Bainbridge v Lawton
[2003] WASC 43
•20 MARCH 2003
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS |
| CITATION | : | BAINBRIDGE & ORS -v- LAWTON & ORS [2003] WASC 43 |
| CORAM | : WHEELER J | ||
| HEARD |
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| DELIVERED | : 20 MARCH 2003 | ||
| FILE NO/S |
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| BETWEEN |
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AND
GARY HAMILTON LAWTON
IAN ROSS GILLONFirst Defendants
GARY HAMILTON LAWTON
IAN ROSS GILLON
JULIAN RICHARD TYDDESecond Defendants
GARY HAMILTON LAWTON
IAN ROSS GILLON
JULIAN RICHARD TYDDE
SIMON CHRISTOPHER ENGLANDThird Defendants
GARY HAMILTON LAWTON
IAN ROSS GILLON
SIMON CHRISTOPHER ENGLAND
Fourth Defendants
[2003] WASC 43
Catchwords:
Turns on own facts
Legislation:
Nil
Result:
Plaintiffs' applications dismissed
Category: B
Representation:
Counsel:
| Plaintiffs | : | Mr D H Solomon & Mr J C Giles |
| First Defendants | : | Mr J T Gleeson SC, Mr S M Davies, |
Mr D W Newnes & Mr A D L Throssell
| Second Defendants | : | Mr J T Gleeson SC, Mr S M Davies, |
Mr D W Newnes & Mr A D L Throssell
| Third Defendants | : | Mr J T Gleeson SC, Mr S M Davies, |
Mr D W Newnes & Mr A D L Throssell
| Fourth Defendants | : | Mr J T Gleeson SC, Mr S M Davies, |
Mr D W Newnes & Mr A D L Throssell
Solicitors:
| Plaintiffs | : | Solomon Brothers |
| First Defendants | : | Blake Dawson Waldron |
| Second Defendants | : | Blake Dawson Waldron |
| Third Defendants | : | Blake Dawson Waldron |
| Fourth Defendants | : | Blake Dawson Waldron |
Case(s) referred to in judgment(s):
Franich v Swannell (1993) 10 WAR 459
Case(s) also cited:
Nil
[2003] WASC 43
WHEELER J
WHEELER J:
The Minute of Amended Statement of Claim
1 This is a plaintiffs' application to amend their statement of claim,
together with an application to consolidate with this action certain portions of other actions. The defendants object to the proposed amended statement of claim on a number of bases. Broadly, they allege that the allegations and issues are so complex that the attempt to combine in one statement of claim some 77 groups of plaintiffs is impossible, in the sense that no statement of claim could be pleaded which would be other than embarrassing and vexatious. Alternatively, they submit that if it is possible to perform such a feat, the present amended Minute of statement of claim (the Minute) is in its current form defective in a number of important respects, and that being required to plead to it would embarrass the defendants.
2 In some respects, the action does not appear to be a complex one. It
appears to be based upon the application of relatively well understood legal principles, relating to the duty of a solicitor to clients and former clients, albeit that the principles are sought to be applied in somewhat unusual circumstances. It does involve a very large number of allegations of fact, and it is sometimes difficult in respect of these allegations to separate facts essential to the claim from facts which are properly described merely as "background". However, the overwhelming majority of pleaded facts appear to be facts which can readily be ascertained by reference to relevant documents, and are unlikely to be in dispute. Further, the broad thrust of the plaintiffs' claim emerges with reasonable clarity from the statement of claim, although I accept that understanding the thrust of the claim and being able to plead to particular allegations are two quite distinct tasks.
3 The action arises in the following way. The defendants had acted as
solicitors for certain finance brokers, and entities associated with those finance brokers, over a number of years and in relation to a considerable number of transactions. It is alleged that the finance brokers acted improperly in relation to many transactions during those years in a number of respects. For example, it is alleged that: the finance brokers preferred their own interests to that of their clients; acted in reckless disregard of the interests of their clients; were negligent; contravened certain statutory requirements; induced lenders to enter into transactions where the money was lent on inadequate security and where the borrower and/or guarantor could not repay. It is alleged that in the course of acting
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for the finance brokers and their associated entities, the defendants became aware of the facts of those transactions at a variety of dates commencing in 1983, which dates are pleaded. On occasion, the dates are pleaded in the alternative. By and large, the dates are arrived at by reference to the dates of particular documents prepared by, or allegedly seen by, the defendants.
4 At various points in the Minute, a conclusion is drawn from a
number (sometimes a considerable number) of facts. For example, par 13.10 pleads that by reason of the matters pleaded in pars 13.1 - 13.9, the finance broker "preferred its interests, further or alternatively [another party's] interests ... to the interests of [the broker's] lender clients". In relation to this conclusion, it is pleaded that the defendants knew the "matters" pleaded in that conclusionary paragraph from a date or from dates which are pleaded in the alternative; the particulars of knowledge of the conclusion are pleaded by incorporating by reference all of those paragraphs in which it is pleaded that the defendants knew certain facts relating to certain pleaded transactions.
