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[2026] NSWCA 5
respondent. Appeal dismissed with costs: [163].
The Court of Appeal dismissed the appeal against the solicitor’s successful defence of a negligence claim. The alleged breach was narrowly framed: the appellants had to show that, before particular documents were filed, a reasonably careful solicitor would have concluded that the relevant case was hopeless, not merely risky or in need of more information. The Court found that the material available at the relevant times did not compel that conclusion. It also held that an order giving liberty to apply about costs did not extend the UCPR’s 14-day period, and that the primary judge had not denied fairness by making a costs order without a separate hearing when no specific request to defer costs had been made.
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2,707 words · generated 08/10/2026
The dispute began with three Victorian medical imaging businesses, VXG Dandenong, VXG Boronia and VXG Balwyn. Philips serviced their equipment under separate service agreements. After the businesses fell behind on payments, Philips terminated the agreements on 8 September 2016 and brought separate District Court proceedings against the companies. Bevyn White, a director and guarantor, and another guarantor were also defendants in those proceedings [5]-[6].
8 cited instruments linked from this judgment.
The respondent, solicitor Anthony Malouf, acted for the companies and White. The underlying defences included claims that the service agreements had been orally varied, or that Philips had failed to provide the required services. The Balwyn and Dandenong defences failed at trial. White’s Balwyn appeal was dismissed. The Boronia matters, including a separate claim brought by VXG Boronia against Philips, settled before hearing [11]-[22].
The later negligence claim was brought by VXG Dandenong, VXG Boronia and White. VXG Balwyn was in liquidation, but its liquidator assigned its claim against Malouf to White [23]. The claim was confined to legal costs, including costs paid to Malouf or payable under costs orders in the Philips litigation [24].
At trial, the parties framed the main negligence questions narrowly. They asked whether a careful solicitor would have concluded, before filing specified documents, that the defences or separate Boronia claim were “hopeless and doomed to fail”, or that the proposed Balwyn appeal had no “arguable basis” [29]-[38]. The primary judge found no breach of duty, gave judgment for Malouf and ordered the plaintiffs to pay his costs. The order also gave liberty to apply on three days’ notice to seek a variation of the costs order [146].
The appellants later sought a costs hearing. The primary judge concluded that their application was out of time under UCPR r 36.16. They then appealed, arguing both that the negligence findings were wrong and that they had not received procedural fairness on costs. The Court of Appeal dismissed the appeal with costs [147]-[154], [162]-[164].
The Court emphasised that it was deciding the case the parties had actually run. The agreed issues were about what a careful solicitor would have concluded on material available at the time each document was filed. They were not general complaints that Malouf should have investigated more, warned that a case was risky, or advised that available information was not yet sufficient to support a pleading [31]-[38], [51], [58].
That distinction set a high threshold. The Court explained that “hopeless and doomed to fail” meant that, on the information then available, there was “no realistic possibility” of success [33]. In the Court’s view, the fact that a defence later failed did not answer the question of what a solicitor should reasonably have concluded earlier. The relevant point was the filing date, assessed on the then available material, not the eventual outcome after evidence had been tested at trial [74], [119]-[124].
For Balwyn, the appellants relied on cl 18 of the service agreement, which said that variations would not bind unless in writing and signed by an authorised Philips representative and the customer [52]. The Court accepted that the clause was important context, but it did not necessarily prevent an oral variation under Australian law. The primary judge’s conclusion that such a clause would not necessarily bar an agreed oral variation was not challenged by reference to contrary authority [53]-[55].
The Court also considered the instructions gathered before the Balwyn defence was filed. The solicitors sought particulars of the alleged oral variation, requested details of the conversations, and received further material about discussions with Philips personnel, invoices and related correspondence [67]-[72]. On that record, a reasonable solicitor was not required to decide that the defence was hopeless. The Court expressly distinguished that conclusion from whether there might have been enough information to certify or file the pleading, an issue that was not the agreed question on appeal [74].
The Balwyn appeal issue was also tied to timing. When the notice of intention to appeal was filed, Malouf was awaiting counsel’s considered advice. Counsel had recommended filing the notice promptly to preserve time for deciding whether to proceed with a formal appeal. The notice itself did not commence the appeal and did not require grounds [81]-[87]. The later concession by appellate counsel that critical factual findings were open to the trial judge was made after a full opportunity to analyse and argue the appeal. It did not establish what a solicitor should have concluded when the earlier notice was filed [78]-[87].
In Dandenong, the Court considered the evolving instructions and evidence. The solicitors raised gaps in the account of the alleged agreement, asked for further detail, and received additional instructions about the meeting and the proposed lower-cost service arrangement [101]-[109]. A barrister’s assessment that there was an arguable case, though not a prediction of success, was relevant to the evaluative question whether a careful solicitor should have regarded the defence as doomed [110]-[113]. The second application to set aside default judgment succeeded, and that was also relevant to the assessment, though not conclusive [120]-[123]. The later trial judge’s rejection of White’s evidence did not prove that the defence had been hopeless at the earlier filing date [119]-[124].
The Court rejected the claim that the Boronia defence was inevitably defeated by the agreement’s payment clause. It considered it “fairly arguable” that payment for selected services was due only to the extent those services were actually provided, and that the agreement did not give Philips a third option of continuing to invoice for services it had stopped providing [127]-[134]. For the separate Boronia proceedings, the pleaded lost-profit claim was not necessarily barred by the limitation clause. The solicitors had counsel’s advice that the clause did not preclude a misleading-conduct claim, and the Court referred to authority supporting the proposition that a contractual term does not, by itself, bar such a claim [140]-[142].
The costs issue turned on the interaction between the wording of the primary judge’s order and UCPR r 36.16. The liberty-to-apply wording did not create an indefinite period to seek variation. The rule required a notice of motion within 14 days for the relevant procedure, and the Court noted that the appellants had not filed one or asserted sufficient informal notice within that period [148]-[154].
Finally, the Court rejected the procedural fairness complaint. The appellants had referred during the trial to likely costs submissions, but had not specifically asked the judge to defer making the costs order. They did not identify any costs submission they had been prevented from making before judgment was reserved, nor any conduct by the judge that reasonably led them to believe costs would be dealt with later [156]-[161].
The judgment is primarily an application of existing rules to a closely defined negligence case and a procedural time limit. It does not purport to change the general law of solicitors’ negligence. Its central contribution is to show how the precise formulation of the alleged breach determines the question the court must answer.
Here, the claim was not simply that Malouf should have warned that the litigation was risky or sought further instructions. The agreed question was whether reasonable care required him to advise, before filing, that the cases were hopeless. The Court treated those as materially different allegations, with different implications for the assessment of breach and for the counterfactual causation case [32]-[42]. That distinction should be kept in view when reading the judgment: it does not decide every possible claim that could arise from failing to investigate, advise, or certify a pleading.
The Court applied the Civil Liability Act 2002 (NSW), including ss 5A and 5B. It recorded that the foreseeable risk of harm from unmeritorious litigation included incurring legal costs and liability for the other side’s costs, and that this risk was reasonably foreseeable and not insignificant [28]-[29]. The contested question was which precautions a reasonable solicitor should have taken, given the particular agreed allegation.
On contractual variation, the Court did not treat a written-variation clause as an absolute rule that made oral variation legally impossible. It noted that the primary judge had considered the authorities and concluded that a clause like cl 18 could have significant evidentiary and contextual weight without necessarily barring an oral variation [52]-[55]. The Court also discussed the terms of the Boronia service agreement, but did so to assess whether a careful solicitor had to regard the proposed defence as hopeless, not to finally resolve the underlying contractual dispute [127]-[134].
On costs procedure, the judgment applies UCPR r 36.16. The Court relied on the 14-day period in r 36.16(3A), alongside the rule’s restriction on extending that period, and held that a general liberty-to-apply order did not displace those requirements [148]-[154]. Its discussion of ordinary costs practice also makes clear that a party seeking a separate costs hearing should not assume that an indication of future costs argument is equivalent to a request to defer the decision [156]-[161].
The judgment’s discussion of appeal notices also applies UCPR r 51.9(3). A notice of intention to appeal does not itself commence appeal proceedings and does not require grounds. That procedural character mattered to the assessment of whether filing it while counsel’s advice was pending was negligent [87].
At [33], McHugh JA says that a “hopeless and doomed to fail” case is one with “no realistic possibility” of success on the information then available. In plain English, the appellants had to establish more than that a case looked weak, uncertain or difficult. The alleged duty was to recognise that success was not realistically possible before filing.
At [38], the reasons explain why the issue involved more than asking whether the file already contained enough information. The agreed allegation necessarily assumed that the existing instructions showed both that the case was insufficiently founded and that there was no reasonable prospect of obtaining further supporting material. The practical point is that “more information is needed” and “the case is doomed” are not interchangeable conclusions.
At [74], the Court says that the instructions and corroborative material for Balwyn meant the answer to the agreed question was no. This is an application of the threshold to the particular file, not a rule that detailed instructions always make a defence viable.
At [87], the Court rejects negligence in filing the notice of intention to appeal while counsel’s advice was pending. The notice preserved time to assess whether to appeal; it did not itself launch the appeal. The Court’s reasoning turns on both the limited function of that notice and counsel’s recommendation to file it.
At [113], the Court explains that whether a case is doomed involves an evaluative assessment and that a solicitor may take account of considered opinions from other lawyers, especially counsel briefed in the matter. That does not make counsel’s view conclusive. The point is that the professional assessment need not be conducted as if the solicitor were the only legal adviser involved.
At [153], the Court says that liberty to apply did not remove the need to file a notice of motion under r 36.16. In plain English, the order’s wording did not create a separate, open-ended route around the rule’s deadline.
At [156] and [161], the Court explains why the costs process was fair in this case. Costs are ordinarily dealt with alongside the substantive orders unless a party specifically requests a deferral. The appellants had not made that request and had not identified a submission they were prevented from making before judgment was reserved.
The reasoning is most directly relevant to professional-negligence claims where the alleged breach is framed as a failure to advise, before filing a pleading or other court document, that the client’s case is hopeless. The judgment shows that the timing and wording of the alleged breach matter. A case pleaded as “the solicitor should have advised that the claim was doomed on the material then available” is different from a case alleging inadequate investigation, failure to seek further instructions, or failure to warn of significant risk [31]-[42].
It is also relevant where the underlying case involved oral variation of a written agreement containing a written-variation clause. The Court’s reasoning indicates that the existence of such a clause may be significant, but does not necessarily mean an oral variation is legally impossible or that any defence relying on one must be hopeless [52]-[55].
The reasoning may be relevant where a lawyer is deciding whether to file a notice of intention to appeal while awaiting counsel’s opinion, especially where the notice does not commence the appeal and is intended to preserve time for further consideration [81]-[89]. The judgment does not establish that such a filing is always appropriate. It addresses the particular facts, including the advice received and the procedural effect of the notice.
For costs procedure, the case concerns a party who receives a costs order containing liberty to apply, but does not act within the period specified by r 36.16(3A). It also concerns a party who mentions that costs argument may occur without specifically asking the court to defer the costs order [153]-[160].
The judgment is not a finding about what a reasonable solicitor must advise in every commercially weak case, nor does it establish that later loss is irrelevant. Rather, it insists that the alleged breach must be assessed at the identified time and against the precise standard the parties put in issue [33]-[38], [51].
The judgment was delivered on 9 February 2026. The text provided contains no later judicial decisions discussing how subsequent courts have treated it. It would therefore be unsafe, on this source alone, to say whether it has been followed, distinguished, or otherwise applied after delivery.
The judgment itself discusses earlier authorities, which help explain the reasoning but are not subsequent treatment of this decision. It refers to Attwells v Jackson Lalic Lawyers Pty Ltd in connection with advocates’ immunity and advice about proceedings that are doomed to fail [31]. It applies Boateng v Dharamdas to the effect of a liberty-to-apply order on an application to vary a costs order [153]. It also refers to Stoltenberg v Bolton; Loder v Bolton and Medical Council of New South Wales v Mooney about the importance of concise and precise appeal grounds [45]-[48].
For contractual claims, it discusses White v Philips Electronics Australia Ltd t/as Philips Healthcare in relation to the written-variation clause [53]-[55], and refers to Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd in considering whether a contractual term necessarily bars a misleading-conduct claim [141]. These are authorities considered by the Court in this appeal, rather than later decisions applying this judgment.
The Court’s conclusions are tied to the agreed issues and the record before it. The judgment does not decide what the outcome would have been if the negligence case had instead alleged that Malouf failed to obtain further instructions, failed to warn that the material was not yet sufficient to support a pleading, or failed to take some other specified precaution. McHugh JA expressly distinguished those possibilities from the question the parties had agreed for trial [35]-[42], [51].
Nor did the Court decide the appellants’ grounds concerning quantum. Because it found no breach of duty, it was unnecessary to determine those grounds. It commented that the primary judge’s treatment of costs paid by third parties did not obviously disclose error, but expressly left the issue undecided [143]-[145].
