RIDGEPOINT CORPORATION PTY LTD -v- McCALLUM DONOVAN SWEENEY (A FIRM) [2011] WASC 167 (7 July 2011)

3 The two causes of action which the plaintiff essentially seeks to ventilate against the second defendant under the reamended statement of claim are respectively:

(a) Breaches of the common law duty of care, which it is asserted the second defendant, a firm of solicitors, owed to the plaintiff as regards the circumstances surrounding the lodgement of caveats against certain leasehold areas at the Perth Airport in February 2002; and

(b) an alternative argument based upon statutory misleading and deceptive conduct, contrary to s 10 of the Fair Trading Act 1987 (WA), as it then applied.

4 The Fair Trading Act claim was added to the pleading as pars 51 59 as part of reamendments of 3 May 2011. The statutory plea draws upon the facts, matters and circumstances underlying the common law duty of care plea associated with the February 2002 caveats, on the basis that a representation by the second defendant is said to have been made to the first defendant (another firm of solicitors specifically retained by the plaintiff), or the representation is said to be made by the second defendant to the first defendant, on behalf of the plaintiff.

5 The representation under the statutory claim is said to arise as a result of conduct, communications or a failure to disclose an existence of a 'prior legal interest registered over the land comprising the Ridgepoint lease'.

6 So, as the result of an aggregation of alleged positive conduct, a communication by letter and an asserted failure to disclose, it is pleaded by the plaintiff that the second defendant represented that 'there were no prior interests already registered over the land comprising the Ridgepoint lease'. As a consequence of the most recent augmentation to the pleading, damages (statutory compensation) are sought from the second defendant under s 79 of the Fair Trading Act.

7 As regards the common law pleading of duty of care owed the second defendant, such an plea had been manifest under earlier iterations of the statement of claim. However, the reamendments of 3 May 2011 delivered some surrounding augmentations to that overall plea, now found as pars 40A through 40D and culminating in a plea at par 41, that:

At no material time prior to lodging the caveats did the first defendant or the second defendant ascertain, as was the case, that a significant part of the area of land comprised in the Ridgepoint lease was already the subject of two caveats each lodged by Whitewood and NAB to protect their interests under the Whitewood lease, nor ascertain that the Whitewood lease had priority over the Ridgepoint lease in respect of the overlapping land.

8 The underlying facts grounding the plaintiff's claims are long and complicated. It is an oversimplification to say that the plaintiff first sues its retained solicitors, as first defendant, for 'losing out' financially over a defective subsublease arrangement, in a situation where the plaintiff's equitable interest under the sublease was lost or seriously diminished, due to a conveyancer's bungle. The root problem stems from an overlap of land areas which had been earlier caveated in time by other parties, whose prior equitable interest was accepted or proved to be superior, thereby causing the plaintiff financial losses to the extent of approximately $1 million. Those funds had been paid to the plaintiff's sublessor, West Group Pty Ltd, prior to that company's descent into insolvency and receivership.

9 The undetected conveyancing 'bungle' underlying everything relates back to an attempted land swap (or sublease) which West Group Pty Ltd tried to implement over other Perth Airport land that it had subsubleased to Whitewood Pty Ltd in 2001. The problem was that the areas of land at the Perth Airport the subject of each proposed subsublease overlapped, to the extent of about 6 (of 8) hectares. This mapping overlap error apparently went undetected up to and beyond the time Ridgepoint's subsublease was entered on 21 December 2001 (see attachment JF3 to the affidavit of John Fiocco of 3 May 2011). At that time Ridgepoint's lender, Police & Nurses Credit Society, lent Ridgepoint over $1 million as a secured loan. Part of Police & Nurses' security included the equitable mortgage it took over the subsublease to Ridgepoint from West Group Pty Ltd. Whitewood Pty Ltd and its secured lender, National Australia Bank, lodged their caveats against that subleased land on 29 November 2001.