5 Then, it is pleaded that the defendants owed a duty to the finance
broker not to disclose any of the "matters" - that is, either the facts or the conclusions which it is pleaded flow from them - to any of the plaintiffs. As I understand it, that is a pleading which relies upon the assertion that the defendants acted for the finance broker or for related entities in relation to those transactions, and is said to arise out of the solicitor's common law duty of confidence which operates both during the retainer and after its conclusion. There is a further specific pleading in pars 79 and 80, pulling together a variety of these conclusions, and pleading that by reason of the matters pleaded elsewhere in a very large number of paragraphs of the statement of claim, the defendants knew or ought reasonably to have known by 1 July 1994, or alternatively at the date of advancing each of the loans to which I shall shortly refer, that the finance broker, in the course of its business, engaged in the various types of impropriety to which I have referred.
6 It is pleaded that, in relation to a variety of transactions set out in
par 81 and following, the plaintiffs engaged the defendants for reward so that a solicitor/client retainer arose between them. The very large number of transactions in relation to which it is said that one or other of the plaintiffs at different times retained the defendants are transactions in relation to which the finance brokers in question brokered loans from the plaintiffs to certain borrowers, the identity of which is pleaded in each case.
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7 With certain variations, the pleading in relation to those transactions
follows a common form. The loan is pleaded, as is the retainer. The plaintiffs then plead (using the "pleading by reference" technique described above) what the defendants knew or should have known about the transaction at the relevant time. It is pleaded that in relation to each of the plaintiffs, the defendants owed them: fiduciary duties not to represent them if there was a real and substantial possibility of conflict between the duties owed by the defendants to that plaintiff and to present or other clients; a duty not to prefer the interests of the finance broker or associated entities to the interests of the plaintiff; duties of care and in contract to take reasonable care to advise each plaintiff of any unusual features or risks associated with that plaintiff's loan; a duty to "adequately protect" each plaintiff in relation to his or her investment in loans brokered by the finance broker; a duty to inform each plaintiff of every fact within the defendants' knowledge affecting the quality of the plaintiff's investment or of the security on which the plaintiff was investing.
8 It is pleaded in relation to each loan made by each plaintiff, that the
defendants did not advise that plaintiff of the facts pleaded in relation to the course of conduct by the finance broker in relation to other loans prior to the loan made to that plaintiff. The pleading is made in a very shorthand way, by pleading that the defendants did not advise the plaintiff of the "matters" pleaded in specified paragraphs of the Minute.
9 It is then pleaded that by reason of the defendants acting as solicitor
in relation to the loans, and by reason of their failure to advise particular plaintiffs of the matters pleaded in the earlier paragraphs, each plaintiff made the relevant loan. In each case, there is a plea that each plaintiff suffered a loss in relation to that plaintiff's loan. It is pleaded then that the defendants breached their duty of care, and further that by the conduct pleaded the defendants engaged in misleading or deceptive conduct or conduct likely to mislead or deceive in contravention of s 10 of the Fair Trading Act. Certain of the matters pleaded are alleged to lead to the conclusion that the defendants breached the Corporations Act, and the Australian Securities and Investment Commission Act.
10 It is pleaded by reason of the defendants' failure to inform the
plaintiffs of "those facts known to" the defendants pleaded in pars 13 - 497 of the Minute by the date of each plaintiff's loan, each plaintiff was, as the defendants knew or ought reasonably to have known, exposed to the risks and conduct of the finance broker which has been pleaded. It is then alleged that each of the plaintiffs did suffer loss and
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damage by reason of one or more aspects of that conduct. There is a schedule giving "particulars" of the conduct which is relevant to each plaintiff. It takes the form of a list of the plaintiffs and a number of columns each headed with a reference to a particular type of conduct alleged against the finance broker, eg "negligent", with either a "yes" or a "no" inserted in each column against the number of each plaintiff. It is fair to say that the particulars do not appear on first perusal to be very selective, since only in the columns headed "Guarantor could not repay" and "Group borrowers" is the word "no" occasionally inserted.
This application
11 The defendants' "outline" of submissions in relation to the Minute
covers some 31 pages. The plaintiffs' "outline" in reply runs to 57 pages. There are numerous questions of detail with which I do not propose to deal in these reasons. As I pointed out to counsel at the hearing of this application, there have been defects in the conferral process. At the hearing, the plaintiffs conceded that many of the points of detail made by the defendants either were well made or related to matters in respect of which it would be appropriate for the defendants to seek, and to be provided with, particulars. There were other matters raised by the defendants which the plaintiffs had not had the opportunity to consider before the hearing, and it would be inappropriate for me to make rulings on all of the issues raised without giving the plaintiffs the opportunity for further consideration and for further amendment of their proposed Minute if they wished to do so.