The judgment also does not finally decide whether Philips’ contractual terms entitled it to payment in every disputed circumstance. The Boronia analysis was whether the proposed defence was so clearly hopeless that reasonable care required Malouf to say so before filing. The Court found an alternative construction of cl 6 fairly arguable; it did not adjudicate all underlying contractual rights between Philips and VXG Boronia [130]-[134].
Finally, the judgment provides no information about post-decision treatment by later courts. Any assessment of its subsequent precedential influence would require sources beyond the judgment provided here.
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on or relying on this analysis, have a qualified Australian lawyer check it.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Victorian Xray Group (Dandenong) Pty Ltd v Anthony Mark Malouf t/as Malouf Solicitors [2026] NSWCA 5
Hearing dates: 15 August 2025
Date of orders: 9 February 2026
Decision date: 09 February 2026
Before: Stern JA at [1];
McHugh JA at [2];
Free JA at [164]
Decision: Appeal dismissed with costs.
Catchwords: NEGLIGENCE — Professional negligence — Solicitors — Breach of duty — Whether solicitor should have advised proceedings were hopeless and doomed to fail — Whether solicitor should have advised appeal lacked any arguable basis
CIVIL PROCEDURE — Effect of grant of “liberty to apply” with respect to costs order — Uniform Civil Procedure Rules 2005 (NSW), r 36.16 — Time limit for application to vary final order — Procedural fairness — Whether primary judge ought to have reserved the question of costs
Legislation Cited: Civil Liability Act 2002 (NSW), ss 5A, 5B
Civil Procedure Act 2005 (NSW), s 56
Legal Profession Uniform Law Application Act 2014 (NSW), sch 2
Uniform Civil Procedure Rules 2005 (NSW), rr 36.16, 51.9, 51.18
Cases Cited: Attwells v Jackson Lalic Lawyers Pty Ltd (2016) 259 CLR 1; [2016] HCA 16
Boateng v Dharamdas [2019] NSWCA 233
Gokani v Visvalingam Pty Ltd [2023] NSWCA 80
Medical Council of New South Wales v Mooney [2024] NSWCA 180
Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd (as trustee for the Baker Family Trust) (2005) 220 ALR 211; [2005] FCAFC 131
Stoltenberg v Bolton; Loder v Bolton [2020] NSWCA 45; (2020) 380 ALR 145
Victorian Xray Group (Dandenong) Pty Ltd v Malouf t/a Malouf Solicitors (No 4) [2025] NSWSC 353
Victorian Xray Group (Dandenong) Pty Ltd v Malouf t/a Malouf Solicitors (No. 5) [2025] NSWSC 506
Victorian X-Ray Group Pty Ltd v Malouf t/a Malouf Solicitors (No 3) [2024] NSWSC 888
White v Philips Electronics Australia Ltd t/as Philips Healthcare [2019] NSWCA 115
Category: Principal judgment
Parties: Victorian Xray Group (Dandenong) Pty Ltd (First appellant)
Victorian Xray Group (Boronia) Pty Ltd (Second appellant)
Bevyn Thomas White (Third appellant)
Anthony Mark Malouf t/as Malouf Solicitors (Respondent)
Representation: Counsel:
M E Luitingh (Appellants)
A Avery-Williams; J Norton (Respondent)
Solicitors:
Jane Button & Associates Pty Ltd (Appellants)
Sparke Helmore Lawyers (Respondent)
File Number(s): 2024/302485
Publication restriction: Nil.
[This headnote is not to be read as part of the judgment]
Victorian Xray Group (Dandenong) Pty Ltd (VXG Dandenong), Victorian Xray Group (Boronia) Pty Ltd (VXG Boronia) and Victorian Xray Group (Balwyn) Pty Ltd (VXG Balwyn) operated medical imaging businesses in Victoria. Mr Bevyn White was a director of each company. Philips Electronics Australia Limited t/as Philips Healthcare (Philips) serviced the medical imaging equipment for those businesses pursuant to a Service Agreement with each individual company.
After each of the companies fell behind in payments they were required to make in accordance with the Service Agreements, Philips terminated those Agreements. Philips then commenced separate proceedings against each of the companies in the District Court. Mr White and another director of the companies, who were guarantors, were joined as defendants. The companies and Mr White were represented in the proceedings by the respondent, Mr Anthony Mark Malouf, solicitor.
In early 2017, the respondent certified and filed defences for the companies and Mr White in each of the District Court proceedings. The defences in the VXG Dandenong and VXG Balwyn proceedings both failed at trial.
On 30 August 2017, the respondent filed on behalf of Mr White a notice of intention to appeal from the District Court’s decision in the VXG Balwyn proceedings. This was followed by a notice of appeal filed on 5 November 2018 and an amended notice of appeal filed on 10 January 2019. On 17 May 2019, the Court of Appeal dismissed the appeal.
On 14 November 2017, the respondent certified and filed a statement of claim on behalf of VXG Boronia that commenced separate proceedings against Philips in the District Court. Both sets of proceedings involving VXG Boronia were settled before hearing.
The appellants, VXG Dandenong, VXG Boronia and Mr White (to whom VXG Balwyn’s liquidator had assigned the whole of VXG Balwyn’s right, title and interest in its chose in action against Mr Malouf), brought a claim alleging that the respondent was negligent when acting for the companies and Mr White in the proceedings with Philips. The primary judge found that the respondent had not breached his duty of care. His Honour gave judgment for the respondent and ordered that the appellants pay the respondent’s costs. His Honour also granted liberty to apply on 3 days’ notice should either party seek a variation of the costs order.
On 11 December 2024, the appellants requested that the matter be relisted for argument as to costs. In a judgment given on 14 April 2025, the primary judge held that, in light of r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW), the appellants were out of time to make the application.
In light of the way in which the parties had formulated the issues at trial, the main issues on appeal were as follows.
(i) On the material available to him, did the discharge of the respondent’s duty of care as a solicitor require him to advise the appellants, at the time he filed on their behalf defences to the three claims, the separate statement of claim, and the notice of intention to appeal, that the defences and the claim were each “hopeless and doomed to fail”, and that the appeal lacked any “arguable basis”?
(ii) Did the primary judge deny the appellants procedural fairness in making a costs order without hearing from them separately on that issue?
The Court (McHugh JA, Stern and Free JJA agreeing) held, dismissing the appeal:
As to issue (i)
(1) On the material available to the respondent at the time he filed the relevant pleadings for VXG Balwyn, VXG Dandenong and VXG Boronia, a solicitor exercising reasonable care would not have concluded that the defences or proceedings were doomed to fail: [74], [124], [129]-[134], [142].
(2) There was no negligence in the respondent’s having failed to conclude at the time he filed the notice of intention to appeal in the proceedings involving VXG Balwyn that the appeal lacked any arguable basis: [87].
As to issue (ii)
(3) The order granting liberty to apply did not obviate the need for the appellants to file a notice of motion in accordance with r 36.16. The appellants did not file any notice of motion within the 14 days for which r 36.16(3A) provides, nor did they suggest that they gave informal notice within the 14 days to satisfy the substance of that requirement: [153]-[154].
Boateng v Dharamdas [2019] NSWCA 233, cited.
(4) The primary judge did not deny the appellants procedural fairness. The appellants did not point to any specific request for the court to defer making an order for costs. Nor, before his Honour reserved judgment, did the primary judge do anything to lead the appellants to think either (1) that it was not open to them to make submissions on costs before his Honour reserved or (2) that they would be given an opportunity to make submissions as to costs after his Honour gave a principal judgment: [156]-[161].
STERN JA: I agree with the orders proposed by McHugh JA and with his Honour’s reasons for proposing those orders.
McHUGH JA: Notwithstanding the 32 numbered grounds in the amended notice of appeal, the two central questions on which the disposition of this matter turns are as follows.
On the material available to him, did the discharge of the respondent’s duty of care as a solicitor require him to advise the appellants, at the time he filed on their behalf defences to three claims, a separate statement of claim, and a notice of intention to appeal, that the defences and the claim were each “hopeless and doomed to fail”, and that the appeal lacked any “arguable basis”?
Did the primary judge deny the appellants procedural fairness in making a costs order without hearing from them separately on that issue?
The answer to each question is no. The appeal should be dismissed with costs.
The first appellant in this Court (VXG Dandenong), the second appellant (VXG Boronia) and a third company (VXG Balwyn) operated medical imaging businesses in Victoria. The third appellant, Mr White, was a director of each company. Philips Electronics Australia Limited t/as Philips Healthcare (Philips) serviced the medical imaging equipment at the premises of those businesses pursuant to written Service Agreements with each individual company.
The terms of the Service Agreements were highly favourable to Philips. Each of the three companies fell behind in payments they were required to make in accordance with the Service Agreements. On 8 September 2016, Philips terminated the Service Agreements it held with all three companies for non-payment of invoices. Eventually Philips commenced proceedings in the District Court separately against each of the three VXG companies. Both Mr White and another director, Mr Richard Mensink, who were guarantors, were joined as defendants.
It was common ground in the proceedings before Cavanagh J that the cases had been defended in the District Court on the basis that the terms of the Service Agreements governed Philips’ entitlements to recover the debts for which it sued, save to the extent that it was asserted in answer to Philips’ claims that the Service Agreements had been varied or no longer applied. It was also asserted that certain services had not been provided in accordance with the terms of the relevant Service Agreement. The ways in which these issues arose in the various underlying District Court proceedings and in an appeal to this Court, and the disposition of those proceedings, are addressed in further detail below.
The respondent in this Court, Mr Anthony Mark Malouf, is a solicitor of many years experience, practising in commercial law and civil litigation. After practising in partnership with his brother, Mr Gerard Malouf, for a period, Mr Malouf operated between 1993 and 2022 as a sole practitioner, although employing a number of solicitors.
By referral from the VXG companies’ Melbourne solicitor (Mr Webb), Mr Malouf came to act on behalf of all three companies and Mr White in relation to the proceedings brought in the District Court (although the dates on which he came to act differed in the three matters.) Mr Malouf ceased to act on 12 August 2019.
Mr Warren Staples, a senior and experienced solicitor employed by Mr Malouf, had carriage of the VXG matters. Day-to-day instructions were mainly provided on behalf of the VXG companies by Mr Robert Vandermeer, who reported to Mr White. Mr White, who was the decision-maker, also provided instructions to the lawyers.
Philips commenced the Balwyn proceedings in the District Court on 30 September 2016 against VXG Balwyn, Mr White and Mr Mensink. VXG Balwyn filed a defence on 13 January 2017, in part adopted by Mr White, which pleaded:
that the relevant Service Agreement was varied in early April 2014 to provide that some of the invoices issued by Philips would be cancelled and reissued on a lower cost basis and that further invoices would be issued on the same basis; and
that the relevant Service Agreement was varied on 19 November 2014 to provide that from December 2014, Philips would not issue further invoices or charge for further services under the Service Agreement.
Importantly, these defences were advanced on the basis of an oral, rather than any written, agreement varying the Service Agreement. That was so notwithstanding cl 18 of the standard terms of the Service Agreements, to which these reasons will return below, which provided: “No additional terms, conditions, consent, waiver, alteration or modification will be binding unless in writing and signed by Philips’ authorised representative and Customer.” VXG Balwyn gave particulars of the oral agreement identifying telephone conversations between Mr White and Mr Tomek of Philips in April 2014, and a meeting between Mr White and Mr Damen of Philips in November 2014. The meeting with Mr Damen is one of the focuses of the present appeal.
These defences failed. Olsson SC DCJ gave judgment for Philips for $192,426.88 plus interest and ordered costs in favour of Philips on an indemnity basis. Her Honour did not accept Mr White’s evidence about the alleged oral agreement struck in the meeting with Mr Damen. Her Honour considered Mr White’s affidavit evidence inconsistent with his oral evidence to the effect that Philips had agreed to cancel the Service Agreement itself, as opposed to cancelling the invoices.
Mr White filed a Notice of Intention to Appeal (which did not state grounds of appeal) from her Honour’s judgment, followed on 5 November 2018 by a Notice of Appeal and on 10 January 2019 by an amended Notice of Appeal (which did state grounds of appeal). On 17 May 2019, this Court dismissed the appeal with indemnity costs.
Philips commenced the Dandenong proceedings against VXG Dandenong, Mr White and Mr Mensink in the District Court on 30 September 2016.
Philips obtained default judgment on 23 December 2016. A first application to set aside the default judgment was heard on 17 February 2017. That application failed. There was then a second application to set aside the default judgment on 24 March 2017, which succeeded. It will be necessary to say something more below about those applications.
VXG Dandenong filed a defence on 31 March 2017, which pleaded:
(referring to the meeting between Mr White and Mr Damen) that on 19 November 2014 Philips entered into an agreement (called the “termination agreement”) whereby it agreed to terminate the Service Agreement and enter into a new agreement; and
that Philips was estopped from relying on the terms and conditions of the Service Agreement.
