Sutherland v GHR Accounting and Anor

Supreme Court of NSW|2015-11-23|Before: Hall J

Solicitors: Unrepresented (Plaintiff) Colin Biggers & Paisley Pty Ltd (First Defendant) Garland Hawthorn Brahe Solicitors (Second Defendant) File Number(s): 2015/236599

Judgment

These proceedings were commenced by the plaintiff, Richard Sutherland, on 13 August 2015 by way of Statement of Claim. The first and second defendants are an accounting firm, named as GHR Accounting Group ("GHR"), and Macquarie Bank ("Macquarie").
Mr Sutherland's claim is for economic loss, which he has not quantified in his pleadings, said to have arisen because of conduct by the defendants variously alleged as negligence, breach of contract and negligent misstatement. The transaction at the centre of the plaintiff's claim appears to be a "business proposal" he says Macquarie presented him with in early 2006. The details of this transaction are set out at paragraph 3 of the plaintiff's Statement of Claim. The plaintiff claims that GHR gave him advice to proceed with the proposal, and to provide a mortgage over all of the properties he owned in pursuance of the proposal. In 2008 Macquarie alleged that the plaintiff was in default of a loan agreement.
On 23 November 2015 I heard two applications brought by the defendants. By way of Notice of Motion filed 16 September 2015 the first defendant (GHR) sought an order dismissing the plaintiff's Statement of Claim (pursuant to UCPR r 13.4) or alternatively striking out the Statement of Claim (pursuant to UCPR r 14.28) as against them. By Notice of Motion filed on 10 September 2015, the second defendant (Macquarie) sought orders in the same terms in relation to the claim against them.

