Plaintiff v First Defendant

1 The plaintiff, Mr Sloan, is self-represented. The defendants, Arnold Thomas & Becker and Mr Lee Flanagan (together 'ATB') are a firm of solicitors and the solicitor with the conduct of an earlier proceeding in which Mr Sloan was the plaintiff, NS v GD & Ors ('2006 proceeding'). In the 2006 proceeding, Mr Sloan brought a claim against his former employers, and a senior employee of his former employers, with respect to losses allegedly suffered by him arising out of sexual assaults said to have been committed by the senior employee. Confidentiality orders have been made with respect to the 2006 proceeding, which will be respected in these reasons.

2 The 2006 proceeding was settled on 24 October 2011, when Mr Flanagan told the solicitors for the defendants in the 2006 proceeding that an offer made by them had been accepted. Shortly after this time, ATB ceased to act for Mr Sloan, after he purported to withdraw his authorisation to ATB to settle the 2006 proceedings on the terms upon which it was in fact settled. Those instructions were withdrawn in a letter from Mr Sloan to ATB dated 27 October 2011.

3 On 21 December 2011, Zammit AsJ (as she then was) made orders dismissing the proceeding by reason of the settlement agreement being valid and enforceable. An appeal against those orders was withdrawn after the judge hearing the appeal, Whelan J (as he then was), told Mr Sloan that if he wished to avoid the settlement agreement, he would need to repay the funds paid to him by the defendants in the 2006 proceeding pursuant to the settlement agreement.

4 Those funds were paid to ATB on 14 November 2011, and subsequently transferred to Mr Sloan. This proceeding was commenced on 19 December 2017. In this proceeding, Mr Sloan claims as follows:

In breach of each of the term (sic) and the duties referred to in the preceding paragraph ATB and Mr Flanagan failed to exercise due care and skill in prosecuting and compromising the sexual assault proceeding on his behalf and in advising him in relation to the compromise of that proceeding ... and in particular by inadequately advising him that he should settle the sexual assault proceeding for the settlement sum of [$X] without properly or at all considering his entitlement to claim compensation for loss of earning capacity arising from the effects of the sexual assault committed against him and coercing him to make an offer in terms of the written instructions and ultimately accept the terms of the settlement which the defendants were prepared to accept, for motives ulterior to the best interests of Mr Sloan, namely to gain access to the agreement by the defendants to pay the agreed sum for Mr Sloan's legal costs of [$Y].

5 ATB, in the defence filed 26 February 2019, admitted they owed Mr Sloan various duties, but denied that they breached those duties. They bring an application for summary judgment pursuant to s 62 of the Civil Procedure Act 2010 (Vic) ('CPA') on the basis that Mr Sloan's claims in the proceeding have no real prospects of success. Their defence includes an allegation that Mr Sloan's claims are statute barred by reason of s 5 of the Limitation of Actions Act 1958 (Vic) ('Act').

6 ATB alleges that the relevant limitation period commenced on 24 October 2011, the day that agreement was reached to settle the 2006 proceeding, or at the very latest, 14 November 2011, the date upon which the defendants in the 2006 proceeding tendered payment of the settlement sum. Accordingly, ATB has a good defence to Mr Sloan's claim, and the proceeding ought be dismissed.

7 Mr Sloan opposes the application on the basis that his claims against ATB have substantial merit, and that the limitation period only commenced to run from 21 December 2011, the date upon which Zammit AsJ said in Court words to the effect that his real trouble was with his lawyers, not the defendants in the 2006 proceeding.

8 While in the 2006 proceeding Mr Sloan disputed the propriety and enforceability of the settlement agreement, this is not a matter sought to be litigated in this proceeding. That question has been dealt with by the orders made by Zammit AsJ on 21 December 2011, and Mr Sloan's abandonment of his appeal against those orders. This proceeding focuses upon the advice given by ATB to enter into the settlement agreement.

9 Mr Sloan brings his claim in contract, tort, and for breach of fiduciary duty. In relation to the latter claim, he alleges that ATB advised him to enter into the settlement agreement for the ulterior purpose of recovering their legal costs through the settlement agreement. Further, while this is not pleaded, Mr Sloan also alleged (in his oral submissions at the hearing of ATB's application) that ATB was in a position of conflict because the firm had a commercial relationship with the corporate defendants in the 2006 proceeding, having purchased advertising time on their television stations.