On 4 April 2017 VXG Dandenong filed a cross-claim and on 1 May 2017, Mr White filed his defence.
On 6 December 2017, Gibb DCJ gave judgment in favour of Philips in the sum of $85,940.49 plus interest and costs. Her Honour preferred the evidence of Mr Damen to that of Mr White, whom she described as imprecise and loose with words.
Philips commenced the Boronia proceedings in the District Court on 23 December 2016. VXG Boronia filed a defence on 31 January 2017, partly adopted by Mr White on 2 November 2017, which pleaded that Philips had not provided the services required by the Service Agreement.
VXG Boronia brought its own claim against Philips on 14 November 2017 (referred to below as the Separate Boronia proceedings). VXG Boronia brought claims in contract, negligence and misleading or deceptive conduct seeking damages for loss of profit on the basis that Philips had failed to provide proper servicing in accordance with the Service Agreement.
Both sets of Boronia proceedings were settled before hearing. That occurred after VXG Balwyn, VXG Dandenong and Mr White had lost the other proceedings determined in the District Court and were ordered to pay the amounts owing to Philips, plus interest and costs.
VXG Balwyn went into liquidation on 11 August 2017. It was not a plaintiff in the proceeding before Cavanagh J. Instead, on 16 December 2020 its liquidator assigned to Mr White the whole of VXG Balwyn’s right, title and interest in its chose in action against Mr Malouf. No issue was taken with the assignment or with Mr White’s entitlement to pursue the cause of action.
In the proceeding before Cavanagh J, the appellants’ claim for damages was confined to recovery of legal costs paid, either to the respondent or pursuant to the costs orders made against the appellants in the District Court and in this Court. Mr White’s case was that he was the sole director of each of the VXG companies, the owner of at least 50% of the issued share capital in each of those companies, and jointly liable with the VXG companies for legal fees and disbursements charged by Mr Malouf.
The primary judge said the following about Mr White at J[88]-[90]:
“There can be no doubt that Mr White had a strong view about how things should be done, why things were not working out the way he wanted and whose responsibility that was. His emails are replete with expressions such as ‘weakness’ and the other solicitors ‘getting the better’ of them and of his legal representatives not having regard to what he was saying. He was not accepting of some of the advice he was given, seemingly believing that, if he could ‘toughen up’ his lawyers, a better outcome might be achieved.
I have a firm view that he believed that the litigation process could be used to extract a better commercial result from Philips and that he blamed the lawyers for being unable to convince Philips to provide that better commercial result. Of course, commercial settlement often occurs and there is nothing inconsistent with a person pursuing a defence whilst at the same time seeking to reduce the risk of an adverse result by pursuing settlement.
At least during the course of the District Court litigation, pessimistic advice from the firm or from counsel was greeted with criticism of those who provided it and a disinclination to pay the legal fees. This must be so because it is apparent from the invoices sent by the firm that the fees were not being paid as and when they were due. Rather, Mr White decided that he would pay an amount that he determined each month, thereby resulting in a build-up of significant unpaid legal fees during the course of the litigation.”
Mr Malouf did not dispute that by reason of his retainer, and the nature and circumstances of the services required of him, he owed each of the VXG companies and Mr White an obligation in contract (and a duty of care in tort of similar scope and nature):
to exercise reasonable care, skill and diligence in the provision of services pursuant to the retainer; and
to supervise and ensure that all his employees exercise reasonable care, skill and diligence in the provision of services pursuant to the retainer.
Instead, the focus of the dispute, both before Cavanagh J and in this Court, was breach. It is necessary to pay attention to the case the appellants ran at first instance, and in particular to the precise scope of the breaches alleged.
The Civil Liability Act 2002 (NSW) applied in this case because the claim was brought in tort and contract for damages for harm resulting from negligence: s 5A(1). As to the matters identified in s 5B(1)(a) and (b), there was no complaint about the primary judge’s statement at J[82]: “It could not be in dispute that the risk of harm in embarking upon unmeritorious proceedings would be the risk of incurring costs and the obligation to pay the other party’s costs. Such a risk was reasonably foreseeable and not insignificant.”
The position was less straightforward with respect to the alleged breaches of Mr Malouf’s duty of care (in the language of s 5B(1)(c), the precautions against the risk of harm which Mr Malouf failed to take but which a reasonable person in his position would have taken). The primary judge explained at J[42]-[46] that a question had arisen out of the appellants’ opening at trial about the scope of the appellants’ case as to negligence, in light of particulars that had been provided earlier. His Honour records at J[47]:
“As such, the case was conducted on the basis of a statement of agreed issues, which is as follows.
(1) Whether a solicitor exercising reasonable care would have concluded that the defences in the Balwyn, Dandenong and Boronia proceedings were hopeless and doomed to fail prior to the date those defences were filed.
(2) Whether a solicitor exercising reasonable care would have concluded that the Separate Boronia proceedings were hopeless and doomed to fail prior to the filing of that claim on 14 November 2017 or within a few days of receipt of the defence on 22 December 2017.
(3) Whether a solicitor exercising reasonable care would have concluded that the Balwyn Appeal proceedings were hopeless and doomed to fail prior to the filing of the Notice of Intention to Appeal on 30 August 2018.
(4) If the answer to any of 1, 2 and/or 3 is yes, whether the defendant breached his duty of care by:
(a) failing to advise the plaintiffs that the defence in the Balwyn proceedings was hopeless and doomed to fail prior to the filing of the defence in that proceeding on 13 January 2017;
(b) failing to advise the plaintiffs that the defence (filed on 31 March 2017) and the cross-claim in the Dandenong proceedings (filed on 1 May 2017) were hopeless and doomed to fail prior to the filing of those pleadings; [Note: the relevant date for Dandenong appears in fact to be 4 April 2017.]
(c) failing to advise the plaintiffs that the defence in the Boronia proceedings was hopeless and doomed to fail prior to the filing of that defence on 31 January 2017;
(d) failing to advise the plaintiffs that the Separate Boronia proceedings were hopeless and doomed to fail prior to the filing of that claim on 14 November 2017 or within a few days of receipt of the defence on 22 December 2017; and
(e) failing to advise that there was no arguable basis for an appeal prior to the filing of the Notice of Intention to Appeal in the Balwyn proceedings on 30 August 2018.”
In light of those agreed issues, several matters should be observed at this point.
First, the statement of agreed issues was highly specific as to the dates by which the negligence was said to have occurred: prior to filing the various pleadings and the notice of intention to appeal (not, it should be noted, the substantive notice of appeal). This had been the subject of discussion before the primary judge: see particularly at J[42] and J[44]. The alleged negligence was a failure to advise that each defence or claim in the underlying District Court proceedings was “doomed to fail”, and that there was “no arguable basis for an appeal”. It might be noted that, as the primary judge suggested at J[7], the timing of that alleged negligence as prior to filing would appear to put the claim beyond the protection of any lawyer’s immunity, which “does not extend to acts or advice … which do not move litigation towards a determination by a court”: Attwells v Jackson Lalic Lawyers Pty Ltd (2016) 259 CLR 1; [2016] HCA 16 at [38] per French CJ, Kiefel, Bell, Gageler and Keane JJ. Thus, as was said in Attwells at [50]:
“The insufficiency of a mere historical connection between an advocate’s work and a litigious event may be illustrated by reference to negligent advice to commence proceedings which are doomed to fail. No one suggests that the immunity is available in such a case. Likewise, advice to cease litigating or to continue litigating does not itself affect the judicial determination of a case.”
Emphasis supplied.
Secondly, the language used in the statement of agreed issues set a very strict standard, both as to what a solicitor exercising reasonable care would have concluded, and as to the five breaches allegedly constituted by a failure to advise:
“hopeless and doomed to fail”: pars (1) to (3) and subpars (4)(a) to (d); and
“no arguable basis”: subpar (4)(e).
In the context of an allegation of a failure to advise, to describe a defence or a claim as “hopeless and doomed to fail” is to say that in light of the available information, there is no realistic possibility that the defence or claim could succeed. A defence which is “hopeless and doomed to fail” or “unarguable” may be contrasted with one which is “available”.
Thirdly, the premise underlying the statement of agreed issues was that Mr Malouf should have given such advice (that the three defences, the Dandenong cross-claim and the Separate Boronia proceedings were all doomed to fail and that there was no arguable basis for the Balwyn appeal) on the basis of the material that was in fact before him when each of the relevant court documents was in fact filed. The case is to be approached on that basis, not on the basis of what material might have been provided to Mr Malouf if he had sought additional instructions.
Fourthly, and following from the first three points, it is important to be clear about what was not alleged as to negligence in the statement of agreed issues. As to each of the underlying proceedings, the breach alleged against Mr Malouf was a failure to conclude and to advise, before the relevant court document was filed, that the defence or claim was hopeless and doomed to fail or that there was no arguable basis for it.
That was not an allegation that Mr Malouf had failed to advise that the appellants’ prospects were poor or that the litigation was risky. At a number of points Mr Malouf gave advice to that effect, which Mr White and the companies did not embrace.
Nor was it an allegation that Mr Malouf was liable to the appellants for breaching a statutory duty not to certify the pleadings, etc., in light of the information available to him at the time when those documents were filed. No such allegation was made. Moreover, at least as to the three defences, it is doubtful whether there was any such obligation to certify, as the proceedings were for recovery of a debt, not damages: see Gokani v Visvalingam Pty Ltd [2023] NSWCA 80 at [29] per Basten AJA (Leeming JA and Griffiths AJA agreeing). And, as to the Balwyn appeal, there was no occasion for Mr Malouf to certify the notice of intention to appeal.
Similarly, the allegation in the statement of agreed issues was not that a solicitor exercising reasonable care would have formed the view, and advised, that the information which had been provided to Mr Malouf to date did not afford a sufficient basis to certify or file the various documents. Any such advice would be inherently provisional: the position might change if further information came to light. Instead, the allegation was that before the time at which Mr Malouf in fact filed each court document, a solicitor exercising reasonable care would have concluded and advised that the defence, claim or appeal was doomed to fail. That is necessarily an allegation that the instructions and evidentiary material that had already been provided to Mr Malouf before the time at which the relevant court document was filed were such as to require a solicitor exercising reasonable care to conclude not only that that material was itself insufficient to found an arguable defence or claim, but that there was no reasonable prospect that sufficient further material might be obtained.
“The importance of brevity and precision in formulating the grounds of appeal cannot be overstated. Prolixity is inconsistent with the just, quick and cheap resolution of the real issues in proceedings: Civil Procedure Act 2005 (NSW), s 56(1). It also obscures apparent merit: Tame v New South Wales (2002) 211 CLR 317; [2002] HCA 35 at [70] (McHugh J).”
The task of drafting the notice of appeal was made more difficult in this case by the fact that the appellants contend for findings of negligence arising in connection with several different underlying proceedings, as well as raising issues about quantum and costs. Even so, the amended notice of appeal does not comply with r 51.18(1)(e). As noted above, it contains 32 numbered grounds (one of which was not pressed). These occupy 11 pages. Many grounds involve sub-grounds, which raise complaints that are discrete as opposed to cumulative. Nor is the amended notice of appeal drafted having regard to the constraints flowing from the statement of issues agreed at trial, quoted above. For example, Ground 3(a) (one of several sub-grounds connected by the words “and/or”) complained that the primary judge ought to have found that Mr Malouf breached his duty of care by “not complying with the Appellants instruction to read and advise on prospects of success having regard to the Statement of Claim and the attached Service Agreement” in the Balwyn proceeding. In light of the specificity with which the breaches were identified in the statement of agreed issues, Ground 3(a) raises an issue outside the scope of the dispute below.
To echo Stoltenberg v B**olton at [54]: the form of the amended notice of appeal has made the Court’s task more difficult in ascertaining the real issues in dispute. Such a notice of appeal also makes the Court’s task more difficult in structuring reasons for judgment. It is notable in this respect that the appellants’ own written submissions on the appeal do not refer to the grounds of appeal at all.
In the circumstances it is appropriate to address the two central issues on the appeal (negligence and procedural fairness as to costs) by reference to the principal arguments advanced by the appellants at the hearing (and having regard to whether those arguments go beyond the issues agreed at trial), rather than paragraph-by-paragraph of the amended notice of appeal.
It should also be noted that there is no ground of appeal challenging the primary judge’s findings that there was no negligence in connection with the filing of either the defence in the Boronia proceedings or the Dandenong cross-claim.
STERN JA: … The nub of your case is that on the material that had been provided to Mr Malouf by the time the defences were filed, the only reasonable conclusion that a solicitor could've reached was that the defences were doomed to fail.
LUITINGH: Yes, your Honour.
STERN JA: That really is the nub of what you say, and you say the same, as I understand it, in relation to the time when the notice of intention to appeal was filed.
