Valorum Law Group Pty Ltd v Johnson

JUDGMENT

1. By Notice of Motion filed on 27 February 2025, the plaintiff seeks an order striking out the defendant’s Defence to the Further Amended Statement of Claim under r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW) (‘the UCPR’). The defendant also seeks to have a Notice to Produce, which was served upon it on 31 July 2024, struck out.

2. The Notice of Motion was heard on 17 April 2025. The defendant was called three times outside the courtroom and there was no response. There was no appearance by or on behalf of the defendant. I note that the defendant provided a medical certificate from a General Practitioner saying that the defendant was unfit from 10 March to 10 April 2025 inclusive, on account of a “medical condition”. That certificate does not cover the date of the hearing of the Notice of Motion. Even if it had, the description of the cause of the defendant’s unfitness is too vague for the certificate to be persuasive in the context of an application for an adjournment, had such an application been made. I further note that the defendant provided, by email, on 31 March 2025, a letter dated 21 March 2025 from a Gastroenterologist, Dr Fitzgibbon. Dr Fitzgibbon said that the defendant would be unable to “attend appointments or hearings related to his active court process” from 10 March 2025 until the middle of the week following the letter, which took the period of time to 27 March 2025, because he was a hospital inpatient during that period. That letter also does not cover the date of the hearing of the Notice of Motion.

3. In the proceedings, the plaintiff seeks to recover legal fees from the defendant, Mr Gregory Johnson. The fees were allegedly incurred by Verus Construction Pty Ltd (‘Verus’), a building company, over a period of about two years from about 22 May 2019. Mr Johnson was the sole director of Verus. The plaintiff claims that, in September 2020, the defendant entered into an oral agreement by which he guaranteed the payment of fees due to the plaintiff from Verus and all future fees and disbursements incurred by Verus, in consideration for the plaintiff forbearing from taking action to recover the costs then due from Verus and continuing to perform legal work for Verus. Subsequent promises by the defendant to similar effect are also alleged. A part oral and part written agreement between the parties on 12 May 2021 binding the defendant to pay the fees incurred by Verus is also alleged, and so is a written agreement of 24 May 2021 to the same effect. The plaintiff sues on the contracts.

4. Further or in the alternative, the plaintiff brings a claim against the defendant under the Australian Consumer Law (NSW) for misleading and deceptive conduct under s 18(1). The claim relates to representations allegedly made with respect to the payment of legal costs and disbursements by the defendant to the plaintiff from 3 September 2020 to 19 March 2021. The plaintiff also makes a claim against the defendant in the tort of deceit in relation to the alleged representations. The plaintiff further claims that a significant portion of the legal fees owed to it by Verus were incurred whilst Verus was insolvent when the defendant knew that there were grounds for suspecting that Verus was insolvent. It is alleged that the defendant contravened s 588G of the Corporations Act 2001 and caused the plaintiff loss or damage.

5. The effect of the Further Amended Statement of Claim, filed on 7 June 2024, was to plead, for the first time, a quantum meruit claim for the value of the legal work provided.

The further amended defence

6. The Statement of Claim which initiated the proceedings was filed on 9 November 2022.

7. On 1 May 2023 the following orders were made with respect to evidence:

1. The Plaintiff to serve its affidavit evidence in chief by 12 June 2023.

2. The Defendant to serve its affidavit evidence in defence by 17 July 2023.

3. The Plaintiff to serve its affidavit evidence in reply by 7 August 2023.

8. On 16 August 2023, further orders were made for the filing of an Amended Statement of Claim by 21 August 2023 and the filing of an Amended Defence by 30 August 2023. On 11 September 2023, the defendant was given an extension until 21 September 2023 to file his Amended Defence.

9. The Amended Statement of Claim was filed on 16 August 2023 and the Amended Defence was filed on 21 September 2023.

10. At a directions hearing on 6 November 2023, the matter was listed for hearing on 20 May 2024. The following orders were made:

1. List for hearing on 20 May 2024 with an estimate of 3 days.

2. Standard orders for hearing.

3. Plaintiff to serve any further affidavits by 17/11/2023.

4. Defendant to serve affidavits by 2 February 2024.

5. Draft Further Amended Defence to be served by 2/2/2024.

6. If consent not given to draft Further Amended Defence by 16/2/24 any application to amend the defence to be filed and served by 23/2/24 and returnable 1 March 2024.

7. Listed 1/3/24 at 9:30 (to follow motion).

8. Plaintiff to serve affidavit in reply by 8 March 2024.

11. The plaintiff served its affidavit evidence in chief. The defendant served his affidavit evidence and filed it outside the period allowed for in the orders on 1 May 2024.

12. On 17 May 2024, the hearing listed for 20 May 2024 was vacated, with a costs order against the defendant. The plaintiff was given leave to file and serve a Further Amended Statement of Claim by 7 June 2024 and the defendant was directed to file and serve a Defence to the Further Amended Statement of Claim by 28 June 2024. The list Judge noted on the orders “The hearing is vacated due to a proposed new Further Amended Defence and affidavit, the preparation of which was delayed in part due to the defendant’s mental health and financial issues”.

