WATSON v CONOLLY & ORS [2008] NSWSC 1345 | Case summary

1 HIS HONOUR: This is an application by notice of motion dated 9 December 2008, which comes against a background of a judgment which I gave on 26 August 2008 in relation to an application by the plaintiff to amend the statement of claim. Full details of that application and the basis for it and the nature of the amendments sought are set out in that judgment and I will not repeat them. 2 The proceedings came before me on 14 November 2008. Mr D J Fagan SC again appeared for the plaintiff and Mr S D Robb SC appeared for the defendants. The issue was raised on that occasion for the need to make a direction that the defendants file any application concerning leave being granted to meet the amendments, dealt with in my earlier judgment, by 5 December. 3 The notice of motion dated 9 December was supported by an affidavit of Mr Baron David Alder, solicitor, sworn 10 December 2008. That affidavit has, in effect, been treated on the directions hearing this morning as read and it annexes relevant correspondence and transcript; in particular, a letter requesting particulars dated 12 September 2007 (page 21 of the affidavit) and the response dated 19 September 2007. My attention has been drawn to paragraph 101(a) in which the plaintiff particularised his loss as follows:- "As a consequence of the plaintiff's removal as liquidator of Hypec he suffered a loss of income." 4 My attention was also drawn to page 36 of the affidavit, a letter from Etheringtons, dated 10 September 2007, at paragraph 4 which identified two heads of claim, one being legal costs and the other that Mr Watson asserted diminution of income following his removal as liquidator and an estimate provided there of the loss. 5 On 24 November 2008 (page 124 of the affidavit), Etheringtons sent a letter setting out particulars to Middletons. Attention on this application has been drawn to paragraph 8. That paragraph refers to the fact that the plaintiff's case asserted the breaches of duty "pleaded in paragraphs 15 to 149 was a material cause of the plaintiff losing his employment". 6 Mr Fagan accepted that that was what he termed "a slip" and that it should have read paragraphs 15 to 135, the paragraphs to be amended being paragraphs 135 to 149. He claimed it would have been apparent that that was an error against the background of the previous application and that no enquiry had been made to clarify the point. 7 I observe in relation to that paragraph that it goes on to refer to the removal proceedings and the criticism of Gzell J, suggesting that the conduct referred to contributed to his Honour's determination that the plaintiff should be removed as liquidator for the reasons stated in his Honour's judgment of 2 December 2004. 8 On this hearing, Mr Robb did not press for the order sought in paragraph 1 of the notice of motion of 9 December 2008 but did press for an order being made in terms of paragraph 2(a), the terms of which I will have set out in this judgment:- "Alternatively, the plaintiff's application to amend the Statement of Claim be granted on the following condition: (a) the Plaintiff undertakes to the Court not to claim in these proceedings that the decision of Gzell J in BL & GY v Hypec Electronics Pty Ltd [2004] NSWSC 1119 to order that the plaintiff be removed as liquidator of Hypec Electronics Pty Ltd (Hypec) in so far as his Honour relied on the grounds:- (i) discussed in paragraphs [102] to [109] of his Honour's judgment given on 2 December 2004, or (ii) being the failure by the plaintiff to investigate or pursue any of the claims which Hypec may have had referred to in paragraphs 136 to 149 of the statement of claim; was caused by any negligence or wrongful act or other breach of duty by the defendants or any of them;" 9 It is clear that the plaintiff has been claiming for some time now loss on two bases, namely, the costs incurred referred to in my earlier judgment, and economic loss or income loss resulting in loss of employment which he says is an adjunct to the removal order having been made by Gzell J. 10 His claim is that he acted on advice in the winding up. He claims he was wrongly advised in respect of the proceedings, the history of which is summarised in my earlier judgment, and that that advice led to significant criticisms of him, and that, in due course, he lost his employment, he claims, in consequence of the fact that he had been removed as liquidator in circumstances of and on the basis of findings made by Gzell J. He says that as a consequence he suffered loss, being the costs liability that I have referred to and the loss of income from his loss of employment. 