LUITINGH: Yes, your Honour. There are differences, but, your Honour, just to deal with your Honour's question, that is the nub of the case.
STERN JA: In support of that, the nub of the case, you rely on I think what you call the warning letter, which is 30 November.
LUITINGH: The warning letter is one such element.
STERN JA: And the oral instructions and written instructions as to what had occurred--
LUITINGH: Between October and 12 January. Correct, your Honour.
STERN JA: You say that we should approach those matters on the basis that all of the instructions seeks in that they're instructions as to factual matters. The solicitor is entitled to assume the client will be believed.
LUITINGH: Your Honour, there was not any part of this case in which anybody's integrity was challenged. This case went about what the solicitor was to do, and what he was not to do. We didn't introduce questions of credit, and it wasn't necessary for Mr Malouf to do that. What he ought to have done is he ought to have read the instructions that was provided to him, including all of the correspondence, and then made a call as to whether or not he had a defence, and he did that.
STERN JA: That's slightly different to what you just agreed with me or you told me was the nub of the case in response to my question, which is not what he did or didn't do, or what he believed or didn't believe. It's whether any reasonable solicitor would've concluded that the defence was hopeless.
LUITINGH: That's correct.
STERN JA: That's the nub of it.
LUITINGH: That is correct.
Tcpt, 15 August 2025, 13.50-14.45; see further at 24.40-48.
In light of the agreed statement of issues at trial, the real issues on the appeal are those bearing on the ultimate question identified in that exchange: whether a solicitor exercising reasonable care would have concluded that the various defences, etc, were hopeless at the time Mr Malouf filed them, based on the material then before him. The appellants’ acknowledgement that that was so focussed the issues for determination. For example, returning to Ground 3(a), the appellants’ written submissions had emphasised Mr Malouf’s failure personally to read the Service Agreements. That aspect of the appellants’ argument largely fell away at the hearing. Even putting to one side that there was no particular of negligence that Mr Malouf had failed to read the Service Agreements, it makes no difference whether it was Mr Malouf who read the Service Agreements (the primary judge found that he had not), or his employed solicitor Mr Staples who read the Service Agreements, or how long Mr Staples spent doing so (if indeed he did). Instead, in light of pars (1), (2) and (3) of the statement of agreed issues, the ultimate question is whether, on the material available to Mr Malouf at the time (which included the Service Agreements), a solicitor exercising reasonable care would have concluded that any of the Balwyn, Dandenong and Boronia defences, the Separate Boronia proceedings, or the Balwyn Appeal were hopeless and doomed to fail. As to par (4) of the statement of agreed issues, there was no dispute that if a solicitor exercising reasonable care had reached any such conclusion, reasonable care would have required the solicitor to advise the appellants of that conclusion.
The appellants’ basic argument as to why the Balwyn and Dandenong defences and the Balwyn appeal were hopeless was “the legal insufficiency of the evidence”, even taken at its highest, to establish an oral variation of the relevant Service Agreements. The argument started with cl 18 of the standard terms and conditions of the Service Agreements, which provided:
“18. ENTIRE AGREEMENT
This Agreement constitutes the entire understanding of the parties and supersedes all other agreements, written or oral, regarding its subject matter. No additional terms, conditions, consent, waiver, alteration or modification will be binding unless in writing and signed by Philips’ authori**zed representative and Customer. Additional or different terms and conditions, whether stated in a purchase order or other document issued by Customer, are specifically rejected and will not apply to the transactions contemplated by this Agreement. No prior proposals, statements, course of dealing, course of performance, usage of trade or industry standard will be part of this Agreement.”
Emphasis supplied.
“This all leads to the conclusion that whilst cl 18 of the Service Agreement would have a significant bearing on the Court’s assessment, particularly as to the parties’ intentions and the validity of any suggested variation or termination agreement, it would not necessarily operate as a bar to an agreed oral variation. ...”
At times, the appellants appeared to want to submit in this Court that the primary judge had erred in stating the law as he did: see, e.g., Tcpt, 15 August 2025, 9.49-10.19. If that is the submission, it should be rejected in light of the authorities to which the primary judge referred.
However, the appellants’ complaint was ultimately not as to his Honour’s statement of the principles, but instead concerned the conclusion the primary judge reached on the facts. In the context of this complaint, the importance of cl 18 is that its stringent terms provided the context in which the oral variation of the relevant Service Agreements was claimed to have taken place: such a variation could only be achieved by clear and specific words. The appellants argued that the instructions Mr Malouf had at the time the Dandenong and Balwyn defences and Balwyn appeal were filed were incapable of supporting an oral variation to the Service Agreements, and that that had been borne out when Olsson SC DCJ, Gibb DCJ, and the Court of Appeal gave judgment in favour of Philips. They submitted (Tcpt, 15 August 2025, 17.6-9): “if you want to plead a variation, a variation is in and of itself a contract, so you have to comply with the minimum requirements of establishing a contract. Mr White never came close to that.”
Importantly, the appellants made clear that their case was not merely that it was negligent of Mr Malouf to file the defences without first obtaining more detail of the conversations that were said to found the variation. The appellants accepted that it was necessary for them to establish that a reasonable solicitor would have concluded that the defence was hopeless and doomed to fail. The steps in the argument were as follows.
On the instructions Mr White had given Mr Malouf and Mr Staples, “there was no evidence to support the oral variation on provable facts”: Tcpt, 15 August 2025, 24.17-18.
That being so, it was incumbent upon a solicitor exercising reasonable care to obtain instructions as to precisely what had been said in the conversations relied on to found the variation before filing a defence making that allegation.
If Mr Malouf had sought those instructions, he would have realised that the defence was hopeless and given advice to that effect.
It should be noted at this stage that steps 2 and 3 above do not pay sufficient attention to the timing aspect of the alleged negligence identified in the statement of agreed issues. Moreover, the steps in the argument are themselves contestable and in light of the matters to which the respondent points, discussed below, the conclusion for which the appellants contend should be rejected.
At the hearing of the appeal, the respondent rejected the proposition that before the defences, etc, were filed it was necessary for the solicitor to obtain instructions as to the precise words that would be relied upon to sustain the variation of contract argument. The respondent submitted that in any event, the instructions he held (1) were sufficient to enable him to certify the defences, and (2) were such that a solicitor acting reasonably would not have advised that the defences were hopeless and bound to fail (as opposed to risky, which advice was given). It should be observed that, given the statement of agreed issues, it is only the second of those propositions which is in issue on the appeal. It should also be observed that while a solicitor who had reached the affirmative conclusion that a defence was doomed to fail could not properly certify the defence, the mere fact that a solicitor might have lacked sufficient information properly to certify a defence would not require a conclusion that the defence was bound to fail. There might simply be insufficient information either way.
In light of the statement of agreed issues, the relevant date here is 13 January 2017, when VXG Balwyn filed its defence. That defence was adopted in part by Mr White on 21 April 2017.
The appellants gave relatively little attention at the hearing of the appeal to the instructions given to the solicitors in relation to this proceeding. (As will be seen, however, the respondent traversed that material in detail.)
The appellants instead approached the question whether a solicitor exercising reasonable care would have concluded that the Balwyn defence was doomed to fail at a higher level of generality. They referred to the defence to the Balwyn proceedings filed on 13 January 2017, where it was alleged that there had been oral variations both in April 2014 and on 19 November 2014. As to the April variations, the defence alleged “that some of the invoices that had been issued by the Plaintiff prior to that date were to be cancelled and reissued on the basis of time and parts under a lower cost contract for work, support or maintenance actually performed, and that any invoices issued by the Plaintiff subsequently would only be issued on the same basis”. The particulars stated that the April variation was “made in phone conversations between [Mr] White for the Defendant and Simon Tomek for the Plaintiff”. The invoices were particularised by date and invoice number.
The appellants submitted that given that the variation was as to “time and parts, one would expect that there would be an inquiry as to what time, what parts, what cost. Those are the questions that weren’t asked.” Tcpt, 15 August 2025, 31.38-40. There are several difficulties with that submission. It is not enough to assert that “the questions … weren’t asked”. The appellants did not point to any finding or evidence to that effect. In any event, in order to establish the appellants’ case (negligence in failing to advise before the defence was filed that it was doomed to fail), it would be necessary to show not only that these were questions that a solicitor exercising reasonable care would necessarily have asked before filing a defence, but also that the answers to those questions, if asked, would have shown that the defence was doomed to fail. Neither proposition has been established. Indeed, it does not appear to have been necessary for a solicitor exercising reasonable care to obtain more detail for the purposes of filing the defence. For example, as to the prior invoices, the “time and parts” would be understood as referring to the services or goods supplied in the period the subject of the invoices which had been particularised. And the cost would be understood as referring either to Philips’ usual rates for time and cost or, if Philips had no usual rates of those matters, to reasonable rates. On either approach, the defence would not be, on that account alone, doomed to fail.
The appellants also relied on a letter dated 29 June 2016 which Philips’ Sales Director, Mr Mcdonald, had sent to Mr Vandermeer, responding to various matters raised in an earlier email sent by Mr Vandermeer.
The relevant date is 30 August 2018, when VXG Balwyn filed a notice of intention to appeal.
The appellants relied heavily on the following statement in the reasons for judgment of Bell P in the Balwyn appeal:
“… towards the end of his oral submissions, counsel for Mr White conceded that the critical findings reached by the primary judge were ‘open to her’. This concession, rightly made, was in my opinion all but fatal to the case sought to be brought on appeal.”
[2019] NSWCA 115 at [44], Basten and Gleeson JJA agreeing.
“… the appeal was defeated on a single question and that was not a question that required counsel's advice. It was not a question that required a complex assessment of the facts. … [T]he fact is that by the time the notice of intention to appeal had come around, the question of whether or not it was open to the judge should have been asked by the solicitor.”
Tcpt, 15 August 2025, 36.33-46.
The basic difficulty with this submission is that it is based on an answer given in argument on the appeal by counsel, Mr Woods, many months after the time at which the question with which the present appeal is concerned is to be determined. Counsel had had a full opportunity to consider the merits of the appeal. That opportunity included exposing the appellants’ arguments to the scrutiny of oral argument before Bell P and Basten and Gleeson JJA; it is notable that the concession was made “towards the end of his oral submissions”.
The situation facing the solicitor at the time, many months earlier, when the notice of intention to appeal was filed was very different. Mr Malouf, Mr White and Mr Vandermeer had attended a conference at the chambers of counsel, Mr Woods, on 30 July 2018. It is apparent from Mr Malouf’s letter to the client the following day that “[m]uch of the time spent was in discussion with regard preparation of an Appeal.” The letter referred to notes prepared the week before by Mr Vandermeer and stated, “As discussed, what can or cannot be put in the Appeal is largely governed by the evidence at the trial.” The letter also referred to the need to obtain a transcript of the proceedings at first instance and to the likely cost of doing so.
Mr Woods advised by email on 17 August 2018:
“1 I have received the transcript. I will review it next week and advise in respect of any grounds of appeal having regard to the memo prepared summarising the clients concerns, the evidence, the pleadings and my conference with Anthony, Bevyn White and Robert Vandermeer. By way of preliminary comment, even if appealable error can be shown in respect of her Honour’s consideration of the evidence of Mr White, Victoria X Ray (Boronia) will still have to deal with her Honour’s findings at [84] in respect of clause 18, where her Honour said that Clause 18 ‘makes it plain that the parties agreed that no variation or modification to the terms would be operative unless in writing and signed by an authorised representative of Philips. This did not occur. On the face of it, the defendants can not succeed’.
- Although in my view the time for filing is 28 days from 3 August, I suggest, as an abundance of caution, so as to avoid possible unnecessary argument, that a notice of intention to appeal be filed and served today being within 28 days of the day of her Honours 20 July 2018 Judgment.”
Emphasis in original.
It might be noted that the italicised words above, culminating in the reference to Olsson SC DCJ’s statement that on the face of it (i.e., in light of cl 18) the appellants could not succeed, was not the basis upon which the Balwyn appeal was determined. The Court of Appeal found it unnecessary to consider that issue because “the challenge to the central finding of fact fail[ed]”: at [41]-[42].
By letter dated 27 August 2018 to Mr White and Mr Vandermeer, Mr Malouf referred to having received Mr Woods’ preliminary advice that day. “He and we recommend that we lodge a Notice of Intention to Appeal without delay and on or before 31 August 2018 to give you additional time to lodge the final, formal Appeal and allows (3 months) further time to prepare the Appeal.” The letter further stated, “Harry Woods is currently finalising his consideration with regard the Appeal.”
The notice of intention to appeal was then filed on 30 August 2018, that is, in accordance with Mr Woods’ advice to do so and at a time at which Mr Woods’ advice on prospects (referred to below) had not yet been received.
