Pursuant to a summons filed on 5 July 2022, the plaintiffs, being Josephine Smith and two corporate entities which she controls, seek damages from the defendants, being two solicitors and a related company, who are said to have provided professional services to the first plaintiff in respect of property-related matters, including the transfer of property at Pyrmont and subsequent proceedings arising out of that transfer. The claim is in the nature of a professional negligence action against solicitors who were formerly retained by the first plaintiff.
The plaintiffs seek orders transferring the proceedings from the District Court to this Court in accordance with s 140 of the Civil Procedure Act 2005 (NSW) as well as orders relating to the future conduct of the matter, including for the service of further evidence by the plaintiff, and that the matter be listed for hearing for a period of three to four days at some stage in the near future.
Mr Grace appears on behalf of the plaintiffs and Ms Avery-Williams appears on behalf of the defendants. Both counsel provided helpful submissions in respect of the issues arising.
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Background to the summons
The proceedings were originally commenced in the District Court in August 2020. At that time, the first plaintiff was the only plaintiff. On 10 February 2021, the plaintiffs filed an amended statement of claim, pursuant to which the corporate entities became plaintiffs to the proceedings. As identified by Mr Grace, the plaintiffs' case against the defendants is being pursued on three bases, being:
1. That the defendants provided inadequate advice in respect to the transfer of property in Pyrmont;
2. That the defendants provided inadequate advice in respect of the conduct of proceedings subsequent to the transfer, being proceedings to set aside the transfer of the property; and
3. That the defendants provided inadequate advice in respect of the meaning and effect of a restraining order imposed upon the first plaintiff.
It seems that, at some stage subsequent to the first plaintiff being made subject to a restraining order in respect of property, she sought to and did purchase two hotels using property which was the subject of a restraining order for the purposes of providing security. When this was discovered, a receiver was appointed and the hotels were sold. The plaintiffs say that, as a result, they have suffered significant losses, including the loss of income which they would have generated from the hotels and the loss of additional capital value.
In support of their claims, the plaintiffs obtained an expert report from an accountant, Mr Saleh, on 11 November 2021, which was served on the defendants in or around the time that it was received. The report is titled "A Report on Income and Fees - SSI & NPA Operation of Lucky Australian Hotel", which is one of the hotels which I understand to have been purchased and then sold. Based on that report, it is said that the plaintiffs' losses will amount to approximately $2 million. It is not necessary that I be more specific than that, for the reason the plaintiffs submit, on any view, the potential quantum of their damages claim will significantly exceed the jurisdictional limit of the District Court, being $750,000.
In support of the summons, the plaintiffs rely on two affidavits of a solicitor employed by the solicitor for the plaintiffs, Blaise Prentice‑Davidson, filed 5 July and 11 July 2022. As Mr Prentice-Davidson suggests, the amended statement of claim introduced these claims on behalf of the second and third plaintiffs in the District Court case. He points out that at no such time since the filing of the amended statement of claim have the solicitors for the defendants indicated any objection to the extension of the District Court's jurisdictional limit in the District Court proceedings.
On 24 February 2022, Judge Wilson SC listed the matter for a three day hearing commencing 18 July 2022 and ordered that the defendants file and serve any evidence on which they would rely by 4 March 2022. The defendants served their evidence and the plaintiffs served evidence in reply on 10 May 2022. The parties then participated in a mediation. On 15 June 2022, the defendants purported to serve some further documents suggesting that they would be relying on a further affidavit. Then on 28 June 2022, the defendants served a further affidavit of the first defendant. Although the further affidavit is only six pages long, it has exhibited to it 130 pages of documentation.
The plaintiffs say that they will need to respond to this evidence and they may need time to do so. Having said that, as pointed out by Ms Avery-Williams, the further affidavit of the first defendant really only annexes documents and, if the documents are admissible, they are admissible whether they be annexed to an affidavit or not. The defendants oppose the matter being transferred to this Court at this stage because:
1. The proceedings are listed for hearing in the District Court next week and have been so listed for a period of five months;
2. It is not incumbent upon the defendants to give notice to the plaintiffs that they will oppose the extension of any jurisdiction in the District Court; and
3. The claim which gives rise to the potential for the jurisdictional limit to be exceeded might be described as somewhat tenuous or novel (according to Ms Avery-Williams). She points out that it is pleaded in the amended statement of claim that, although the defendants were not retained by the second and third plaintiffs, they are said to have owed a duty to them. She also points out that, at least on her interpretation of the amended statement of claim, the claim for the losses referred to in the report of Mr Saleh is only being pursued by the second and third plaintiffs and not the first plaintiff.
