Bartlett v Swan Television & Radio Broadcast Pty Ltd [1995] FCA 1429; [1995] ATPR 41-434

Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd [1987] FCA 84; (1987) 71 ALR 615

Bruce v Odhams Press Ltd [1936] 1 KB 697

Citicorp Australia v O'Brien (1996) 40 NSWLR 398

Craig v Troy (1997) 16 WAR 96

Day v William Hill (Park Lane) Ltd [1949] 1 KB 632

Farrington v Rowe McBride & Partners [1985] 1 NZLR 83

Flour Australia Pty Ltd v SECWA, unreported; SCt of WA; 14 April 1996, Master Seaman QC

H 1976 Nominees Pty Ltd v Galli [1979] FCA 74; (1979) 30 ALR 181

Hanflex Pty Ltd v N S Hope & Associates [1990] 2 Qd R 218

Herald Sun Television Pty Ltd v Australia Broadcasting Tribunal (1984) 57 ALR 309

Hospital Contribution Fund of Australia v Hunt (1983) 44 ALR 365

Kelmsley v Foot [1951] 2 KB 34

Kimberly Downs Pty Ltd v Western Australia, unreported; SCt of WA; Library No 6414; 1986

March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506

Marsden Beyers v Casselan Pty Ltd, unreported; SCt of WA; Library No 556; 1991

Meckiff v Simpson [1968] VicRp 8; [1968] VR 69

Perpetual Trustees Victoria Ltd v Marti, unreported; FCt SCt of WA; 20 December 1995

Rubenstein v Truth & Sportsman Ltd [1960] VicRp 75; [1960] VR 473

Sims v Craig Bell & Bond [1991] 3 NZLR 535

Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642

This is a pleading summons. The third defendant seeks to strike out the whole of the statement of claim or alternatively certain paragraphs thereof. The application is brought under O20 r19(1)(c). It was not seriously contested at the hearing that the statement of claim disclosed no reasonable cause of action. It was rather suggested that the pleading was obscure, ambiguous and failed to properly plead all material facts. Although the chamber summons seeks to have judgment entered for the third defendant, it was always the case that, if the application was successful, leave would be given to replead.

The fact situation in this case is quite complex. However, to properly understand the issues that arose in the course of the application, it is necessary for me to go into the plaintiff's claim against the third defendant in some detail. It is a complicated claim and providing a succinct and relevant summary is rendered difficult by the presence of claims against two other defendants who are not parties to this application.

The first four paragraphs identify the parties. Relevantly, the third defendant is a firm of solicitors. In September of 1991 the plaintiff entered into an option agreement to acquire certain property at Singleton Beach, referred to in the statement of claim as "the Land". In September 1991 the plaintiff appointed the second defendant as a consultant with respect to the development of the land. This agreement is referred to as "the First Management Agreement". There then follows paragraph 7 of the statement of claim which, because of its central importance in this application, I will quote in full:

"Sly and Weigall represented the plaintiff (for reward) and AAA (the second defendant) with respect to the preparation of, and their entering into, the First Management Agreement."

It is then pleaded (in para 8) that prior to the execution of the First Management Agreement, the plaintiff and the second defendant agreed that the plaintiff would be entitled to have the First Management Agreement varied if the plaintiff had any objections to any of its provisions. This agreement is referred to as "the Agreement to Vary". Paragraphs 9 and 10 deal with the Agreement to Vary and its relationship to the First Management Agreement. Paragraph 11 sets out the provisions of the First Management Agreement. Paragraphs 12 through to 17 deal with claims against the first and second defendants and are not presently relevant. Paragraph 18 then reads as follows:

"18. In acting for the plaintiff whilst also acting for AAA as pleaded in paragraph 7, Sly and Weigall owed to the plaintiff:-

18.1.1 not to represent the plaintiff with respect to the preparation of an entering into the First Management Agreement if it might be damaging to the plaintiff to do so, without requiring the plaintiff to take independent advice; and

18.1.2 not to prefer the interests of AAA or Oliver to those of the plaintiff;

18.2.1 in the same terms as pleaded in paragraph 18.1; and

18.2.2 to advise the plaintiff of any material risks in entering into the First Management Agreement."

Paragraph 19 details the alleged deficiencies in the First Management Agreement. Paragraph 20 pleads that the third defendant failed to properly advise the plaintiff with respect to these deficiencies. Paragraph 21 then reads as follows:

"21, By reason of the matters pleaded in paragraph 9.2, 19 and 20, Sly and Weigall breached the duties pleaded in paragraph 18."

