Young v Hones

Supreme Court of NSW|2016-06-09|Before: Garling J

JUDGMENT

By Notice of Motion filed in Court on 7 June 2016, the applicant, Ms Young, sought, pursuant to s 67 of the Civil Procedure Act 2005 ("the Act"), that the Court stay costs orders made on 1 May 2014 against her in favour of the five defendants in these proceedings.
Each of the five defendants are respondents to the Notice of Motion. The five respondents to the Motion are: 1. Mr Keith Hones and Mr Jason Hones ("the solicitors"), the first and second respondents; 2. Mr Ian Hemmings ("the barrister"), the third respondent; 3. Hughes Trueman Pty Ltd and Stephen John Perrens ("the expert witness"), the fourth and fifth respondents.
It will also be convenient to refer to the solicitors and the barrister, jointly, as "the trial lawyers". It is unnecessary for the purpose of this Motion to distinguish between the position of the fourth and fifth respondents.
The Notice of Motion was listed and heard urgently by the Court on 9 June 2016. During the course of the hearing, Mr Newell, the solicitor appearing for Ms Young, sought to amend the Motion so that the claim for relief was expressed in the following way: "An order, until further, that pursuant to s 135(2)(c) of the Civil Procedure Act 2005, that the respondents, and each of them, be prohibited from taking any steps to enforce the costs orders made by the Court on 1 May 2014."
The respondents did not object to that amendment. Accordingly, the Court proceeded to hear the Notice of Motion in its amended form.
At the conclusion of argument, I dismissed the Notice of Motion, and indicated that I would publish reasons in due course. These are those reasons.

Enforcement Proceedings

In 2016, the expert witness respondents served a Bankruptcy Notice on Ms Young. The Bankruptcy Notice was based upon this Court's costs order in favour of them against Ms Young in the sum of $110,000, as set out in SC3.
Ms Young made an application to the Federal Circuit Court of Australia to set that Bankruptcy Notice aside upon the basis that she had "… a counterclaim, set off or cross demand …" which was equal to or exceeded the sum claimed in the Bankruptcy Notice: see s 40(1)(g) Bankruptcy Act 1966 (C'th).
The Federal Circuit Court heard Ms Young's application on 16 March 2016. On 29 April 2016, the application was dismissed: Young v Hughes Trueman Pty Ltd & Anor [2016] FCCA 989.
It appears from that decision, that the counter-claim upon which Ms Young relied was the claim that she had made in LEC for her costs to be paid, and for her to receive an indemnity with respect to the costs of Mr and Mrs King from the large number of respondents, including the present respondents. It was said to the Federal Circuit Court that her costs were in the order of $3M.
Judge Smith, in his reasons for dismissing Ms Young's application, by reference to the submissions that she had a counter-claim of substance that would lead to the relief that she was seeking, said: "17. Undeterred, the applicant has sought leave to appeal from both the decision to refuse to set aside the consent orders and the decision on the application for costs against the respondents (amongst many others). In essence, the applicant argues that she should have the opportunity to pursue that application for leave to appeal. She says that it has strong prospects. In my view, her right to pursue that avenue should not be preferred to the right of the respondents to insist on satisfaction of the bankruptcy notice. 18. First, there is no basis whatsoever for the underlying allegation of conspiracy. It is unarguable and should not, on any view, have ever been argued by members of the legal profession. Justice Sheahan was correct to find that the application for costs was an abuse of process. 19. Secondly, the argument that Sheahan J gave inadequate reasons for his judgment is plainly wrong and would not, in any event, have provided any basis for setting aside the bankruptcy notice in those proceedings. 20. Thirdly, there are strong discretionary grounds upon which leave to appeal might be refused. Those include the fact that it concerns an application for costs against non-parties in long drawn out and multi-faceted proceedings. 21. Fourthly, even if there were some chance of leave to appeal being granted, and the appeal succeeding, that is still insufficient in my view to justify the setting aside of the bankruptcy notice: the costs claim is for joint and several responsibility against many parties whereas the judgment underlying the bankruptcy notice is in favour of only the respondents in these proceedings. Further, the allegations against the second respondent are such that there is unlikely to be any indemnity of him by the first respondent as his employer. 22. Finally, there is no admissible evidence that establishes, to my satisfaction, that any award of costs in favour of the applicant against the respondents in the Land and Environment Court would exceed the amount of the bankruptcy notice. No costs agreement was tendered, and no time sheets or tax invoices were relied on. It is remarkable, if it true, that a pensioner has accrued a liability to her lawyers for legal fees in the amount of $3,000,000 because of a drain."
I have been informed from the bar table, that an appeal against that decision has been filed, but as yet no hearing date has been fixed.
I was also informed from the Bar Table that the expert witness respondents have issued a Creditor's Petition based upon Ms Young's act of bankruptcy in failing to comply with the Bankruptcy Notice. I was informed that the Creditor's Petition had been sent to Ms Young's solicitors, but personal service has not yet been effected.
I was not provided with a date when it is anticipated that the Creditor's Petition would come before the Federal Circuit Court.