Acknowledging that Mr Malouf had sought Mr Woods’ advice on prospects, the appellants nevertheless submitted:
“But we say that doesn't exonerate him from his duty to read this and to conclude[.] [A]ny reasonable solicitor in the circumstances, the first question they would ask themselves is, ‘Was that decision open to [Olsson DCJ]?’ If the answer to that is, ‘No’ then he shouldn't file a notice of intention to appeal.”
Tcpt, 15 August 2025, 39.23-26.
The appellants’ submission must be rejected. Mr Malouf was awaiting the advice of counsel. A solicitor exercising reasonable care was entitled to do so. What is more, counsel affirmatively recommended that the solicitor file a notice of intention to appeal without delay in order to protect the position. As the primary judge said at J[290], a notice of intention to appeal does not have the effect of commencing proceedings in the Court of Appeal: UCPR, r 51.9(3). Instead, it merely allows a party a further period to determine whether to file a notice of appeal. Importantly, it is not necessary to state any grounds of appeal in the notice of intention to appeal. In the circumstances, there was no negligence in Mr Malouf’s having failed to conclude at the time he filed the notice of intention to appeal that any appeal lacked any arguable basis.
Mr Woods’ memorandum of advice was not received until 5 September 2018, that is, after the relevant date. Mr Woods referred in detail to the transcript of the evidence at the hearing, and gave close consideration to whether there was error in her Honour’s reasons for not accepting Mr White’s version of events. However, Mr Woods also advised: “In my view, even if her Honour erred in her rejection of Mr White’s version of events, even at its highest, the evidence does not appear to give rise to a binding contract.” Mr Woods’ conclusions included the following:
“Although her Honour may have erred in her consideration of Mr White[’]s evidence … and whether there can be an oral variation in light of clause [18], Balwyn and Mr White[’]s version of events lack sufficient certainty to give rise to a further contract varying the Service Agreement;” and
“Although there are matters where it might be argued that her Honour has erred, I think it unlikely that an appeal would be successful”.
Even so, Mr Woods did not advise that there was no arguable basis for the appeal. It is also notable that Cavanagh J found that Mr Woods “thought the Balwyn appeal would be unlikely to succeed but he never formed the view that the Balwyn appeal was hopeless”: J[180].
The challenge to the primary judge’s finding with respect to the Balwyn Appeal is not made out.
Some of the appellant’s submissions made in the context of the Dandenong proceeding were also relevant to issues arising with respect to the other underlying proceedings. For example, Philips’ standard terms formed part of each Service Agreement, and some of the communications (in particular, between the VXG companies and Philips) involved more than one VXG company at the same time.
For its part, the respondent traced the history of the instructions in the Dandenong matter in a similar way to the exercise carried out in relation to Balwyn.
In light of the statement of agreed issues, the relevant dates with respect to the Dandenong proceeding itself are:
31 March 2017, when VXG Dandenong filed its defence; and
4 April 2017 when VXG Dandenong filed its cross-claim and 1 May 2017, when Mr White filed his defence.
At the hearing of the appeal the appellants relied on an email which Mr Vandermeer sent to Mr Staples, copied to Mr White, on 10 November 2016 which stated: “Dandenong — the Philips demand total of $85,940.49 is correct”. That email is ambiguous on its face: it might do no more than confirm the accuracy of the arithmetic, in that the $85,940.49 figure was “made up of … monthly invoices and the last invoice (invoice dated 10 May 16) for an odd amount of $3,257.22”; or the “correctness” to which it referred might be an instruction as to the existence of a liability. It appears to have been understood by Mr Malouf as the latter. In any event, the email at most represented the position as at the time it was sent, and was not directed to the matters ultimately run by way of defence.
The appellants rely on a file note recording advice given by telephone (apparently to Mr Vandermeer) on 20 December 2016 in relation to all three matters. With respect to Dandenong, the file note recorded the following: “They have given deadline of 23/12”; “We don’t have insts for a defence so nothing has been done”; “What are your insts re their response”; and, later, “They can get judgment on Dandenong”.
The fact that no instructions had been taken supporting a defence at that stage says nothing about the position later, when the defence was ultimately filed. In particular, it says nothing about whether Mr Malouf should have advised at that later time that the defence he was about to file was hopeless and doomed to fail.
The respondent points to a letter from Mr Malouf to Mr Vandermeer and Mr White of 22 December 2016. The letter stated that the original instructions had been to the effect that the amount claimed by Philips was in fact owing and would be paid, and added: “As far as we are aware you have [not] informed us of any matter of defence.” The letter stated that Philips could seek default judgment from as soon as the following day. Mr Malouf expressed his concern that if Philips obtained default judgment it could take steps to wind up the company. He said that if there were grounds for a defence such as a dispute as to the amounts claimed, those instructions should be given as soon as possible.
“I advised John of my discussion with Simon [Tomek] that we needed to change the contract at Balwyn as we only did 5 CT scans per week at the most and could not afford a Gold service contract. He agreed that there had been very little work done on the Balwyn CT and that the account would be stopped from when I contacted Simon on the day he left. He also agreed that there would be no further billing on Balwyn. This ceased the very next month.
I then discussed the Dandenong CT and advised that due to the numbers being so poor we couldn’t afford the Gold service contract and needed a cheaper alternative. John advised that there was a time and parts style contract and that he would arrange for Dandenong to go onto a lesser level of contract. I assumed that when Balwyn invoicing stopped the same would happen at Dandenong. When this didn’t happen we asked multiple times for John to contact me with little or no success.”
While the form of that account may not be ideal, it has the virtue of reflecting the way in which human beings actually tend to remember events. These were, in any event, sufficient instructions for solicitors to prepare a draft affidavit directed to establishing oral variations to the two Service Agreements. That circumstance is very far from showing that the defence was doomed to fail.
The appellants rely on part of a conversation Mr Staples had with Mr Fermanis, barrister, on 9 February 2017. The primary judge found at J[254] that Mr Fermanis had said that there was no defence in the Dandenong matter, as cl 18 of the Service Agreement required that amendments be in writing. But his Honour went on to find at J[255] that Mr Fermanis said further:
“[W]e might have to say Philips was estopped from relying on the terms of the agreement, there was a month-by-month agreement. I will need to amend the [draft] Defence. I might as well go all out. Either the Court will say you have a whiff of a defence and let the case run, or it won’t.”
Moreover, VXG Dandenong’s application to set aside the default judgment was heard on 28 February 2017. On 1 March 2017, Mr Fermanis, who had appeared for VXG Dandenong on the unsuccessful application, wrote a letter of advice addressed to Mr Staples. Mr Fermanis said that the Judicial Registrar had been satisfied with the explanation for the delay and that the pleading prepared on behalf of VXG Dandenong demonstrated an arguable case on the merits, but that he had dismissed the application due to a lack of evidence. The barrister said that he anticipated that Philips would serve a statutory demand. He then canvassed the clients’ options. One of these was to file another application to set aside the default judgment. Mr Fermanis advised that VXG Dandenong would need to lead evidence as to the events which took place on 19 November 2014.
Mr Fermanis also advised:
“On one view our client has an arguable case. This does not mean that our client will enjoy success at a final hearing. One of the difficulties in our client’s defence is that there is a lack of objective evidence that would tend to prove what took place at the meeting on 19 November 2014. Our client’s post representation behaviour may be contrary to the actions alleged in that meeting.”
The appellants submitted that the words, “[o]n one view our client has an arguable case” were no more than “an opinion of Mr [Fermanis]”, which “in and of itself is not a provable fact”: Tcpt, 15 August 2025, 27.36. There are two difficulties with this argument. The first is that the question arising on the statement of agreed issues is not whether there were provable facts; it is whether the solicitor should have advised that the proceedings were doomed to fail. The absence of the former would not establish the existence of the latter. The second difficulty follows from the first. It is that (at least in the context of determining whether a solicitor has exercised reasonable care in not giving certain advice), the question whether a claim or defence is doomed to fail involves an evaluative assessment. At least in that context, the solicitor must be entitled to take into account the considered opinions of other lawyers including, most obviously, counsel briefed in the matter.
The lawyers were instructed to file another application to set aside the default judgment.
On 8 March 2017, Mr Vandermeer and Mr White had a telephone conversation with Mr Staples. The file note records Mr White giving instructions: “Affidavit wrong. Didn’t terminate.” (We were informed in argument that the reference to an affidavit was to one prepared by Mr Damen which had been filed in relation to the application to set aside default judgment.) Mr White continued: “I then said due to numbers we need a lesser contract. Arrange for [Dandenong] to go on lesser level of service.” Mr Staples advised: “If contract still on foot there is no defence.” The file note records instructions: “Every single time we’ve varied contract over [the] years it’s been done face to face. Simon T (ex Philips) confirms.”
By letter dated 8 March 2017, Mr Malouf referred to the telephone conversation that morning and to Mr Vandermeer’s email of 19 January 2017 (which had included the “Transcript”), and enclosed a draft affidavit of Mr White addressing his 19 November 2014 meeting with Mr Damen. The letter gave strong advice about the difference between the variation and the termination of a contract, and stated: “If we do not argue that the original Contract had been terminated then the only other conclusion is that it must continue until the new Contract comes into existence. If that is the case there is no defence to the claim.” The letter explained that Mr Fermanis had drafted an amended defence to include an allegation of misrepresentation, to the effect that a new contract would be provided.
Mr White made an affidavit on 10 March 2017 in the Dandenong proceedings. The appellants submitted that it was clear from the affidavit that, even assuming the accuracy of Mr White’s account of the meeting, what was said at the meeting “did not result in a binding agreement”: Tcpt, 15 August 2025, 19.2-3. In particular, Mr White deposed that the 19 November discussion with Mr Damen had concluded on this issue with Mr Damen saying, “I agree that the current arrangements need to stop and a new level of cover put in place.” Counsel referred to Gibb DCJ having described that as no more than “an agreement to agree”: Tcpt, 15 August 2025, 27.13.
“The words asserted fall far short of sufficient to establish a contract.
…
Putting aside anything else, the words attributed to Mr Damen are short of an agreement constituting a contract. Taken at face value and at its highest Mr Damen agreed that something needed (my emphasis) to be done — without actually agreeing to doing anything in particular. There was no agreement as to time (when), or level/scope of service contract, or price in a contract where price is patently the essential item and a contract of service is required as a matter of law (as is discussed below).”
Specifically with respect to the Dandenong proceeding, there are two difficulties of timing with the appellants’ argument based on the 10 March 2017 affidavit. The time at which the alleged negligent failure (to advise that the defence was doomed to fail) occurred was the date of filing the defences. The first difficulty is that, as the appellants acknowledged, Gibb DCJ was analysing the state of the evidence at a later point in time, which was at trial. The second difficulty is that VXG Dandenong’s defence in the Dandenong proceeding was filed on 31 March 2017 (i.e., after the successful second application to set aside the default judgment). That is three weeks after the date of Mr White’s affidavit.
In the meantime, importantly, the second application to set aside the default judgment had succeeded on 24 March 2017. This was a matter to which the primary judge gave some emphasis at J[263]-[264], [267]. The application could only have succeeded on the basis that VXG Dandenong had shown by evidence on the application that it had an arguable defence on the merits. The appellants submitted in this Court that the Registrar’s decision to set aside the default judgment was no more than “an opinion, which quite frankly doesn’t affect the state of the evidence prior to the filing of the defence”: Tcpt, 15 August 2025, 28.34-5.
The difficulty with this argument is again that (at least in the context of determining whether a solicitor has exercised reasonable care in not giving certain advice), the question whether a claim or defence is doomed to fail involves an evaluative assessment. Depending on the state of Mr Malouf’s instructions, the proceedings might still be doomed to fail notwithstanding that the court had set aside the default judgment and permitted the matter to proceed based on Mr White’s affidavit of 10 March 2017. But the fact that the court had done so was certainly relevant to the consideration that a solicitor exercising reasonable care would give to the issue.
Moreover, even as at 10 March 2017, the solicitors had reason to think that there might well be more evidence available than what was set out in Mr White’s affidavit prepared for the purposes of the application to set aside the default judgment. The solicitors had been instructed that Mr White had handwritten notes of his meeting with Mr Damen, and they had been given the “Transcript”. At the hearing of the appeal, the Court was informed that there was no evidence showing that the 10 March affidavit represented the full extent of Mr White’s recollection of the meeting. The affidavit had been prepared for the particular application, and it appears in circumstances of some urgency, given that concern had been expressed that Philips would move to wind up VXG Dandenong based on the default judgment.
Mr White’s account in his 10 March 2017 affidavit was that Mr Damen said, “I agree that the current arrangements need to stop …” (emphasis supplied). The difficulty with that account was not that it was inconsistent with VXG Dandenong’s defence, but rather, as Gibb DCJ found, that it did not go far enough. There was, however, a real possibility that Mr White would give a more extensive account of the meeting, or of the surrounding circumstances, in the future. It was also possible that there might be other documentary evidence. The former possibility eventuated when Mr White was giving evidence at the hearing before Gibb DCJ. Under cross-examination, Mr White said: “[Mr Damen] agreed that this contract and move to a new level”, being “the silver contract clause” (emphasis supplied). But Gibb DCJ preferred Mr Damen’s evidence, which was emphatically to the contrary: “I also confirmed that I could do no alteration to the price of Dandenong”. That all occurred well after the defence in the Dandenong proceeding was filed.