10 The overlap problem looks to have been undetected by any legal representatives acting for Ridgepoint, or at Phillips Fox (acting for Police & Nurses) in the period leading up to when, on 22 February 2002, Phillips Fox caused a caveat dated 18 February 2002 to be lodged against lease G520495 for Police & Nurses Credit Society at 9.25 am. On the same day the first defendant, at 2.57 pm, caused a caveat of that date to be lodged for its client, Ridgepoint, in respect of an interest in leasehold, as lessee and optionee. I refer respectively to the Police & Nurses (subject to interest) caveat at pages 45 and 46 of Mr Fiocco's affidavit (JF7) and the Ridgepoint (subject to interest) caveat at pages 42 and 43 of Mr Fiocco's affidavit (JF6).

11 In the dual caveat lodgement as regards the plaintiff's sublease interest scenario of 22 February 2002, the property overlap (to the extent of about 75% of the area of Ridgepoint's subsublease) remained undetected. Ridgepoint, as borrower from Police & Nurses, having lost it would appear about $1 million overall on its investment, under what has proven to be an ineffective subsublease taken from Mr Kevin Pollock's subsequently insolvent West Group, points the finger of blame not only at its own solicitors (the first defendant) for not detecting the area overlap problem, but also at its lender's solicitors Phillips Fox, essentially over that firm allegedly also not picking up the underlying area overlap problem. There was no retainer or solicitor/client contractual relationship as between Ridgepoint and Phillips Fox. Nevertheless a common law duty of care is contended for, that is said to have been breached. As I have indicated there is now also, by the most recent amendments, a statutory claim.

12 In support of its application to summarily dismiss the action as unarguable, Phillips Fox relied upon three affidavits. Two of these affidavits are sworn by Geoffrey Wayne Stevens (of 12 April and 30 May 2011 respectively). Mr Stevens was the Phillips Fox partner concerned in periods during late 2001 and early 2002. The other affidavit is by Roy Lee sworn 12 April 2011. Mr Lee, a junior solicitor, worked at Phillips Fox under Mr Stevens' supervision at relevant times.

13 Mr Lee had more of a hand's on solicitor's role in the Police & Nurses secured lending transaction. Mr Stevens, as the partner, was the overseer.

14 Attached to Mr Lee's affidavit are two key annexures, RLL2 and RLL3. At 9.40 am on Christmas Eve 2001, Mr Lee sent an email to Mr Stevens, his supervising partner, in terms (RLL2):

Call from Ross McCallum - McCallum Donovan Sweeney

he acts for Ridgepoint.

understood we want a caveat by Ridgepoint to protect the sublease - b4 settlement.

his office is closing today - until 2 Jan - he will be back on 7 Jan.

wants to get the caveat lodged asap.

he does not have title details.

ask if he could sub brief us - ie we prepare the caveat since P&N are also doing one.

or he partially prepare caveat - authorise us to fill in the title details.

I told him some 150 titles involved - maybe conflict.

will get back to him.

15 From RLL3, it would seem that at 10.11 am Mr Stevens replied by email to Mr Lee in these terms:

16 Mr Lee says that he then telephoned and spoke to Mr McCallum. Some longhand in Mr Lee's handwriting is endorsed upon the bottom half of the email which is copied at RLL3, in terms:

∀ told Ross we can't prepare caveat for his client.

∀ wants copy of caveat & property description.

17 In par 12 of his affidavit Mr Lee explains his longhand note:

From my reading of the handwritten note I say that:

(a) I said to McCallum words to the effect that Phillips Fox cannot prepare a caveat for Ridgepoint;

(b) McCallum then said to me words to the effect - would I send him a copy of the caveat Phillips Fox Perth prepared for PNC and provide him with the property descriptions.

18 The 2001 Christmas and 2002 New Year break then intervened. A subsublease appears to have been signed off on 21 December 2001 as between Ridgepoint, West Group Pty Ltd, Westralia Airports Corporation Pty Ltd, Noel Jamie and Kevin Pollock as sublessors' guarantors and Francesco Cardaci as the sublessee's guarantor (i.e. Ridgepoint's guarantor). Although carrying a date, 21 December 2001, on the face page, I note that the stamp duty imprint is actually one day earlier, at 1604 hours.

19 By 15 January 2002, the solicitors would appear to have returned to work. Annexure RLL4 to Mr Lee's affidavit is his typewritten memo/telephone attendance note of 15 January 2002 for an incoming call from Ross McCallum. The notation is (as regards McCallum):

Asked us to send over a copy of our caveat and searched obtained from DOLA.

