Arnold Thomas and Becker Pty Ltd v Finch
[2014] VCC 1269
•14 August 2014
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL LIST | Revised |
GENERAL DIVISION
Case No. CI-13-01273
| ARNOLD THOMAS & BECKER PTY LTD (trading as ARNOLD THOMAS & BECKER) | Plaintiff/Defendant by Counterclaim |
| v | |
| JO-ANNE FINCH | Defendant/Plaintiff by Counterclaim |
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JUDGE: | HER HONOUR JUDGE KENNEDY | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 August 2014 | |
DATE OF RULING: | 14 August 2014 | |
CASE MAY BE CITED AS: | Arnold Thomas & Becker Pty Ltd v Finch | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 1269 | |
REASONS FOR RULING
Practice and Procedure- Application to file and serve a further amended Counterclaim
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff/Defendant by Counterclaim | Mr D. Harrison | Arnold Thomas & Becker |
| For the Defendant/Plaintiff by Counterclaim | Mr J. Selimi | MLC Lawyers |
HER HONOUR:
1 This is an application to file and serve a proposed further amended counterclaim.
2 On 29 November 2013, His Honour Judge Lacava struck out the particulars of estimated loss and damage to paragraph 8 of the defendant’s Amended Statement of Counterclaim dated 24 June 2011. Judge Lacava gave the defendant leave to file and serve any proposed amended counterclaim before 13 December 2013. He adjourned the hearing of the plaintiff’s application by amended summons dated 7 November 2013 for judgment on the counterclaim, or alternatively that it be struck out, and dismissed two summonses issued by the defendant.
3 The defendant sought leave to appeal. The Court of Appeal, on 18 March 2014, dismissed the application for leave. Following that decision, the defendant was granted further time to file a proposed amended counterclaim by order of Her Honour Judge Lewitan dated 6 May 2014.
4 By orders of His Honour Judge Anderson of 4 June 2014, His Honour refused the defendant leave to deliver an amended counterclaim in accordance with a draft of 3 June. His Honour also stayed the (existing) counterclaim and confirmed the trial date of the plaintiff’s claim on 15 October 2014. The orders also made provision for the defendant to make application to file and serve a further amended counterclaim by 27 June and for the plaintiff to notify of any objections to the proposed pleading by 16 July.
5 The defendant subsequently provided a proposed further amended counterclaim dated 30 June which was objected to by the plaintiff on 18 July.
6 Given the objection of the plaintiff, the issue for the court is whether the defendant should be given leave to file the said draft.
7 In considering whether to grant such leave the matter is not to be determined on a final basis. Rather, consideration has been given to whether there is some tenable claim (or claims).
Appropriate Orders
8 The pleading proposed relies upon six causes of action as follows: for breach of retainer; for duress; for breach of duty of care; for breach of fiduciary duty; for misleading and deceptive/unconscionable conduct; and for equitable estoppel.
9 Central to the relief sought were 5 categories of damages initially pleaded at paragraph 10 ( and repeated for various other causes of action) as follows:
(A)For “replacement legal fees” of $160,135.55. Thus it was said that by reason of the plaintiff’s withdrawal of services, the defendant was compelled to retain new solicitors and counsel on a fee paying basis which fees would not have been incurred if the plaintiff had discharged its contractual obligations under the retainer (the replacement legal damages);
(B)that, by reason of the need to fund the replacement legal costs, the defendant incurred interest, costs and charges in refinancing her home, full particulars of which were to be provided at trial ( the consequential replacement damages);
(C)That, by reason of the plaintiff’s failure to “properly prepare in the preliminary stages of the VCAT matter”, the defendant lost the chance of securing a favourable settlement from the respondent employer at VCAT at $115,000 (the lost settlement opportunity damages);
(D)That, by reason of the plaintiff’s unilateral termination, the plaintiff suffered extreme anxiety, distress and depression and great inconvenience in seeking alternative representation (the general damages);
(E)That, by reason of the plaintiff’s failure to comply with directions made by VCAT, adverse cost orders were made against the defendant to a value of $3,000 (the adverse costs orders damages).
10 The form of proposed pleading should not be allowed to go forward in its present form. The deficiencies include that the breaches and corresponding loss and damage are again “rolled up” (as also identified by Judge Anderson) without any attempt to separate out the causes of action and referable damage. Other deficiencies will be identified in the discussion below.
