Scope Data Systems Pty Ltd v Agostini Jarrett Pty Ltd & Anor

COUNSEL : A.P. Lo Surdo/T.M. Mehigan (Plaintiff) G. Curtin (Defendants)

SOLICITORS : Norman Waterhouse (Plaintiff) Middletons (Defendants)

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

12191/04 Scope Data Systems Pty Limited v Agostini Jarrett Pty Limited & anor

JUDGMENT 1 HIS HONOUR: These proceedings were commenced by summons. The summons was subsequently amended. The plaintiff sought relief against its former solicitors essentially pursuant to s198M and s198N of the Legal Profession Act 1987, alternatively, pursuant to s76C of the Supreme Court Act, alternatively, pursuant to Pt 52A r 43(1) of the Supreme Court Rules, and also for breaches of contract and breach of fiduciary duty. 2 The proceedings were listed for hearing before me on 14 May 2007. On that occasion the plaintiff sought an adjournment as its counsel had withdrawn from the case for "professional reasons" at 8.00 pm on the previous Friday. The adjournment application, though opposed, was granted to enable new counsel to be briefed. With the agreement of all parties, a hearing date of 12 June 2007 was fixed. 3 On 12 June 2007 the matter again came on for hearing before me. The plaintiff sought a further adjournment and leave to amend the claim. The purpose of the adjournment was to enable the claim to be reformulated in a statement of claim as a claim for damages for professional negligence. It was suggested that other parties may be joined to the proceedings and that an application may be made for the proceedings to be heard with District Court proceedings brought by the plaintiff against other solicitors who had acted for it. The Court was informed the underlying facts to be relied upon in the reformulated case would be no different than in the claim as originally cast, save in relation to damages and, possibly, the qualification of an expert witness. The adjournment application was said to be made in consequence of the application of a fresh legal mind to the issues. The amendment was described as vital as, without it, there was a real prospect the plaintiff's case would fail. The Court was informed that if the adjournment application failed, counsel for the plaintiff would be required to withdraw for ethical considerations but a director of the plaintiff would seek leave to conduct the hearing of the case as previously formulated. 4 Counsel for the defendants opposed the application for an adjournment. He indicated that, subject to seeing the proposed statement of claim, he anticipated he would be able to meet the plaintiff's amended claim. The proceedings were stood down to enable counsel for the plaintiff to draft the proposed statement of claim. 5 When the Court reconvened, counsel for the plaintiff indicated he had been unable to obtain sufficient instructions to prepare the proposed statement of claim. He referred to a number of matters, including difficulties in determining against whom the cause of action lay, the extent of the cause of action and in formulating appropriate particulars of the claim. He said that "because of those difficulties, there are difficulties certifying, for the purposes of the Legal Profession Act, that there is a reasonable cause of action, and what that cause of action may be." He was of the opinion the plaintiff had little or no prospect of succeeding in the case as presently formulated and that if the case was forced on the plaintiff would more than likely lose. 6 Ultimately, the plaintiff sought leave to discontinue the proceedings. After some debate and consultation between the parties, the matter was discontinued when a notice of discontinuance was filed by the plaintiff pursuant to leave of the Court granted under UCPR 12.1. The leave was granted on terms, and an order was made in accordance with the following terms contained in Short Minutes agreed to by the parties: "(1) I grant leave to the plaintiff to file a Notice of Discontinuance discontinuing the proceedings against each defendant on the following terms: (a) the Notice of Discontinuance is to be filed by 4pm on 13 June 2007; (b) the plaintiff, or its assigns, may not commence or maintain any proceedings against the defendants, or either of them, upon the following causes of actions, or raise in any costs assessment: (i) the cause of action in paragraphs 1 to 6 of the Amended Summons filed on 29 July 2005;

(ii) the cause of action in paragraphs 7 to 8 of the Amended Summons filed on 29 July 2005 as further described in Exhibit EA 1;

(iii) the cause of action in paragraphs 9 to 10 of the Amended Summons filed on 29 July 2005 as further described in the Points of Claim filed on 9 August 2005." 7 The parties were unable to agree as to the costs of the discontinuance. Rule 42.19(2) provides: "(2) Unless the court orders otherwise or the notice referred to in rule 12.1(2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued." 8 The plaintiff conceded that, by reason of its discontinuance, it was liable for the costs of the proceedings on a party-party basis. 9 However the defendants sought costs of the proceedings on a party-party basis to 24 June 2006 and thereafter on an indemnity basis pursuant to an offer of compromise made in accordance with UCPR 20.26. 10 In support of their application the defendants sought to tender a notice of offer of compromise served upon the plaintiff in June 2006. 11 The plaintiff opposed the defendants' application. It submitted:

(a) The Notice of Offer of Compromise was not admissible in evidence as all questions of liability and relief had not been determined (UCPR 20.30(3)(c)); and

(b) The defendant was not entitled to costs on an indemnity basis as no order or judgment on the claim had been made (UCPR 42.15A). 12 The plaintiff accepted that unless it succeeded in one or other of those submissions the defendants were entitled to the costs order sought.