Fax number is 9221 2220.

he will arrange for his caveat to be lodged and send us a copy.

20 Annexure RLL5 to Mr Lee's affidavit is Phillips Fox's letter signed by Mr Stevens (but with Mr Lee as nominated contact) addressed to Ross McCallum at McCallum Donovan Sweeney. It reads:

Dear Ross

Police & Nurses Credit Society - Mortgage over portion of Perth International Airport

Further to our telephone conversation, I enclose:

If you have any queries please contact myself or Roy Lee.

21 Almost a month looks to have elapsed from Mr McCallum's 15 January 2002 request to Mr Lee and a response to that request, on 14 February 2002. The relevant communication appears to be by a letter, transmitted by facsimile on 15 February 2002 at 11.58 am (see page 17 to Mr Lee's affidavit). In his affidavit Mr Lee at par 14 speculates about this communication, of which he says he has no recollection. He says:

While the facsimile letter is dated 14 February 2002, the facsimile transmission report confirms it was sent on 15 February 2002. Further, as appears from the annexure to this affidavit, the copy of the facsimile retained on Phillips Fox Perth's file only attaches a copy of the caveat referred to and does not incorporate a copy of the DOLA search.

22 As appears elsewhere, the copy of a caveat for Police & Nurses that was sent with this facsimile was unexecuted. The Police & Nurses' caveat, ultimately filed on 22 February 2002, was in different terms.

23 In Mr Stevens' first affidavit, he indicates that he has no recollection of any telephone conversation with Mr McCallum on 24 December 2001. There are no notes or time entry recordings that Mr Stevens can locate, indicating any contact by him with Mr McCallum. Mr Stevens remembers, however, his contact with Mr Lee by email and his brief response to Mr Lee at 10.11 am on Christmas Eve 2001. At par 25 Mr Stevens explains borrower/lender billing practices applicable to this transaction. These saw Phillips Fox send, in effect, its account for the work it did in acting for its client as the secured lender to Ridgepoint. There is nothing unusual in this practice. Mr Stevens is at pains to point out that a practice of having the borrower accept end responsibility for rendering payment of the lender's solicitors' account for legal work incurred in the secured borrowing transaction by the lender's solicitors, cannot suggest that the lender's solicitors accepted a brief or retainer to act in the transaction to protect the interests of the borrower, as well as the client lender. None of that seems particularly controversial.

24 Mr Stevens says that the first conversation he recalls with Ross McCallum relevant to this matter was only in July 2007, after proceedings were commenced by Ridgepoint, so as to 'get a better understanding of the claim given Phillips Fox Perth had not acted for Ridgepoint' (par 26, first Stevens affidavit). Mr Stevens made a file note of this 2007 conversation with Mr McCallum. He contends it confirms his understanding that Phillips Fox Perth never acted for Ridgepoint and that Mr Stevens was unaware that either Ridgepoint or McCallum were seeking to rely on Phillips Fox Perth. His affidavit says:

In response McCallum said words to the effect that I was probably right about that as the decision by Ridgepoint to rely on Phillips Fox Perth was not conveyed to Phillips Fox Perth and there was certainly no agreement between McCallum and Phillips Fox Perth or Ridgepoint and Phillips Fox Perth.

25 On behalf of the plaintiff resisting this O 16 application, is an affidavit from its current solicitor, Mr Fiocco, of 3 May 2011, to which I have referred (in two volumes). Additionally there is an affidavit and supplementary affidavit from Ridgepoint's managing director, Mr Marc Cardaci of 3 May and 4 May 2011 respectively.

26 The plaintiff points out that it is presently at somewhat of a forensic disadvantage. Mr McCallum is a partner of the first defendant. He has therefore been inaccessible to the plaintiff for the purpose of swearing an affidavit to directly respond to the Stevens and Lee materials relied upon by the second defendant. The first defendant in fact has played no part at all in this summary judgment application by the second defendant. It is essentially an onlooker upon the application.