Background

The plaintiff, at some stage, was the sole director and single shareholder of a company, Quadratus Pty Ltd. The plaintiff did not put on any affidavit evidence on this application. However, a chronology document prepared by him came to be included in the Court Book provided by the defendants, apparently on the plaintiff's wishes. The chronology was attached to a letter dated 19 July 2011 from the plaintiff. It is not clear who the letter was addressed to. It is apparent that the chronology was not prepared for this litigation.
According to the chronology, the plaintiff and his family have been involved in the buying and selling of various properties in New South Wales since about 1928. Relevantly, the chronology states that a property at 120 Bridge Road, Glebe was purchased in 1989 and that a property at 418 Abercrombie Street, Chippendale was purchased in 1992. An entry in the chronology for January 1996 states: "On advice, incorporation of Quadratus Pty Ltd and, Sale of 120 Bridge Road Glebe into Quadratus Pty Ltd Sale of 418 Abercrombie Street Chippendale into Quadratus Pty Ltd Properties at all times tenanted and continually leased."
As will be seen below, it is likely that the reference to "advice" in that entry and subsequent entries in the chronology is intended as a reference to advice alleged to have been provided by the accountants including the first defendant in these proceedings, GHR.
An entry for June 2005 states: "Gren Olsen (family accountant for twenty years) semi-retires and sells practice into GHR Accounting Group - he advises that he will work part time."
The chronology outlines events said to have occurred in early 2006. It is said that on 20 January 2006 there was a conversation with an employee of Macquarie, Stuart Boag. Details are not given as to the substance of that conversation. It is then said that on 3 February 2006 there was a "subsequent meeting requested by Macquarie at Accountant's office." It is said that in attendance were the plaintiff, three employees of Macquarie including Stuart Boag, three employees of GHR Accounting named as David Gordon, Bernadette Gore and Lisa Callaghan, and the family's former accountant, Gren Olsen. It is then recorded: "proposal suggested by Macquarie Bank and recommended by GHR Accounting to Richard Sutherland as director of Quadratus Pty Limited in order to develop the Company: $4.0m facility to be made available to Quadratus Pty Ltd. refinance out of RAMS Loans. $600k to be held on deposit by Macquarie Bank mortgage over all properties including family home property to be in the Glebe/Darlington area around the University precinct portfolio to be a mixture of residential and commercial properties Macquarie Bank assures "long term" business relationship" (Original emphasis).
It is said in the chronology that on 15 February 2006 Macquarie sent documents and an offer in writing "as per meeting" though it is not said to whom the documents were sent. The chronology then deals with various proposed property purchases which were said to have been either pursued or not proceeded with depending on the advice of "Accountants", which for the purposes of this application I presume to be a reference to GHR.
Difficulties are mentioned in terms of the "cash position" presumably of Quadratus, and attempts to find tenants for properties purchased in Glebe. In March 2008 it is said that there were "various telephone conversations with both the Accountant and Macquarie Bank regarding the increasingly difficult financial position" again, presumably of Quadratus. It is said that a meeting took place in June 2008, again at the request of Macquarie and at the office of the accountants. The entry states, amongst other things: "Richard Sutherland asks that funds be released from the $300k on deposit as working capital otherwise the Company will not be able to continue to function Crag Jaffe says that the Bank is not happy with the situation and that the entire $300k on deposit will be applied against the loan position - effectively leaving Quadratus Pty Ltd with no working capital Craig Jaffe and Margo Faraci say that Macquarie Bank wants Quadratus Pty Ltd. to refinance the loans elsewhere - a difficult situation given that the position with Macquarie Bank is already problematic Richard Sutherland asks the Accountants to speak up in order to reach a solution to the problem - they do not…"
It is said that in 2009 certain loans (it is unclear which loans are being referred to) were refinanced through various lenders. It is said that in March 2010 "both commercial properties are repossessed and sold substantially below purchase price." The chronology concludes with further information as to challenges and difficulties said to have been faced by the plaintiff or his company. Some statements are then made as to the plaintiff's belief that his losses were caused by the defendants in the present proceedings.
The Affidavit of Brenden Miller sets out the details of two loan facilities provided by Macquarie to Quadratus Pty Ltd in April 2006. It seems probable that these facilities form part of the transaction or "proposal" referred to by the plaintiff in his chronology (see [9] above).
The first facility, number 144334, was offered to Quadratus pursuant to a facility letter dated 29 March 2006. Macquarie provided a line of credit to Quadratus on or about 26 April 2006. The facility limit was $525,000 and the plaintiff was the guarantor. According to Mr Miller's affidavit, the purpose of the facility was to assist with the refinancing of an investment property at 418 Abercrombie Street, Darlington (presumably the Chippendale property referred to by the plaintiff in his chronology). A mortgage was provided over the Darlington property as security.
The second facility, number 109584, was offered to Quadratus pursuant to a facility letter dated 29 March 2006. The line of credit was also provided to Quadratus on or about 26 April 2006. The facility limit was $600,000 and again, the plaintiff was the guarantor. According to Mr Miller's affidavit the purpose of the facility was to assist with the refinancing of an investment property at 120 Bridge Road, Glebe. Again, a mortgage over that property was provided as security.
Mr Miller states in his affidavit (at [6] and [9]) that the loan facilities were each varied on or about 28 July 2006. Annexure B to his affidavit is a copy of the variation letter relating to both facilities. Mr Miller states at [10] that the second facility was further varied on or about 25 June 2008, Annexure D to his affidavit being a variation letter.
It is alleged that the plaintiff defaulted in respect of these facilities. On or about 11 December 2008, Quadratus was issued with a Notice of Demand by Macquarie. After no payment was received, on or about 19 January 2009 Macquarie issued notices pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW) with respect to the Darlington and Glebe properties. Macquarie commenced proceedings in this Court (proceedings number 2009/11290) on 6 March 2009 against Quadratus, naming the plaintiff in these proceedings as second defendant due to his role as guarantor. According to Mr Miller's affidavit, no defence was filed.
On or about 12 May 2009, Quadratus sold the Darlington Property. On or about 21 July 2009, Quadratus sold the Glebe property. The balances owing under both facilities were then repaid. The Supreme Court proceedings were discontinued. Quadratus was deregistered on 11 August 2013.
As mentioned above, these proceedings were commenced by the plaintiff on 13 August 2015.