13. The trial in the proceedings was subsequently relisted for 2 December 2024.

14. The plaintiff filed a Further Amended Statement of Claim on 7 June 2024. As I have said, the only substantive amendment was the addition of a quantum meruit claim.

15. The Further Amended Defence, which is dated 30 July 2024, was filed on 3 October 2024, with the leave of the Court granted on 3 October 2024.

16. On 3 October 2024, the hearing listed for 2 December 2024 was vacated and the matter was relisted to be heard on 22 September 2025 with an estimate of 6 days. The plaintiff was ordered “to serve any expert report as to quantum meruit of legal costs and disbursements and any related lay affidavit evidence by 28 October 2024”. The defendant was ordered to serve “any responsive expert and lay evidence” by 16 December 2024.

17. The plaintiff has served all of its evidence. The defendant has only served the affidavit of 7 May 2024. No further exchange of evidence is presently timetabled.

18. On 10 February 2024, the defendant was directed to respond to the plaintiff’s request, dated 5 December 2022, for further and better particulars of the Further Amended Defence by 21 February 2025. The defendant has not complied with this direction. No further particulars have been provided.

19. On 25 February 2025, the defendant’s solicitors informed the plaintiff that they no longer had authority to act on the defendant’s behalf.

The plaintiff’s submissions

20. The plaintiff seeks to have the Further Amended Defence struck out on two broad bases; firstly, that the Further Amended Defence withdraws admissions previously made and secondly, that the pleading in the Further Amended Defence is confused.

The Amended Defence withdraws submissions previously made

21. The plaintiff’s evidence was served prior to the vacation of the trial listed for 20 May 2024, except for the evidence in relation to the quantum meruit claim which was the subject of an order on 3 October 2024 (see [16] above). The plaintiff has prepared its case in reliance upon the pleading by the defendant which pre-dated the Further Amended Statement of Claim. Although the Further Amended Statement of Claim does not make any substantive changes to the plaintiff’s claim, apart from adding a new claim in quantum meruit, the defendant has, in his Further Amended Defence, pleaded to the unchanged parts of the Further Amended Statement of Claim differently from the way he pleaded to those parts in his previous defences, in material ways. This includes the implicit withdrawal of admissions previously made by the defendant which the plaintiff has relied upon when preparing its evidence.

22. The plaintiff complains that the Further Amended Defence changes “the entire basis of the defendant’s pleaded case”.

23. The plaintiff complains, in particular, of paragraphs [3], [9], [13], [16], [20], [23] and [30] of the Further Amended Defence as “being a traversal of matters previously admitted”.

24. In paragraph 3 of the Amended Defence, the defendant admitted that he instructed the plaintiff to act for Verus in proceedings in the Queensland Supreme Court entitled Sentinel Springwood & Ors v Verus & Ors (Sentinel), saying that “the Defendant instructed the Plaintiff in his capacity as director of the Verus and only in that capacity” [sic]. In paragraph 3 of the Further Amended Defence, the defendant pleads differently in relation to that issue, in a way which is difficult to understand and which, on some possible interpretations, avoids a direct admission as to the defendant’s role in instructing Verus in relation to Sentinel.

25. In paragraph 9 of the Further Amended Defence, the defendant denies the allegation in paragraph 9 of the Further Amended Statement of Claim that, by 3 September 2020, Verus was indebted to the plaintiff in the sum of $81,796.65 under two costs agreements. The pleading to the same allegation in the Amended Defence did not admit the debt, in reliance on paragraphs 7 and 8 of the defence, which allege that one of the costs agreements was not signed and makes various complaints about the pleading in the Statement of Claim. Paragraphs 7 and 8 in the Further Amended Defence are different from paragraphs 7 and 8 in the Amended Defence, and make a series of new allegations, which I will discuss further below.

26. In paragraph 13 of his Amended Defence, the defendant admits that the plaintiff provided legal services to Verus on dates from 3 September 2020. In paragraph 13 of the Further Amended Defence, the defendant does not admit this allegation.

27. In paragraph 16 of his Amended Defence, the defendant admits that the plaintiff provided legal services to Verus on dates from early December 2020 onwards. In paragraph 16 of the Further Amended Defence, the defendant does not admit this allegation.

28. In paragraph 20 of his Amended Defence, the defendant admits that the plaintiff provided legal services to Verus on dates from March 2021. In paragraph 20 of the Further Amended Defence, the defendant does not admit this allegation.

29. In paragraph 23 of his Amended Defence, the defendant admits that the plaintiff provided legal services to Verus on dates from 19 March 2021. In paragraph 23 of the Further Amended Defence, the defendant does not admit this allegation.