27 Mr Fiocco took over the matter for Ridgepoint as its solicitor, in mid 2003, after being advised by Mr McCallum of a potential conflict of interest, arising out of a professional indemnity matter. Mr Fiocco refers, as his attachment JF1, to a statement of facts he believes to have been prepared by Mr McCallum setting out a history of the matter. Part of this statement of facts, apparently provided in 2003 to Mr Fiocco, at par 12, reads:

It was agreed by MDS and Phillips Fox that searches would need to be undertaken and caveats lodged. MDS agreed with the Cardacis and with Phillips Fox that Phillips Fox would undertake the searches and prepare the PNC caveat and provide MDS with copies of their searches and caveat in order to prevent duplication of effort and costs for the client. MDS would then lodge Ridgepoint's caveat. Phillips Fox provided a copy of their title search and caveat to MDS who prepared and lodged a caveat based on Phillips Fox's caveat. Phillips Fox lodged the PNC caveat.

28 There are a number of obvious evidentiary difficulties arising with this par 12. References to what was 'agreed', for instance are obvious inadmissible conclusions. The primary passing communications generating a conclusion of agreement are not stated. Paragraph 12 also fluctuates between 'searches' (plural) and reference to a 'title search'.

29 Nevertheless, this information is effectively the best the plaintiff can assemble at this time, it is said, without being in a position to lead evidence from Mr McCallum directly.

30 Mr Fiocco's affidavit sets out some file notes obtained from Mr McCallum's file, believed to be his. It emerges from these file notes that a Ridgepoint caveat was actually prepared by Mr McCallum on 22 February 2002 (see page 42 of Mr Fiocco's affidavit) and lodged at 14:57:30 seconds (page 43). Moreover, it emerges that the Police & Nurses caveat prepared by Phillips Fox and lodged that day, is significantly different to the unexecuted Police & Nurses caveat, sent under cover of the Phillips Fox facsimile sent on 15 February 2002. Contrast in that respect pages 45 and 46 of Mr Fiocco's affidavit with page 39, which is the unexecuted caveat sent under cover of the Phillips Fox facsimile, together with a title search in respect of Lot 1 on Plan 7481, being the land in Certificate of Title Volume 2069 Folio 304.

31 A facsimile header notation seen at the top of page 40 as regards this title search would seem to indicate that contrary to one of Mr Lee's hypotheses, the record of certificate of title in respect of Lot 1 in fact was transmitted by facsimile on 15 February 2001, along with the copy of an unexecuted caveat for Police & Nurses. Differences as between the unexecuted Police & Nurses caveat and what was ultimately lodged, appear to relate to issues which arose with DOLA, as regards an amendment from fee simple owner and registered proprietor (namely the Commonwealth of Australia) to the head lessor (namely Westralia Airports Corporation Pty Ltd) (see page 51 of Mr Fiocco's affidavit). A longhand notation upon the Ridgepoint caveat would also suggest that there were also communications between DOLA and Mr McCallum, on 28 February 2001 (see page 43 of Mr Fiocco's affidavit).

32 It is clear that the ultimately lodged form of the Police & Nurses caveat differed from the earlier draft, in terms of how an estate or interest in land was claimed. The three subpars (a) to (c) in the Police & Nurses caveat as lodged (dated 18 February 2002) at page 46 of Mr Fiocco's affidavit are in contrast to the unexecuted caveat (page 39 of Mr Fiocco's affidavit) which identified four subparagraphs. The land description also altered. The Ridgepoint caveat prepared by Mr McCallum dated 22 February 2002 (page 42 of Mr Fiocco's affidavit) looks different again, as regards the description of land and the basis for the interest claimed.

33 An upshot of all this material strongly points to separate retainers, with distinct drafting work done by different solicitors, as regards their different clients in relation to an eventual lodgement of caveats for Ridgepoint and Police & Nurses respectively, on 22 February 2002.

34 Attachment JF12 to Mr Fiocco's affidavit contains file notes of Mr McCallum for Christmas Eve 2001, as regards his communications with Marc Cardaci of his client Ridgepoint, and then with Mr Stevens, of some 15 minutes duration. The tenor of this file note would seem to indicate that there was a conversation between Mr McCallum and Mr Stevens (not with Mr Lee), although Mr Lee's name is referred to with an asterisk that is circled on the file note. At page 62 Mr McCallum's further file note records:

24/12/01

Roy Lee rang. Can't prepare the caveat. Do when back on 7th Jan.