Paragraphs 22, 23 and 24 identify an officer of the plaintiff (one Ricky Ling) and say that Ling sought advice from the third defendant as to the provisions of the First Management Agreement. Paragraph 25 pleads that the plaintiff was advised that the First Management Agreement was "a standard project management agreement". It is then pleaded the option was exercised (para 26). Paragraph 27 details the alleged failures of the third defendant in giving advice. Paragraph 28 deals with duties said to arise consequent upon the third defendant acting for the plaintiff and the second defendant. It reads as follows:

"28. In giving the advice pleaded in paragraph 25 and in acting for the plaintiff with respect to exercising the Option whilst continuing to also act for AAA, Sly and Weigall owed to the plaintiff:-

28.1.1 not to advise the plaintiff that the First Management Agreement was a standard project management agreement if it might be damaging to the plaintiff, without requiring the plaintiff to take independent advice;

28.1.2 not to prefer the interests of AAA or Oliver to those of the plaintiff;

28.2.1 in the same terms as pleaded in paragraph 28.1; and

28.2.2 to advise the plaintiff of any material risks in exercising the Option without requiring prior variation of the First Management Agreement or the Agreement to Vary being reduced to writing."

Paragraph 29 pleads that the option was exercised. Paragraph 30 pleads that by reason of the prejudicial nature of the First Management Agreement, the plaintiff has been put to cost and expense in relation to its finance arrangements in developing the land. Without detailing this pleading, it is sufficient if I say that the plaintiff alleges difficulties have arisen with a mortgage which was "negotiated and prepared" by the third defendant. Paragraph 32 then alleges breaches by the third defendant of its obligations in relation to the mortgage which are in similar terms to those in earlier paragraphs. The remaining paragraphs of the statement of claim (paras 33 to 43) relate to claims against the first and second defendant. By para 44, complaint is made of further advice allegedly given by the third defendant to the plaintiff which it is said again amounts to breaches of fiduciary duty, a duty of care and in contract in much the same terms as earlier pleaded. Paragraph 44 actually deals with advice given by the third defendant as to an amount payable under the First Management Agreement or the Second Management Agreement. (The Second Management Agreement is referred to in para 33 of the statement of claim and is said to have arisen after negotiations pursuant to the Agreement to Vary. No allegations are made against the third defendant in relation to the negotiation of the Second Management Agreement.)

There then follows the prayer for relief. The prayer for relief is in staged form. Without going into precise detail, it is enough if I say that relief is only claimed against the third defendant if relief against the first and second defendants is not available. For instance, under para B of the prayer for relief the plaintiff claims an order for specific performance of the Agreement to Vary. If this order was granted, then the relief claimed in para D against the third defendant would not be necessary. The same is true in relation to para G. Restitution of the sum allegedly paid on advice from the third defendant is claimed from the first defendant. If restitution is made, then the claim for equitable compensation against the third defendant, found in para H, falls away.

The third defendant has two main complaints. The first has to do with para 7 of the statement of claim and flows through to paras 18, 20 and 21. Essentially, what is said is that the plaintiff has failed to plead the material facts relating to its retaining the third defendant and has failed to plead what duties arose consequent upon that retainer. It is then said that the alleged breaches of duties to be found in paras 18, 20 and 21 exist in a vacuum. Of course, the same arguments apply in relation to paras 27, 28, 32 and 44 as they relate to para 7. For convenience, the argument centred on the interrelationship between paras 7, 18 and 20 as indicative of the third defendant's complaints overall.

It can be said at the outset that the form of the pleading in para 7 is somewhat unusual. It was common ground between counsel that when a party retains a solicitor the solicitor owes that party duties in contract and in tort and that duties arise as a consequence of the fiduciary relationship. It was also accepted by both counsel that there may be a degree of overlap in these respective duties. What counsel for the third defendant submitted is that it was necessary for the plaintiff to plead not only the retainer, but the particular duties that arose consequent upon the retainer. Further, with respect to the contractual aspect of the retainer, it was necessary to plead whether the contract was written or oral, what terms were express and what terms were implied and the basis upon which such terms were to be implied.

Counsel for the plaintiff submitted that such a plea was not required. In particular, counsel relied upon what was said by Ipp J in Pegrum v Fatharly (1996) 14 WAR 92 (at p95):

"A contractual relationship of solicitor and client will therefore be presumed if it is proved that the relationship of a solicitor and client existed de facto between a solicitor and another person. Upon proof of that kind it would not be necessary to prove when, where, by whom or in what particular words the agreement of retainer was made. Applying the rule expressed by Thomas J in Australian Energy Ltd v Lennard Oil NL, the de facto relationship of solicitor and client has to be a necessary and clear inference from the proved facts before a retainer will be presumed."

