Cassis v Kalfus

[2002] NSWSC 163

CITATION:	Cassis & Anor v Kalfus [2002] NSWSC 163
CURRENT JURISDICTION:	Common Law Division Professional Negligence List
FILE NUMBER(S):	SC 20589/96
HEARING DATE(S):	1 March 2002
JUDGMENT DATE:	15 March 2002
PARTIES :	Sami Alfred Cassis (First Plaintiff) Giselle Cassis (Second Plaintiff) Marcel Isador Kalfus (Defendant)
JUDGMENT OF:	Studdert J

COUNSEL :	P. Roberts SC/M.K. Minehan (Plaintiffs) G.C. Lindsay SC (Defendant)
SOLICITORS:	LMG Solicitors & Attorneys (Plaintiffs) Mallesons Stephen Jaques (Defendant)
CATCHWORDS:	Pleading - application to strike out statement of claim - whether pleading deficient and, if so, in what respects.
LEGISLATION CITED:	Limitation Act
DECISION:	See para 43

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
PROFESSIONAL NEGLIGENCE list

STUDDERT J

Friday 15 March 2002

20589/96 SAMI ALFRED CASSIS & ANOR v MARCEL ISADOR KALFUS

JUDGMENT

1 HIS HONOUR: This is an application by way of notice of motion to strike out an amended statement of claim “pursuant to Part 15 rule 26(1)(a), (b) and (c) of the Supreme Court Rules 1970 or the inherent jurisdiction of the Court.”

2 It is appropriate to record some matters by way of history.

3 The plaintiffs, Sami Alfred Cassis and Giselle Cassis, instituted proceedings against the defendant, Marcel Isador Kalfus, in 1996. Those proceedings came to trial before Dowd J, whose judgments were delivered on 18 December 2000 and 27 April 2001. On 17 May 2001 the plaintiffs filed notices of appeal from the two judgments and on 22 June 2001 Dowd J delivered a further judgment in favour of the defendant. Then, on 5 July 2001, the plaintiffs filed an amended notice of appeal seeking orders to set aside the earlier judgment of 27 April 2001 and the orders of 22 June 2001. The plaintiffs sought instead judgment in their favour with damages to be assessed.

4 The appeal was heard on 20 and 21 November 2001 and on 11 December 2001 the Court of Appeal allowed the appeal and set aside the orders made by Dowd J in the previous June. The matter was remitted to this Division for a new trial. The Court of Appeal made an order which assumes significance for present purposes:

“Order that the appellants [plaintiffs], within twenty-eight days, serve a further draft statement of claim which does appropriately raise the issues concerning causation and quantum of damages in relation to each substantial distinct cause of action relied on.”

5 On 14 January 2002 the plaintiffs filed an amended statement of claim expressed to be pursuant to the above order of the Court of Appeal, and it is the filing and serving of that document which has prompted the present notice of motion.

6 The defendant has submitted that the most recent pleading does not comply with the order of the Court of Appeal in respects set out in the submissions of Mr Lindsay of Senior Counsel, and which I will now summarise:

(i) the pleading makes “rolled up” allegations as to

(a) the existence of duties which are said to arise by virtue of a solicitor-client relationship and also a fiduciary relationship;
(b) breaches of those duties alleged;
(c) loss and damage resulting from those breaches;


(ii) not only are the matters pleaded “rolled up” but the facts allegedly giving rise to the duties are not pleaded;

(iii) absent any clear allegation of the existence of agreements between the plaintiffs and the defendant, the pleading does not reveal the basis upon which duties are alleged to “arise by virtue” of the defendant being “a solicitor” or “a joint venturer”;

(iv) reference is made to consensual arrangements not appropriately pleaded or particularised;

(v) in paras 17(d) and (e), 19(d) and (e), 20, 22(b), 23(b) and 24, the allegation is made that an “agreement” or an “arrangement or agreement” was unlawful and unenforceable but there was no proper identification of what was unenforceable or unlawful, nor does the pleading assert why it was unenforceable or unlawful.

7 Mr Roberts of Senior Counsel submitted that the order of the Court of Appeal was neither an invitation nor a direction to plead the plaintiffs’ case afresh and that which was done in the preparation of the pleading filed in January 2001 was a proper compliance with the order of that court. He submitted further that it would not have been proper for the plaintiffs to have treated the order as affording an opportunity to do other than address the substance of the court order.