The amended notice of appeal is divided by headings addressing the Balwyn proceedings, the Dandenong proceedings, the Separate Boronia proceedings and the Balwyn appeal, as well as Quantum and Costs. No heading is addressed to the defence to the Boronia proceedings or the Dandenong cross-claim. Under the headings referable to the Dandenong proceedings and the Second Boronia proceedings, the amended notice of appeal makes fleeting references to the defence to the Boronia proceedings (in particular, at grounds 12(c) and 16). But, as noted above, there is no ground of appeal challenging the primary judge’s findings that there was no negligence in connection with the filing of the defence in the Boronia proceedings. That is a sufficient reason to reject the submissions (few as they were) which the appellants made on the appeal with respect to the Boronia defence. (It should be noted the appellants do not appear to have made any submissions with respect to the Dandenong cross-claim.)
In any event, the appellant’s submissions with respect to the Boronia defence should be rejected on their merits. In light of the statement of agreed issues, the relevant dates here are:
VXG Boronia filed a defence on 31 January 2017;
VXG Boronia brought the Separate Boronia proceedings against Philips on 14 November 2017.
The only submission of substance which the appellants made is that, to the extent that the defence to Philips’ claim in the Boronia proceedings was that Philips had failed to provide services under the agreements, that argument was doomed to fail for the following reasons.
Clause 6 “PAYMENT” of the standard terms and conditions of the Service Agreements included the following:
“The Customer shall pay Philips the Service Fees for the selected Services at the frequency specified in the Agreement. The Service Fees and fees for any additional Services shall be paid to Philips within 30 days of date of invoice.
…
Philips reserves the right to withhold services under this agreement where any invoices remain unpaid for more than 30 days after the invoice due date without limitation to any other right hereunder.
The occurrence of any Equipment faults or malfunctions shall not entitle the Customer to reduce or withhold due payment to Philips.
...”
Mr Malouf admitted in his defence that VXG Boronia had failed to pay a number of invoices.
It followed from cl 6 that Philips was entitled to withhold the services, such that the failure to provide them could not found any defence.
The appellants rely in this regard on a letter dated 30 November 2016, referred to below as the “Warning Letter”, which was sent to Mr Malouf, acting for VXG Boronia, by CCSG Legal Pty Ltd, acting for Philips. The letter referred to the terms of the relevant Service Agreement, including cl 6 referred to above. That letter also referred to the amount outstanding for services provided, to Philips’ legal costs incurred and to interest said to be claimable (three figures totalling $106,427.56), and demanded payment in the sum of $103,000 by 14 December 2016. The letter threatened that in the event VXG Boronia failed to comply with the demand, CCSG held instructions to file an enclosed draft statement of claim without further notice.
Mr Malouf was not bound to accept Philips’ assertions in the Warning Letter. Still less was he bound to conclude, based on the Warning Letter, that the Boronia defence was doomed to fail.
Moreover, the appellants have not established that a solicitor exercising reasonable care would have concluded that on the proper construction of cl 6 of the Service Agreement, the defence was doomed to fail. It is at least fairly arguable that on the proper construction of the first paragraph of cl 6, the customer’s liability to “pay Philips the Service Fees for the Selected Services” arises only to the extent that the Selected Services are in fact provided. The word “for” is capable of conveying the notion of a quid pro quo, which supports that construction.
The later provision in cl 6 of a right in Philips to withhold services under the agreement where any invoice remained unpaid protected Philips against the risk of an obligation to continue to incur the cost of providing services for which it was not receiving payment. On this construction, in the event that that right was engaged, Philips would have a choice. It could cease providing services (and cease issuing invoices), or it could continue issuing invoices (and continue providing services). But it is fairly arguable that read as a whole, cl 6 did not give Philips a third option to continue to invoice for services which it was not providing. That construction would give the clause a business-like interpretation and avoid any suggestion that the clause operated as a penalty.
Clause 8 then gave Philips a (different) third option: the ability to exit the arrangement. That clause provided that in the event that the customer failed to pay any amount due within ten days of the due date, Philips would have various rights. One was to terminate the Agreement without notice to the customer. It follows that Philips was not locked into the contract in the situation where the customer was not meeting its payment obligations.
With respect to the Separate Boronia proceedings, the appellants submit that there was no evidence of any consultation or advice given by Mr Malouf. They say that the causes of action in the proceedings were barred under the service agreements and if that bar was effective, relief would be limited to resupply of the services. In circumstances where the relief was so limited, they say that there was no utility to the damages claim.
The appellants’ complaint about a lack of consultation or advice by Mr Malouf should be rejected, given that the contemporaneous documents show that Mr Fermanis gave advice about the Boronia cross-claim (which would become the statement of claim for the Separate Boronia proceedings), which Mr Malouf’s firm passed on to the appellants.
The appellants’ case at first instance was that a solicitor exercising reasonable care should have realised and advised that the proceedings were doomed to fail prior to filing the statement of claim on 14 November 2017, because the relief claimed was precluded by cl 10 of the Service Agreement. That clause provided:
“10 LIMITATIONS OF REMEDIES AND DAMAGES
Philips’ total liability, if any, and Customer’s exclusive remedy with respect to the Services and Philips’ performance hereunder is limited to an amount not to exceed the price stated herein for service that is the basis for the claim. IN NO EVENT WILL PHILIPS BE LIABLE FOR ANY INDIRECT, PUNITIVE, INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOST REVENUES, OR PROFITS, OR THE COST OF SUBSTITUTE PARTS OR SERVICES, WHETHER ARISING FROM BREACH OF THE TERMS IN THIS AGREEMENT, BREACH OF WARRANTY, NEGLIGENCE, INDEMNITY, STRICT LIABILITY OR OTHER TORT. PHILIPS WILL HAVE NO LIABILITY FOR ANY ASSISTANCE PHILIPS PROVIDES THAT IS NOT REQUIRED UNDER THIS AGREEMENT. Nothing contained herein shall affect the rights of a Customer who is a ‘consumer’ within the meaning of the Trade Practices Act, or any relevant State legislation, provided always the liability of Philips for any condition or warranty implied by such legislation and which may not be excluded shall be limited at the option of Philips, to resupply of the services, including parts, or payment of the costs of having the services supplied again.”
The appellants’ claims in the Separate Boronia proceedings were for breach of contract, negligence and/or misleading and deceptive conduct. The relief claimed was damages for loss of profit in the amount of $371,565 and the cost of repairing one of the CT machines in the amount of $40,642. The pleadings were drafted by Mr Fermanis, who was of the view that cl 10 did not preclude a claim for misleading and deceptive conduct. As the primary judge found, while Mr Malouf remained responsible for the pleading and was required to certify it, he was entitled to have regard to Mr Fermanis’ advice along with his (Mr Malouf’s) instructions. Moreover, Mr Fermanis’ advice is consistent with authority that while a contractual provision may be relevant to the question whether the element of reliance is established for the purposes of a misleading and deceptive conduct claim, it does not in and of itself bar such a claim: Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd (as trustee for the Baker Family Trust) (2005) 220 ALR 211; [2005] FCAFC 131 at [101]-[102].
It follows that there was no error in the primary judge’s conclusion that the appellants did not establish that a reasonable solicitor ought to have advised the appellants that the Boronia separate proceedings were hopeless.
As noted above, although the primary judge found in favour of Mr Malouf on the question of breach of duty, his Honour went on to make contingent findings as to causation and damages. There is no challenge to his Honour’s contingent finding in favour of the appellants on the question of causation.
However, the appellants challenge the primary judge’s contingent determination of quantum, whereby his Honour rejected so much of the claim as depended on invoices and costs orders that had been paid by third parties: J[330].
In view of the conclusions reached above as to negligence, it is not necessary to decide the grounds of appeal directed to this issue. It suffices to note that it is not obvious that there was error in his Honour’s conclusion in the following circumstances.
The appellants bore the onus of proving their loss.
As to certain invoices and costs orders issued to the appellants, it was not in dispute:
(a) that the appellants had not paid those invoices or costs orders; (b) that third party entities had instead paid those invoices or costs orders; and (c) that the third parties, although apparently under Mr White’s control, were not themselves parties to the litigation or otherwise liable to meet the invoices or costs orders.
“(1) Judgment for the defendant.
(2) The plaintiff is to pay the defendant's costs.
(3) I grant liberty to apply on 3 days’ notice should either party seek a variation of the costs order.”
On 11 December 2024, the appellants requested that the matter be relisted for argument as to costs. The matter was listed on 17 December 2024 and was heard on 1 April 2025. On 14 April 2025, the primary judge delivered judgment on the preliminary issue of whether, in light of UCPR, r 36.16, it was too late for the plaintiffs to seek a variation of the costs order: Victorian Xray Group (Dandenong) Pty Ltd v Malouf t/a Malouf Solicitors (No 4) [2025] NSWSC 353 (‘CJ’).
Rule 36.16 of the UCPR provides:
36.16 Further power to set aside or vary judgment or order (cf SCR Part 40, rule 9)
(1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.
(2) The court may set aside or vary a judgment or order after it has been entered if—
(a) it is a default judgment (other than a default judgment given in open court), or
(b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or
(c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order.
(3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it—
(a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or
(b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief.
(3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered.
(3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered.
(3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B).
(4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order.
The primary judge noted at CJ[20]-[21] that UCPR, r 36.16(3) precludes the court from setting aside or varying a judgment that determines any claim for relief or determines any question on any claim for relief, except insofar as there is compliance with subrule (3A) or the court, of its own motion, sets aside or varies the judgment in accordance with subrule (3B). If the costs order determines a question arising on any claim for relief, r 36.16(3A) applies and the court may only set aside or vary the order if a motion is filed within 14 days after entry of the order. The court has no power to extend the 14 day period.
His Honour held at CJ[23]:
“The plaintiffs did not file a motion or even give notice within the 14 days. As such, the plaintiffs cannot rely on r 36.16 as a basis for their application to set aside or vary the costs order. Rule 36.16 precludes an extension of time and they are now out of time to make the application.”
His Honour refused the application with costs. The appellants then made a second application, seeking to vary the costs order made in respect of the first application, on the following bases.
They were confused by the original order granting liberty to apply.
The fact that the appellants were barred from bringing their application to vary the costs order after the expiry of 14 days involved a degree of unfairness and injustice.
A costs order is discretionary and, having regard to the issues of confusion and unfairness created by the order granting liberty to apply, the discretion should be exercised in their favour.
They acted reasonably as they thought they had liberty to apply notwithstanding r 36.16.
The primary judge’s comment at CJ[15] that “[u]nconstrained by authority, the submissions made on behalf of the [appellants] might have had some attraction” should be accepted as meaning that they acted reasonably in pursuing the motion, despite r 36.16.
The primary judge rejected the appellants’ second application: Victorian Xray Group (Dandenong) Pty Ltd v Malouf t/a Malouf Solicitors (No. 5) [2025] NSWSC 506.
The first question is whether the order granting liberty to apply should either party seek a variation of the costs order effectively granted to the applicants an indefinite period within which to apply to vary the costs order. The answer to that question is no: see Boateng v Dharamdas [2019] NSWCA 233 at [20]-[21] per Macfarlan JA (Gleeson JA agreeing). The primary judge’s order granting liberty to apply did not obviate the need for the applicants to file a notice of motion to vary the costs orders in accordance with r 36.16.
The appellants did not file any notice of motion within the 14 days for which r 36.16(3A) provides. Nor do the appellants suggest that they gave informal notice within the 14 days sufficient to satisfy the substance of the requirement in r 36.16(3A).
The appellants next submit in this Court that the primary judge denied them procedural fairness by not giving them an opportunity to be heard on costs, and that his Honour should have reserved the question of costs to give effect to the liberty to apply provision.
It is the ordinary practice of the court to make an order for costs at the same time as making orders disposing of the substantive rights of the parties, unless there is some specific request to defer making a costs order until the parties are separately heard. A costs order made in those circumstances is, of course, liable to be varied pursuant to r 36.16, provided that notice of motion is filed within 14 days. In this case, the appellants do not point to any specific request for the court to defer making an order for costs.
“None of the Counter Allegations are with respect sustainable and have embraced a significant volume (Thirty-two thousand pages) of unnecessary and, in the Plaintiff’s submission, irrelevant evidence. Irrespective of the outcome of the decision on liability, there are likely to be submissions on costs and who is liable for them and to what extent.”
Emphasis supplied.