12 However, it did emerge with reasonable clarity that there are issues
of principle which are likely to remain in dispute between the plaintiffs and the defendants concerning the structure of the proposed pleading. They are issues which are likely to arise also in relation to claims which will be made by other plaintiffs represented by Solomon Brothers in proceedings against other firms of solicitors. It is desirable to resolve those issues of principle so far as possible at this stage. Further, the argument in relation to this application has led me to consider, albeit in general terms, the way in which a trial of these issues might sensibly be conducted. It seems to me that a statement of claim which facilitates the identification and grouping of issues for trial would be desirable, and I propose to make certain observations in relation to that question.
13 There are three broad issues in relation to which I have concluded
that the submissions of the defendants have merit and, which appear to me to require recasting of the statement of claim if the fair trial of this matter
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is not to be embarrassed. They are: the "cross-referencing technique"; the issue relating to par 84 of the Minute; and the pleading of misleading and deceptive conduct. There are some other issues in relation to which I think there could either be greater clarity or greater particularity in the pleading, and there are a number of aspects of the Minute with which the defendants find fault but which I consider to be acceptable. I propose first to deal with the issues which seem to me to require significant amendment of the Minute, and then to work through the other questions which I consider it is appropriate to resolve at this stage, keeping so far as I can to the order in which they were argued by the defendants.
Paragraph 84 of the Minute
I set out in full pars 84 and 85 as they appear in the Minute:
"84. LG [Lawton Gillon] did not advise the 28A plaintiffs of the matters pleaded in paragraphs 12.2 - 12.4 (the material fact only and only in relation to those transactions which occurred prior to 1 July 1994), 12.5.8 (the material fact only and only in relation to those transactions which occurred prior to 1 July 1994), 13 - 80 (which LG is alleged to have known by 1 July 1994) or 81. 85. By reason of LG's conduct pleaded in paragraphs 82 and 84 the 28A plaintiffs invested in the Gardeb Victoria Park loan."
15 Translated, this pleading alleges that because of the defendants'
failure to advise certain plaintiffs of certain pleaded matters, those plaintiffs invested in a particular loan. Later pleading is to the effect that the borrowers could not repay the loan, certain other events occurred, and the plaintiffs suffered loss and damage as a result. The matters which are said not to have been disclosed (and which it is alleged should have been disclosed) are very numerous, being scores of individual facts extending over more than 100 pages of the Minute.
16 As it presently stands, this pleading in my view tends to obscure
rather than to advance the nature of the plaintiffs' real case. If one takes examples of individual facts to which par 84 refers, at random, it is self-evident that, in relation to very large numbers of those facts, disclosure of a particular fact on its own could not conceivably have
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influenced the decision of a plaintiff to make or refrain from making a
loan. Most of the individual facts, taken alone, lack any significance.17 For example, in relation to the loan described as the "Kentlaw" loan,
it is pleaded that Kentlaw was incorporated on 16 July 1992. The example is a trivial one, but the fact on its own plainly has no significance. It derives its significance, if any, from many other facts pleaded in relation to that particular loan, which include that the first loan to Kentlaw was advanced approximately three months after the incorporation, that at the relevant time Kentlaw had no assets other than a particular shopping centre, that the purchase price of the shopping centre was an amount pleaded, whilst the total amount lent to Kentlaw was an amount in excess of that purchase price, and so on. The conclusion which is drawn from all of the facts pleaded in relation to the Kentlaw loan is that in that transaction the brokers preferred their own interests or the interests of others to the interests of the plaintiff lenders. That conclusion is pleaded at par 13.10.
18 It seems reasonably clear that what the plaintiffs seek to assert in
relation to non-disclosure by the defendants is really that the defendants
failed to disclose:
• that the brokers invariably, or very often, preferred their own interests or the interests of others to the interests of lender clients; • that in particular specified transactions, eg in relation to the Kentlaw loan, the brokers preferred their own interests or the interests of others to the interests of lender clients; or • sufficient facts from which the plaintiffs would themselves have been able to infer that on occasion the finance brokers preferred their own interests or the interests of others to the interests of their lender clients.
19 As I understood it, the plaintiffs' counsel argued that they wish at
trial to pursue their claim by alleging either that the defendants should
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have disclosed the conclusions of the type to which I have referred in the first two points above, or that they should have disclosed all of the facts which are pleaded. Counsel accepted that it may be that at trial either some of those facts could not be proved or, more likely, the plaintiffs might be unable to prove that some particular facts had been known to, or had been recalled by, members of the defendant firm. It was suggested that it would then be a matter for argument at trial as to the significance of those facts which had been proved.
20 Further, the point was made with some force on behalf of the
plaintiffs that the facts themselves were largely not contentious, being able to be ascertained from documents. Further, they noted that this was not in any event a case in which it could be said that some facts had been disclosed while others had not; rather, the plaintiffs' case was that none of the facts whatever had been disclosed to the plaintiffs - indeed, as I understood it, it was said that no member of the defendant firm had ever spoken to any of the plaintiffs, let alone discussed any aspect of the finance broker's conduct with them. Therefore, it was suggested that no embarrassment could flow from the pleading in its present form, since the defendants would be able by reference to the documents to ascertain which of the various facts incorporated by reference in par 84 could be admitted.
