Riva NSW Pty Limited v Mark A Fraser; Fraser v Riva

The Questioned Statement of Claim

1. With some minor exceptions, the first 13 paragraphs of the pleading set out a relatively uncontroversial history. But the second part of the pleading, which attempts to plead the causes of action relied upon, is where the Court finds defects that warrant the whole pleading being struck out. The pleading is set out in full below, commencing with the relief claimed and then the pleading itself. "Relief Claimed 1 Damages pursuant to section s.243 of the Australian Consumer Law. 2 An order that an assessment be made as to the plaintiff's loss. 3 An order directing the defendants to consent to the setting aside or discharge of the asset freezing order made on 11 April 2014 in proceedings number 2012/0013479. 4 Costs 5 Interest. Pleadings and Particulars 1 The plaintiff at all material times has been the trustee of the Cavallino Unit Trust. 2 The defendants at all material times have carried on practice as solicitors in a partnership styled Fraser Clancy Lawyers. 3 In 2009 the defendants accepted instructions from the plaintiff and provided legal services to the plaintiff in or about the bringing of proceedings against Maria Gerace (Solicitor) and TGR Parker (Barrister) in proceedings number 1762/2009 in the District Court of New South Wales ("the Gerace & Parker Proceedings"). 4 The Gerace and Parker Proceedings were dismissed on or about 18 August 2011 and thereafter the defendants sought to recover legal fees from the plaintiff in respect of those proceedings. 5 The plaintiff commenced proceedings against the defendants, number 2012/0013479 in the District Court of New South Wales ("the District Court Costs Appeal Proceedings"), by way of appeal against the costs assessment obtained by the defendants for costs and disbursements claimed from the plaintiff in respect of the Gerace & Parker Proceedings. 6 On 6 August 2012 Curtis DCJ made further orders in the District Court Costs Appeal Proceedings ("the 6.8.12 orders"), inter alia, to the effect that the plaintiff pay the defendants $38,118.57 in respect of the costs of the Gerace & Parker Proceedings. 7 On 20 December 2012 Curtis DCJ made further orders in the District Court costs Appeal Proceedings ("the 20.12.12"), inter alia, to the effect that two further plaintiffs be added and that the then plaintiffs pay the defendants costs of the District Court Costs Appeal in the sum of $78,256.00. 8 On or about 11 April 2014 Curtis DCJ in the District Court Costs Appeal Proceedings made further orders ("the Asset Freezing Orders") which had the effect of restraining the plaintiff and Macquarie Bank Limited from dealing with the account ("the Macquarie Account") of the plaintiff with Macquarie Bank Limited held by the plaintiff in its capacity as trustee of the said Cavallino Unit Trust. 9 At all times the defendants were on actual notice that the Macquarie Account was held by the plaintiff as trustee of the Cavallino Unit Trust and that the plaintiff had no beneficial interest in the account. Particulars of notice (a) Notice of motion filed by the plaintiff in the District Court Costs Appeal Proceedings on 10 March 2014. (b) Affidavit or Angelo Ferella sworn on 11 March 2014 in the District Court Costs Appeal Proceedings. (c) Submissions made to the District Court of New South Wales on behalf of the plaintiff on 2 June 2014 in the District Court Costs Appeal Proceedings. 10 In obtaining the Asset Freezing Orders the defendants in breach of their duty of candour to the District Court of New South Wales failed to disclose to that Court the matters referred to in paragraph 9 hereof and that the defendants were not as a matter of law entitled to enforce the 10.8.12 orders or the 20.12.12 orders as against the monies standing to be credit of the Macquarie Account by reason of those monies being held by the plaintiff as a trustee. 11 At all times since 11 April 2014 the defendants have failed and refused to consent to a discharge or setting aside of the Asset Freezing Orders. 12 On 8 March 2012 the New South Wales Court of Appeal gave judgment in Riva NSW Pty Ltd v Provident Capital Ltd [2012] NSWCA 28 as a result the orders made in those proceedings the plaintiff as trustee of the Cavallino Unit Trust became entitled to seek an inquiry as to damages against Provident Capital Ltd ("Provident") and its several directors in respect of an undertaking as to damages given in connection with interlocutory relief which was found by the Court of Appeal not to have been justified. 13 On 18 November 2013 the plaintiffs as trustee of the said Cavallino Unit Trust in proceedings ("the Provident Proceedings") against Provident in the Supreme Court of New South Wales, number 2012/275336 sought an inquiry as to damages claimed by the plaintiff against Provident and its said directors. 14 On 12 May 2014 in the Provident Proceedings the plaintiff was ordered to provide security for costs ("the Provident Security for Costs Orders"). 15 By reason of the continued operation of the Asset Freezing Orders the plaintiff was unable to comply with the Provident Security for Costs Order and the Provident Proceedings were stayed. 16 By reason of the plaintiffs inability to comply with the Provident Security for Costs Order at the time it should have been complied with the plaintiff lost an opportunity to obtain and recover a substantial award of damages from Provident end /or its said directors. 17 At all material times in acting for the plaintiff and in pursuing recovery of costs pursuant to the 6.8.12 orders and the 20.12.12 orders the defendants were acting in the course of trade and commerce. 18 In the premises referred to in paragraphs 9, 10 and 11 hereof the defendants engaged in conduct which was and remains unconscionable within the meaning of section 20 of the Australian Consumer Law. 19 In the alternative to paragraph 18 hereof, in the premises referred to in paragraph 3, 9 10 and 11 hereof the defendants in connection with the supply of services engaged In conduct which was and remains unconscionable within the meaning of section 21 of the Australian Consumer Law. 20 By reason of each of the said contraventions of the Australian Consumer Law referred to above the plaintiff as trustee of the Cavallino Unit Trust has suffered loss and damage. Particulars (a) Loss of opportunity to recover damages from Provident and its directors in the Provident Proceedings. (b) Loss of opportunity to deploy the funds held in the Macquarie Account."
2. The solicitors sought the production of documents and particulars of paragraphs 4, 11, and 14 of the pleading in a letter dated 24 May 2017. Riva did not provide documents or any satisfactory particulars in answer to that letter before the hearing of the motion.