8 The version of the statement of claim which the Court of Appeal had before it was the fourth amended statement of claim. The document filed in January 2002 is the fifth amendment. It is difficult to identify the amendments in the most recent pleading on the face of the document filed and it is difficult to identify the amendments made on a quick comparison between that document and its immediate predecessor. No attempt was made on the face of the document by underlining or otherwise to identify the amendments. However, at my request, a copy of the most recent amended statement of claim in which the amendments have been underlined has been made available to the Court. The amendments that have been made are to be found in paras 6, 10, 13, 17, 18, 19, 20, 21, 22, 23, 24, 25, 31, 33, 36, 37, 41, 46, 53, 55, 56, 57, 58, 59, 61, 62, 63, 65, 66, 67, 68, 69, 73, 74, 76 and 77 of this document.

9 Because of the competing submissions of the parties as to whether the pleading the subject of the motion complies with the directions of the Court of Appeal, it is necessary to examine what appears in the judgment of that court.

The history of the relationship between the parties

10 This is addressed in the judgment of Hodgson JA. Briefly, the first plaintiff is a scientist who worked in France before 1981. He migrated to Australia in 1981 with his wife, the second plaintiff, and the first plaintiff engaged the defendant as his solicitor to establish an Australian subsidiary to the company by which the first plaintiff had been employed in France. Following the establishment of that subsidiary company, the first plaintiff became its managing director and the defendant acted in various matters for the first plaintiff and for the subsidiary company. Later still, in 1988, the first plaintiff established a new company to carry on the business then acquired from the French subsidiary. The first plaintiff and the defendant became directors and shareholders of that company. I will not record what happened thereafter; the history of events is outlined in paras 22-37 of the judgment of Hodgson JA. Suffice it to say that events occurred which allegedly involved breaches of duty by the defendant towards the plaintiffs, both in his capacity as their solicitor and by reason of a fiduciary relationship alleged. The plaintiffs claim to have suffered damage in consequence thereof.

Criticism of the statement of claim in the Court of Appeal

11 At first instance the trial judge determined that a defence pleaded under the Limitation Act was substantiated. In order to make out his defence under the Limitation Act on the claim in negligence, the defendant had to prove that relevant damage was suffered from any relevant breach of duty before the middle of 1990. One of the difficulties on the face of the pleadings was in determining when damage was suffered and in consequence of what breach.

12 Hodgson JA said as to this at para 82:

“Finally on this topic, there was a submission by the first appellant that the primary judge should have considered whether there were causes of action arising after mid-1990 due to breaches occurring after that date or breaches in respect of which damage first occurred after that date. In my opinion, it would have been a denial of natural justice to the respondent in this case to have made a finding against the respondent on any such basis, in circumstances where a claim on that basis had not been formulated with any clarity by the first appellant. A plaintiff must put a claim in some reasonably clear way before a court can give effect to it, because otherwise the defendant cannot adequately respond to it and a court would deny the defendant natural justice if it gave effect to such a claim. It is not enough to include in a global claim for damages some items of damage that might be held referable to particular breaches occurring within the limitation period. In my opinion, the circumstance that the allegations of breach of duty in this case included allegations of breaches in relation to the White and Vesaro mortgages and the Roden transaction, and the list of damage included items relating to those transactions, did not amount to a sufficiently clear formulation of a distinct claim arising within the limitation period.
(Emphasis added)

13 Hodgson JA, in proposing a new trial on all issues, went on to say this at para 89:

“There should in my opinion be further orders with a view to ensuring that the trial does not miscarry again. A large factor in causing the trial to miscarry has been the lack of precision in the appellants' pleading. It is not acceptable to plead a series of breaches occurring over many years, and then to make a global pleading of damage caused by all the breaches . While it may be appropriate to bring a claim arising out of an ongoing relationship, involving a number of breaches occurring over many years, and while it could be productive of complexity and repetition to require each individual breach to be explicitly linked to allegations of damage caused by that breach, a pleading should enable definition, in a way fair to both parties, of issues concerning breach, causation and quantum of damage in relation to each cause of action relied on . It may be possible to group causes of action where the damage involved in each of them are substantially the same, so long as this can be done without obscuring issues of causation and quantum of damages arising in relation to each of them. The pleading in this case was grossly inadequate in this regard, and in my opinion would be liable to be struck out. I propose to order that the appellants, within 28 days, serve a fresh draft Statement of Claim which does appropriately raise issues concerning causation and quantum of damages in relation to each substantially distinct cause of action relied on.”
(Emphasis added)

14 It is against the background of the above remarks in the judgment of the Court of Appeal that I should determine whether the last pleading amounts to a compliance with the order of the Court of Appeal.