“HIS HONOUR: I understand you’re under-resourced, Mr Luitingh, and I want to work with you; that’s not a criticism of anyone. But understand, in some cases, on the one hand, you have Mr [Coorey] and his team; very good team, pretty well resourced. On the other hand, you have Ms Button sitting there trying to do everything with you. But I’ve got to keep track of the evidence, and you’re handing up a whole bundle of material, saying, ‘it may be in that bundle, or it may be in that bundle; we just want to rely on this bundle as well’.
LUITINGH : … If your Honour wished, we could – and we will – do it, but if your Honour said, ‘if they are all here, you need find out where they are in the bundle’, we will do that. But it is a huge exercise, because if they’re not in the 10,000 pages that make up the defendant’s bundle, then they are going to be in the 22,000 pages which the defendant has provided to us. It’s exhausting, your Honour; it’s absolutely exhausting. There will be argument about this irrespective of what happens to this matter. That whole issue will be – but I don’t want to plague your Honour even with the thought of that at this time.”
Tcpt, 28 November 2023, 114.9-33. Emphasis supplied.
The submissions that there “are likely to be submissions on costs” and “there will be argument about this irrespective of what happens to this matter” were not requests to defer making a costs order until after those submissions were made. Instead, they were an indication that the appellants’ then intention was to make submissions about costs at some stage. But, particularly given the early stage of the trial in which those indications were given, there was no reason to think that the submissions as to costs could not be made in written or oral closing submissions, before the primary judge reserved his judgment in the ordinary way. Moreover, in light of the context in which the indications were given (complaints about the respondent’s conduct of the proceedings as opposed to, for example, without prejudice offers of compromise) it is not apparent, and the appellants have not identified any reason, why those submissions could only be made after a principal judgment disposing of the parties’ substantive rights was delivered. In this Court, although the appellants’ complaint is one of procedural fairness, they did not submit that there was any submission that they had wished to make that they were deprived of the opportunity to make before his Honour reserved judgment.
Nor, before his Honour reserved, did the primary judge do anything to lead the appellants to think either (1) that it was not open to them to make submissions on costs before his Honour reserved or (2) that they would be given an opportunity to make submissions as to costs after his Honour gave a principal judgment.
It follows that the appellants’ submissions that the primary judge ought to have reserved the question of costs and that they were denied procedural fairness by not being heard on costs ought to be rejected.
The appellants have not established any error in the primary judge’s decisions.
The order I propose is:
Appeal dismissed with costs.
FREE JA: I agree with McHugh JA.
**********
Victorian Xray Group (Dandenong) Pty Ltd
Anthony Mark Malouf t/as Malouf Solicitors [2026] NSWCA 5
(2016) 259 CLR 1
(2005) 220 ALR 211
(2020) 380 ALR 145
(2002) 211 CLR 317
Appeal dismissed with costs: [163].
The distinction is important. One consequence of framing the allegation of negligence in the way identified in the statement of agreed issues is that the nature and timing of the alleged breaches directly affected the case as to causation and damage. With respect to the three defences, the primary judge noted that the appellants had particularised their case in each matter as being that if advice had been given that the defence was unarguable, the appellants would have immediately accepted that advice and would have been able to satisfy the claims made by Philips either by paying in full or paying a reduced amount as part of a commercial negotiation. Similar particulars were given that the appellants would have immediately accepted advice that there was no arguable claim or basis for appeal with respect to the Separate Boronia Proceedings and the Balwyn Appeal. On that basis, the appellants claimed that they would have ceased incurring legal costs and not been exposed to an order for legal costs.
By contrast, if instead the allegation had been that Mr Malouf should have advised that the material he had received to date did not (yet) provide a sufficient basis to certify or file the defences and other court documents, the counterfactual as to causation and damages would be very different. If the advice given in the counterfactual was anything less than that the proceedings were doomed to fail, that would have raised a series of questions. What would Mr White and the companies have done upon receipt of advice that Mr Malouf considered that there was not (yet) a sufficient basis to certify or file? Particularly given Mr White’s attitude to the litigation, his reluctance to follow advice, and his clear intention to reach a negotiated settlement with Philips rather than to capitulate, it is implausible to suggest that they would have immediately surrendered.
Would they have turned to another lawyer? (The finding at J[325] that the appellants would not “have simply retained other solicitors and incurred similar costs” was made on a different counterfactual assumption, namely, that Mr Malouf declined to file the defences on the ground they were “bound to fail”.) Would they have given Mr Malouf instructions to seek more and better information so as to try to establish a sufficient basis to file the defences and other documents? The findings at J[106], [125], [138], [139], [141] and [191(1)] about the iterative process by which the solicitors sought and received instructions suggest that the answer is yes. What instructions and information would have emerged if more had been sought? What would the parties have done in light of any such information? The findings at J[162], [196] and [319]-[320] suggest that the appellants were either unable or unwilling “to entertain settlement in any range sought by Philips”, and that the proceedings were being defended, at least in part, “to provide time to negotiate”. All of those questions involve the likelihood of the appellants’ incurring further costs after the dates on which the various court documents were filed.
The appellants’ submissions at times collapsed these distinctions, in effect equating the question whether Mr Malouf might have had a sufficient basis to certify the court documents at the time they were filed with the question whether a solicitor exercising reasonable care would have advised at that point that the defence or claim was doomed to fail. The submissions appeared to assume (1) that a solicitor exercising reasonable care would have been required to certify the court documents (a proposition which may be doubted for the reasons discussed above); (2) that in order to do so, such a solicitor would have sought more and better instructions and information; and (3) that that process would (eventually) have disclosed that each defence or claim was doomed to fail. Even assuming (which is by no means clear) that that was so, this reasoning fails to confront the timing aspect of the case as to negligence identified in the statement of agreed issues. Namely, that Mr Malouf should have advised on the material already provided to him that each case was hopeless, with the result that the appellants would have ceased incurring costs in each matter at around the date on which the relevant court document was in fact filed.
The primary judge rejected the appellants’ claim. For example, with respect to the Balwyn proceedings, Issue 1 was whether a solicitor exercising reasonable care would have concluded that the defence to those proceedings was hopeless and doomed to fail prior to the date it was filed. His Honour found that the failure so to advise did not demonstrate a failure to exercise reasonable care. His Honour did not accept that a solicitor exercising reasonable care would have concluded that that defence was hopeless as opposed to risky.
However, his Honour went on to decide causation and damages on the alternative hypothesis that there was negligence in failing to advise that the various documents that were filed were hopeless or doomed to fail. His Honour found as follows.
As to causation, this was established because in the counterfactual situation where Mr Malouf had formed the view that the defences were hopeless and bound to fail, he would not have certified or filed the defences. The primary judge did not accept that if Mr Malouf had declined to act, Mr White and the companies would have simply retained other lawyers. As a result, Mr White would have been left to either settle on the best possible terms or deal with the cases himself. On either scenario, he would not have incurred the legal costs in the matter.
As to damages, the parties agreed that the damages would amount to at least $887,613.12 including interest. Mr White and the VXG companies acknowledged that the difference between that amount and the amount they claimed was approximately $612,069.90 comprising interest in the sum of $206,228.02 and $405,841.88 which had been paid by related third parties. In circumstances where Mr White and the VXG companies did not pay the $405,841.88, had no ongoing obligation to pay it and did not establish that they are liable to repay it, his Honour found that that amount did not constitute a loss suffered by them (collectively or individually).
As to the sufficiency of Mr Malouf’s instructions, he relied on the primary judge’s findings at J[191(1)] to the effect that Mr Malouf did not merely file defences based on cursory instructions; that instead he either personally or through his employed solicitors told Mr Vandermeer or Mr White that the information provided would be insufficient to permit a defence to be filed; and that the appellants’ submissions ignored the fact that further information was then provided. Mr Malouf relied on the primary judge’s detailed findings at J[99]-[160] about the instructions received in each set of proceedings, which he submitted were not contested on the appeal.
At the hearing of the appeal, the appellants pointed to a number of circumstances or pieces of evidence said to support the proposition that a solicitor acting reasonably would have concluded that the VXG companies’ various defences, etc, were doomed to fail. The respondent in turn pointed to various matters said to demonstrate the opposite. For ease of comprehension, in what follows the matters identified at the hearing by the appellants and the respondent are addressed in chronological order, and separately by reference to the underlying proceedings, rather than in the sequence in which submissions were made.
One of the matters to which Mr Mcdonald was responding was: “As to December 2014 I said this was the time of a meeting with Philips (included John Damen) where it was agreed, again, that the Balwyn historical invoicing was incorrect and should be reversed to nil. I reminded you that the CT has never done more than 3 to 5 CTs a week.”
Mr Mcdonald’s response was: “I have followed this up with John Damen and he confirmed that while VXG had enquired whether a reduction in price was possible, a discount was not agreed. At no stage did Philips agree to a reduction of cost to NIL.”
The appellants accepted that the fact that Philips rejected the suggestion that there was an agreement did not establish that fact, but argued Philips’ position was “part of the matrix”: Tcpt, 15 August 2025, 18.45. So much may be accepted. But that the variation was disputed was the start of the inquiry, not the end of it.
By contrast, the respondent relied on evidence showing the iterative and extensive process by which the solicitors took their instructions.
File notes recorded instructions taken by Mr Staples in October 2016 from the Melbourne solicitor Mr Webb, from Mr White and from Mr Vandermeer. These were to the effect that there had been a meeting with Mr Damen in (or perhaps in relation to) December 2014, of which there was “no written record”, at which there had been an agreement that the Service Agreement was to come to an end. In answer to the question whether there had been correspondence about the “Dec 14 meetings”, Mr Vandermeer instructed that there were emails referring to the meeting.
On 3 November 2016, Mr Staples sought further instructions in relation to the “Dec 14 agreement” from Mr Vandermeer, including details of in what way the invoices prior to that agreement had been “incorrect”. On the same day, Mr Staples sent a letter to Philips’ solicitor requesting particulars, including whether there had been any variations to the Service Agreement.
On 9 November 2017, Mr Staples’ file note records a discussion with the solicitor for Mr Mensink, who was the third defendant in the Balwyn Proceedings: “Balwyn we will allege a variation of the agreement to cancel further charges fr[om] Dec 14 and that invoices prior to that date are incorrect.” It was submitted for Mr Malouf that at that stage his instructions were that in relation to Balwyn there would be no further services provided.
On 20 December 2016, Mr Staples sought instructions from Mr Vandermeer with respect to December 2014. Mr Staples said, “You have sent corro for this year but we need what was done then. Who was involved? Bevyn?” To which the answer was “Yes Bevyn”. Mr Staples then referred to getting a statement from Mr White and asked to see what had been written at the time.
On 22 December 2016, Mr Malouf wrote to Mr White and Mr Vandermeer, stating that Philips’ response to the request for particulars had denied that there had been any variation to the Service Agreement. The letter enclosed a draft defence and stated that particulars of the agreement made in December 2014 to vary the Service Agreement, including the terms of the variation, were required in order to complete the defence. If the variation agreement was reached orally, the letter sought a statement “from your company’s representative, particularly in relation to the conversation or conversations which finalised the terms of the Variation.”
On 9 January 2017, Mr Vandermeer responded by email providing the particulars that Mr Malouf had sought on 22 December 2016. These included the following matters.
No later than April 2014, Mr White had agreed with Mr Simon Tomek of Philips that the invoices needed to be cancelled and reissued on a time and parts basis. Mr Tomek had emailed Mr White on 11 April 2014 to say that he was leaving Philips. Mr White had responded by email the same day, referring to “an issue with one contract” and saying “that can go to John now.”
Mr White then sought a meeting with Mr Damen, which did not occur until on or about November 2014. “At this meeting Bevyn informed John Damen of his earlier discussions with Simon Tomek that we needed a lower cost alternative support agreement as the Balwyn CT only performed 5 CT scans per week. At this meeting Bevyn agreed, again, with John Damen that the support agreement be revised to nil cost, as John acknowledged that not a lot of scans were being performed there. Also at this meeting Bevyn asked for a lower cost support agreement alternative for Dandenong, and queried the ultrasound support agreements.”
On 17 June 2015, Philips had sent an email to acknowledge payment plans proposed by Mr White in respect of agreements at Boronia, Carlton and Dandenong. The email referred to “a dispute wrt Balwyn contract”. It also attached a spreadsheet which referred to Balwyn invoices up to 10 November 2014 totalling $112,749.91, with the comment “Balwyn contract to be cancelled/reviewed”.
“Bevyn met with John Damen on or about November 2014 and all invoices stopped after that meeting. … No invoices were received for the next six months - which was to be expected, given what was agreed at the meeting with John Damen.”
Philips had claimed in a letter of demand issued on 26 June 2016 that it had issued the six months of invoices retrospectively on 3 June 2015. But “[t]he original invoices were never received (not a surprise as they were incorrectly addressed).” Nor did those invoices appear in the Philips spreadsheet sent 14 days later on 17 June 2015.