11 I have therefore determined to refuse the defendant’s application.
12 It remained to determine whether the defendant should be given yet another opportunity to remedy her pleading. On the one hand, the defendant has been given multiple opportunities to do so. On the other hand, there would be serious prejudice to the defendant in denying her such an opportunity. The prejudice to the plaintiff is also ameliorated somewhat by the fact that the counterclaim is currently stayed with a trial on the claim listed to proceed separately on 15 October 2014.
13 Overall, I have determined that the defendant should have one last opportunity to remedy her counterclaim. I was fortified in this decision by oral submissions wherein it appeared that there were some causes of action open to plead.
14 To some extent this is sufficient to dispose of the matter. However, given the myriad of hearings to date, I will set out the deficiencies in a more detailed fashion so that the defendant can avoid repeating them.
Revision of the pleading
Breach of retainer
15 Notwithstanding the form of the pleading, in oral submissions, Counsel for the defendant submitted that there were 3 ways the breach of retainer case was put.
(a) Breach of reasonable skill in “failure to properly prepare”
16 Firstly, the defendant sought category C “lost settlement opportunity” damages by reason of the breaches of retainer alleged at paragraph 9(c)- (j). These breaches were said to be a breach of the term that the plaintiff would exercise reasonable care and diligence (at paragraph 6(e)).
17 Thus, it was submitted that, by reason of the failure to “properly prepare in the preliminary stages of the VCAT matter” prior to the mediation, the defendant was not in a good bargaining position so as to secure a favourable offer of settlement without associated stringent releases.
18 The first difficulty with this is that many of the matters alleged at 9(c) - (j) are not concerned with a failure to properly prepare the VCAT matter in the preliminary stages and are thus disconnected to the damages claim as articulated. Thus, sub-paragraphs (g) and (h) are concerned with alleged failures to advise in relation to rights “other than” the rights being prosecuted at VCAT. Sub-paragraphs (e) and (j) appear concerned with events actually occurring at the mediation rather than the preparation prior to it. Finally, sub-paragraphs (f) and (i) appear related to an alleged failure to request an adjournment.
19 The remaining paragraphs are (c) and (d) as follows:
9. (c) the plaintiff failed to attend to all necessary interlocutory steps of and incidental to the preparation of the matter for trial with due expedition and diligence in accordance with the directions of the VCAT.
(d) the plaintiff failed to brief Counsel diligently and with all due expedition in a timely manner in anticipation of the trial at VCAT.
20 At first blush such allegations appears caught by the immunity principle the subject of the decision of the High Court in D’Ortat-Ekenaike v Victoria Legal Aide & Anor.[1]
[1] (2005) 223 CLR 1
21 However, in upholding the Giannarelli principle, the plurality in D’Orta state that the test operates in relation to work done in court or “work done out of court which leads to a decision affecting the conduct of the case in court.”[2] The complaint in the present case (as best as can be understood) is that, because of the failures to prepare the case and put the defendant in a good bargaining position, she lost the opportunity for a favourable offer. There may be real issues with demonstrating this at trial, but it is at least arguable that the alleged “out of court” conduct did not really affect conduct in court, as opposed to affecting the course of settlement discussions outside court.
[2] Ibid at 31
22 Secondly, it is also arguable, having regard to the justification for the immunity as described by the majority in D’Orta, that there is no occasion for the application of the immunity in the present case as the claim does not involve any abrogation of the principle of finality. Thus, it is not alleged that the ultimate decision of VCAT itself was wrong, nor that any of the costs orders leading up to that decision were wrong. To the contrary, those orders appear to be the premise on which the claim is founded since these presumably contributed to the deficient bargaining position.
23 The issue is complex and not free from doubt[3] with neither Counsel fully addressing all relevant authorities. Considered then, on an interlocutory basis, I am not satisfied that it is so untenable that the defendant should not be permitted to plead the matter if such pleading otherwise conforms with authority. In particular, the defendant’s next proposed pleading should clearly identify the term; the breach of the said term; and the corresponding damage referable to that breach. The pleading also must not contain references to superfluous matters that have no consequence.
(b) Failure to comply with directions and orders – 9(k)
[3] See also the discussion of the Court of Appeal at [2014] VSCA 45 at [23], [24]
24 The second part of the breach of retainer case was that there was an alleged failure to abide by orders and directions of VCAT (at 9(k)) which allegedly gave rise to category E damages, being adverse costs orders damages. It was unclear which term this allegedly breached although it appeared to be again attributable to the breach of the “reasonable care” term at paragraph 6(e).