The plaintiffs accept that they are very late in bringing this application. The only explanation of substance offered for this late application is that it was an oversight on the part of the solicitors for the plaintiffs. However, the plaintiffs dispute the contentions of the defendants in respect of the merits of the claim and further maintain that, on a proper interpretation of the amended statement of claim, the first plaintiff is also seeking damages, including the amounts referred to in Mr Saleh's report. The plaintiffs thus dispute that the first plaintiff's claim is limited to costs thrown away or incurred in earlier proceedings (which would not exceed the jurisdictional limit of the District Court).
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Principles to be applied
The principles to be applied are well known. In Johnstone v State of New South Wales [2006] NSWCA 105, Giles JA (Santow and McColl JJA agreeing) said at [22]-[23]:
"The judge then stated his conclusion. He was dealing with the application as a matter of urgency, and in the circumstances could not be expected to give extensive reasons. Plainly he was not to engage in an exercise of complete assessment, but was to arrive at a likelihood, and of necessity he had to do so to an extent as a matter of impression, albeit founded on the evidence before him. The judge did this and, in my opinion, he sufficiently explained why he did not accept the suggested assessment of $1.6 million.
It was submitted that the judge should have gone to each of the items in the assessment, and stated his own assessment in substitution for that proposed on behalf of the claimant, so that it was demonstrated quasi-mathematically that the threshold of $750,000 was not achieved. I do not think that is correct. The question for the judge was not an assessment of the individual components of a damages claim, but rather the broader question of whether it appeared likely to him that if the claimant were successful his damages would exceed $750,000. In my opinion the judge's reasons, although brief, sufficiently disclosed why he came to his conclusion that it seemed unlikely. I do not think that there is insufficiency of reasons warranting leave to appeal."
Further, as was observed by Adamson J in Aitofi v The Council of the City of Sydney [2020] NSWSC 611, the words "if successful" are not confined to liability but extend also to damages. I should not merely assume that the plaintiffs will be successful in establishing that the defendants are liable and that the amount sought by the plaintiffs will be recovered.
However, in determining whether I should exercise my discretion to transfer the proceedings, it is only necessary that I form an impression based on the evidence that the plaintiffs may recover damages in excess of the jurisdictional limit. This was expressed by Adamson J in Thomas v Laundy (Exhibition) Pty Ltd [2016] NSWSC 1395 at [7]:
The problem with applying the principles in a matter such as this is that, on any view, there is some complexity in the arguments which will be advanced by the parties on the hearing. There may or may not be merit in Ms Avery‑Williams' point about the novelty or tenuous nature of the claim pursued by the corporate plaintiffs, but it is not my function at this stage to make any such determination. Ms Avery-Williams did not submit that the claim must be viewed as completely hopeless such that it in any way should be dismissed. That may be the defendants' ultimate submission, but it was not the submission for the purposes of this application.
In terms of the damages issues, I have reviewed the report of Mr Saleh, but my ability to comprehend its merit is limited by the lack of knowledge of all of the evidence in the proceedings. Plainly, on the face of it, it gives rise to a potential for the plaintiffs to recover a sum substantially higher than the jurisdictional limit of the District Court. The submissions made by Ms Avery‑Williams as to the lateness of this application and the lack of any real explanation for the delay are well made, but I must make orders in accordance with s 56 of the Civil Procedure Act. I must do justice between the parties.
The problem is that it seems the parties are in this position due to an oversight on the part of the solicitors for the plaintiffs. This application should have been made long before the matter was set down for hearing in the District Court. It is not incumbent upon those representing the defendants to remind those representing the plaintiffs about such issues. Of course, it would be helpful if they did so but the plaintiff can hardly blame the defendants for opposing such a late application.
In the end, it seems to me that the prejudice to the defendants can be cured by a costs order and further case management in this Court. It also seems to me that this is a matter which could and should be listed for hearing in this Court as soon as possible.
In those circumstances, I am prepared to make the orders transferring the proceedings from the District Court to the Supreme Court and make the following orders:
1. The District Court of New South Wales Proceedings no. 248990 of 2020 be transferred to the Supreme Court of New South Wales.
2. The plaintiffs to pay the cost of the summons and the costs thrown away by reason of the vacation of the hearing date in the District Court of New South Wales.
3. The plaintiffs to serve any evidence in reply on which they rely by 5 August 2022.
4. The matter is listed in the Professional Negligence List on 4 November 2022.
5. The matter is listed for hearing for 5 days on 27 February 2023.
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Decision last updated: 08 November 2022