15 The statement of claim in the form now presented remains a lengthy document, comprising eighty paragraphs. Mr Roberts described paras 2-11 of it as being essentially historical and those paragraphs outline the relationship between 1982 and 1988 and they assert a solicitor-client relationship between the first plaintiff and the defendant during that period.

16 Then in paras 12-25 the pleading asserts the duties, breaches and damages in the period between 1982 and 1989.

17 In paras 12-21 the pleading addresses the acquisition from the French subsidiary company by the company of which the first plaintiff and the defendant became directors and shareholders.

18 Paragraph 17 asserts duties arising by reason of the defendant’s “acting as solicitor” for the first defendant, and then in para 18 the duties identified in para 17 are expressed to arise “by virtue of the solicitor-client relationship” and “by virtue of the fiduciary relationship between the defendant as solicitor and the first defendant as his client”.

19 Paragraph 18 is in a form similar to that later used in para 55 when the pleader considered the relationship between the first plaintiff and the defendant in the period 1989-1995. It was not made clear in the course of submissions what distinction was sought to be drawn in the two expressions of the relationship in para 18 and the same applies to the two ways the relationship was expressed in para 55. If, indeed, the first plaintiff is going to seek to maintain two discrete bases for the breaches of duty set out in para 17, then the pleading should deal with the facts relied upon as giving rise to each such relationship separately, and should also define the duties, breaches of duty and losses separately. If the first plaintiff does not intend to maintain a distinction between the relationships expressed in para 18, then para 18 should be amended to delete the reference to the fiduciary relationship.

20 Paragraph 20 addresses the issue of causation concerning the breaches of duty identified in para 19. What is here asserted is that the first plaintiff would not have entered into the agreement had he known

(a) the true financial position of the defendant, and

(b) the fact that the proposed agreement was or might be unlawful and unenforceable.

21 Presumably that same agreement is referred to in para 17(e), 19(d), 22(b) and 23(b) but nowhere does the pleading identify the “agreement” (or “arrangement”: para 23(b)), nor does it specify why it was unlawful and unenforceable. In my opinion, this deficiency in the pleading must be addressed.

22 Paragraph 21 pleads the damage suffered by reason of the breaches of duty identified in para 19 and identifies the time at which the losses were suffered.

23 The pleader moves in para 22 to express the claim advanced by reason of breach of fiduciary duty as a joint venturer. In this paragraph the pleading should identify the facts giving rise to and identifying the joint venture, at the very least by reference to one or more of the preceding paragraphs. This deficiency must be rectified.

24 Paragraph 23 then recites breaches of the fiduciary duties and para 24 addresses the issue of causation, again in the same objectionable form employed in para 20. I will not repeat what I said earlier as to para 20 or the need for the revision of the pleading.

25 Paragraph 25 identifies losses and damage, but fails to identify which breach or breaches caused each loss particularised. This should be done.

26 In para 26 and following paragraphs, the pleader has turned to the period 1989 to 1995. Mr Roberts identified para 26-52 as being essentially historical as to events in that period and those paragraphs do not call for further comment.

27 In para 53 the pleader has identified matters in relation to which the defendant acted as the first plaintiff’s solicitor. In what is here particularised the pleader is presumably referring to the various historical paras 26-52, but, at the very least, the pleading should identify the earlier paragraphs to which each of the sub-paras 53(a) to (l) refer.

28 Paragraph 54 asserts the duties owed and para 56 defines the breaches.

29 Paragraph 57 pleads the loss and damage suffered. I observe that the particulars in 57(i) and (ii) are insufficient to identify when the moneys referred to were paid, and this must be addressed when the statement of claim is amended once again. Paragraph 57 should also identify which breach or breaches of duty caused each loss particularised.

30 I have already referred to the need for the pleading to deal discretely with the duties and breaches and damages if the plaintiff seeks to maintain a distinction between the duties arising by virtue of the solicitor-client relationship and the fiduciary relationship asserted in para 55 (see para 19 above). If there is to be a distinction maintained, there must be discrete pleading. If no distinction is to be maintained, then para 55 should be amended by deletion of reference to “the fiduciary relationship between the defendant as solicitor and the first plaintiff as client.”

31 Paragraph 58 discretely addresses the duties arising on the insolvency of IGC and para 60 identifies the breaches. Once again, para 59 rolls up in the one paragraph two different sources of duties and is open to the same criticism I have already voiced about paras 18 and 55. This deficiency in para 59 must be addressed.