Pleadings

Under the heading "Relief Claimed" in his Statement of Claim, the plaintiff has stated that the defendants are indebted to him for "the capital invested; costs; professional fees; interest; legal fees; loss of opportunity to make alternative investments; and other costs as the court deems appropriate." As previously stated, no loss has been quantified in the pleadings. The amounts claimed as capital, fees etc have not been specified. The same statement as to loss and indebtedness appears at [8] of the Statement of Claim.
Paragraph 1 of the Statement of Claim is entitled "Reliance". Under this heading, the plaintiff has stated that the accountants for the plaintiff were "at all times GHR Accounting of Mona Vale (the First Defendant)". The plaintiff has then provided examples of the types of matter he claims to have received advice on from GHR. At [1.3] the plaintiff states that "it was reasonable for the Plaintiff to rely on advice provided by GHR Accounting."
Paragraph 2 is entitled "Duty of Care". As in [1], there is no mention of Macquarie with the matters sought to be pleaded in [2] concerning only GHR. Under this heading the plaintiff makes statements about GHR's advertising methods. He also makes a number of statements claiming that GHR was aware of his financial circumstances as well as matters relating to the finances of his family. At [2.3]-[2.4] the plaintiff pleads: "2.3 GHR Accounting held themselves [sic] to be well experienced in advising on matters pertinent to the plaintiff's financial affairs. 2.4 GHR Accounting has a legal duty to exercise reasonable care; skill and diligence in providing advice to its clients."
Paragraph 3 is entitled "Loan Agreement with Macquarie Bank" and concerns a business proposal said to have been presented to the plaintiff by Macquarie in early 2006. Again, I take this to be a reference to the events discussed above at [9] and [13]. The claims made by the plaintiff in this section of his Statement of Claim are: "3.2 The Plaintiff advised Macquarie Bank that the business proposal would not be proceeded with unless GHR Accounting approved the proposal. 3.3 A meeting was held at the offices of GHR Accounting in early 2006 where the Plaintiff; GHR Accounting; and Macquarie Bank were present and the proposal was discussed. 3.4 GHR Accounting stated that the business proposal was appropriate and that the Plaintiff should proceed. 3.5 GHR Accounting recommended that Macquarie Bank take a mortgage over all the properties which the Plaintiff owned and provide a 'Global Mortgage Facility' which could be drawn upon or repaid at any time. 3.6 During the course of this loan agreement GHR Accounting gave direct recommendations in relation to: 3.6.1 the specific properties to be purchased for the portfolio - accepting some and rejecting others; 3.6.2 in relation to Capital Gains Tax Matters; 3.6.3 the structure of the portfolio; 3.6.4 the structure of the loan; 3.6.5 the overall cash position of the structure; 3.6.7 (sic) the residential/commercial mix of the portfolio; 3.6.8 the leasing of commercial properties. The Plaintiff followed this advice at all times. 3.7 In the advanced stages of the loan agreement the Plaintiff became concerned about the cash position of the facility and suggested to GHR Accounting that one of the properties be sold in order to firm up the available cash position. 3.8 GHR Accounting expressly stated that this should not be done. The Plaintiff followed the advice of GHR Accounting. 3.9 In 2008 Macquarie Bank called a meeting at the offices of GHR Accounting. 3.9.1 Macquarie Bank said that the Plaintiff was in default of the loan agreement and that the loan to the Plaintiff was being called in. 3.9.2 GHR Accounting refused to provide suitable advice at this meeting to resolve the matter. 3.9.3 Macquarie Bank gave no opportunity to the Plaintiff to bring the loan into good order."
Paragraph 4 is entitled "Breach of Contract GHR Accounting". Under this heading it is said that there was a commercial agreement in place between the plaintiff and GHR. At [4.2] it is stated that "GHR Accounting regularly said to the Plaintiff that they would provide advice which would help to increase the wealth of the Plaintiff". It is then said that the plaintiff paid substantial amounts of money to GHR for "the advice which was given in relation to this matter" however the phrase "this matter" is not further specified. At [4.4] it is pleaded that "GHR Accounting did not honour the terms of its agreement with the Plaintiff." No specific terms of any agreement are pleaded, nor any action amounting to breach in the context of this paragraph.
Paragraph 5 is entitled "Breach of Contract Macquarie Bank". Again the plaintiff pleads that there was a commercial agreement between himself and Macquarie, that substantial sums were paid to it "in relation to this matter" and that Macquarie did not "honour the terms of its agreement". It is then stated: "5.4 Had the Plaintiff not entered into the deal with Macquarie Bank and simply left the funds on deposit then the Plaintiff would be in a substantially better position today. 5.5 The sums involved are significant and represent the entire funds available to the Plaintiff."
Paragraphs 6 and 7 are in identical terms except insofar as paragraph 6 is concerned with alleged conduct of GHR and paragraph 7 concerns the same alleged conduct but by Macquarie Bank. The paragraphs are entitled "Negligent Misstatement GHR Accounting" and "Negligent Misstatement Macquarie Bank" respectively. Paragraph 6 is as follows: "6.1 In relation to the advice which GHR Accounting provided to the Plaintiff. 6.2 In relation to the Risk Analysis which GHR Accounting provided to the Plaintiff. 6.3 In relation to the Recommendations made by GHR Accounting without proper or adequate investigation. 6.4 In relation to advice that was not appropriate. 6.5 In relation to advice that was misleading. 6.6 In relation to advice that was deceptive. 6.7 In relation to advice that was likely to mislead or deceive."
Paragraph 7 is in the same terms except references to GHR Accounting are replaced by references to Macquarie. As such, the allegations of negligent misstatement are the same against each defendant. No further details or particulars as to the advice or recommendations referred to are given.

