[2012] NSWSC 802
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Source
Original judgment source is linked above.
Catchwords
[2000] HCA 41
Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256[2006] HCA 27
Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1[1949] HCA 1
Eastmark Holdings Pty Ltd v Kabraji (2012) 91 ACSR 32[2012] NSWSC 802
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125[1964] HCA 69
Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156
Guthrie v Spence (2009) 78 NSWLR 225[2009] NSWCA 369
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41[1991] FCA 41
Maguire v Makaronis (1997) 188 CLR 449
[1997] HCA 23
McDonald v Grech
[2010] HCA 28
Trevorrow v State of South Australia (No 5) (2007) 98 SASR 136
[2007] SASC 285
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514
[1992] HCA 55
Webster v Lampard (1993) 177 CLR 598
[1993] HCA 57
Wentworth v Rogers (No 5) (1986) 6 NSWLR 534
Williams v Spautz (1992) 174 CLR 509
Judgment (10 paragraphs)
[1]
The application for summary dismissal
The third defendant relied on r 13.4 of the UCPR which provides as follows:
13.4 Frivolous and vexatious proceedings
(cf SCR Part 13, rule 5; DCR Part 11A, rule 3; LCR Part 10A, rule 3)
(1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings -
(a) the proceedings are frivolous or vexatious, or
(b) no reasonable cause of action is disclosed, or
(c) the proceedings are an abuse of the process of the court,
the court may order that the proceedings be dismissed generally or in relation to that claim.
(2) The court may receive evidence on the hearing of an application for an order under subrule (1).
On the hearing of the motion, the third defendant indicated he relied on r 13.4(1)(b). The contention initially advanced was that no reasonable cause of action was disclosed as the terms of the pleadings are so vague and extravagant in its rhetorical flourishes that it fails to precisely identify the wrongdoing. During the hearing, however, the third defendant modified his position to contend that no reasonable cause of action was disclosed because the proceedings were statute barred. To the extent that r 13.4(1)(a) was relied on, it was on the basis that, there being no reasonable cause of action due to the expiry of relevant limitation periods, the proceedings could properly be characterised as vexatious. This approach, in essence, conceded that, limitation periods aside, the statement of claim seeks to raise some form of actionable conduct on the part of the third defendant, albeit that substantial amendment may be required to make such conduct clear.
[2]
Summary dismissal - generally
The third defendant's contention requires attention to be given to the principles generally applying to the summary dismissal of proceedings, the operation of the limitation period and the operation of the principles with respect to summary dismissals in that context. A helpful summary of the principles to be applied to determine whether to dismiss proceedings can be found in the reasons of Ward J (as the President then was) in McDonald v Grech; Bank of Western Australia Ltd v McDonald [2012] NSWSC 717 at [26]-[37].
In Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41, Gaudron, McHugh, Gummow and Hayne JJ said at [57]:
"…Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way." (footnote omitted)
To similar effect, see also Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69; Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; [2006] HCA 27 at [46]; Spencer v The Commonwealth of Australia (2010) 241 CLR 118; [2010] HCA 28 at [24].
The question raised is "whether the claims in question are so obviously untenable or groundless that there is 'a high degree of certainty' that they will fail if allowed to go to trial; and whether this is one of the 'clearest of cases' in which the court may accordingly intervene to prevent the claims being litigated": Shaw v State of New South Wales [2012] NSWCA 102 at [32] (Barrett JA), applying General Steel Industries Inc at 128-129 (Barwick CJ). The power to dismiss a claim summarily should be exercised with the utmost caution: General Steel Industries Inc; see also Webster v Lampard (1993) 177 CLR 598 at 602-603; [1993] HCA 57; Brimson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937 at 942.
[3]
Summary dismissal on the basis that a claim is statute barred
The general principle to be applied is that stated in Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 at 533; [1992] HCA 55. That is, it is "undesirable that limitation questions … should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases". (See also Magman International Pty Ltd v Westpac Banking Corporation (1991) 32 FCR 1; [1991] FCA 41; Kingsley Corporation Pty Ltd v Australian and New Zealand Banking Group (No 2) (Supreme Court (NSW), 15 October 1997, unrep); McDonald v Grech at [36].)