21 I accept that the mere pleading of a large number of facts is not
embarrassing. I accept also that it is open to the plaintiffs to plead that by reason of a large number of facts, of which they had knowledge, the defendants should have reached certain conclusions, which conclusions they should have made known to the plaintiffs. I accept that there is no difficulty in principle with the plaintiffs pleading in that context facts which, if viewed alone, could not have led to the relevant conclusion, and leaving to trial the questions of precisely which facts have been proved, of which facts were known at a relevant time to the defendants, and of what conclusion, if any, the defendants should have drawn from those facts which they are proved to have known.
22 However, the difficulty as I see it with the present form of pleading
is that it appears to allege two things which cannot be correct. The first is that there was a duty on the defendants to advise the plaintiffs of every single one of those facts which are pleaded to have occurred and to have been known to the defendants. The second is that it is the failure to inform the plaintiffs of every single one of those facts which caused the plaintiffs to make the relevant loans.
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23 It is not, as I understand it, the plaintiffs' case that only if they had
been told of all of those facts would they have declined to enter into the loan. It cannot be, as I have illustrated by reference to the date of incorporation of Kentlaw, that the plaintiffs allege that telling them any single one of those facts would have caused them not to enter into the loan. Rather, what is really being pleaded is that there is some combination or combinations of those facts which, if conveyed to the plaintiffs, would have caused them to decline to enter into the loan. That can only be the case because there is some combination or combinations of facts which, if told to the plaintiffs, could have led a reasonable plaintiff to form the view that the finance brokers, for example, preferred their own interests and the interests of others to the interests of their lender clients, so that there was a risk inherent in entering into a loan brokered by those particular finance brokers. It seems to me that if that is the pleading it is preferable that it be pleaded directly.
24 A particular vice of the present form of pleading is that it seems to
me to give rise to the possibility of endless, and probably pointless, cross-examination at trial, directed to each plaintiff, dealing with each of the pleaded facts seriatim and raising for consideration the question of what they would have done had they been informed of that particular fact in isolation.
25 The difficulty which I have identified appears to me to flow through
to paragraphs of the Minute dealing with the duty allegedly owed by the defendants and its breach in pars 499 and following, and the plea of causation in pars 511 and following. Although the difficulty is a significant one, it is my view that it may be fairly simply resolved. I discuss what appears to me to be a more manageable form of pleading under the next subheading, which relates to cross-referencing.
"Cross-referencing technique"
26 It is not surprising that in a pleading dealing with a very large
number of facts, many of which are said to be relevant to the claims of each of the plaintiffs, there is a significant amount of cross-referencing. As I understand it, the difficulty which is alleged to arise is that the cross-referencing technique which has been adopted is unduly complex, and makes it difficult for the reader to work out in relation to any particular fact what its relevance may be or, conversely, in relation to any particular plaintiff, which facts are alleged to be of relevance.
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27 For example, when one turns to the allegations of knowledge on the
part of the defendants, the defendants point out that par 12 of the Minute alleges that the defendants acted not only for the plaintiffs and the brokers but for in excess of 15 other relevant parties across the 1990's, and makes the assertion that it is "impossible to fathom which of those other retainers are alleged to have been in place as at July 1994" [a date relevant to a particular class of plaintiffs].
28 The plaintiffs have prepared a document entitled "Particulars of
Statement of Claim Chronological List of Facts and Defendants' Knowledge" filed 24 December 2002, which assists in the task of ascertaining when relevant events occurred and when it is alleged that those facts were known. It is a four column table containing on the left hand side a series of dates ranging from 1983 through to 2000; in the second column a reference is made to a particular paragraph of the Minute pleading a fact; the next column contains a reference to a paragraph of the Minute pleading the knowledge of the defendants; and the final column refers to alternative dates of knowledge. This table does assist the reader of the Minute to ascertain when it is that certain facts are alleged to have occurred, and when it is alleged that those facts were known to the defendants. It is not an entirely satisfactory document, as it is not arranged in transaction form, so that the reader of the Minute is necessarily swapping backwards and forwards between a chronological list and a "transaction" based pleading, but that is perhaps a necessary side effect of the factual complexity of the claim.
29 I do accept that the cross-referencing technique makes the statement
of claim both difficult to read and difficult to plead to. A pleading which more clearly separated allegations of fact and allegations as to proper inferences to be drawn from those facts, would be desirable.
30 Having heard the arguments on this application, considered the
proposed Minute, and given some attention to the way in which a trial might be conducted, it is my view that the particulars filed by the defendants on 24 December 2002 in the form of chronological list provide assistance in pointing towards what might be a simpler claim which could more readily be pleaded to and which could more readily provide a foundation for an orderly trial. It seems to me that this is a case in which, as I noted at the outset, very many facts will not be in dispute. The real areas of dispute appear to me to concern what inferences should be drawn from those facts as to the retainer of the defendants, the knowledge of the defendants, and perhaps as to questions of causation. I expect, although it may be unduly optimistic to say so at this time, that once questions of
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retainer and knowledge have been settled, the question of the duty, if any, owed by the defendants to the plaintiffs will be much more readily ascertainable. It appears to me therefore that the preferable form of statement of claim would be one which so far as possible quarantined relatively non-contentious issues of fact from other allegations. Because of the number and detail of the facts, it may be that it would be appropriate to adapt the Scott Schedule sometimes seen in building cases.