Need C/T.

1. Copy of their Caveat.

2. Copy of sublease.

35 Into the new calendar year 2002, at page 64 Mr McCallum, it seems, made two file notes of 15 January 2002 in terms:

9.32 - 9.34

Marc Cardaci rang.

Caveat - almost ready to settle.

It's arisen again.

What arose again is a matter for speculation. But the note is then ruled off by a horizontal line, under which appears:

9.34 - 9.38 (5m)

Rang Roy Lee 15/1/02

Caveat. Drafts up yesterday.

Going thru, hard to lodge.

Copy on sublease. Prev searches. Specific title.

We to lodge.

36 However, another month went by until mid February 2002. For 14 February 2002 at 10.30 am, Mr McCallum's file note (page 63 of Mr Fiocco's affidavit) reads:

Rang Roy Lee.

Will fax thru the details caveat and search.

37 It is then a matter of record already observed upon, that a Phillips Fox letter of 14 February 2002 was in fact faxed to Mr McCallum the next day on 15 February 2002. It contained the unexecuted Police & Nurses caveat with a title search for Lot 1 at the Perth Airport. From JF5 to Mr Fiocco's affidavit that facsimile was obviously received (see pages 38 to 41 of Mr Fiocco's affidavit).

38 How might it be in these circumstances that a duty of care might arguably have been owed by Phillips Fox to Ridgepoint, whilst Ridgepoint was separately and actively represented by Mr McCallum's firm?

39 The plaintiff relies upon a number of authorities to suggest that such a claim would be arguable, in particular it relies upon a decision of the New Zealand Court of Appeal delivered in 1983, Allied Finance and Investments Ltd v Haddow & Co [1983] NZLR 22 and to observations by Cook and Richardson JJ. However, it is clear in that case that the result explained by reference to (now outdated) concepts of proximity and turned upon the reliance upon a solicitor's certificate issued to the other party. Cook J observed (24):

But surely the result of the established principles is different (that is no duty of care on one solicitor to the client of another) when on request a solicitor gives a certificate on which the other party must naturally be expected to act. That is a classic duty of care situation, now that it is accepted that the likelihood of economic loss only does not automatically rule out a duty. The proximity is almost as close as it could be, short of contract.

40 However, the observations of Cook J (25) and Richardson J (30) indicate that Allied Finance was a rather exceptional fact situation, grounded on the reliance upon a solicitor's certificate and its represented state of affairs.

41 The plaintiff also relied upon observations by Smith J in the Supreme Court of Victoria in Eade v Vogiazopoulos [No 2] [1999] 3 VR 889. Again, however, that decision seemed to turn upon its particular facts, involving as they did another solicitor's certificate, carrying an express representation (see 918 919).

42 The plaintiff also invoked reliance upon a decision of the Court of Appeal of Victoria, Moorabool Shire Council v Taitapanui [2006] VSCA 30; (2006) 14 VR 55 [71], [72] and [73]. There, Maxwell P said:

1. What ultimately determines whether a duty of care arises is the character of the relationship between the plaintiff and the defendant. Matters such as those which we have just mentioned, and others, bear upon the resolution of that question in the particular circumstances of particular cases; though not all of those matters will be at the forefront in every case. The question to be answered is whether, having regard to the salient features of the particular case, the connection between the parties is sufficiently close - though not necessarily physically close - as to give rise to a duty of care. When the defendant's acts or omissions arise in connection with the discharge of statutory duties or the performance of statutory functions, the statutory framework is itself a salient feature to which consideration must be given.
2. To those considerations should be added the following. Three policy considerations are pertinent in every case. First, that the effect of a decision should not lay a defendant open to claims which are indeterminate as to the class or number of potential claimants, time or amount. Second, that the effect of a decision should not be to unduly hinder ordinary commercial transactions (or, be inconsistent with normal business standards). Third, that a decision should not have the effect of intruding into another area of the law.
3. Also to be borne in mind is the fact that the pertinent law has been developed cautiously, incrementally, and by analogy.