The Present Application

The present application before the Court was initially described as being an application pursuant to s 67 of the Act for a stay of the costs order. That approach was abandoned by Ms Young after hearing the submissions by the respondents. She sought, and was granted, leave to amend the orders sought in reliance on s 135(2)(c) of the Act, restraining the respondents from taking any steps to enforce the costs order.
The basis of the application for the orders, as articulated orally by Mr Newell, the solicitor appearing for Ms Young, was that Ms Young proposed to agitate a claim for damages against a large number of defendants being, at least, the 18 respondents the subject of LEC8 and LEC9, including the present five respondents. The proceedings are intended to be commenced in the appropriate jurisdiction, which it is anticipated will either be the LEC or this Court. For purposes of the determination of this Motion, the selection of the Court is not material.
The nature of the prospective proceedings was described by Mr Newell as a claim for damages in reliance on two principal causes of action, namely, deceit and conspiracy to injure.
It was submitted from the Bar Table that the prospective proceedings would claim a sum of damages which well exceeded the outstanding sums of the costs orders which I had made in 2014 in SC3 and that, if enforcement of those costs orders was not restrained by the orders sought, the probability was that Ms Young would be made bankrupt and would thus be unable to commence and conduct the prospective proceedings.
In support of the application, Ms Young also called in aid the recent decision of the High Court of Australia in Attwells v Jackson Lalic Lawyers Pty Ltd [2016] HCA 16. The applicant pointed to the fact that this decision had limited the extent of advocate's immunity (and by analogy, witness immunity) as it had been applied in this Court and the Court of Appeal, to the claim by Ms Young against the present five respondents. The relevance of this fact, and the recent decision of the High Court, particularly in light of the fact that Ms Young had been refused special leave to appeal to the High Court, was rather elusive. However, what Mr Newell, the solicitor for Ms Young, said was this: "In those circumstances, as a matter of justice, the applicant would say that her proceedings ought never to have been dismissed and that the costs orders are the occasion of the mistake that the High Court has said is involved in dismissing proceedings by reference to the advocate's immunity where what is concerned is not a judgment on the merits. In those circumstances, the bases of the stay - and I say compelling bases for an interim stay today - is that those orders should not, there is no further enquiry needed to support the prima facie submission that those orders should not stand in the way of Ms Young effectively resuming the claim for damages which the High Court says ought not on a properly understood basis of the law, have ever been dismissed. So for that reason she seeks the stay with the intention that she is not prevented by events, including the bankruptcy from filing those proceedings against the parties before your Honour today …"