31 It seems to me that it would be desirable for the plaintiffs to produce
what are effectively three documents. The first would deal with the facts of the underlying transactions, and could simply take the form of a chronological list of occurrences. The second would deal with tasks performed by the defendants and could again take the form of a chronological list of actions or correspondence. There need not be a strictly chronological form; it may be preferable for the lists to be arranged internally by reference to particular transactions. However, each list would simply allege that a particular act or transaction occurred; that a company was incorporated, that a loan was made, that a solicitor prepared a document, etc. It may be that a table or schedule could be produced providing both types of information in one document; such a course would be useful if it did not greatly increase complexity.
32 The statement of claim proper, to which it seems to me these would
desirably be schedules, would then take a format a little like the existing one, but much shorter. That is, in relation to the background transactions under the heading of, for example, "The Kentlaw Loan" it would plead that the brokers preferred their own interests or alternatively the interests of other named parties to those of their lender clients (as the existing 13.10 does). The particulars of that allegation would be pleaded simply by a cross-referencing to, for example, items 1F to 15F of the schedule of facts. It would be alleged that the defendants knew: (a) of the facts in 1F to 15F; and (b) that in relation to that transaction the brokers preferred their own interests, and so on. The particulars of that knowledge would be pleaded simply by reference to, for example, pars 9K to 17K of the schedule of knowledge. The duty pleaded would be a duty to advise the relevant clients that the brokers had in the past preferred their own interests or the interests of others to those of their lender clients or alternatively to disclose to the clients facts from which the clients could themselves draw that inference, without it being necessary to plead that there was a duty to disclose any particular facts.
33 I have in mind that the defendants would plead both to the statement
of claim proper - that is to what would in many cases be largely
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conclusory allegations, and that the defendants would also plead individually to each of the listed acts in each of the schedules, so that it would be clear prior to trial whether the defendants admitted or denied that a particular company was incorporated, that a solicitor prepared a particular document, and matters of that kind. As I understand it, the plaintiffs' case is very largely based upon what is said to be the natural inference that one draws from certain facts, and in some cases a presumption of law (as to for example, the knowledge of one partner being imputed to others in a firm). If this is so, the type of pleading which I have suggested would both assist in clarifying those issues, and would largely remove, one would hope, the need for the plaintiffs to attempt to prove matters which they say arise from documents and are largely not contentious.
34 In summary, it appears to me that the cross-referencing technique is
unnecessarily complex as the statement of claim is at present formulated, and that a pleading which is effectively alleging that the defendants should have informed the plaintiffs of every single fact which is pleaded and which occurred prior to the transaction in which that plaintiff engaged, is not (and could not sensibly be) the case which the plaintiffs truly seek to make out, so that the pleading should be recast to identify more clearly the real duties and breaches which they allege.
Misleading and deceptive conduct
35 Paragraphs 503 and 506 of the Minute allege misleading and
deceptive conduct. It is clear from the argument that the misleading and deceptive conduct is said to be the silence of the defendants; that is, it is said to be their failure to inform the plaintiffs of certain matters. To the extent that the "matters" concerning which silence was said to be misleading, include in effect the whole of the prior transactions pleaded, the pleading suffers from the weakness identified under the "Paragraph 84" subheading.
36 However, in relation to misleading and deceptive conduct by silence,
there is a further difficulty. Having regard to the variety of circumstances in which people consult or retain solicitors, it is not open to the plaintiffs to allege that the mere fact that a solicitor acts in a transaction amounts to a representation, if nothing is said to the contrary, that, for example, the solicitor has investigated all aspects of the transaction and that it is one in which a prudent client might properly engage. The question then arises as to what it is about the circumstances of the relationship between any of the plaintiffs and the defendants, or about the particular transaction in
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relation to which the defendants are alleged to have acted, which makes a failure to inform the clients about certain aspects of the transaction or about the other party or parties either misleading or deceptive. In my view, the plaintiffs must identify with precision what relevant circumstances in each case made the defendants' failure to inform the plaintiffs of certain matters misleading, including what facts, if any, exist which could give rise to a reasonable expectation that if particular matters existed they would be disclosed: Franich v Swannell (1993) 10 WAR 459 at 474.
Agency of broker
37 It appears to be alleged that each plaintiff retained the defendants,
because each plaintiff engaged the brokers as agent "to do all things necessary" to effect the loans secured by registered mortgage, and the agency included an implied term that the brokers would engage the defendants to act as solicitors for that plaintiff. The majority of the criticisms of the pleading in relation to that agency and that implied term are matters in relation to which it would be appropriate for the plaintiffs, if asked, to provide particulars.