43 President Maxwell's observations are raised by senior counsel for the plaintiff, to properly remind the court that any ascertainment or otherwise of a duty of care in a particular case is essentially a comprehensive factual enquiry, which must take account of all relevant circumstances. Such a fact grounded process, is inherently not susceptible to summary determination, effectively shutting a plaintiff out from interlocutory enquiries and denying it a day in court. That consideration must, I accept, always be kept firmly in mind. There are, however, situations where the very nature of the established categories of duty of care relationships between parties concerned are so clear and defined that it could be open for a court in clear circumstances to summarily dismiss a claim as unarguable, even applying the very high cautionary standards which condition an exercise of the summary dismissal power. See AAA v BBB [2005] WASC 139 and Talbot & Olivier (A Firm) v Witcombe [2006] WASCA 87; (2006) 32 WAR 179 (Steytler P). However, it is to be borne in mind that pleadings can alter in the interlocutory phase of an action, as it progresses towards trial.

44 This application is not a strike out application against pleadings brought pursuant to RSC O 20 r 19. From a pleading perspective, it is difficult at this time for me to see a basis for the plaintiff's contention of asserted vulnerability under par 40A(i), or why, under par 40A(j), the plaintiff would be dependent upon the skill and expertise of Phillips Fox, whilst it had Mr McCallum acting for it. But ultimately, these are questions more safely resolved in the context of hearing the evidence of all witnesses, particularly from Mr McCallum, Mr Lee and Mr Stevens, after their respective crossexaminations at a trial.

45 Likewise, it is difficult for me to see, on what has emerged to date, how it is factually justified that the second defendant knew or should have known that Mr McCallum intended to rely upon investigations of airport land titles by searches that were conducted by Phillips Fox, in circumstances where nothing at all was said or exchanged to indicate (indeed Mr Lee telling Mr McCallum to the contrary on 24 December 2001) that Phillips Fox had accepted a retainer from Ridgepoint, directly or through Mr McCallum.

46 It is perhaps not difficult to comprehend a scenario of a solicitor making a calculated gamble that another law firm would act comprehensively for its own (different) client in investigating titles, especially for a lending institution client as regards a loan of $1 million. But such a gamble would, on my prima facie view, seem to fall a long way short of a reasonable reliance upon that other firm.

47 But these type of assessments, however, are inherently factual and it is I think dangerous to reach final conclusions outside the environment of a trial. A countervailing policy consideration towards not denying a party a fair opportunity to have its day in court, with the benefit of interlocutory processes, must usually trump the temptation to summarily dismiss what presents at this stage by reference to the pleadings, as a marginal case. Pleadings do alter before trial as the interlocutory processes unfold.

48 An overall assessment also has to be made now, in the context of dealing as well with the further claims newly advanced by the plaintiff through its reamendments contending for statutory relief by reference to the Fair Trading Act.

49 Recently, Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76; (2011) 248 FLR 193, a decision which postdated Miller & Associates v BMW Australia Finance Ltd (2010) 241 CLR 357 (delivered 29 September 2010), dealt with a misleading and deceptive conduct, nondisclosure or silence argument. The argument had been accepted by the trial judge as regards not mentioning the dysfunctional overhead sprinkler system in a warehouse where the respondent proposed to store valuable artifacts subsequently destroyed by fire. In dealing with a statutory claim for compensation under s 51A, s 52 and s 82 of the Trade Practices Act (as it once was), McLure P explained [62]:

Thus, the identification of the defendant's contextual conduct and what it conveys or communicates to the persons to whom it is directed must be assessed having regard to all relevant surrounding circumstances. Not all surrounding circumstances are relevant in the identification process. In particular, conduct cannot be attributed to the defendant unless he had had actual or constructive knowledge of the circumstances that affect its content. In other words, contextual circumstances of which the defendant had no actual or constructive knowledge that altered the scope of what would otherwise be attributed to it, are irrelevant: see Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [27]. This specific proposition is but an aspect of the wider and well-established proposition that the identification of the defendant's actual conduct, the relevant surrounding circumstances and what is capable of being conveyed is to be undertaken by reference to the actual, objectively determined, circumstances. Reasonable inferences, reasonable assumptions and reasonable expectations arising from the objectively determined circumstances will be in the constructive knowledge of the parties. An objective test excludes from consideration subjective matters (knowledge, intention) not known to the parties. I leave open the question whether an objective test applies in circumstances where the only relevant conduct of the defendant is a deliberate failure to disclose.