Principles

UCPR r 13.4 provides: 13.4 Frivolous and vexatious proceedings (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).
Rule 14.28 provides: 14.28 Circumstances in which court may strike out pleadings (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 defendants face a high burden in seeking to obtain orders under either of these rules. The power to summarily dismiss proceedings should only be exercised in limited and exceptional cases, and not where determination of seriously disputed questions of fact is required. As Dixon J (as his Honour then was) said in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91: "A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process."
The power to strike out pleadings should also only be exercised in clear cases. An order may be made merely on an examination of the pleadings: Dey v Victorian Railway Commissioners, supra. One ground for either summary dismissal or strike out of pleadings is if the proceedings/pleadings do not disclose a reasonable cause of action. The following principle was stated in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129: "The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'."
The fact that a plaintiff has slim prospects of success is not enough to strike out a pleading: McGuirk v The University of New South Wales [2009] NSWSC 1424 at [38] referring to Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241 at 271; Preston v Star City Pty Limited [1999] NSWSC 1273 at [31]. As Johnson J stated in McGuirk at [38]: "The question for determination is whether a reasonable cause of action is disclosed, that is a cause of action which has some chance of success, or which could conceivably give the plaintiff a right to relief, or which, although weak, is properly debatable, and has some apparent legitimate basis, if the facts upon which it is alleged to be based are made good: Preston v Star City Pty Limited at [37]."
An order should not be made simply because pleadings are defective; pleadings must be beyond saving by legitimate amendment: Mutual Life and Citizens Assurance Co Ltd v Evatt (1970) 122 CLR 628.
As to the principles relating to pleadings, the following observations were made by Johnson J in McGuirk, supra: "27 For a Statement of Claim to comply with the rules of Court, a party 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: Rule 14.7 UCPR. In doing so, the pleadings should be as brief as the nature of the case admits: Rule 14.8 UCPR. 28 In Kirby v Sanderson Motors Pty Limited (2001) 54 NSWLR 135 Hodgson JA (Mason P and Handley JA agreeing) said at 142-143 [20]-[21], with respect to the requirement for a pleading to state material facts: "It might appear that these rules [the Supreme Court Rules] do not require that causes of action be stated in pleadings; the requirement is to have a statement of material facts, and indeed to have only such a statement. However, in my opinion, 'Material' means material to the claim, that is, to the cause or causes of action which are relied on. The requirement of a statement of material facts does not exclude the allegation of legal categories, such as duty of care, fiduciary duty, trust and contract. The general requirement to avoid surprise means that material facts must be stated in such a way that the defendant can understand the materiality of the facts, that is, how they are material to a cause of action…"
On the topic of pleadings said to be embarrassing for the purposes of UCPR r 14.28, Johnson J in McGuirk stated: "32 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: Northam v Favelle Favco Holdings Pty Limited (Bryson J, 7 March 1995, BC9504276 at 5-6). 33 Although the pleading of a conclusion may, in some circumstances constitute a material fact, nevertheless, the pleading will be embarrassing if allegations are made at such a level of generality that the defendant does not know in advance the case it has to meet: Charlie Carter Pty Limited v Shop Distributive and Allied Employees Association (1987) 13 FCR 413 at 417-418. In such a case, the appropriate remedy is to strike out the pleading rather than to order the provision of particulars, as it is not the function of particulars to take the place of the necessary averments in a pleading: Trade Practices Commission v David Jones (Australia) Pty Limited (1985) 7 FCR 109 at 112-114. 34 Rule 14.28 UCPR provides that pleadings that involve non-compliance are liable to be struck out as an embarrassment. However, generally the Courts recognise that a wide range of discretionary considerations arise where there is a failure to comply with the technical requirements of the pleading rules: Beach Petroleum NL v Johnson (1991) 105 ALR 456 at 466. In many instances, the appropriate order may be to strike out the offending pleading, but grant leave to amend: Rubenstein v Truth & Sportsman Limited [1960] VR 473 at 476; H 1976 Nominees Pty Limited v Galli (1979) 30 ALR 181 at 186."