The Defendants' Challenge to the Pleading

1. The focus of Riva's pleading is certain freezing orders made by Curtis DCJ on 11 April 2014, which restrained Riva and its bank, Macquarie Bank, from dealing with a credit balance held in Riva's name with the bank, in Riva's capacity as trustee of the Cavallino Unit Trust. The freezing orders were made in support of existing judgments for costs already entered in the solicitors' favour in April 2014 in the sum of approximately $106,000. The evidence before the Court on the motion sets out a largely uncontroversial history of the making of the 11 April 2014 orders. The solicitors applied ex parte to Curtis DCJ on 11 April 2014 and obtained the freezing orders preventing Riva from dealing with monies in the Macquarie Bank account.
2. The matter came back before the District Court on 17 April 2014 when Riva had its own legal representatives present. On that occasion, the injunction obtained on 11 April was continued with the consent of Riva's legal representatives. Then on 2 June 2014, Curtis DCJ heard an application by Riva to dissolve the freezing orders. But that application failed and they were continued.
3. Thus, the ex parte operation of the freezing orders was only for a period of 6 days. Thereafter they continued by consent until 2 June, when they were continued by Court order. The freezing orders were eventually set aside by consent in September 2018, but that is not material for present purposes.
4. Riva's pleading (at paragraph [12]) alleges that in other proceedings in which it was involved, Agusta Pty Ltd v Provident Capital Ltd (2012) 16 BPR 30,397; [2012] NSWCA 26, but incorrectly cited in the pleading ("the Provident proceedings"), it became entitled to seek an inquiry as to damages in connection with certain interlocutory relief granted in the Provident proceedings but which was found by the Court of Appeal not to have been justified.
5. The essential allegation in the pleading is that on 12 May 2014 Riva was ordered in the Provident proceedings to provide security for costs, so it could proceed with the inquiry as to damages in those proceedings (paragraph [14]). But Riva says that the continued operation of the 11 April 2014 freezing orders meant that it was unable to comply with the security for costs orders in the Provident proceedings and those proceedings were stayed (paragraph [15]).
6. At a very high level of generality, the nature of what is alleged can be understood. But for the reasons that follow, both Riva's factual pleading and the relief constructed upon it are deficient.
7. Paragraphs [14] and [15] of the pleading are embarrassing, are likely to prejudice the solicitors and are likely to delay the proceedings. As to paragraph [14], despite the solicitors' request for particulars, Riva has never identified the exact security for costs orders upon which it relies and whether the security ordered was required to be paid in cash or by other means, or paid in tranches. There is some suggestion in the evidence filed for the plaintiff on the motion that the security ordered in the Provident proceedings was $115,000. But even that is uncertain. This is essential information that should be in the pleading or in particulars.
8. Equally important is for the pleading to identify, in paragraph [15], what is meant by the allegation that Riva "was unable to comply with the security for costs orders in the Provident proceedings." This is most important to enable the solicitors to understand the case they must meet. On some evidence it is said that there is in excess of $328,000 in Riva's account with Macquarie and that Riva was receiving $23,000 a month in rental payments and that the freezing orders only amounted to a restraint for the costs judgment of about $106,000. The exact cause of the inability to comply needs to be pleaded for the solicitors to be able to deal with this case.