Anderson J, in the same case, adopted a slightly different approach. His Honour put the position as follows (at p102):

"It is well-settled that a professional engagement may be implied: see Allan v Bone [1841] EngR 1203; [1841] 4 Beav 493; Morgan v Blyth [1891] 1 Ch 337 at 355. A retainer will be presumed if the conduct of the parties shows that the relationship of solicitor and client has, in fact, been established between them: see Groom v Crocker [1939] 1 KB 194 at 222, per Scott LJ."

During the course of submissions, both counsel canvassed in detail the authorities dealing with solicitors' duties, how they arise and the way in which they should be defined. In particular, attention was given to the High Court decisions in Hawkins v Clayton (1989) 164 CLR 539 and Hill v Van Erp (1997) 142 ALR 697. These decisions illustrate that there is some degree of difference between the various Justices on how solicitors' duties to their clients arise at law and what those duties involve. However, it seems to me that for the purposes of this case, it is the decision in Pegrum v Fatharly (supra) which is of most assistance. At first instance, the trial Judge was not satisfied that the evidence established a retainer by the appellant of the respondent solicitor. In their decisions both Ipp and Anderson JJ detailed the evidence that satisfied them that there was, in fact, a retainer of the respondent by the appellant. What the plaintiff has done in this case is simply plead that the giving of advice, or the representation of the plaintiff by the third defendant, gave rise to a retainer. In other words, at trial it would not be open to the plaintiff to argue that there was an oral engagement of the third defendant by the plaintiff on certain terms and conditions or that there was some document which was relevant to the question of retainer. The plea is quite specific. The giving of advice in and of itself is said to give rise to the retainer. The obligations that arise consequent upon this retainer then arise as a matter of law. It seems to me that they could have been, but need not be, pleaded. In other words, I am satisfied that para 7 is a proper plea.

Having reached that conclusion, the arguments with respect to the breach of the duties really fall away. It is true that the plaintiff has not specified precisely what duties it is that the third defendant has breached. But as these duties arise as a matter of law consequent upon the retainer, it seems to me that such a plea is unnecessary. The nature of the duty breached is implicit in the plea detailing the breach. Once again, I am satisfied that there is a proper plea.

The third defendant's second complaint has to do with the question of causation. It is to be remembered that the plaintiff pleads breach of duties in contract, tort and equity (breach of fiduciary duty). In relation to this last matter, there need be no plea of causation because breach of a fiduciary duty generates a right to a remedy in equity, without anything more: see Maguire v Makaronis [1997] HCA 23; (1997) 144 ALR 729. In relation to both the contract and tort claims, it is not necessary for the plaintiff to show that the loss would not have occurred "but for" the actions of the third defendant: see March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506; Medlin v SGIC [1995] HCA 5; (1995) 182 CLR 1. Causation is really a question of fact. It seems to me that the plaintiff in this case has pleaded all the material facts. It is then a question of whether, upon the facts as pleaded and proved at trial, the losses allegedly sustained by the plaintiff were caused, all or in part, by the actions of the third defendant. I am satisfied that the pleading in its present form is satisfactory.

In conclusion, I should make some comments about strike-out applications generally. They bedevil litigation in this State. Some years ago, the provisions of O20 were amended so that strike-out applications must now be made within 21 days of the service of a pleading. The effect of that amendment is to cure the defects in a pleading simply by the flux of time. That is a remarkable situation. What it demonstrates is a recognition of the need to do something to limit strike-out applications.

Complex cases produce complex pleadings. This is a relatively complex case, although it must be said that it is well short of the most complex cases which come before this Court. Nonetheless, a reading of this pleading from beginning to end shows a clear, logical narrative. There can be no doubt as to the plaintiff's claims against the defendants and the legal basis upon which those claims were made. There is no ambiguity or inconsistency in the pleading. Furthermore, experience shows that the statement of claim is likely to be amended, if not prior to trial, then certainly at trial. To strike out any part of this pleading would, in my view, be a triumph of form over substance. It would serve no useful purpose. It seems to me that in considering strike-out applications, they need to be considered in the context of the litigation as a whole and careful consideration needs to be given to whether or not the interests of any of the parties are advantaged by the striking-out of the pleadings and the consequent delay and expense occasioned to all concerned.

I would dismiss the third defendant's chamber summons. The third defendant should pay the costs of this application in any event.