he had suffered any loss or damage when he had not paid any such money to Mr Mahony, he claimed that he had had to research the point and get legal advice.
2. I do not consider that Mr Neale has any claim in relation to the matter contained in particular (f). No reasonable cause of action is disclosed.

The costs agreement

1. In relation to particular (h), I enquired of Mr Neale why the costs agreement had ceased to apply. He said it had not ceased to apply but that he had agreed to pay Mr Mahony $25,000 because he was to receive $250,000 from a person called Rocky in relation to the property in Avon Road.
2. As it transpired, Mr Neale did not receive the money from Rocky. He said, rather, that Mr Mahony got the money himself but argued in the Local Court proceedings that the costs agreement he (Mr Mahony) had with Mr Neale had changed when Mr Neale agreed to pay him $25,000.
3. Mr Neale admitted that he did agree to pay Mr Mahony $25,000, but that he raised as a defence in the Local Court the fact that the $250,000 was not forthcoming from Rocky. He said that this was not accepted by the Local Court, and judgment was given against him. That being so, the matter is a clear case of issue estoppel, and Mr Neale cannot be allowed to re-litigate the issue in the present proceedings.

Failure to lodge caveats

1. Particular (d) concerns a failure to lodge caveats when advised by Mr Notley of counsel that Mr Mahony should do so. As best I can understand this claim, Mr Notley in an email of 15 June 2012 asked Mr Mahony whether caveats had been lodged over the Avon Road properties and said that, if they had not, Mr Mahony should consider whether caveats should be lodged. Mr Neale, of course, was the registered proprietor of the Avon Road properties, but it seems that the purpose of lodging the caveats was to enable him to receive notice by a Lapsing Notice when the Bank was ready to sell that property.
2. Mr Neale appeared to accept that he would have needed to remove the caveat whether on receipt of a Lapsing Notice or after a hearing but, being on notice that the property was about to be sold, he would, unlike what happened with the Yatala Road property, be in a position to ensure that the Bank marketed and sold the Avon Road property at a fair price. Instead of that, it appears that the Bank was able to sell that property without any notice to him. Implied in all of this, although not expressly stated, and certainly not pleaded, was the suggestion that this property was also sold at under-value.
3. Although this claim seems a very tenuous claim, and it is certainly not pleaded properly in the statement of claim, I am conscious of the fact that the statement of claim was filed on 22 March 2017 and it seems likely that the Avon Road property was sold some time in 2011 or 2012. That being so, if I was to dismiss the present proceedings because this claim is not properly pleaded, Mr Neale may become statute barred from pursuing it. That is a significant consideration where he is acting for himself.
4. I consider in those circumstances that the fairest course is to permit that claim to go forward, to strike out the present pleading of that claim, but give leave to Mr Neale to file an amended statement of claim that properly pleads that matter. It may be necessary to scrutinise carefully any revised pleading before it is allowed to be filed, to ensure that the issue in fact involves a reasonable cause of action.
5. None of the other claims should be permitted to be brought for the reasons I have given. No reasonable causes of action are disclosed in relation to them. Those claims should be summarily dismissed.

Conclusion

1. Accordingly, I make the following orders: 1. Apart from the claim identified in paragraph 8(d) of the Statement of Claim, the claims pleaded in the Statement of Claim are dismissed pursuant to UCPR r 13.4; 2. The whole of the pleading contained in the Statement of Claim is struck out pursuant to UCPR r 14.28; 3. Grant leave to the plaintiff to re-plead the claim identified in paragraph 8(d) of the Statement of Claim; 4. Any re-pleaded Amended Statement of Claim is to be served in draft on the solicitors for the defendant by 3 August 2018; 5. Stand over the further hearing of the Notice of Motion to Friday 10 August, 2018 at 2.00pm; 6. Costs reserved.

Amendments 16 July 2018 - Title page 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: 16 July 2018