38 There are however more substantial criticisms. First, it is suggested
that par A of par 1.2 of the Minute simply asserts an engagement by the plaintiffs of the brokers without giving any "usual particulars" of the contract between the plaintiffs and the brokers. To the extent that it is suggested that it is necessary to plead the time and place of every relevant conversation between plaintiff and broker, or to identify each contractual document between each plaintiff and broker, it appears to me that the defendants cast their net too widely. It is necessary, however, for the defendants to be able to discern how it is that the engagement by the plaintiff of the broker was an engagement which required the broker to "do all things necessary" to effect a loan secured by registered mortgage. It is therefore necessary for the plaintiffs to be able to plead the existence of something, such as a standard letter of engagement, or a usual course of dealing, or something of that kind, between the plaintiff and the brokers from which an agency of the appropriate type either may be discerned on the face of the documents or from which an agency of the relevant type might be inferred.
39 It may be that the dealings of the brokers with each plaintiff were
different on each occasion, and in that case it would be necessary for there to be a pleading in respect of each plaintiff. However, whatever the situation, it is necessary for the plaintiffs to point to some fact or facts
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capable of giving rise to the conclusion that an agency of the relevant type
existed.40 Assuming that an agency of the relevant type existed, the defendants
then criticise par B of the particulars to par 1.2, which asserts that the agency included an implied term that the brokers would engage Lawton Gillon to act as solicitors for that plaintiff. The defendants assert that the allegation that such a term is necessary for the reasonable and effective operation of the agency engagement is "doomed at law". This contention cannot at this stage be made out. Whether such an implied term is arguable depends upon the nature of the agency engagement which, as I have indicated, the plaintiffs must plead with more clarity. Next, the defendants note that the second basis of the implied term is that of a "custom" and that proof of custom is notoriously difficult; obviously, the plaintiffs are entitled at this stage to raise the pleading, whether or not they will have difficulty in establishing it at trial. The third basis for the implication of the term is said to arise from a course of prior dealings between broker and each plaintiff. It seems to me that the defendants are entitled to particularisation of that course of dealing, if they seek appropriate particulars.
"Background retainers"
41 It is apparent that the plaintiffs have pleaded that the defendants
acted for other parties during the course of a variety of transactions over a number of years, and that it was through acting in this way that they received the knowledge which the plaintiffs say should have been imparted to them. It is asserted by the defendants that it is important that each of those other retainers be "individually pleaded in a conventional contract manner". As I understand it, it is suggested that it is necessary in each case to identify, for example, the time and place and manner of the communication from the person retaining the defendants which gave rise to the retainer, and probably the particular transaction which is the subject matter of the retainer.
42 In relation to this matter, it seems to me that the defendants are not
embarrassed. It either is or is not the case that the defendants acted on a number of prior occasions to prepare documents and to take other action in relation to certain transactions. It seems that it may well be open to argue that in doing so they must necessarily have been retained by some person. The nature and scope of the retainer, if any, can often be identified (at least at its narrowest) by reference to what was in fact produced.
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43 It is not, it seems to me, a necessary part of the plaintiffs' case that
the defendants were retained on any particular occasion by any particular party, prior to the transactions in which the plaintiffs engaged. Rather, their case rests on the proposition that through a prior course of dealings (for whatever purpose) the defendants acquired certain knowledge and that, once they were retained by the plaintiffs, they owed the plaintiffs a duty to afford them the benefit of that knowledge. The relevance of prior retainers would be that if the knowledge, or portion of it, were gained in the course of a prior retainer, there would be a duty to the former client to keep that information confidential and not to disclose it to the plaintiffs. As I understand the plaintiffs' case, it is in the alternative; either the defendants were free to disclose the knowledge which they had acquired to the plaintiffs, in which case they had a duty to do so or, alternatively, if it be the case that because of the terms of prior retainers they were precluded from disclosing that knowledge, they had either a duty not to act for the plaintiffs at all or, in agreeing to act for the plaintiffs, they were placing themselves in a position of hopelessly conflicting duties. It does not at present seem to me, on that case, it is necessary to know the "usual contract particulars" of prior retainers.
"The Second Retainers"
44 Paragraphs 86 to 88 inclusive provide an example of this type of
pleading. It is to the effect that when the particular loans made by particular plaintiffs "went bad" the defendants acted as solicitors in relation to the default by the borrowers, and it is alleged that they had a duty to tell the plaintiffs at that point to get independent advice in relation to their loss and in relation to the conduct of both the finance brokers and of the defendants. The defendants assert that the fundamental problem with this pleading is that there is no relevant plea of loss. It is not clear from the pleading how any plaintiff could have suffered loss from the failure of the defendants to provide the advice which it is alleged should have been given. My understanding is that the plaintiffs accept that there is no clear pleading in relation to any loss which may have been suffered in this respect, and that it is necessary for an appropriate pleading to be framed. I think this is more than a mere matter of particulars; rather, there is at this point a gap in the pleading which requires to be filled.