10 The test applicable to applications for summary judgment under the CPA is uncontroversial. As stated by the Court of Appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd:[1]

(a) the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a 'real' as opposed to 'fanciful' chance of success;

(b) the test is to be applied by reference to its own language and without paraphrase or comparison with the 'hopeless' or 'bound to fail' test essayed in General Steel;

(c) it should be understood, however, that the test is to some degree a more liberal test than the 'hopeless' or 'bound to fail' test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent's case is not hopeless or bound to fail, it does not have a real prospect of success;

(d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.[2]

11 There is no dispute between the parties as to when key events occurred. Mr Sloan does not dispute that the settlement agreement was made on 24 October 2011, or that payment was tendered on 14 November 2011. However, he contends that, because ATB was in a position of conflict, the limitation period did not commence to run until 21 December 2011, when he became aware, by reason of the remarks made by Zammit AsJ in Court, that he had a cause of action against his solicitors. As can be seen from the following, Mr Sloan's understanding of the legal position is a little muddled, but he is not entirely wrong.

12 In the case of Mr Sloan's causes of action arising out of allegations of breach of contract and negligence, the limitation period of six years commenced when the relevant causes of action were complete. In the case of the alleged breach of contract by ATB, the cause of action would be complete upon breach: that is, when ATB provided the advice to enter into the settlement, which, logically, would pre‑date the date the settlement agreement was made. In the case of the alleged negligence by ATB, the cause of action was complete when Mr Sloan suffered loss by reason of ATB's conduct.

13 I agree with counsel for ATB that any damage suffered by Mr Sloan accrued on the date the settlement agreement was made: that is, when his entry into the settlement agreement extinguished Mr Sloan's rights to pursue his claims with respect to his allegations of sexual assault in the 2006 proceeding, in exchange for his entitlements under the settlement agreement. For practical purposes, given that Mr Sloan's claims in contract and tort arise out of the same alleged material facts, the claims that ATB provided negligent advice crystallised on 24 October 2011, and thus Mr Sloan is out of time to bring these claims. No application has been made by Mr Sloan for an extension of time under the Act, and one might expect such an application to face some hurdles, given that extensions of time are not granted lightly.

14 However, contrary to the submissions advanced on behalf of ATB, that is not the end of the matter. While the statement of claim is not particularly well expressed, it is apparent from the statement of claim that Mr Sloan also brings a claim against ATB for breach of fiduciary duty, based upon an alleged conflict arising out of ATB's apparent motive to pressure Mr Sloan to settle the 2006 proceeding so that ATB could recover their legal costs from the settlement sum.

15 There can be no doubt that, as Mr Sloan's solicitors, ATB owed a fiduciary duty to him. There can also be no doubt that the duties owed by ATB to Mr Sloan encompassed a duty not to further their own interests ahead of those of Mr Sloan. It may well be that, depending upon the circumstances, a legal firm could be found to have acted in conflict with their duty were they to pressure their client to accept an unreasonable settlement in order to maximise their chances of recovering their costs. Accordingly, the question of whether in fact ATB acted in conflict with their fiduciary duty has been pleaded, and is a triable issue. It is also a claim which is not particularly amenable to summary determination, and I do not understand ATB to be pressing for summary judgment on this basis.

16 Equitable claims such as a claim for a breach of fiduciary duty are not governed by the Act, subject to the terms of s 5(8) of the Act. Rather, equitable claims can be defended on the grounds of laches (in lay terms, delay), or, in certain types of claims, a statutory limitation period may be applicable by way of analogy, such as in actions based upon fraud, or claims seeking quasi‑contractual remedies such as restitution (see s 5(8) of the Act).

17 It seems to me that, save in the clearest of cases, it is inappropriate to determine on a summary basis whether a defence to a claim for breach of fiduciary duty based upon laches would be successful, or whether such a claim would be statute barred by analogy.

18 In particular, just as equitable remedies are discretionary, the Court has a broad discretion, based upon all of the circumstances of the case, to determine whether a plaintiff should be deprived of an equitable remedy by reason of laches. Essentially:

Equitable relief will be refused on the grounds of laches in any circumstances where the plaintiff's delay would make it unjust to grant the relief which he seeks.[3]

19 As observed by Macaulay J in Amaca Pty Ltd v CSR Ltd & Anor ('Amaca'):[4]

... the defence encompasses two strands: one, a period of delay which, on the part of the person seeking the remedy, amounts to the equivalent of waiver; the other, a period of delay coupled with a change of circumstance that makes it unjust to allow the remedy. It seems that in either case mere delay itself will be insufficient: some element of unreasonableness is also required.[5]

20 Circumstances relevant to the question of whether relief will be denied on this basis include whether there has been a loss of evidence, the Court's ability to grant relief on just terms, and whether there is an unfair prejudice to a defendant or third parties. While these matters might be arguable at a trial, it is not immediately apparent that Mr Sloan's claim would be defeated on any or all of these bases.