The plaintiff's Statement of Claim and the defendants' Notices of Motion must be considered in light of these principles.

Claim against Macquarie Bank

The pleadings, outlined above, indicate that the plaintiff's claims against the second defendant, Macquarie, are for alleged breach of contract and alleged negligent misstatement.
Macquarie, in its written submissions, acknowledges that in the early stages of proceedings a Court may be inclined to strike out a problematic pleading and allow an opportunity to re-plead rather than dismissing the proceedings entirely. Macquarie submits however, that the plaintiff's case against it is misconceived and cannot succeed even if pleading issues could be resolved. For that reason it submits that the proceedings should be dismissed.
In their written submissions at [20]-[22], Macquarie has identified what it submits are difficulties with, or defects in, the plaintiff's Statement of Claim, including that the "commercial agreement" relied upon in paragraph 5 is not identified or particularised, nor the sums of money said to have been paid by the plaintiff to Macquarie or the "advice", "Risk Analysis" and "Recommendations" referred to in paragraph 5
It is not necessary to re-state the various problems identified by Macquarie in relation to paragraph 5 and paragraph 7 in any greater detail because I accept that they do constitute defects in the Statement of Claim. As submitted at [21] of its written submissions, Macquarie "is left to entirely speculate as to what is the breach of contract claim sought to be made against it." In relation to the plaintiff's negligent misstatement case, Macquarie submits at [23] that they are "also left to speculate about the claim…There is no proper pleading of duty, breach or causation. It is impossible to understand what is the essence of the claim and it cannot be responded to…"
Macquarie also noted that, in relation to the "significant losses" identified in paragraph 8 of the Statement of Claim there has been no attempt by the plaintiff to identify or explain what losses are claimed against whom, how the losses are said to arise and the quantum of the losses: Second Defendant's Written Submissions at [24].
It was submitted by Macquarie that the evidence on the application demonstrates that there is no reasonable cause of action by the plaintiff against it. In this respect Macquarie, in its written submissions, referred to the chronology prepared by the plaintiff and the letter to which it was attached, stating that those documents demonstrate: 1. That the plaintiff's claim appears to relate to loans to Quadratus and the financial position of Quadratus. 2. That any complaint in relation to poor advice which is alleged to have been relied upon by the plaintiff and caused loss (presumably to Quadratus) is against GHR. 3. The relevant events occurred long ago and more than 6 years before these proceedings were commenced.
Macquarie made the following submissions: "31 In the circumstances (1) there is no disclosed cause of action, (2) the evidence indicates that the plaintiff is not the proper plaintiff, (3) if Quadratus ever had a claim (which is denied), it is now deregistered and cannot bring it and, (4) in any event, any claims relating to the plaintiff's or Quadratus' dealings with MBL are likely statute barred. 32 This is one of those cases where the plaintiff's claim is so clearly deficient and untenable that it should not be permitted to proceed. It would be inconsistent with the objectives and requirements of ss 56‑58 of the Civil Procedure Act for the proceedings to be maintained against MBL. The claims against MBL should be dismissed."