[4]
Summary dismissal - this case
Having regard to the way in which the third defendant sought to demonstrate the lack of a reasonable cause of action, that is, on the basis that any relevant limitation period has expired, there is a need for the Court to determine what the potential causes of action are, in order to ascertain whether a limitation period applies, and, if so, whether it has expired. While it is not for the Court to advise a plaintiff as to what his or her causes of action may be, in circumstances here, where the applicant for summary dismissal effectively concedes the pleading of an action but relies on the expiry of a limitation period, that contention can only be determined by identifying the potential causes of actions.
The third defendant submitted that limitation periods were relevant in two respects. Firstly, insofar as the third defendant is said to have acted in some actionable way when engaged in the period from 2003 to 2005, it related to his failure to take appropriate action with respect to the conduct of the plaintiff's lawyers in the litigation in the Federal Court concluded in March 1995, and, perhaps relatedly, with respect to the initial proceedings. The third defendant makes the point that, by the time the third defendant was approached, any action in relation to the conduct of the most recent proceedings in the Federal Court was in relation to events well in the past (and, on his argument, out of time). The argument is, that being the case, there was no action then available to the plaintiff, and consequently the present proceedings do not disclose any reasonable cause of action. Secondly, it is submitted that any act or failure to act on the part of the third defendant now complained of was, most recently, in 2005. That being the case, it is submitted that any cause of action arising from such act or failure to act is also statute barred.
The third defendant submitted that the plaintiff had neither pleaded facts, nor led evidence capable of supporting the conclusion that the plaintiff was, during the time of the alleged events, that is, from 1995 or from 2005, under a disability within the meaning of s 52 of the Limitation Act 1969 (NSW), so as to suspend the running of the limitation period. There may be merit in this submission. It was, however, premised on an assumption that a relevant limitation period necessarily applied. No attempt was made to provide a foundation for that assumption.
[5]
Alternative relief sought - striking out of the statement of claim
The third defendant sought, in the event that prayer one of his motion failed, an order that the statement of claim be struck out pursuant to r 14.28. Rule 14.28 provides as follows:
14.28 Circumstances in which court may strike out pleadings
(cf SCR Part 15, rule 26; DCR Part 9, rule 17; LCR Part 8, rule 3)
(1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading -
(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or
(b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or
(c) is otherwise an abuse of the process of the court.
(2) The court may receive evidence on the hearing of an application for an order under subrule (1).
The third defendant submitted that relief under the above rule was appropriate because the pleading disclosed "no reasonable cause of action". While the expression "no reasonable cause of action" is the same as that used in r 13.4(1)(b), the third defendant submitted that failure under r 13.4(1)(b) would not necessarily result in failure under r 14.28(1)(a). I accept that submission. Rule 13.4 provides a power to dismiss the proceedings on the basis that "no reasonable cause of action is disclosed" in "relation to the proceedings generally or in relation to any claim for relief in the proceedings". As can be seen, the focus there is on the foundation of any claim. By contrast, the issue raised by r 14.28 is whether "the pleading" discloses no reasonable cause of action: see also Eastmark Holdings Pty Ltd v Kabraji (2012) 91 ACSR 32; [2012] NSWSC 802 at [111]-[113]. Given the difference between the two rules, it was somewhat unhelpful that the third defendant's written submissions dealt with them together.
A useful summary of the principles in relation to the striking out of pleadings can be found in Clarke v State of New South Wales (No.4) [2015] NSWSC 1054 at [33]-[45] where Garling J said:
"33. The requirements of a pleading are in part addressed in the UCPR, and in part, in authorities as to the role which proper pleadings take in the prompt and inexpensive resolution of civil litigation.
34. A party who commences proceedings ought to have a reasonable opportunity to plead out an arguable case against another party. The other party also must have an opportunity, at an early point in the proceedings, to understand the case being made against them. It is in that way that the rules in the UCPR referable to pleadings, and the common law principles of pleading "… are the servants of the interests of justice": Perpetual Trustees Victoria Ltd v Dunlop [2009] VSC 331 at [24].
35. I have in an earlier decision, set out comprehensively the legal principles of pleading which are also relevant here: see Young v Hones [2013] NSWSC 580 at [78]-[84]. I will for ease of reference reproduce here those principles and remarks.
36. The function of pleadings is to state with sufficient clarity the case that must be met by a defendant. In this way, pleadings serve to define the issues for decision and ensure the basic requirements of procedural fairness, namely that a party should have the opportunity to meet a case against him or her: Banque Commerciale SA v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 at 286, 296, 302-3. As well, the issues defined in the pleadings provide the basis upon which evidence may be ruled admissible or inadmissible at trial upon the ground of relevance: Dare v Pulham [1982] HCA 70; (1982)148 CLR 658 at 664.