Nature of the Court's Power

The application to this Court is for orders restraining the respondents from enforcing this Court's orders for costs. It relies on s 135(2)(c) of the Act.
The respondents submitted that this provision of the Act did not provide the Court with the power to make the orders sought. Section 135 is contained within Part 8 of the Act, which makes provision for various means by which judgments, or final orders, of the Court may be enforced by the processes of the Court identified in that Part. The divisions of the Part are addressed to specific processes: Writs for the Levy of Property (Div 2); Garnishee Orders (Div 3); and Charging Orders (Div 4).
Section 135 is contained within Division 5 which contains a series of miscellaneous provisions. It provides: "135 Directions as to enforcement (1) The court may, by order, give directions with respect to the enforcement of its judgments and orders. (2) Without limiting subsection (1), the court may make any of the following orders: (a) an order authorising the Sheriff to enter premises for the purpose of taking possession of goods under a writ of execution, (b) an order prohibiting the Sheriff from taking any further action on a writ, (c) an order prohibiting any other person from taking any further action, either permanently or until a specified day, to enforce a judgment or order of the court, (d) an order requiring the Registrar-General to cancel any recording of a writ for the levy of property that, under section 105 of the Real Property Act 1900 , has been made in the Register under that Act, either generally or in relation to specified land."
The provisions of s 138 of the Act, which also fall within Division 5 should be noted: "138 Other methods of enforcing judgments (1) Nothing in this Part limits the manner in which a judgment or order of the court may be enforced apart from this Act. (2) Without limiting subsection (1), nothing in this Part prevents the court: (a) from issuing consecutive writs for the levy of property against the same judgment debtor, or making consecutive garnishee orders or consecutive charging orders in respect of the same judgment debtor, in respect of the same judgment debt, or (b) from making concurrent garnishee orders against different garnishees, or consecutive garnishee orders against the same garnishee, in respect of the same judgment debt."
The respondents argue that the power to give directions with respect to enforcement in s 135 of the Act is limited to the means of enforcement described in Part 8. They submit that the provisions of s 138 of the Act make it plain that the directions power in s 135 does not permit an order to be made restraining enforcement steps which do not fall under the Act. The respondents submit that the enforcement steps presently being undertaken fall under the Bankruptcy Act and, therefore, the directions power in s 135 cannot be relied upon by Ms Young for the orders she seeks.
Ms Young submits that the power ought not to be read down in that way. The applicant submits that there is no warrant to read down the terms of s 135(2)(c) so as to restrict the prohibition order only to action taken in accordance with Part 8 of the Act. She points to the fact that the words do not expressly contain such a restriction and that, accordingly, the Court ought not to impose one.
On the other hand, the respondents point to s 138 as being a sufficient basis for the existence of such a restriction.
Were it necessary to decide this question finally, I would be inclined to the view that the power to give directions in s 135 is directed towards the enforcement provisions contained within Part 8 of the Act, and not to any other provisions for enforcement which are external to the Act such as those under the Bankruptcy Act.
However, it is unnecessary to determine this question finally, because s 23 of the Supreme Court Act 1970 and the Court's inherent powers are a more than adequate basis for the making of the orders, if otherwise appropriate: Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico [2014] NSWSC 344 at [14].
The Court's inherent power includes a power to take appropriate action to prevent injustice. That inherent power is confirmed by s 23, which provides that "[t]he Court shall have all jurisdiction which may be necessary for the administration of justice in NSW". The power of the Court to control and supervise its process to prevent injustice is not restricted to defined and closed categories: see Hamilton v Oades [1989] HCA 21 at [8]; (1989) 166 CLR 486 at 502. The notion of injustice which needs to be prevented includes a consideration of the consequences of the proceedings for the person invoking the power. In considering whether to exercise the Court's power to make the orders sought, the Court is obliged to consider, and act according to, the interests of justice.
By analogy, when a stay of a final order is sought, pending an appeal, or the prosecution of a cross-claim, or the determination of some other cognate proceedings, the Court will ordinarily require proof, by acceptable means, of the following: 1. that the appeal, or cognate proceedings, are properly pleaded, and disclose an arguable case; 2. that the applicant for the order would sustain prejudice of a kind which could not easily be remedied by orders of the Court, if the stay were not made; and 3. the balance of convenience favours the making of the order.
These are appropriate principles of the consideration of the present application.