Lawton Gillon's knowledge
45 In par 1A of the Minute, a definition provision makes it clear that
wherever it is pleaded that "Lawton Gillon" knew a matter or fact, unless
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otherwise pleaded it is meant that Mr Ian Ross Gillon knew that matter or fact. The plaintiffs then propose to rely upon the rebuttable presumption that the knowledge of one partner should be imputed to others.
46 However, when one comes to look at the pleading from which it is
said that knowledge can be inferred, the definition in par 1B provides that a plea that Lawton Gillon engaged in a form of conduct means that the defendants did so "by I R Gillon or an employee of Lawton Gillon under the supervision or direction of I R Gillon". The complaint is at this stage that it is necessary for the defendants to know whether it is alleged that it was Mr Gillon or some employee who engaged in conduct (and therefore, in the course of the conduct, learnt a particular fact). Again, that seems to be putting the matter too high at this stage.
47 It seems to me that as a general proposition it is not unreasonable to
suggest that where an employee of a firm, under the supervision or direction of a partner, engages in conduct during the course of which certain knowledge must have been gained, that that knowledge can be imputed to the supervising or directing partner. Much may depend upon the nature of the particular transaction, and I would not wish at this stage to be taken to be suggesting that there is any presumption that knowledge should be imputed to the supervising or directing partner. However, questions of knowledge and of the organisation of the practice which might give rise to knowledge, are matters peculiarly within the knowledge of the defendants themselves. It appears to me that the plaintiffs have pleaded in this respect with as much particularity as could reasonably be required of them at this stage.
48 In relation to the question of knowledge generally, a criticism made
at a number of points of the form of this Minute is that it appears to be suggested that the defendants had a duty, on each occasion on which they dealt with a transaction relating to the particular finance brokers, to "dredge through" their own recollection and the recollections of their employees, bring to mind any and every relevant fact, and organise those facts into "transactions" so that conclusions might be drawn from them concerning the nature of the finance broker's business. It is not clear to me that this is a criticism of the form of the pleading or that it involves any suggestion that the defendants would be embarrassed at trial by such a pleading. It rather seemed to me that it was - perhaps tentatively - suggested that a pleading in that form could give rise to no arguable cause of action.
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49 I do not think that the plaintiffs' case is precisely as it was
characterised by the defendants in this respect. Rather, as I understand it, the plaintiffs will seek to argue that either the sheer number of such transactions, or the unusual features of them, or a combination of weight of numbers and of unusual features, was such that a competent solicitor must necessarily at some time have drawn the conclusions about the conduct of the broker which are pleaded.
50 Perhaps alternatively, it would also be sought to argue that, having
acted for the relevant broker on such a number of occasions, when the defendants came to act for the plaintiffs in their transaction with the broker, the broker's name would at least have "rung a bell"; having recalled the name, it would then be argued that the duty of the solicitors was to consider whether there were any matters relating to that broker about which the plaintiff should be informed. If this latter alternative forms part of the case which the plaintiffs seek to make out, it appears to me that that does not emerge with clarity from the pleadings at present, and that that is something which may require clarification.
51 For the present, in relation to this argument, it is enough I think to
say that I do not accept the defendants' proposition that it is "untenable" to argue that disparate information received in different contexts over a number of years will be retained and combined to become knowledge of a whole "transaction" with a duty then arising to disclose the nature of that transaction to the plaintiffs. It seems to me that whether it is possible to argue in that way or not will depend upon the nature of the information and the context in which it is received, and that that is very much an issue for trial.
Conduct relevant to each plaintiff
52 Finally, it seems to be necessary to refer to the lack of selectivity in
the schedule giving "particulars" of the conduct of the broker which is relevant to each plaintiff and which I have described in par 10 of these reasons. As I understand it, the complaint in relation to this schedule is not that the pleading is not in proper form, since it is plainly open to the plaintiffs to plead that each of the relevant types of conduct was manifested in each transaction. The difficulty is that it is not always easy to ascertain from the pleaded case in relation to each plaintiff's transaction how it is that the material facts alleged demonstrate, for example, that the broker was negligent or that the property was inadequate as a security. It seems to me that if the plaintiffs wished to continue to assert, broadly, that almost every risk was manifested in almost every transaction, it would be
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appropriate for the defendants to seek and for the plaintiffs to provide, particulars of the facts relied upon as demonstrating that a "yes" should be inserted in the relevant column in respect of each particular plaintiff.
53 The absence of this material is not critical at this stage, however. It
was suggested to me by the counsel for the defendants that a "yes" in the column referring to an inadequate security left the defendants with the difficult decision as to whether it would be necessary to engage a valuer to value the relevant property at the relevant time in relation to each plaintiff's transaction. That submission overlooks two things; first, that the onus is upon the plaintiffs to prove that the relevant risk materialised, and second that the action is yet in its very early stages. It may be that in relation to matters of loss, at least, the usual procedure for the exchange of witness statements should be departed from and the defendants should be given an opportunity to consider all of the plaintiffs' evidence in relation to those issues before being required to determine what experts they may engage, and what evidence they will call on the question. Alternatively, appropriate particulars at a later stage may assist. I do not have any concluded view as to the best course, but it seems to me that it is a necessary consequence of running a lengthy and complex trial that normal procedures will be departed from to some extent, and that where either party can demonstrate that the ordinary procedures could result in unnecessary expenditure or inconvenience, they should consider making an appropriate application.