37. Proper pleading is of fundamental importance in assisting courts to achieve the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in the proceedings: s 56 Civil Procedure Act; McGuirk v The University of NSW [2009] NSWSC 1424 at [24] per Johnson J.
38. As Hodgson JA (with whom Mason P and Handley JA agreed) said in Kirby v Sanderson Motors Pty Ltd (2001) 54 NSWLR 135 at 142-143:
"The requirement for a pleading to state material facts which is to be found in the Rules includes the cause or causes of action which are relied upon. Materiality of facts means how those facts are material to a cause of action."
39. Bongiorno J said in Gunns Ltd v Marr [2005] VSC 251 at 57, in a passage with which, if I may say with respect, I entirely agree:
"Not only must the pleading inform the defendants of the case they must meet now, but it must clearly set out the facts which the plaintiffs must assert to make good their claim with sufficient particularity to enable any eventual trial to be conducted fairly to all parties. Vague allegations on very significant matters may conceal claims which are merely speculative. If this be not the case, the plaintiffs must put their allegations clearly."
40. As his Honour went on to say,
"A pleading is embarrassing where it is unintelligible, ambiguous, vague or too general."
41. In Shelton v National Roads and Motorists Association Ltd [2004] FCA 1393 at [18], Tamberlin J dealt with the concept of embarrassment, with respect to a pleading, in this way:
"Embarrassment in this context refers to a pleading that is susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense. ..."
42. As Bryson J recognised, a pleading may be embarrassing if the material facts alleged are couched in expressions which leave difficulties or doubts about recognising or piecing together what is referred to: Northam v Favelle Favco Holdings Pty Ltd (Bryson J, 7 March 1995, unreported).
43. Section 56 of the Civil Procedure Act 2005 ("the Act") places on a party to proceedings, a statutory duty to assist the Court to further the overriding purpose to which I have just made reference. As the Court of Appeal noted in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [161] per Allsop J:
"The need for clarity, precision and openness in the conduct of litigation and the responsibility of parties and their legal representatives therefore, flows most clearly from the statutory duty of a party and his, her or its legal representatives in civil proceedings to assist the Court to further the overriding purpose … These principles can be seen to be reflected in the longstanding rules of pleading requiring any matter that may cause surprise to be pleaded.
…
The clear statutory duty to assist the Court, and in a practical way, to cooperate to bring forward the real issues in dispute, encompasses the requirement to be clear and precise in the illumination of the issues for trial. The occasion for this is not merely pleading …, it extends to all aspects of the engagement in the Court's processes."
44. The Court expects, and is entitled to expect, that the parties and their legal representatives make clear what is, and what is not, legitimately part of the controversy.
45. The UCPR require that a statement of claim is a document which should plead, in a summary form, a statement of the material facts upon which the party relies, but not the evidence by which those facts are to be proved: r 14.7 of the UCPR. There is also a requirement that the pleadings should be as brief as the nature of the case allows: r 14.8 of the UCPR."
[6]
The application for a stay
The third defendant sought, as an alternative to the above orders, an order that the proceedings be permanently stayed as an abuse of process, relying on the High Court's decision in Batistatos. Proceeding on the basis of the manner in which the motion is structured, it appears unnecessary to deal with this ground, as the third defendant has succeeded in obtaining an order with respect to which this order is pleaded in the alternative. However, although the application for a permanent stay of proceedings was pleaded as an alternative to the striking out of the statement of claim, a permanent stay would be a more favourable outcome to the third defendant than an order which would allow the plaintiff to replead his case. This is particularly so in the context of r 13.4(1)(c) of the UCPR, which provides that the Court may dismiss the proceedings, either generally or in relation to any claim for relief in the proceedings, on the basis "the proceedings are an abuse of the process of the court". In the event that the proceedings are found to be an abuse, the preferable course would be that they be dismissed pursuant to r 13.4(1)(c) rather than simply stayed. It is quite unclear as to why this relief was not sought in preference to the relief under r 14.28.