50 It is clear from this passage with reference to surrounding circumstances, reasonable inferences, assumptions and expectations, that the contextual enquiry that is required in such a case must be comprehensive and wide ranging. This goes not only as to facts, but also as to inferences which might be drawn from facts. Such a comprehensive enquiry could not in my assessment of the present case be comprehensively or safely conducted within the framework of the second defendant's summary judgment application.

51 Over and above this, there is a present absence of any affidavit or evidence from Mr McCallum, in rather understandable forensic circumstances. In providing for the ability of a defendant to bring a summary judgment application for dismissal of the action against it, O 16 RSC is essentially the reverse scenario to a plaintiff's summary judgment application provided for under O 14 RSC. But O 14 r 3(1) permits a court to dismiss a summary judgment application on the further basis that, 'there ought for some other reason to be a trial of that claim or part, ...'.

52 There is no reason to think that similar forensic considerations are not involved in an O 16 analysis. In my view, the inability presently of the plaintiff to obtain an affidavit from Mr McCallum in the circumstances (understandable enough, where his firm is first defendant in the action) means that the plaintiff is at a forensic disadvantage in that respect, at least until trial, when it is likely that Mr McCallum will be a witness for the first defendant and can then be crossexamined. In the circumstances, his inaccessibility to the plaintiff until trial, is an independent reason influencing me now, in the interests of justice, towards not allowing this matter to be resolved summarily.

53 Accordingly, the second defendant's application for summary judgment must be dismissed. The costs of the application should be the plaintiff's costs in the cause of the action. In other words, the plaintiff would only receive its costs associated with successfully resisting the second defendant's summary judgment application, if the plaintiff is ultimately successful at trial, as against the second defendant.

CITATION : RIDGEPOINT CORPORATION PTY LTD -v- McCALLUM DONOVAN SWEENEY (A FIRM) [2011] WASC 167 (S)

Costs - Summary judgment application under RSC O 16

Costs to be plaintiff's costs in the cause of the action against the second defendant

Second Defendant : Mr P Quinlan SC & Mr S Popperwell

1 KENNETH MARTIN J: In the wake of my reasons dismissing the first defendant's summary judgment application against the plaintiff, the parties have filed written submissions in respect of the costs disposition of that application which is contentious. The matter is determined on the papers.

2 On the application, the successful plaintiff contended in written submissions that the costs of the second defendant's failed application for summary judgment under the Rules of the Supreme Court 1971 (WA) (RSC) O 16 should be the plaintiff's costs, assessed in the cause of the action against the second defendant. In other words, if the action does go to trial and the plaintiff ultimately proves successful against the second defendant, that then and only then will the plaintiff be entitled to receive its taxed costs incurred in resisting the second defendant's application brought against it for summary judgment. I indicated my prima facie disposition towards that costs outcome in my reasons for decision at [53].

3 The plaintiff submits (par 35 of its written submissions) that 'such an outcome is measured and reasonable, in the circumstances, as it resolves to compensate the plaintiff only in the event that it is successful at trial, as against the second defendant, thus there is no question of 'over compensation' of the plaintiff or of 'sanction' against the second defendant.

4 On the other hand, the second defendant by written submissions of 1 August 2011 contends the preferable costs order is the more orthodox order simply for costs in the cause. On that basis, even though the second defendant failed on its RSC O 16 summary judgment application, it in effect contends that if it is ultimately successful at a trial in defeating the plaintiff's application against it for damages on the merits, that such a trial outcome should deliver it the entitlement to also then receive the taxed costs of its unsuccessful summary judgment application.

5 I am not attracted to the course suggested by the second defendant since the question that will be evaluated at any trial between the plaintiff and the second defendant will be a different question to that which I evaluated on the second defendant's summary judgment application. Put simply, the second defendant was not successful in surmounting the high threshold it faced on its RSC O 16 application. It could not in the end persuade me that the plaintiff's case was so meritless or unarguable that the plaintiff's action against it should not even proceed to trial. A very distinct focus for the trial will require an evaluation of the merits of the plaintiff's case against both defendants by reference to the civil standard of proof, namely the balance of probabilities. That assumes of course that the matter is one day ultimately disposed of at a trial. Nowadays in Western Australia, most actions are sensibly resolved before trial.