9. Paragraph [16] of the pleading is also deficient. It simply pleads that Riva's inability to comply with the security for costs orders meant that Riva "lost an opportunity to obtain or recover a substantial award of damages." But unless Riva establishes that it has suffered damage on the balance of probabilities, the lost opportunity may only result in nominal damages: see for example Tabet v Gett (2010) 240 CLR 537; (2010) 265 ALR 227; [2010] HCA 12, (at [122] to [131]). Some definition of what the award of damages in the inquiry as to damages in the Provident proceedings was likely to be and why it would probably be a success for Riva would be an essential part of a damages pleading such as this.
10. But there are also significant problems with the way that the cause of action under the Australian Consumer Law is pleaded. It is not at all obvious that the defendants were at the time in question before the District Court "acting in the course trade and commerce", as alleged in paragraph [17] of the pleading. Statements made to courts by a party in litigation cannot be readily categorised as statements made in trade or commerce: Little v Law Institute of Victoria (No 3) [1990] VR 257, (at 273).
11. Equally, it is difficult to comprehend that the solicitors could have engaged in conduct that was "unconscionable" within Australian Consumer Law, s 20, when, apart from the first 6 days of the ex parte relief between 11 and 17 April 2014, Riva was represented by its own lawyers, who for the period between 17 April and 2 June consented to the order. Unconscionability ordinarily requires a plea of special disability that is entirely absent here in this pleading.
12. Reliance in paragraph [19] of the pleading on unconscionable conduct in connection to "supply of services" is equally problematic. It is difficult to understand how the solicitors, who were appearing on the other side of the District Court proceedings against Riva, could be considered in any sense "supplying services" to Riva. If this kind of pleading is to be relied upon it needs to be made much clearer, or abandoned.
13. Riva advanced submissions in answer to the complaints about the pleading. But those submissions did not address the main defects of the pleading highlighted by the solicitors and identified in these reasons. Not all the defects the solicitors allege in the pleading have been dealt with here. But the defects addressed here are sufficient to dispose of the motion.
14. These observations relate to the operative part of the pleading of the basis of the relief sought and are enough for the Court to conclude that the whole of the pleading must be struck out. The Court will so order. But the pleading may yet be able to be salvaged by amendment.
15. The Court observes as a footnote to this conclusion that paragraph 10 of the pleading contends that the solicitors failed to make proper disclosure to the District Court of the matters pleaded at paragraph 9. The solicitors make the point in their submissions that this pleading may conceal the possibility of an abuse of process by the bringing of these proceedings. The solicitors submit that they should not be vexed by two potential actions arising out of the grant and discharge of one set of orders. They submit that they should not be the subject of the damages claim in these proceedings and any claim brought on an undertaking as to damages in the District Court proceedings.
16. The Court does not have to address this issue as yet, pending the delivery of a satisfactory pleading by Riva. But if these proceedings do continue, they may only be allowed to proceed on the basis that they are consolidated with any other action that may be brought on the undertaking as to damages given in the District Court proceedings.
17. But none of these issues arise as yet, nor do limitation questions that may arise by way of defence to this pleading.

Appropriate Consequential Orders.