11 The claim in terms of the loss of income is based upon his removal as liquidator by an order of this Court. Grounds for that order are detailed in the judgment of this Court, namely, the judgment of Gzell J given on 2 December 2004. That judgment refers to the history, which is lengthy and detailed, of proceedings and the outcome of proceedings. It also includes reference to the matters concerning the failure to investigate the question of the goodwill of Hytec said to have been taken over by Hytec Information, and other claims. Those matters are referred to in the judgment of his Honour Gzell J at paragraphs [102] to [109] and later paragraphs including, in particular, paragraph [130]. The judgment indicates, therefore, that there were a number of matters and findings that led to the order for removal. 12 The plaintiff in these proceedings relies upon the fact of an order for removal having been made and the basis for it but does not intend to pursue as part of the evidentiary case the factual matters set out in the paragraphs that he has sought leave to delete, being paragraphs [136] to [149]. 13 The question then arises as to whether or not the order sought should be made, which would seek to restrain the plaintiff by undertaking not to claim in relation to the judgment/order of Gzell J, that the plaintiff be removed as liquidator of Hytec Electronics Pty Limited, on the grounds identified in paragraph 2 of the notice of motion, was caused by any negligence or wrongful act or other breach of duty by the defendant or any of them. 14 Given the precise basis upon which it is intended to pursue the plaintiff's claim as articulated by Mr Fagan today, and which I have endeavoured to summarise, I see no basis whatever for making an order in terms of paragraph 2(a). I do not consider that anything said by Mr Fagan on the last occasion in any way provides any support for imposing such a condition on the plaintiff. Even if there were some misunderstanding that may have contributed to it - I say "may" - by the indirect reference to paragraphs 15 to 149 in paragraph 8 of the letter of 24 November 2008, there is no reason at all in my opinion for the plaintiff to have his claim restricted in the way sought. 15 It is clear that the order made by Gzell J is a significant part of the history of this matter and certainly significant in terms of the plaintiff having been removed from his position as liquidator. The judgment of the Court in that respect speaks for itself and, accordingly, I decline to make the orders sought in paragraph 2(a). The notice of motion is accordingly dismissed. 16 The plaintiff applies for costs in two respects, the hearing conducted on 25 September 2008 and in respect of costs to today. He does not press for any costs order in his favour in respect of the listing on 14 November 2008. He simply seeks an order that the costs of 14 November 2008 be costs in the cause and I agree and I so order. 17 Mr Robb has pointed out some of the history of this matter, in particular, what is said to have been a changed ground in respect of the costs claimed said, at one stage, to have been in the net amount of $300,000 as referred to in paragraph 101(c) of the letter of particulars dated 19 September 2007, later clarified. He asserts to the fact of the amount being $1.3 million. 18 The deletion of paragraph 173 in the context of the change is said to have caused some division as to the true nature of the case and reliance is placed in part upon paragraph 8 of the letter of 24 November 2008, which I have already referred to. He submitted there has been a series of particular directions hearings directed to clarifying the plaintiff's case. 19 The motion that I have heard today I do not consider falls into the category of clarifying matters or is prompted or due to any inadequacies in the particulars about the costs claimed. It was a motion made initially for an order to refuse an amendment that was not pressed today and there was a substantive order sought in paragraph 2(a) which I have dealt with and which I have refused. 20 I think notwithstanding some of the lack of clarity or confusion that has arisen in terms of the particulars, the substantive issue dealt with on 25 September 2008 was decided favourably to the plaintiff and I think that costs follow the event really should apply and I order the defendant to pay the plaintiff's costs of the motion of 25 September 2008. 21 In respect of costs of today, in hearing the substantive application of the defendant, it has been of some benefit to the plaintiff in so far as he obtained leave to further re-formulate his claim by way of a further statement of claim. Doing the best I can, the plaintiff is entitled to, given the failure of the defendant to obtain an order pursuant to paragraph 2(a) of the notice of motion, costs but they should be apportioned. 22 I order the defendant to pay the plaintiff's costs of today as to 75% of the costs as assessed or agreed. I otherwise direct the parties to bring in directions for the further progress of these proceedings. **********

WATSON v CONOLLY & ORS

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Judgment (9 paragraphs)

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