Conclusion: Macquarie Bank

The plaintiff's Statement of Claim against Macquarie fails to comply with the provisions of the UCPR in respect of pleadings: UCPR Part 14, Division 3.
In paragraph 3 ("Loan Agreement with Macquarie Bank") the first reference to Macquarie concerns what was said to be the presentation of a business proposal by it in early 2006. Paragraph 3.2 pleads as a fact that the plaintiff was dependent upon GHR to approve the business proposal. As previously stated, it is in the following terms: "3.2 The Plaintiff advised Macquarie Bank that the business proposal would not be proceeded with unless GHR Accounting approved the proposal."
In paragraph 3.4 it is pleaded that GHR Accounting allegedly stated that the business proposal of Macquarie was appropriate. In 3.6 the plaintiff says he followed advice given by GHR Accounting.
It is plain from the plaintiff's own pleading that he relied upon the approval and advice of GHR, not Macquarie, in relation to Macquarie's business proposal.
In paragraph 5 ("Breach of Contract Macquarie Bank") there is no recital of any facts supporting the bare contentions made as to "advice" not being appropriate or being misleading or deceptive.
Paragraph 7 ("Negligent Misstatement Macquarie Bank") is equally bereft of any factual matter capable of supporting any claim of negligent misstatement or misleading or deceptive advice.
In particular there is no legal relationship identified in the Statement of Claim as having existed between the plaintiff and Macquarie or between Macquarie and Quadratus.
The evidence before me, particularly Mr Miller's evidence, establishes that Macquarie were involved with the business and financial affairs of the plaintiff only insofar as the 2006 loan facilities provided to Quadratus. Two issues of significance arise. The first is that the plaintiff is not the 'proper plaintiff' because the loans were made to Quadratus and Macquarie's services were provided to Quadratus. The second is that any losses said to have resulted from those transactions (bearing in mind that no losses are particularised and although there was default, the possession proceedings were discontinued following an orderly sale of the property and payment of the debts by Quadratus) would, at best, be reflective losses suffered by the plaintiff as a shareholder in Quadratus. In this respect it was stated by Stevenson J in VPlus Holdings Pty Ltd v Bank of Western Australia Ltd [2012] NSWSC 1327 at [28] that: "The relevant principle is that a shareholder of a company cannot recover damages merely because the company has suffered damage, and cannot recover damages that are merely a reflection of a loss suffered by the company. A shareholder may only recover damages for loss suffered personally that is separate and distinct from the loss of the company: Chen v Karandonis [2002] NSWCA 412 at [34]-[53] (per Beazley JA, with whom Heydon and Hodgson JJA agreed) and Ballard v Multiplex [2008] NSWSC 1019; (2008) 68 ACSR 208; per McDougall J at [32]-[41]."
On the above bases the plaintiff's case against Macquarie is untenable, cannot possibly succeed, and should be dismissed under UCPR r 13.4.