Prospective Proceedings

The nature of the prospective proceedings was central to the application for the restraining orders in the Notice of Motion. In light of the past history of the matter, and in the absence of a draft pleading being provided to the Court, and having regard to the proposed causes of action being in deceit and conspiracy, Mr Newell was asked to articulate orally the nature of the prospective proceedings.
At various times in the course of the submissions on this issue, Mr Newell described the proceedings in this way: "The claim in damages is that … there was a systematic deceit in the cause of action being deceit which could only in the circumstances that I would explain, have been sustained by a conspiracy. At the centre of the deceit which is complex in its execution is, however, a simple proposition, that the case was conducted and it was presented to McClellan J as a case according to which Ms Young would have her land drained and retained at the responsibility and expense of the Kings. …" (T11.4). "… It is the applicant's case that it was not the intention of those representing the matter to the Court that it should be a drain and retain solution, but rather it should be one by which some limited problem other than draining Ms Young's land was purportedly dealt with." (T11.33)" "… On 2 December 2015 it was acknowledged, admitted and proposed by, we say, all of the defendants, either because they proposed it, or they acquiesced in it, that the Exhibit A had nothing to do with draining Ms Young's land. So there is a clear acknowledgement that there was no intention to put forward a solution that would result in the draining of Ms Young's land. So there is a clear, for present purposes, unequivocal juxtaposition of the purport of the representation made to the Court and the purport of the intention of the parties making that representation." (T11.42). "The deceit is systematic. What I am presenting to your Honour today is the deceit as it is evidenced what was put to the Court in the presence of Ms Young. … It began with the council's own conduct in giving consent for a retaining wall." Council gave consent on 5 February 2002.
Over four years ago, on 31 January 2012, this Court, in the proceedings against the current respondents, was presented by counsel for Ms Young with a document entitled "Applicant's Nature of the Case Statement". Although prepared for the LEC proceedings, which were then on foot between Ms Young and her neighbours, this document was described by her lawyer, Mr Newell, as providing "… a unified view of the claims against all the parties about whom we complain and the foundation of it … It is a set of particulars which explains our case".
Notwithstanding the length and detail of this document, it became apparent in the hearing before the Court in January 2012 that there was a need to further amend the proposed Statement of Claim. In the course of submissions on that day, Mr Newell informed the Court that he believed that he was then in a position to provide a proposed amended pleading to the other parties "… that will articulate our case as well as any case has been articulated on the basis of the known facts".
After further versions of a proposed pleading were served, on 3 April 2012, Mr Newell informed the Court that there were further matters of fact which had recently become apparent, which required a "… complete reframing of the conceptual foundation of how the plaintiff was misled and by what techniques".
As the history recounted in SC1 [19]-[57] demonstrates, Ms Young has had considerable difficulty in formulating her causes of action against the current five respondents in an acceptable pleading, where those causes of action were based upon allegations involving deceit and conspiracy to injure. There were many iterations of a Statement of Claim.
The ultimate version upon which SC1 was based involved allegations of deceit and conspiracy to injure, which are the causes of action upon which, according to Mr Newell, the application for the restraining orders would be pursued.
As SC1 shows, notwithstanding the statements of Mr Newell about the adequate state of knowledge about the causes of action and a good deal of time being allowed to draft an acceptable pleading, Ms Young was not in a position to formulate adequately those causes of action in an acceptable pleading. Leave was not granted to permit the amended Statement of Claim being propounded in those proceedings to be filed.
After SC1, a Further Amended Statement of Claim was propounded in which the causes of action for fraud, deceit and conspiracy had been removed. During the course of the proceedings on 23 August 2013, Ms Young sought leave to file in court another proposed Amended Statement of Claim. The nature of the proposed amendments is contained in SC2 at [51]. What was there being asserted was a breach of fiduciary duty on the part of the trial lawyers and, at least indirectly, a failure to act in good faith. The proposed amended pleading was not permitted to be filed because I determined that its contents did not reveal a properly pleaded cause of action and were embarrassing.
In the course of my reasons in SC2, I said: "55 However, it is appropriate to point out that by the time that those proceedings were heard in April 2012, although they had been only commenced in 2010, there had been at least eight versions of a proposed Amended Statement of Claim propounded or served in the period up to the hearing of the motion. There have been five since. These various drafts of the Statement of Claim have at times included allegations, however pleaded, of bad faith, or the like, and at other times have abandoned those pleadings. The pleading which was being propounded and being considered by the Court in the first judgment, was not permitted to be filed because of its complexity, prolixity and verbosity, and the embarrassing nature of the many of the paragraphs pleaded. It included allegations of mala fides on the part of each of the defendants. 56 The current proposed Amended Statement of Claim is one which has been drafted, again after a number of attempts, since the first judgment of 17 May 2013, which made plain the principles appropriate for proper pleading."
In LEC9, Sheahan J described at [18] the basis upon which Ms Young was seeking an order for costs against the 16 respondents other than Mr and Mrs King, as being a claim based on "… a broad-based 'conspiracy' to defeat or defraud her, a claim in which she has comprehensively failed". Sheahan J, from [48] to [60], then traced in the proceedings in the LEC the various allegations which had been made from time to time by Ms Young with respect to allegations which had variously been described as fraud, bad faith, collusion, corruption, conspiracy and the like. This history led to the conclusion of Sheahan J to which I have earlier referred at [40].
This historical context reveals a significant history of attempts by Ms Young or her lawyers to frame a properly pleaded cause of action against, at least, the five respondents to these proceedings by way of some form of fraud or conspiracy or deceit or the like. Each of those attempts to frame a properly pleaded cause of action has failed.
The applicant has not produced, on this application, a pleaded cause of action which she contends adequately describes the prospective proceedings upon which she relies for the restraining orders.
The oral outline given by Mr Newell, to which I have referred in [68] above, does not suggest a prospective cause of action in which the relevant facts have been clearly identified, the nature of the conduct of each of the current respondents has been identified and articulated, and does not permit a conclusion that the prospective proceedings could be reduced to a properly expressed written pleading. And this is after a period of time of at least six years in this Court, and eight years or so in the LEC. Numerous attempts have been made to identify and articulate the causes of action. None has been successful.
I am not satisfied that on the material before me, and having regard to the history of the proceedings in the LEC and this Court, that Ms Young had demonstrated that she has an arguable case which could be brought and articulated at some point in time for damages against the present respondents by way of either deceit or conspiracy to injure.
Nor am I satisfied that even if such a case could be pleaded, that Ms Young had identified, in a relevantly causal way, how the causes of action, which Mr Newell had described, would have a monetary result which would be of a sufficient value to equal or exceed the orders for costs in these proceedings.