21 Further, while, given the manner in which ATB's application was pressed, while I have not heard argument as to whether a statutory limitation period should be applied by way of analogy, it does not seem to me to be immediately obvious that an alleged breach of fiduciary duty based upon a conflict of interest is so analogous to claims in contract or tort so as to automatically attract a statutory limitation period by analogy. As noted by Macaulay J in Amaca: 'in order for the doctrine to apply, however, there must be an analogy at law'.[6]

22 It seems to me arguable that a claim for breach of fiduciary duty may be analogous to a claim for breach of contract or negligence, given that actions in contract, tort, and breach of fiduciary duty are all founded in a breach of duty, but I have heard no such argument, and my (relatively limited) searches have not led me to any authority which would clarify the position one way or another. Further, even if there is an appropriate analogy, the law is not settled as to whether the Court, in exercising its equitable jurisdiction, retains a residual discretion to decline to apply the statutory limitation period. Further, even if there was an appropriate analogy with breach of contract and/or negligence, there may be some doubt as to whether time would begin to run from the date of breach, or when, as contended for by Mr Sloan, he became aware of the alleged breach of duty.

23 In 'Law of Limitation',[7] the learned author noted that there is considerable authority to support the contention that:

the application of any analogy in this context is discretionary, informed by questions of justice, such that equity would not apply a statute of limitations by analogy if it were unjust or unconscionable to do so.[8]

24 The learned author then went on to refer to the statement of the New South Wales Court of Appeal to the contrary in Gerace v Auzhair Supplies Pty Ltd,[9] where the Court opined that there was only a limited, if any, discretion not to apply a limitation statute by analogy. However, the learned author also referred to the decision of White J in Issa v Issa,[10] where his Honour stated:

if the circumstances of the case make it unjust to apply the statute of limitations by analogy to prevent a plaintiff from obtaining an equitable remedy arising from the defendant's breach of [a purely equitable] duty so that it would be against conscience for the court to apply a rule founded on the analogy, it is arguable that it would be unconscientious for the defendant to rely on the analogical application of the statute.[11]

25 In Amaca, the question of whether there was a residual discretion not to apply the analogous limitation period did not appear to have been the subject of argument before him, or on appeal.[12] The trial judge proceeded on the basis that once a statutory limitation period was applicable by analogy, the limitation period was to be applied to the claim in question without further discussion.

26 The language of s 5(8) of the Act suggests that there may be some residual discretion retained by the Court as to whether the limitation period applicable to contracts and torts is to be applied to analogous equitable claims. Section 5(8) of the Act provides as follows:

This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except insofar as any provision thereof may be applied by the Court by analogy ... (emphasis added).

27 Accordingly, the question of whether Mr Sloan is time barred from bringing a claim for breach of fiduciary duty is one of some complexity.

28 All of the above matters warrant further investigation and argument, in the absence of any binding authority that provides that, first, a statutory limitation period applies to breaches of fiduciary duty of the kind alleged by Mr Sloan by way of analogy, and secondly, that time would begin to run from the date of breach, rather than when Mr Sloan became aware of any breach. Further, if no limitation period applies by way of analogy, then any defence to an equitable claim based upon laches is by its very nature unsuitable for summary determination, depending as it does upon the exercise of the Court's discretion, based upon a number of factors, only one of which is the effluxion of time.

29 Accordingly, ATB's application for summary judgment will be dismissed. However, given that I have found that Mr Sloan's claims for breach of contract and negligence are statute barred, the statement of claim will need to be amended. However, that will be a relatively simple exercise, involving some deletions from paragraphs 15 and 16 of the statement of claim, and an amendment to the prayer for relief to claim equitable compensation rather than damages.

[1] [2013] VSCA 158; (2013) 42 VR 27.

[3] R Meagher, D Heydon and M Lehane Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (Butterworths, 4th ed, 2002) [36-025].

[4] [2015] VSC 582.

[7] G Dal-Pont, LexisNexis Butterworths, 2016.

[9] [2014] NSWCA 181; (2014) 87 NSWLR 435.

[10] [2015] NSWSC 112.

[12] CSR Ltd & Anor v Amaca Pty Ltd [2016] VSCA 320.