6 Bearing in mind that the court's approach as to costs orders is inherently discretionary, I am of the view that the fairest costs outcome is for the second defendant only to be exposed to the adverse costs consequence of failure on its RSC O 16 application in the event that the plaintiff succeeds against it at a trial. If the plaintiff ultimately fails against the second defendant at the trial, the second defendant will more than likely be awarded its taxed trial costs incurred in (ultimately) defeating the plaintiff's action. But even on the latter hypothesis, I still see no reason why the second defendant should then also receive its taxed costs relating to the summary judgment application upon which it was unsuccessful.

7 In support of the submission for a costs in the cause order generally, the second defendant referred to two authorities on costs orders, in particular Whitehall Holdings Pty Ltd v Custom Credit Corporation Ltd (Unreported, WASCA, BC 9201139, 19 June 1992) and an even older case, Harry Smith Car Sales Pty Ltd v Claycom Vegetable Supply Co Pty Ltd (1978) 29 ACTR 21. They were both decisions concerning costs orders on applications for failed summary judgment applications brought by plaintiffs. In such circumstances, Blackburn CJ in Harry Smith Car Sales observed '... the costs are normally ordered to be costs in the cause, the principle being that should the defendant ultimately fail he will probably be ordered to pay the plaintiff's costs of the action which will then include the costs of the application'. Blackburn CJ also observed that in cases where the application for summary judgment should not have been made, the (successful) defendant should have his taxed costs of the application.

8 Neither decision addressed the situation of the costs of a defendant's failed application for summary judgment brought against a plaintiff. Furthermore, both decisions were delivered in the environment before intensification of case management practices now utilised by courts in Western Australia under rules such as RSC O 1 r 4A and r 4B.

9 This was an interlocutory application that was argued in the CMC List of this court - where interlocutory disputation is strongly discouraged unless it is absolutely necessary. An ultimately unsuccessful interlocutory applicant on a CMC List application would expect, in the ordinary course, to suffer a likely adverse exposure to some cost consequence arising from its failure on an application it has been responsible for pressing to a curial determination, see CMC List Practice Direction 4.1.2(17) which provides:

A fundamental objective of the CMC List, and indeed the general practices and procedures of the Court, is the discouragement of interlocutory disputes with all means at the Court's disposal, including costs orders in appropriate cases. The procedure specified in O 4A r 3 is generally to be followed, as is the approach set out in Practice Direction 4.7.1.

10 It is unwise to seek to lay down hard and fast rules in considering the application of a court's general discretion for costs orders. Each case must be evaluated by reference to its own particular merits. The present application was pressed in circumstances where one of the issues involved an argument challenging the existence of the common law duty of care pleaded as owed by the second defendant to the plaintiff.

11 Bearing in mind the unique nature of ascertaining the existence of a common law duty of care and its scope by reference to the particular facts and circumstances of any particular case, the second defendant's task of surmounting the dismissal threshold for RSC O 16 was always well and truly ahead of it in bringing and persisting with its application. Nevertheless, the application did actually draw from the plaintiff some revisions to its statement of claim. Arguments before me on the application also identified areas where the plaintiff's pleading was less than optimal.

12 Because of those positive features favouring the second defendant, it seemed to me that this was not an appropriate situation for the second defendant to be exposed immediately to the costs on the failure on its summary judgment application. My discretionary assessment is that exposure of the second defendant to the taxed costs of its failed summary judgment application should only crystallise in the event of the second defendant being unable to resist the plaintiff's substantive case brought against it at a trial.

13 For those brief reasons, my view is that the appropriate discretionary costs order is that the costs of the failed summary judgment application of the second defendant be the plaintiff's costs in the cause of the action as between the plaintiff and the second defendant at trial. Accordingly, I would propose to make these orders, effective seven days after the publication of these reasons (unless interrupted by my further order):

1. that the second defendant's summary judgment application be dismissed; and
2. the costs of the unsuccessful application shall be the plaintiff's taxed costs to lie in the cause of the action as between the plaintiff and the second defendant.