30. The relevant Statements of Claim plead in paragraph 30 that, on 8 June 2021, the plaintiff made a demand of Verus and the defendant for the payment of all invoiced amounts which were then outstanding to the plaintiff. In paragraph 30 of the Amended Defence, the defendant admits that the demand was made, whilst denying that he was liable for the invoiced amounts. In paragraph 30 of the Further Amended Defence, the defendant pleads differently to paragraph 30 of the Further Amended Statement of Claim in a way which could be interpreted as avoiding making an admission that the demand was made of him.

31. Paragraphs 13, 16, 20 and 23 of the Further Amended Defence clearly attempt to withdraw an admission made in the corresponding paragraphs of the Amended Defence. Paragraphs 3, 9 and 30 also arguably attempt to withdraw an admission made in the corresponding paragraphs of the Amended Defence.

32. The Uniform Civil Procedure Rules 2005 (the UCPR) state, in rule 12.6(2), (3) and (4):

12.6 Withdrawal of matter in defence or subsequent pleading

…

(2) Despite subrule (1), a party may not withdraw any admission, or any other matter that operates for the benefit of another party, except with the consent of the other party or by leave of the court.

(3) A withdrawal under this rule is to be made by filing a notice of withdrawal stating the extent of the withdrawal.

(4) If the withdrawal is by consent, the notice under subrule (3) must be accompanied by a notice from each party whose consent is required by subrule (2) to the effect that the party consents to the admission or other matter being withdrawn in accordance with the notice of withdrawal.

33. No leave of the court has been sought or given for the withdrawal of the admissions, and the plaintiff has not consented to any withdrawal of the admissions.

34. In addition, the plaintiff has filed its evidence in the matter and framed its case in reliance on the admissions made. It would be arguable, had the plaintiff sought leave to amend its defence, that such an amendment would be at odds with the overriding purpose of the Civil Procedure Act 2005 and the UCPR, which is to facilitate the just, quick and cheap resolution of the real issues in the proceedings (see Harvey v John Fairfax Publications Pty Ltd [2005] NSWCA 255 at [7] per Santow JA and [72] – [73] per Hunt AJA).

The pleading is confused

35. The defendant pleads differently in paragraphs [4], [5], [7], [8], [25], [26] and [27] of his Further Amended Defence from the pleading to those paragraphs in the Amended Defence. The effect of the different pleading is to put the plaintiff to proof of matters which had not previously been contested. Again, these new paragraphs are pleaded without the leave of the Court or the consent of the plaintiff after the evidence of the plaintiff has been served.

36. In paragraphs [4], [5], [7], [8], [25], [29] and [34], the defendant raises the enforceability of agreements to which he was not a party. Neither the party to the agreements, Verus, nor that party’s liquidator, has sought any relief in relation to the agreement.

37. In paragraphs [4] and [8] of the Further Amended Defence, the defendant says that he defers particulars until “discovery”. No discovery has been sought. In any event, there is authority that it is not permissible without sufficient grounds for suspicion, to make an allegation to found an application for discovery in the hope of making out that allegation (see Entertainment One Films Australia Pty Ltd v Hopscotch Pictures Pty Ltd [2024] NSWSC 365 at [34] – [36] per Ball J).

38. The pleading at [5] and [8] of the Further Amended Defence is confused in relation to the attribution of invoices to matters and the defendant has not responded to a request for clarification.

39. In paragraph 25 of the Further Amended Defence, the defendant has pleaded differently, in relation to an allegation in the Statement of Claim that he acknowledged the debt orally and in writing, from the manner in which he pleaded to that allegation in the Amended Defence. The defendant seeks to plead a counterfactual which is entirely new. The defendant has refused to particularise this new pleading.

Conclusion on the Further Amended Defence

40. For all of the reasons set out above, the Further Amended Defence must be struck out.

Notice to Produce of 10 July 2024

41. The plaintiff seeks to have the Notice to Produce served upon it on 10 July 2024 set aside. The plaintiff argues that, on the basis of the pleadings as they were prior to the filing of the Further Amended Defence, the subject matter of the Notice to Produce did not relate to a matter in issue in the proceedings. The plaintiff argued that the Notice to Produce was a fishing expedition.

42. The defendant has not put any argument in support of the Notice to Produce before the Court.

43. The Notice to Produce served upon the plaintiff on 10 July 2024 will be set aside (see Joseph v Spencer [2025] NSWCA 80).

Costs

44. The plaintiff has been entirely successful in relation to its Notice of Motion filed 27 February 2025. The plaintiff is entitled to an order for costs in relation to the Notice of Motion. It was put that costs should be awarded on an indemnity basis, but insufficient basis was advanced as to the basis for indemnity costs. Costs will be awarded on the ordinary basis.

Orders

45. The following orders will issue:

46. The defendant’s defence to the Further Amended Statement of Claim is struck out under rule 14.28 of the Uniform Civil Procedure Rules 2005 (NSW).

47. The defendant’s Notice to Produce served on the plaintiff on 31 July 2024 is struck out.

48. The defendant is to pay the plaintiff's costs of the Notice of Motion.

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Amendments

01 May 2025

Typographical error corrected at [45]