Was the Notice of Offer of Compromise admissible? 13 UCPR 20.30 provides: "(1) No statement of the fact that an offer has been made may be contained in any pleading or affidavit. (2) If an offer is not accepted, no communication with respect to the offer may be made to the court at the trial or, as the case may require, to the arbitrator. (3) Despite subrule (2), an offer may be disclosed to the court or, as the case may require, to the arbitrator: (a) if a notice of offer provides that the offer is not made without prejudice, or (b) to the extent necessary to enable the offer to be taken into account for the purpose of determining an amount of interest up to judgment, or (c) after all questions of liability and relief have been determined, to the extent necessary to determine questions as to costs, or (d) ..." 14 The purpose of the compromise provisions in the UCPR is to facilitate the early compromise of proceedings by putting the offeree at risk of a costs sanction if an appropriate offer is not accepted. 15 The refusal of an offer is not to be disclosed to the court in the litigation of the substantive issues in the proceedings, as to do so may influence the determination of those issues. 16 Once the substantive issues in the proceedings have been determined, there is prima facie no reason why details of the offer should not be disclosed, indeed their disclosure is necessary to ensure the operation of the rules imposing the costs sanctions. 17 In the present case, the substantive issues have been determined by the filing of a notice of discontinuance following an order of the Court granting leave to discontinue on terms agreed by the parties. Those terms prevent further proceedings on any of the causes of action in the amended summons. 18 Accordingly, it is, prima facie, appropriate that details of the offer of compromise should be disclosed to the Court in order to enable the costs issues to be determined. 19 The plaintiff however submits that disclosure of the offer may not be made as "all questions of liability and relief have not been determined". It submits that the word "determined" means "heard and determined" and cites the Victorian case of Brott v Maher [2004] VSCA 186 in support of that construction. 20 I do not find that decision, which is upon the different Victorian legislation, of assistance. 21 In my opinion, the word "determined" in r 20.30(3) should be construed to mean decided by the court or by agreement of the parties. Accordingly, in my opinion, if UCPR 20.30 is applicable, then the offer of compromise is admissible under sub-r (3) of that rule. 22 The questions of liability and relief to which the sub-rule applies are the questions of liability and relief in the proceedings in which the offer has been made - see UCPR 20.25 and 20.26. All such questions have been determined by the terms upon which the notice of discontinuance was permitted. 23 Alternatively, UCPR 20.30, in its terms, applies only in respect of limiting disclosure to the court at a trial. The defendants do not seek to disclose the offer at a trial. Accordingly, the limitation upon disclosure in UCPR 20.30 has no application. The offer is admissible - see the Evidence Act, s 131(2)(h). 24 In my opinion, all questions of liability and relief in these proceedings have been determined or brought to an end by the terms of the order upon which leave to discontinue was granted and the consequent filing of the notice of discontinuance on those terms. In my opinion, the offer of compromise may be disclosed to the court.

Had the defendants obtained an order or judgment? 25 UCPR 42.15A provides: "(1) This rule applies if the offer concerned is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim concerned as favourable to the defendant, or more favourable to the defendant, than the terms of the offer. (2) Unless the court orders otherwise: (a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made." 26 In my opinion, an order was obtained by the defendants as to the terms upon which the proceedings were permitted to be discontinued. The terms the subject of that order were such as to prohibit the plaintiff from relying upon any of the claims for relief made in these proceedings. Such an order was more favourable to the defendants than the terms of the offer which the defendants had made to the plaintiff. Accordingly, UCPR 42.15A is applicable and, in those circumstances, as the plaintiff has agreed, the defendants are entitled to the costs order sought.

Were the defendants otherwise entitled to an order for costs on an indemnity basis? 27 The defendants relied upon the Civil Procedure Act s 98(1)(c) in the event that they failed in their primary submission. As I have found for the defendants on their primary submission, it is unnecessary to consider this alternative.

Orders 28 The plaintiff is to pay the defendants' costs of these proceedings on an ordinary (party-party) basis to 24 June 2006 and thereafter on an indemnity basis. **********

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