The onus of satisfying the Court that there is an abuse of process lies upon the party asserting the abuse of process, and that onus is "a heavy one": Williams v Spautz (1992) 174 CLR 509 at 529; [1992] HCA 34. I would not, in this matter, exercise my discretion to dismiss the proceedings on the basis that they constitute an abuse of process, or otherwise stay the proceedings. I accept, as submitted by the third defendant, that many years have passed since the relevant events. I also accept that the third defendant is prejudiced by that delay including by the fact the third defendant's file, as the result of the passage of time, is no longer available to the third defendant. The third defendant suffers the resultant difficulty that time has passed and he is unable to refresh his memory from that file. On the other hand, the plaintiff's complaint appears, at least in a significant part, to relate to issues going to the relationship between the third defendant and the plaintiff's earlier representative (formerly, the first defendant in these proceedings). While, as indicated above, there may ultimately be real issues with the merits of the plaintiff's complaint in this regard, evidence of the nature of the professional relationship which existed at the time is not likely to be affected in the same way as evidence of the conduct of litigation in the distant past. I do not mean to suggest that the third defendant is not prejudiced by the delay. However, it is an issue which, to my mind, is less significantly affected by the passage of time than other more prosaic happenings in the context of an ongoing legal practice.
[7]
Conclusion
For the reasons given above, I have reached the view that, while the proceedings should not be dismissed or permanently stayed, the statement of claim does not comply with the rules and authorities with respect to pleadings and must be struck out.
Should the plaintiff wish to progress his claim, he will need to produce a pleading which adequately pleads his claim in a way required by the rules and authorities. The current pleading falls short of the requirements by a significant margin. Further, this much should have been apparent to the plaintiff in September 2021 when Harrison AsJ handed down her decision in Skelton v Foggo. Despite this, no attempt has been made to replead the claim. In these circumstances, I am not of the view that the plaintiff should be left with the unfettered right to replead his case. Such an approach may lead to a further inadequate pleading which then places the onus on the third defendant to bring a motion seeking orders similar to those sought here. However, I am also not of the view that the plaintiff should be entirely shut out from bringing a case if he is able to properly plead it. In my view, the appropriate resolution is for the Court to make an order striking out the existing pleading and directing that, should the plaintiff wish to file an amended statement of claim, he can only do so by seeking the leave of the Court by a notice of motion in which he sets out the form of his proposed pleading, and should he think it appropriate for the success of that motion, to accompany it by an affidavit setting out the facts and matters upon which his application is based.
I will fix a reasonable period to enable the plaintiff to replead his causes of action. In my view, six weeks is sufficient.
[8]
Costs
The third defendant has succeeded in obtaining one of the two alternative orders sought in the notice of motion. The usual rule is that costs should follow the event: UCPR, r 42.1. Costs should follow the event and be awarded on the ordinary basis.
[9]
Orders
I make the following orders:
1. Pursuant to r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW), the plaintiff's statement of claim filed on 17 March 2021 is struck out as against the third defendant.
2. The notice of motion filed by the third defendant on 22 March 2022 is otherwise dismissed.
3. If the plaintiff seeks to amend the statement of claim, the plaintiff is to file and serve a notice of motion on or before 8 November 2022 accompanied by the proposed version of his pleading and any affidavit that may be appropriate in support of his notice of motion.
4. Leave is granted for any such motion to be returnable before the Court on 22 November 2022.
5. The plaintiff is to pay the third defendant's costs on the motion on the ordinary basis.
6. The proceedings are stood over for further directions before the Common Law Registrar at 9am on 22 November 2022.
[10]
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: 27 September 2022
Motor Terms Co Pty Ltd v Liberty Insurance Ltd (in liq) (1967) 116 CLR 177; [1967] HCA 9
Shaw v State of New South Wales [2012] NSWCA 102
Skelton v Foggo [2021] NSWSC 1228
Spencer v The Commonwealth of Australia (2010) 241 CLR 118; [2010] HCA 28
Trevorrow v State of South Australia (No 5) (2007) 98 SASR 136; [2007] SASC 285
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514; [1992] HCA 55
Webster v Lampard (1993) 177 CLR 598; [1993] HCA 57
Wentworth v Rogers (No 5) (1986) 6 NSWLR 534
Williams v Spautz (1992) 174 CLR 509; [1992] HCA 34
Category: Procedural rulings
Parties: Brett Skelton (Plaintiff)
Robert Foggo (First Defendant)
Alistair Henskens (Second Defendant)
Michael Evers (Third Defendant)
Carl Terpstra (Fourth Defendant)
Nicholas Coren (Fifth Defendant)
Robert Harris (Sixth Defendant)
Representation: Counsel:
Plaintiff (self-represented)
G Ng (Third Defendant)
JUDGMENT
An application is brought by way of notice of motion by Michael Evers, seeking a dismissal of the proceedings brought against him. The plaintiff in those proceedings is Brett Skelton, who is also the respondent to this motion. It is convenient for the purpose of this judgment to refer to the parties by reference to their positions in the substantive proceedings. The motion seeks the following orders:
"1 Pursuant to r 13.4(1) of the Uniform Civil Procedure Rules 2005, these proceedings be dismissed.