By letter of 29 June 2016, Philips had claimed that the invoicing had been blocked in order to enable Philips to make corrections to the VXG companies’ addresses, and that it had been discovered in May 2014 that Balwyn was still on block. Mr Vandermeer said, “This explanation is not plausible as the described actions are not internally consistent and do not align with the actual invoicing. Firstly, why would Philips discover something in May 2014 and then not action it for 13 months? Secondly, the invoice address was correct as at November 2014 and, thereafter Philips issued invoices with the incorrect address, not the correct address as Philips claim. We believe this excuse is just to cover up continual stuff-ups by Philips’ staff in not doing what we requested them to do on the contracts.”
Mr Vandermeer said he could provide copies of various emails and letters if required.
The following day, 10 January 2017, Mr Malouf sent Mr White and Mr Vandermeer a letter enclosing a further draft defence. The letter said that the essential defence was that the agreement had been varied, and stated “we need to provide the particulars of when, where and by whom it was varied. It is not necessary to plead the supporting evidence that you have provided in relation to the variations. However it is essential to have the details of the variations.” As to the April 2014 agreement reached with Mr Tomek, the letter stated: “Although we do not require it for the defence pleadings we will need Bevyn to provide details of the conversation to the best of his memory, in an ‘I said “ …… ” He said “ …… ”’ format.” As to the November 2014 agreement reached with John Damen, the letter said: “Again the evidence we will need to support the defence will have to be Bevyn’s memory of the conversation.”
A file note taken by Mr Malouf dated 11 January 2017 records that he had a conversation with Mr White the night before in which Mr Malouf told Mr White that they needed a barrister in relation to the Balwyn matter. Mr White responded that he did not agree, and instructed Mr Malouf to go ahead with what they were doing with the defence.
Also on 11 January 2017, Mr Vandermeer sent Mr Malouf an email responding to the draft Balwyn defence. This referred to an email dated 13 November 2014 which had scheduled a meeting between Mr White and Mr Damen on 19 November 2014. Mr Vandermeer said that it was at that meeting that the parties had agreed to vary the Service Agreement. Mr Vandermeer’s email also gave particulars of the invoices in issue.
On 12 January 2017, Mr Staples sent an email to Mr Vandermeer and Mr White attaching a letter and a final draft of the defence. The letter noted that the defence had included some of the particulars that had been suggested but omitted others “as they are evidence that will support the Defence but do not need to be included in the pleadings.”
The respondent submitted that the primary judge’s judgment “went through those emails, conversations, file notes, instructions, particulars to reach the conclusion that is recorded in relation to the Balwyn proceeding at [J[242]]”, namely, “I do not accept the plaintiffs’ assertion that if the defendant had read the Service Agreement he would have concluded that the defence was hopeless as opposed to just risky.”
There was no error in his Honour’s finding. The solicitors had correctly distinguished between the pleading and the evidence necessary to support it. Whether or not there was sufficient material to certify the defence is not the question on this appeal. The question is whether on the material available to Mr Malouf at the time he filed the defence, a solicitor exercising reasonable care would have concluded that the defence was doomed to fail. In view of the detailed instructions and corroborative material referred to above, the answer must be no.
One further matter should be addressed. The appellants rely on a statement in Mr Malouf’s defence that Mr Malouf, Mr White and Mr Vandermeer had a telephone conversation on 16 January 2017 in which Mr Malouf said words to the effect: “the problems you’re facing are, first, that there doesn’t seem to have been any certainty about the amount that would be payable and secondly, in any event, even if the cost had reduced to half, Vic Xray should have paid half instead of nothing”. The appellants submit that “the evidence seems to indicate that [Mr Malouf] did not believe there was a defence”: Tcpt, 15 August 2025, 31.47-8. Again, there are several difficulties with this submission.
First, Mr Malouf’s affidavit evidence on the question “whether the Defence of and/or claim made by Mr White and/or the VXG Companies in each of the VXG Proceedings was not worth pursuing” was that he “did not consider that to have been the case” and “did not receive any advice to that effect”: affidavit made 21 November 2022, par 22(a). It was not put to Mr Malouf that he did not personally believe that there was an available defence. Secondly, it was neither alleged nor admitted on the pleadings that Mr Malouf lacked belief in the existence of a defence. Thirdly, the statement made in Mr Malouf’s defence about the conversation on 16 January 2017 was not in any event to the effect that Mr Malouf lacked a belief that there was a defence. He was, instead, identifying “problems” that the client was facing. That the problems did not necessarily go to the viability of a defence is made clear by Mr Malouf’s point that “even if the cost had reduced to half”, that amount would still have been payable. The prospect that the defence might not be a complete answer to Philips’ claim is very different from saying it was doomed to fail. Similarly, given what is said above about usual or reasonable rates, the reference to a lack of “certainty about the amount that would be payable” did not necessarily go to whether the variation defence was hopeless, but rather to the forensic challenge of establishing it.
This was followed by the entry of default judgment on 23 December 2016. Mr Malouf wrote to Mr Vandermeer and Mr White on 10 January 2017 confirming the default judgment had been entered. Mr Malouf explained that in order to set aside the default judgment it was necessary to provide prima facie evidence of a defence. Recording the position as at 10 January, he said, “We understand that the only available Defence in this matter is that Philips did not service the machine as frequently as was required under the Service Agreement.”
By letter dated 12 January 2017, Mr Malouf referred to a phone call he had had on the evening of 10 January 2017 with Mr White, in which Mr White had indicated that the firm already had enough information to draw a defence. The letter traced the history of the instructions received and the advice given. It pointed out that it would be necessary for an officer of the company to verify the facts pleaded in any defence.
On the same day, 12 January 2017, Mr Vandermeer sent an email to Mr Malouf and Mr Staples. In relation to the defence required for the purpose of applying to set aside the default judgment in the Dandenong matter, Mr Vandermeer instructed that in the 19 November 2014 meeting between Mr White and Mr Damen, Mr White had “asked for a lower cost support agreement for the CT. John Damen agreed to this at the meeting but failed to progress this. … John failed to meet his commitment to offer or implement a lower cost agreement. … [Mr White] may be able to elaborate on the circumstances of this.”
The appellants rely on a statement in Mr Malouf’s defence that on 17 January 2017, Mr Malouf, Mr Staples and Mr Vandermeer had a telephone conversation in which Mr Malouf said words to the effect: “We are preparing the defence in accordance with your instructions but have concerns about it as there appear to be many gaps including: what was agreed in November 2014, why it was agreed, what was the consideration, what was the reduced amount, why payment ceased in June 2015. There needs to be a very good reason for the complete cessation of payment in June 2015, otherwise the Judge will say this is just delaying tactics”.
The submission was that Mr Malouf “was aware of the fact that there needed to be support for the oral agreement”: Tcpt, 15 August 2025, 25.28-9. The difficulty with this argument is again that it does not go far enough. The case advanced for the appellants was not simply that Mr Malouf needed more information; it was that he should have advised that the case was hopeless and doomed to fail.
The respondent points to an email sent by Mr Vandermeer to Mr Malouf and Mr Staples on 17 January 2017 which provided further instructions. Mr Vandermeer said that he understood the solicitors’ concern that the defence had gaps and appeared unconvincing, and provided further instructions. The email said that Mr White had handwritten notes of the meeting which included the statement, “Asked for a cheaper alternative on Dandenong”. (We were informed that the judgment in the underlying proceedings in the District Court referred to both Mr White and Mr Damen as having contemporaneous notes of the meeting, which were not before us.) Mr Vandermeer instructed that Mr Damen had agreed to that request but failed to progress it. Mr Vandermeer also stated that it was common practice to end a service agreement mid-term despite the fixed term, as he said had happened at the Frankston practice. Mr Vandermeer acknowledged that they had been unable to “produce an email from Damen recording his agreement to reduce the Dandenong CT service agreement monthly fee from $X to $Y … but this does not mean that he did not agree a reduction in the meeting with [Mr White]”. Mr Vandermeer said that they should put in “the best possible defence recognising imperfect documentation”, followed by “an opportunity to test [Mr White’s] word against Damen’s”.
The appellants rely on a statement in Mr Malouf’s defence that on 18 January 2017, Mr Malouf, Mr Staples and Mr Vandermeer had a telephone conversation in which Mr Staples said words to the effect: “We have to certify that we believe ‘on the basis of provable facts and a reasonably arguable view of the law that the Defence has reasonable prospects of success.[’] We can’t do that on the information presently available”. Again, the difficulty is that this argument does not address the proposition the appellants have to establish, namely, that Mr Malouf should have advised that the case was hopeless. It should also be noted that the file note of the telephone conversation records that the solicitors gave strong advice about the “legal realities”, including that the agreement was not followed up by any written acknowledgement by either Mr Damon or VXG Dandenong; that Philips had continued to invoice at the original rate, some of which invoices were paid; and that even if there was an agreement for a reduced rate, that was not a defence to the failure to make any payment at all in respect of other invoices. The solicitors advised that without other evidence it was most likely that the notice of motion to set aside judgment would fail.
The appellants rely on a statement in Mr Malouf’s defence that in a second telephone conversation on 18 January 2017 with Mr Staples, Mr White and Mr Vandermeer, Mr Malouf said: “It is unlikely that a Judge will find you and Damen arrived at a binding agreement to vary the Dandenong agreement”. The fact that Mr Malouf held that negative view at that stage does not mean he should have reached the much stronger conclusion that the defence was hopeless and doomed to fail prior to filing it weeks later.
Moreover, Mr White and Mr Vandermeer gave further instructions on 18 January 2017. The solicitors’ file note records that the level of cover at Dandenong was not appropriate for the level of use; that in May of the previous year the client had asked Philips for a lower cost arrangement; and that it had been “[a]greed he [apparently Mr Damen] would put in place a lower level of cover”. There were then instructions about the desired level of cover that had been discussed: “Silver”, which would have reduced the rate by about half.
By letter dated 19 January 2017, Mr Malouf referred to the telephone conversations on 17 and 18 January and enclosed, among other documents, a draft defence. He advised: “We need a full verbatim record of [Mr White’s] discussion with John Damen in November 2014 as relates to Dandenong to the best of his memory, that is in an: I said ‘……..’; He said ‘……..’ format. This is the evidence required by the Court”. The letter recorded the solicitors’ understanding that VXG Dandenong’s instructions were that that discussion had resulted in the mutual termination of the “Gold” agreement, pending substitution of a lesser agreement (Silver or Bronze).
Mr Vandermeer sent an email to the solicitors on 19 January 2017, providing “the requested further information on Dandenong”. The email included what was described as a “Transcript” of the 19 November 2014 meeting. This included the following, first as to Balwyn, then as to Dandenong:
The appellants submitted that Gibb DCJ’s conclusions about the evidence were correct:
The case against Mr Malouf was that a solicitor exercising reasonable care would have advised at the time the defences were filed they were doomed to fail. The evidence does not rise to that level. There was no error in the primary judge’s conclusion substantially to that effect at J[268].
It is also significant that another right that cl 8 purported to give Philips was to “declare all sums due and to become due to become immediately due and payable under this Agreement and any or all of the other agreements”. On the assumption (which may be contestable) that that clause was not a penalty, it tends to confirm the construction of cl 6, which has no corresponding provision, referred to above.
In light of the availability of the construction discussed above, VXG Boronia’s defence “that the payments requested or invoiced were not due because [Philips] had not provided the services required under the Agreements” (at par 3) was not rendered hopeless by cl 6 of the Service Agreement. The defence was not doomed to fail.
The appellants also rely on Mr Staples’ file note of a telephone conversation between Mr Staples and Mr Fermanis on 6 April 2017 which concerned, it would appear, both the Boronia and the Dandenong proceedings. The file note records someone, (perhaps Mr Staples): “Will have to tell them it will fail anyway” and “Yes will send draft ask for insts & when they can’t provide evidence on followup give them advice on prospects”. The appellants submit that this shows that “at that particular point in time, they already know that the evidence is not there”: Tcpt. 15 August 2025, 30.5-6.
However, as counsel for the appellants accepted, the file note was concerned with Mr White’s personal defence as guarantor. Earlier in the file note, there was a note of a discussion about whether the filing and service of the statement of claim amounted to the making of a demand, i.e., for purposes of the guarantee. That Mr White’s defence as guarantor was the subject matter of the telephone conversation is confirmed by a letter written by Mr Staples to Mr White on the same day, 6 April 2017. That letter took up the question whether Mr White wished to rely only on “the Defence raised by the Company and [did] not wish to raise any Defence in respect to the obtaining of or the effectiveness of the guarantee”.
In any event, both the file note and the letter are dated 6 April 2017. Neither document supports the proposition that the solicitors held the view that there was no evidence to support:
the defence to the Boronia Proceeding more than two months earlier, when VXG Boronia filed its defence on 31 January 2017; or
the Separate Boronia proceedings more than seven months later, when VXG Boronia commenced them on 14 November 2017.
Instead, they refer to par 11 of their written opening submissions at trial dated 21 November 2023 which they say “foreshadowed” the question of costs.