25 When understood on this basis this part of the pleading appears in similar form to that rejected by Judge Lacava and endorsed by the Court of Appeal.
26 I consider that the defendant should not be permitted to plead any cause of action which calls into correctness the costs orders made against her at VCAT.
27 This part of the Counterclaim should not be pursued.
(c) repudiation of retainer by wrongful termination
28 The final claim was said to be the primary way the defendant now put her case. This was that there had been a breach of retainer by reason of the unilateral termination of the contract (as currently referred to in paragraph 9(a)). This was said to give rise to the replacement legal damages (A) as well as categories (B) and (D) above.
29 There may be some doubt as to whether replacement legal fees, including consequential costs, would really be recoverable by reason of any wrongful termination. However, the defendant submitted that “but for” the wrongful termination the defendant would not have needed to retain new fee-charging lawyers such that such loss would not have been incurred. She also alleged that there was consequential distress.
30 Although there may be serious issues as to the recoverability of the damages sought, including whether the circumstances would give rise to distress damages,[4] the claim as reworked does not appear to contravene the immunity principle. Overall, then, I consider that the matter should be left to determination at trial but only if it is properly pleaded (including the proper pleading of the alleged repudiation and acceptance).
[4] Although there are such cases as discussed by the Court of Appeal at [2014] VSCA 45 at [21]
Duress
31 The pleading of duress at paragraphs 11 to 13 is not sound, in particular it includes no proper pleading of any alleged “illegitimate pressure.” [5] It should not be pursued.
[5] And see Bloomingdale Holdings Pty Ltd v 63 Buckley Street Pty Ltd [2008] VSC 168 at 427
Breach of duty of care
32 The current pleading contains a “rolled up” claim for all categories of damages which are not clearly attributable to any particular breach.
33 In oral submissions, however, Counsel accepted that the damages claimed were essentially for loss of opportunity only (category C) by reason of the negligent failure to prepare the case, similar to the way the defendant sought to run her breach of retainer case (in the first sub-class, above).
34 For reasons given already, it appears that only paragraphs 14(a) and (c) would be so relevant on the basis of category C damages. The other breaches appear to be superfluous.
35 The pleading should therefore be reworked as indicated, above.
Breach of fiduciary duty
36 The current pleading again contains a “rolled up” claim for all categories of damages .
37 However, in oral submissions Counsel suggested that the damages sought for the breach of fiduciary duty were the replacement legal costs and consequential replacement damages at categories A and B. This was said to flow from the pressure placed upon the defendant to accept a settlement offer, which the defendant rejected, whereupon the plaintiff wrongfully terminated the retainer, thereby forcing the defendant to engage a new legal team.
38 The revised pleading should again be reworked so that it is possible to trace through the duty; associated breach; and corresponding damage. It should also not contain superfluous matters. Thus, for example, although the pleading currently contains an allegation that the duty includes a duty to act with “reasonable promptness” (paragraph 8(b) this appears to be unnecessary, having no corresponding consequence (see paragraph 16).
39 Counsel for the plaintiff suggested that there was no fiduciary duty to act in the “best interests of the defendant” (as alleged in paragraph 16(a)). However, given the decision in Goddard Elliott v Fritsch[6] this is a question for trial.
[6] [2012] VSC 87 at [542]
Misleading and deceptive/unconscionable conduct
40 The current pleading again contains a “rolled up” claim for all categories of damages which could not flow from the various breaches alleged.
41 However, Counsel suggested that damages were only sought in categories A and B for the “unilateral withdrawal”.
42 This should be clarified with proper particulars provided at paragraph 19.
Equitable Estoppel
43 The equitable estoppel claim appears to be in sound form, save that particulars should be given at paragraphs 24 to 26.
Conclusion
44 The following orders are appropriate:
· The application to file and serve a proposed further amended counterclaim in the form of the document dated 30 June 2014 is refused;
· On or before 29 August 2014, the defendant should file and serve a further proposed amended counterclaim in a form which is consistent with, and gives effect to, these Reasons;
· On or before 5 September 2014, the plaintiff should advise the defendant as to whether it objects to the form of the proposed pleading, giving reasons;
· The matters is listed before the Commercial List Duty Judge on 10 September 2014 at 10.30 am for further directions;
· The defendant should pay the plaintiff’s costs of and incidental to this application, including the costs of the hearing on 7 August 2014.
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