Claim against GHR Accounting

The first defendant, GHR, relied upon written submissions dated 13 November 2015 and oral submissions made on its behalf by Mr CJ Peadon of counsel at the hearing of the Notices of Motion.
At [2] of GHR's written submissions the following summary of the plaintiff's claim is set out with references to the plaintiff's Statement of Claim: "As best as GHR Accounting can tell, the Plaintiff's claim is that: a. In early 2006 GHR Accounting advised the Plaintiff in relation to a proposed lending facility to be provided to the Plaintiff by Macquarie Bank Limited… : Statement of Claim, paras 3.1 to 3.5. b. GHR gave advice to the plaintiff in respect of the application of the funds and repayment of the facility: see Statement of Claim, paras 3.6 to 3.8. c. GHR did not provide suitable advice to the Plaintiff in 2008 following Macquarie issuing a notice of default on the loan facility: para 3.9. d. GHR did not honour the terms of its commercial agreement with the Plaintiff: paras 4.1 to 4.4. e. GHR made negligent misstatements to the Plaintiff and engaged in misleading and deceptive conduct: para 6. f. The Plaintiff claims he suffered loss and damage: para 8."
This is an accurate summary of the plaintiff's pleadings against GHR insofar as they relate to the 2006 loan facility. It is clear from paragraphs 2, 4 and 6 that the plaintiff alleges breach of a duty of care, breach of contract and negligent misstatement in relation to the transaction outlined in paragraph 3.
The pleadings indicate however that the relationship between GHR (in various corporate forms as discussed below) and the plaintiff had been ongoing over a number of years and that the plaintiff's involvement with it was not limited to the 2006 transaction. Paragraph 1 of the Statement of Claim, headed "Reliance" stated that GHR had "regularly advised" the plaintiff on "various accounting matters" said to include taxation matters and superannuation. At [1.2.2] the plaintiff states: "GHR advised the Plaintiff on investment strategies in relation to setting up a corporate entity (Quadratus Pty Ltd)."
Additionally, at [4.2] of the Statement of Claim, under the heading "Breach of Contract GHR Accounting" the plaintiff alleges that: "GHR Accounting regularly said to the Plaintiff that they would provide advice which would help to increase the wealth of the Plaintiff."
These aspects of the pleadings suggest that the plaintiff's claim against GHR is not limited to the 2006 transaction with Macquarie but relates more broadly to advice given to him by the firm in relation to his investments in general and the structuring of Quadratus in relation to certain property holdings. In that respect, the claim against GHR is, in my opinion, materially different to the claim against Macquarie, and may not be susceptible to a reflective loss defence.
If it was the plaintiff's intention to plead losses against GHR extending beyond the 2006 transaction this has not been conveyed with specificity. The plaintiff has not provided particulars as to specific advice he says was given to him by GHR or communications between himself and GHR. More fundamentally, specific breaches and causation between any alleged acts done or statements made by GHR and losses, which are not quantified in the Statement of Claim, have not been pleaded.
GHR submitted that the plaintiff's claim discloses no reasonable cause of action for three reasons: 1. GHR was not incorporated at the time the plaintiff was advised (if the plaintiff was advised) to enter into the facility in 2006. Therefore, GHR did not relevantly advise the plaintiff. 2. The facility from Macquarie was made available to Quadratus and not the plaintiff himself. 3. The plaintiff was not called on to pay any amounts as guarantor pursuant to the facility. The plaintiff therefore did not suffer any compensable loss. It was submitted that whether or not Quadratus suffered any loss is not relevant to the proceedings.
It was submitted by GHR that the Statement of Claim should accordingly be summarily dismissed, with reliance placed on the decision of French CJ and Gummow J in Spencer v the Commonwealth (2010) 241 CLR 118 at [17], [22] and [25]. Alternatively it was submitted that the Statement of Claim should be struck out, with reliance placed on General Steel Industries Inc v Commissioner for Railways (NSW), supra, at 129-130.