32 Paragraph 61 pleads loss and damage sufficiently.

33 In para 62 the pleading turns to the Roden transaction in 1994 addressed in an earlier historical paragraph. The duties arising are sufficiently pleaded, but para 63 gives rise to the same problem as in earlier paragraphs where there is a rolled up assertion as to the source of the duties. Once again, for the purposes of the Roden transaction, the statement of claim should plead discretely in relation to breach of solicitor-client duty and breach of fiduciary duty if the two sources are to be maintained as grounds for the plaintiffs’ claim. Otherwise para 63 should be amended by omitting reference to the fiduciary relationship.

34 Paragraph 65 pleads the loss and damage but fails to identify which breach or breaches caused each loss particularised. This should be addressed.

35 In paras 66-68 the pleading addresses fiduciary duty of the defendant as a joint venturer. In this paragraph the joint venture requires identification, at least by reference to earlier paragraphs in the pleading such as sufficiently identify it.

36 Paragraph 67 sufficiently pleads the breaches of that duty and para 68 pleads the loss and damage but, once again, in the particulars under this paragraph the dates of payments in (i) and (ii) should be stated.

37 Paragraph 69 addresses the claim of the first plaintiff for personal injury. It is asserted

“The defendant owed a duty as aforesaid not to cause the first plaintiff financial harm. As a result of the aforementioned breaches of duty, the first plaintiff suffered personal injuries, loss and disabilities.”

38 There follow some particulars, many of which do not amount to personal injury, but they do include an allegation of a psychiatric disorder. What the paragraph does not sufficiently identify is what breach or breaches of duty occasioned the harm alleged or when, and, in my opinion, this paragraph does not comply either with the requirements of Pt 15 of the Supreme Court Rules or with the order of the Court of Appeal. If this claim is to be maintained, it must be repleaded.

39 In paras 72-77 the claim of the second plaintiff is addressed. Paragraph 72 asserts that the defendant acted as her solicitor in the transfer of the property at Leeton Avenue, earlier dealt with in pleading the first plaintiff’s case, and the paragraph defines the duties arising according to para 73 by reason of the solicitor-client relationship. However, once again, in para 73 the pleader has rolled up duties under the solicitor-client relationship and by virtue of a fiduciary relationship. The paragraph cannot stand in this way and what I have observed as to the earlier like paragraphs applies here. If the second plaintiff maintains there is a difference in the nature and significance of the solicitor-client duty and the nature and significance of the fiduciary duty arising from such relationship, the pleading must deal with what gives rise to such duties, the breaches and the damage resulting discretely. If no distinction is to be maintained as to the alternative expression of the relationship, that expression should be deleted.

40 In para 76 loss and damage is pleaded but not sufficiently identified. Since this statement of claim is to be amended again, the pleader should sufficiently particularise when the encumbrances occurred and when the ultimate sale took place.

41 Paragraph 77 suffers from the same defect as para 69 concerning the first plaintiff’s claim for personal injury and should be repleaded.

42 I have identified what I regard to be deficiencies in this pleading to which attention must be addressed so as to give effect to the order of the Court of Appeal. The pleading filed on 14 January 2002 is to be struck out but the plaintiff should be afforded an opportunity to file and serve a further amended statement of claim and I propose to give consequential directions.

43 Accordingly, the orders of the Court are as follows:

1. The amended statement of claim filed on 14 January 2002 is struck out, but the plaintiffs are permitted to replead, so as to address the matters identified in paras 19, 21, 24, 25, 27, 29, 30, 31, 33, 34, 35, 36, 38, 39, 40 and 41 above.

2. The plaintiffs are to have leave to file a further amended statement of claim within twenty-one days from today.

3. The defendant is to request any further and better particulars thereof within fourteen days of service of the further amended statement of claim.

4. The plaintiffs are to answer any reasonable request for further and better particulars within a period of fourteen days of receipt of the request.

5. The defendant is to file an amended defence within fourteen days of the receipt of proper particulars.

6. The matter is to be relisted in the Judge’s Professional Negligence List on 7 June 2002 to determine whether it is ready to be allocated a further hearing date.

7. The plaintiffs are to pay the defendant’s costs of the motion.

8. Liberty to apply on forty-eight hours notice, in the event of non compliance with any of the above directions or in the event that the matter is ready to be relisted for the purposes of the allocation of a hearing date prior to 7 June 2002.

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Last Modified: 03/18/2002