1. The Statement of Claim will therefore be struck out for the reasons given. The possible dismissal of these proceedings cannot be considered until the nature of the relief being sought is better understood. But the pleading is a long way from satisfactory, as the Court's earlier reasoning has shown. It is objectionable on multiple grounds, which have already caused a number of procedural hearings to take place and the solicitors to put on detailed submissions pointing out the defects in the pleading.
2. Although the solicitors sought particulars of the pleading, nothing satisfactory was provided. This is also in the background of other instances of non-compliance by Riva with the Court's orders for the production of documents, in these and the related Receiver proceedings.
3. Although the Court will only act upon Riva's conduct demonstrated in the Riva Damages proceedings, it should at least be noted that Riva's conduct in related proceedings shows persistence in bringing multiple applications to set the original 11 April 2014 orders aside, some of them years after entry of the orders: see for example the observations of Leeming JA in Riva NSW Pty Ltd v Mark A Fraser & Christopher P Clancy trading as Fraser Clancy Lawyers (No 3) [2018] NSWCA 326, (at [22]).
4. But very considerable change will need to take place to this pleading, before it will be acceptable. For that reason in particular, the Court will not simply grant leave for the filing of an amended pleading. Riva should be put in a position to put up its best pleading, and the Court will decide when it sees that pleading whether or not it is fit to be filed. If it is not fit to be filed, then the solicitors will be permitted to renew their application for dismissal of the proceedings on the basis that they disclose no reasonable cause of action or otherwise are an abuse of process of the Court; UCPR, r 14.28(1)(a) and (c). That argument should be finalised on the basis of the best pleading that Riva says that it can advance.
5. The Court will impose a reasonably tight timetable for Riva to put on this pleading. Unless Riva complies with the timetable, or seeks an extension, the proceedings will be liable to dismissal on the solicitors' application. Riva has lost the argument on this motion and should pay costs, but only costs associated with the strike out motion. Those costs can be separated out from other costs incurred by the solicitors.
6. But the pleading is far from perfect and the Court does not want its own orders to cause further injustice. After all, this is a case about the recovery of costs by a firm of solicitors against their former clients, in litigation which was dismissed in 2011. The non-payment of solicitors' costs, the judgment for which has never been set aside, is the underlying theme of this case. It seems quite unfair in the circumstances that the solicitors should have to incur further costs to deal with an Amended Statement of Claim, if one is forthcoming, incurring further costs in analysing the new pleading, whilst existing costs orders in these very proceedings are unpaid.
7. Because of these circumstances, the Court will take the course of making the relatively unusual order of requiring Riva to pay the solicitors' reasonable costs of the strike out motion incurred to date, as a condition of any leave that they might otherwise obtain to file a pleading that is compliant with UCPR, r 14.28.
8. The Court's approach on this is not unprecedented with respect to Riva. In analogous circumstances, other judges have imposed not dissimilar regimes on Riva when it has advanced defective pleadings: Riva NSW Pty Ltd v Key Nominees Pty Ltd [2016] NSWSC 1569 (Stevenson J) and Riva NSW Pty Ltd v Key Nominees Pty Ltd [2013] NSWSC 1952 (Young AJ).
9. All that remains now is to deal with the Receiver proceedings. As indicated earlier, the Receiver proceedings have largely resolved but orders are still sought by motion for a special costs order and the making of a gross costs sum order instead of assessed costs. But due to the changes that have taken place, and the application to reopen proceedings and the withdrawal of the application to reopen the proceedings, there needs to be a short audit undertaken as to what material each party wants the Court to rely upon to resolve that part of the proceedings, so the Court can then dispose of them. The Court will make directions for this to occur.

Conclusions and Orders

1. For these reasons the Court makes the following orders and directions both in these proceedings, the Riva Damages proceedings, and the Receiver proceedings: 1. Strike out the whole of the Statement of Claim filed in the Riva Damages Proceedings on 27 February 2017; 2. Direct the plaintiff in the Riva Damages Proceedings to circulate to the defendants by Tuesday 8 October 2019 at 4.00pm any form of Amended Statement of Claim which, if the Court were to grant leave to it to do so, it would propose to file to replace the Statement of Claim; 3. Order the plaintiff in the Riva Damages Proceedings to pay the defendants costs in those proceedings of the defendants motion to strike out the whole of the Statement of Claim; 4. Direct the defendants in the Riva Damages Proceedings to serve on the plaintiffs in those proceedings by 4.00pm on Friday 4 October 2019 an itemised summary of its reasonable costs incurred and ordered pursuant to order (3); 5. Order that the plaintiff not be granted leave to file an Amended Statement of Claim circulated pursuant to order 2, unless it has first paid to the defendants the reasonable costs of the defendants served in itemised form pursuant to order (4), as agreed or assessed; 6. Adjourn the proceedings for directions to Friday 11 October 2019 at 9.30am or at such other time as the parties may arrange with my associate. 7. Direct that each party in the Receiver proceedings by Thursday 10 October at 4.30pm provide to the Court a complete list of all affidavits to be relied upon by that party in relation to the plaintiff's claims for a special costs order and for a lump sum costs order pursuant to the Court's orders of 11 April 2018; and 8. Further direct each party to be ready to put any supplementary submissions to the Court on 11 October at 9.30 am upon plaintiff's claims for a special costs order and for a lump sum costs order.

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: 02 October 2019