Consolidation
54 The plaintiffs have sought an order for consolidation of the claim by
the cross-respondents in three actions, being COR 203, 204, and 205 of 1999 with this action. An unusual feature of the application is that it is an attempt to consolidate part only of those actions with this claim and requires, as the plaintiffs accepted, the "deconsolidation" of matters presently joined in those actions and bringing a part only of those actions into the present case.
55 I do not think that it is necessary to go into the details of those other
actions at present. Broadly, the defendants do not object to those portions of those actions being dealt with together with the present action. There is a substantial overlap of fact between those actions and the present action. Those other actions are not far advanced, so that there would apparently be no disruption to them by bringing them into the present action.
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56 However, there are difficulties with making the order as presently
sought by the plaintiffs. The primary difficulty is one of procedural fairness. There are a number of other parties to the COR actions who are not parties to this action. In each of those actions, Lawton Gillon has issued contribution notices against the other cross-respondents. There are, then, a number of parties in those other actions who have an interest in the consolidation question and who are not parties to the present actions.
57 The plaintiffs in this action have written to the various parties in the
COR actions, or their legal representatives, advising that they have applied for an order consolidating the claims brought by the plaintiffs against Lawton Gillon in those COR actions into the present action. The letter advises that the application to consolidate is only to consolidate the claims against Lawton Gillon and that it is "not an application to consolidate the claim against your client with this action". There is in the letter a request that the party advise the plaintiffs' solicitors whether or not the party has a view in relation to the consolidation application. The parties were advised of the time and date of the hearing of the application for consolidation.
58 The defendants submit that both as a matter of power and in the
alternative as a matter of discretion, it is not open to me to do other than consolidate the whole of the COR actions with the present action. Whether that be a matter of power or a matter of discretion, it does appear to me that, prima facie, if the purpose of consolidation is to save time and cost, and to ensure that all related issues are dealt with in one action, then either the whole of the COR actions should be consolidated with this action or they should be left to proceed as they are.
59 In any event, the defendants advise that, should there be partial
consolidation, they would inevitably consider issuing third party notices against the other cross-respondents in the COR action so as to enable the claims against them to be determined in the present action. That is a possibility which is not canvassed in the letter which has been written to the parties in the COR actions. It may be that, were those parties aware that there was such a possibility, their response would be to oppose any consolidation. Some of the parties have not responded to the plaintiffs' solicitors letter; others have advised that they do not oppose consolidation; one, Mr Hamilton, has appeared before me to advise that he has no objection to the consolidation proposed by the plaintiffs, but that he would be very much opposed to a consolidation order which would mean that he would be brought into the present action, which he
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understands (correctly) to be potentially a lengthy and expensive
proceeding.60 It may be that the potential difficulties which could flow from
consolidation for parties other than the plaintiffs and the defendants in the present action, would not in practical terms be very significant. The plaintiffs have apparently reached the view that there is for one reason or another no purpose in pursuing claims against those parties in the COR actions other than the present defendants, and have either settled with them, offered to settle with them, or simply formed the opinion that there is no economic advantage to be obtained in pursuing a claim against them. Mr Gleeson, for the defendants in this action, indicated that there was clearly a question which the defendants would need to consider as to the extent to which they did wish to pursue the parties in the COR actions, either in those actions or in the present action, but that would be a matter in relation to which some investigations might need to take place and instructions be taken.
61 It seems to me that procedurally the appropriate course would be for
a summons to issue in the COR proceedings, and to be served upon each of the parties to those actions, seeking their consolidation with the present action. It would be desirable for such a summons to be accompanied by a letter which referred to the earlier letter from the plaintiffs' solicitors, and advised that one course which the Court might take would be the consolidation of the entirety of the COR actions with this action. That would, I think, give those parties to the COR actions all of the information which they should in fairness have in order to make submissions in respect of the consolidation application. I understand that the plaintiffs have, in pursuing the present course, sought only to do that which seemed to them to be the most practical course, but it seems to me that an unintended result may have been that the parties to the COR actions may not be aware of the risk which they face of involvement in this action.
62 In the light of the considerations of natural justice which I have
mentioned above, it seems to me that the appropriate course is to decline to make any order on the present application for consolidation. I would leave it to the plaintiffs to make a fresh application if they wish. It seems to me that it is desirable that the defendants determine their attitude to the involvement of the other parties in the COR actions as soon as is practicable. In principle, it seems to me (as I think the defendants accepted) that there would be advantages flowing from consolidation, but it would be desirable to ascertain precisely how many other parties - and
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particularly how many litigants in person, or parties of limited means -
might potentially be involved in such a course.
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