2 In the alternative to order 1, pursuant to r 14.28(1) of the Uniform Civil Procedure Rules 2005 the Statement of Claim filed on 17 March 2021 be struck out.
3 In the alternative to orders 1 and 2, pursuant to s 67 of the Civil Procedure Act 2005, these proceedings be permanently stayed.
4 The plaintiff is to pay the third defendant's costs of these proceedings assessed in a specified gross sum pursuant to s 98 of the Civil Procedure Act 2005.
5 In the alternative to order 4, the plaintiff is to pay the third defendant's costs of this motion in a specified gross sum pursuant to s 98 of the Civil Procedure Act 2005 and payable forthwith.
6 Such further order or relief that the Court sees fit."
The application for summary dismissal is brought in the context of a statement of claim that is inexpertly drafted, makes very serious and wide-ranging allegations with no meaningful particularisation of their foundation, and descends into belligerence. So much was observed by Harrison AsJ in dismissing the proceedings against the first defendant: Skelton v Foggo [2021] NSWSC 1228. It is not possible to understand the contentions sought to be raised in the statement of claim without some understanding of the background to its filing and the plaintiff's attempts to explain his grievances in oral submissions.
The plaintiff's complaint with respect to the conduct of his lawyers in 1995 might be characterised as negligence, in that there was a breach of a relevant duty of care, or possibly a breach of contract, based on a retainer or any implied agreements between the plaintiff and his then lawyers. This is similarly the case in relation to the plaintiff's complaint as to the conduct of the third defendant in failing to take action when instructed by the plaintiff in the period between 2003 and 2005. Subject to s 52 of the Limitation Act, a limitation period of 6 years applies to such claims: Limitation Act, s 14.
Section 52 of the Limitation Act, in essence, provides for the suspension of the relevant limitation period, during any period the person is under a disability. That expression is defined, relevantly for present purposes, in s 11(3) of the Act as follows:
11 Definitions
…
(3) For the purposes of this Act a person is under a disability -
(a) …
(b) while the person is, for a continuous period of twenty-eight days or upwards, incapable of, or substantially impeded in, the management of his or her affairs in relation to the cause of action in respect of the limitation period for which the question arises, by reason of -
(i) any disease or any impairment of his or her physical or mental condition…
This provision was recently considered in Binetter v Binetter [2022] NSWCA 169 where Basten AJA (with whom White and Mitchelmore JJA agreed) observed at [10]-[12] that there are three elements to that limb of the definition of being "under a disability" which are material. First, there must be a disease or impairment of the person's physical or mental condition. Secondly, that impairment must operate for a continuous period of at least 28 days so as to render the person incapable of, or substantially impeded in, the management of their affairs. In relation to the third element his Honour noted that it is not sufficient that any period of incapacity or substantial impediment relate to the person's ability to look after themselves or to manage their affairs generally. The incapacity or substantial impediment must "relate to the management of [the person's] affairs 'in relation to' the cause of action 'in respect of' the limitation period [for which the question arises]". In this regard, the test for capacity is task-specific: see Guthrie v Spence (2009) 78 NSWLR 225; [2009] NSWCA 369 as discussed in Binetter v Binetter.
In the present matter, the initial accident would doubtless have prompted the obtaining of advice and the subsequent legal action and says little as to the difficulties under which the plaintiff was then labouring. However, following the appeal and the failed investments, it appears that any impediment suffered by the plaintiff did not prevent him from bringing the action in the Federal Court. Similarly, it is plain that the plaintiff was able to instruct the fourth defendant and assist in the preparation of the brief of evidence compiled in 2011. Finally, the plaintiff was able to bring the present proceedings. There is nothing in the materials that suggests that the plaintiff's condition has fluctuated. Indeed, the plaintiff stressed at the hearing that he had suffered brain damage as a result of the motor vehicle accident and that this has continued to have a deleterious effect upon him. In these circumstances, it is, presently, difficult to see how the plaintiff could mount any serious challenge to the expiry of the limitation periods for causes of action in tort or contract.