Discretionary Considerations

Even if I was satisfied that there was a prima facie case of a reasonable arguable kind that could have been articulated in a proper written pleading, and for the reasons indicated above I have not, then it would be necessary for Ms Young to demonstrate that she would suffer prejudice were the orders which she seeks not to be made, and also that the balance of convenience favoured the making of the orders.
On the question of prejudice, no affidavit evidence or other material was put before the Court. As senior counsel for the barrister submitted, which submissions were adopted by the other respondents, Ms Young did not put before the Court any evidence at all as to her financial position. She did not adduce any evidence in which she offered any undertaking either with respect to the filing and prosecution of the claims for damages or any proposal with respect to her capacity to meet the costs orders if a restraining order was granted.
Mr Newell submitted, from the Bar Table, that the fact that there had been an act of bankruptcy committed by Ms Young ought to be taken by the Court as an indication that his client was impecunious. As well, Ms Young discloses her occupation on her affidavit as a pensioner. These matters give rise to a substantial question as to the financial capacity of Ms Young to meet the costs orders, but that issue was not specifically addressed by the evidence which, potentially, could have been done quite easily. There did not seem to be any suggestion as to any financial arrangement with respect to the payment of any costs associated with the prospective proceedings which would enable Ms Young to undertake those proceedings against, apparently, at least 18 respondents, in circumstances where she was wholly impecunious for the purposes of this application. None of these matters were adequately addressed. It means that there is no evidentiary basis for this Court to find, that Ms Young would be prejudiced by the failure of the Court to make the restraining orders which she seeks.
The Court has also to consider the balance of convenience. The proceedings in this Court, by which Ms Young mounted a claim for damages against the five present respondents, are at an end. The judgment of the Court of Appeal was final. The High Court refused special leave to appeal against it. The orders for costs which the expert witness respondents seek to enforce reflect the final outcome of these proceedings. Those respondents, and the other respondents as well, each have a final order in their favour, which is the equivalent of a monetary judgment. There is no reason to think that those costs orders were not properly made. Restraining the present respondents from enforcing the costs orders whilst Ms Young is free to deal with her assets, the extent of which are unknown, in any way which she sees fit, would not meet the description of fairness or justice. It would not be in the interests of justice. The balance of convenience would not be served in those circumstances.
On the contrary, the balance of convenience falls in favour of the respondents and against the restraining orders sought.

Conclusion

For the foregoing reasons, I concluded that the application ought to be dismissed.
Costs ought to follow the event. No submission was advanced to the contrary by Mr Newell.

Amendments 11 July 2016 - Amendment to legal representation. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 July 2016

At a glance

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Judgment (9 paragraphs)

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Cases Cited (18)

Cited By (3)