It was additionally submitted that the Statement of Claim should be struck out as embarrassing because of deficiencies said to flow from: 1. The plaintiff's failure to plead the material terms of the alleged commercial agreement with GHR as well as his failure to plead the terms of the alleged agreement said to have been breached or causation. 2. The plaintiff's failure to identify the "advice", "risk analysis" and "recommendations" complained of in [6.1]-[6.3] of the Statement of Claim under the heading "Negligent Misstatement", as well as the facts and circumstances rendering any advice given by GHR not appropriate, misleading and/or deceptive.
At the hearing I raised with counsel for GHR the issue discussed above at [58] as to whether the Statement of Claim could be said to embrace not only the discrete loan facilities as their summary of the claim (see above at [54]) would suggest but a more general transaction whereby GHR provided advice in relation to a new structure, including the establishment of Quadratus and any advice as to the transfer of properties into the company name as a property portfolio investment company. In response Mr Peadon submitted: "…There is no complaint that the transfer, if I can put it, of assets or wealth into Quadratus when Mr Sutherland maintained ownership and control, if I could put it like that, as sole director and shareholder caused any problems…"
Mr Peadon maintained, on behalf of GHR, that the essence of the claim brought by the plaintiff is advice in relation to the provision by Macquarie of facilities to the plaintiff's company.
In relation to the submission concerning GHR's incorporation, and the fact that GHR in its current form did not exist at the time many of the alleged acts occurred, I consider that this is in the nature of a misnomer in the pleading which could be overcome by the plaintiff. I accept the plaintiff's contention that the practice which provided advice to him was essentially the same as that carried on by the corporate vehicle known as GHR Accounting today. I consider this could be cured, for instance, by the company's deregistration being revisited or the plaintiff joining an insurer, if leave of the Court was granted to proceed in that way.
As to the submission that any advice given by GHR was given to Quadratus, and any loss was suffered by Quadratus, it was submitted that the reflective loss principle discussed above also applies to any potential claim the plaintiff may have against GHR. As foreshadowed earlier, I consider that the position is slightly different to the claim made against Macquarie, as it appears that the plaintiff seeks to rely upon ongoing conduct over a period of time against GHR causing him losses. If the plaintiff were to be given leave to replead it would be necessary for him to identify: 1. The relevant retainer of GHR; 2. Whether there is any material capable of establishing that the scope of duty of care extended as far as the plaintiff alleges; 3. Whether there is any basis for an allegation of a breach of that duty in relation to any particular transaction/the overall investment scheme and 4. Whether there would be an arguable basis that loss or damage flowed to the plaintiff as distinct from the company against GHR.

Conclusion

I consider that the plaintiff should be afforded the opportunity to replead against GHR in respect of any cause of action as to any maintainable claim for alleged loss separate from losses that may have been suffered by his company, Quadratus.
I consider that the pleadings are embarrassing within the meaning of UCPR r 14.28. I do not consider that the deficiencies in the pleadings can be remedied by the provision of further particulars by the plaintiff. In my opinion the Statement of Claim should be struck out with liberty to the plaintiff to replead against GHR.

Orders 1. The proceedings brought by the plaintiff against the second defendant, Macquarie Bank, are dismissed pursuant to UCPR r 13.4. 2. The Statement of Claim filed by the plaintiff as against the first defendant on 13 August 2015 is struck out pursuant to UCPR r 14.28. 3. Leave is granted to the plaintiff to file an Amended Statement of Claim to re-plead against the first defendant, GHR Accounting, in relation to alleged breach of contract and/or alleged negligence or negligent misstatement. 4. I grant leave to the first and second defendants to lodge with my Associate any written submission on costs. The plaintiff is to lodge with my Associate any written submissions in reply by 4pm Friday, 12 February 2016 with copies to be served on the defendants' solicitors.

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: 18 December 2015

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Judgment (11 paragraphs)

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