It is not, however, clear that the plaintiff is limited to the causes of action referred to above. There are particular relationships that are accepted to be fiduciary relationships. This includes the solicitor and client relationship: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96-97; [1984] HCA 64 (Mason J). Even though there is a legislative regime which governs the legal profession and supervises professional conduct, it does not necessarily follow that the legislation limits the equitable remedies available for abuses of the solicitor's fiduciary duties: see Maguire v Makaronis (1997) 188 CLR 449 at 463-467; [1997] HCA 23; see also Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1; [1999] NSWCA 408 at [185]-[207].
It is generally accepted that fiduciaries owe two types of duties: a duty to avoid a conflict of interest and a duty not to profit from the fiduciary position. Sometimes, courts describe the duty of fiduciaries more generally as a duty of undivided loyalty: Maguire v Makaronis. The conflict of duty and duty rule and the conflict of duty and interest rule can both be seen as manifestations of the overriding duty of undivided loyalty: Beach Petroleum NL at [201].
The duty to avoid a conflict of interest has the result that a fiduciary must not enter into engagements which give rise, or which might give rise, to a conflict between the fiduciary's personal interest and his or her duty to the principal: Chan v Zacharia (1984) 154 CLR 178 at 198; [1984] HCA 36 (Deane J).
In the present case, at the heart of the plaintiff's complaint is that the second defendant, when acting for him in 1995, was affected by a conflict between his duty to his client (the plaintiff) and to his employer (the first defendant, who was instrumental in the plaintiff investing his money with Mr Svanberg). This raises at least the possibility of an action in equity in relation to the proceedings in 1995.
In relation to actions available with respect to the conduct of the third defendant in 2003 to 2005, the plaintiff also asserts in his statement of claim that there was a conflict between the respective interests of the third defendant and the plaintiff. In par 13 of the statement of claim, set out above, the plaintiff complains that the "first and third defendants as Boss and NEW Employee in an obvious conflict of interest chose to pervert Senior Counsel XXX request for better evidence into an unequivocally negative Merit Advice". The foundation for this claim may be doubtful. As I understand it, it is based on the evidence that the third defendant, in April 2004, moved his practice into premises occupied by the first defendant. The plaintiff appears to draw an inference from this that the third defendant was, at that time, employed by, or in some formal sense, engaged in the first defendant's practice (leading to, essentially, the same conflict relied on in the case against the second defendant). Ultimately, however, in circumstances where the third defendant relies only on the expiry of any relevant limitation period to assert the absence of a reasonable cause of action, it is not appropriate to form a concluded view as to whether the plaintiff's claim, that the third defendant was affected by a conflict, has a foundation. Additionally, while the simple fact that the third defendant was operating from the same business premises as the first defendant would not be sufficient, I do not know what evidence may become available as to any business relationship between the two, especially in circumstances where evidence favourable to the plaintiff's claims may become available in the course of the proceedings. While it seems, perhaps, unlikely, that an employer and employee relationship or some other relationship giving rise to a conflict of interest will be established, I would not, at this stage of the proceedings, exercise my discretion to dismiss the plaintiff's claim on this basis.
A claim by the plaintiff for equitable relief for breach of a fiduciary duty is not, at least directly, affected by a limitation period. Equity may, however, refuse relief if an analogy can be drawn between the relief sought and a legal claim barred by a limitation statute: Motor Terms Co Pty Ltd v Liberty Insurance Ltd (in liq) (1967) 116 CLR 177 at 184; [1967] HCA 9.
In order to dismiss a claim based on the application of a limitation period "by analogy", sufficiently close similarity between the equitable rights and legal rights in question is required. This does not require a minute comparison between the claim in equity and the claim that is similar and said to be statute barred, although differences in the elements of the respective causes of action must be relevant, and possibly significant: see Trevorrow v State of South Australia (No 5) (2007) 98 SASR 136; [2007] SASC 285 at [948]-[952] and the cases cited therein. In the absence of some sound analogy, a cause of action for equitable relief for breach of fiduciary duty is not subject to any period of limitation: Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 at [229] (Barrett J). Once sufficient similarity is found, the court must then consider whether, in all the circumstances, it is just to apply the analogy: Trevorrow v State of South Australia (No 5) at [959].
It may well be that, having regard to the above, a limitation period applies with respect to any equitable cause of action suggested to originate in 1995 or with respect to any equitable cause of action based on events in 2003 to 2005. I am not, however, persuaded to the view that this is "the clearest of cases", such that this limitation question should be determined at an interlocutory stage. I would not, therefore, exercise my discretion to dismiss the proceedings against the third defendant on the basis that the operation of limitation periods has the effect that there is no reasonable cause of action. This being the basis on which the third defendant sought dismissal of the proceedings pursuant to r 13.4 of the UCPR, it follows that the application to dismiss the proceedings pursuant to this rule should be refused.
The statement of claim in this matter fails to state the plaintiff's case with sufficient clarity so as to enable the third defendant to meet it. Indeed, as discussed above, it is not possible to understand the statement of claim without regard to the evidence and submissions of the plaintiff. As such, the statement of claim fails to disclose a reasonable cause of action.
Even if, contrary to the above, the pleading could be construed to disclose a cause of action, it is, nonetheless, liable to be struck out on the basis of its tendency to cause prejudice, embarrassment or delay in the proceedings: r 14.28(1)(b). Consistent with the observations of Garling J in the passage above, and emphasised by Johnson J in McGuirk v The University of New South Wales [2009] NSWSC 1424, "[a] pleading may be embarrassing even though it contains allegations of material facts sufficient to constitute a cause of action, if the material facts alleged are couched in expressions which leave difficulties or doubts about recognising or piecing together what is referred to" (McGuirk at [32]), "if allegations are made at such a level of generality that the defendant does not know in advance the case it has to meet" (McGuirk at [33]) or if the pleadings are non-compliant with the rules (McGuirk at [34]). Where there is a failure to comply with the technical requirements of the pleading rules, Johnson J notes that the appropriate order in many instances "may be to strike out the offending pleading, but grant leave to amend": McGuirk at [34].
The above observations are apposite to the present case. Even if the pleading disclosed a cause of action, it does not inform the third defendant of the case he has to meet. The pleading "as a whole would tend to embarrass the fair trial of the action": McGuirk at [35].
Having regard to the above, I am of the view that the statement of claim should be struck out.
However, I am of the view that the plaintiff should be granted leave to amend the statement of claim, so that the plaintiff can properly plead his case in a way that complies with the requirements of the UCPR, and the third defendant is able to determine what case he is to meet. As noted by Kirby P (with whom Hope and Samuels JJA agreed) in Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 536G-537A:
"… the appellant being a litigant now appearing in person, care must be taken to ensure that this significant disadvantage does not deprive her of the opportunity to have her claim, if any, determined according to law. Persons unfamiliar with the rules of pleading and the technicalities which surround the drafting of a statement of claim in adequate and permissible legal form are inevitably, if unrepresented, at a disadvantage. Courts should approach the peremptory termination of the litigation with special care to ensure that, within the possibly ill expressed and unstructured statement of the legal claim sought to be ventilated, there is no viable cause of action which, with appropriate amendment of the pleading and a little assistance from the court, could be put into proper form. If this can be done, the court should avoid the summary termination of the proceedings for this will prevent the Court from examining any merits of the case, once the statement of claim is struck out."
It is a matter for the plaintiff to determine whether, and how, to amend the pleadings. However, having regard to the importance of proper pleading for the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in the proceedings, as set out in s 56 of the Civil Procedure Act 2005 (NSW), litigants may not be given repeated opportunities to put their pleadings into proper order: see Combe v Bank of Queensland [2011] NSWSC 1347 at [23]; McGuirk at [24]-[26].
To the extent that the plaintiff's claim relies on any failures on the part of the first defendant, the onus will be on the plaintiff to prove such failures. The only issue raised on this motion with respect to that aspect of the proceeding was that the claim against the first defendant was statute barred by the time the plaintiff instructed the third defendant. While again, I accept that there is prejudice to the third defendant with respect to this aspect of the matter as a result of the delay, the nature of this issue is such that the impact of the delay is not as acute as it might otherwise be.
For these reasons, I would not exercise my discretion to either stay the proceedings or dismiss them on the basis that they constitute an abuse of process.