Dimos v Fraser
[2010] VCC 331
•6 May 2010
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-08-01682
| LEO DIMOS | Plaintiff |
| v | |
| ROBERT GRANT FRASER | Defendant |
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| JUDGE: | HIS HONOUR JUDGE ANDERSON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 19 & 22 March 2010 |
| DATE OF JUDGMENT: | 6 May 2010 |
| CASE MAY BE CITED AS: | Dimos v Fraser |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 0331 |
REASONS FOR JUDGMENT
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| Catchwords: | Solicitor – Costs recovery action – Counterclaim based on solicitor’s negligence – Proceeding against partnership – Effectiveness of service on the partnership – Attempt to enforce judgment against retired partner – Order 17, County Court Rules of Procedure in Civil Proceedings 1999 – Legal Practice Act 1996. |
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. Stuckey | Leo Dimos & Associates |
| For the Defendant | Mr S. Warne | Lennon Mazzeo |
| HIS HONOUR: |
1 Robert Grant Fraser is a solicitor. He was formerly a member of the firm Rogers & Gaylard. In May 1997, he gave notice of his retirement from the partnership. This would ordinarily have entitled him to certain payments from the remaining partners. In September 1998, Mr Fraser engaged Leo Dimos & Associates to recover the
amount he alleged he was owed by the remaining partners.
2 On 13 December 1999, a writ was issued in the County Court claiming an accounting of the partnership and Mr Fraser’s entitlements (“the partnership action”). The defendant to the writ was named as “Rogers and Gaylards (a firm)”. When Mr Fraser gave notice of his retirement from the partnership there were six other partners, Anthony Hine Walstab, Michael Robert Gaylard, Murray Thompson Hill, Michael Nairn Houston, Roger John King and Sandra Adminis.
3 Mr Hill retired in about March 1998 before the writ in the partnership action was issued. Changes in the areas of practice undertaken by the firm and the retirements of Fraser and Hill had seriously affected the financial stability of the firm. Later, Gaylard and Houston were to become bankrupt and Walstab, King and Adminis each made arrangements with their creditors under Part X of the Bankruptcy Act. Ultimately, Mr Hill was the only remaining former partner who had not become bankrupt or made arrangements under the Act.
4 Mr Hill was never served personally with the writ issued on Mr Fraser’s behalf. The partnership action was later transferred to the Supreme Court. On 17 November 2004, there was an unopposed hearing before Justice Bongiorno. He entered judgment against the firm for $499,004.08 together with costs. An application was made on Mr Fraser’s behalf on 18 January 2006 to execute the judgment against Mr Hill and Mr Houston. Mr Houston later went bankrupt. On 23 June 2006, Master Efthim dismissed the application to enforce the judgment and on 3 July 2006, ordered that the liability of Mr Hill to Mr Fraser be determined at a separate trial. On 31 August 2007, after an appeal from the order of Master Efthim was filed, an agreement was reached between Mr Fraser and Mr Hill. Pursuant to the agreement, Mr Hill paid to Mr Fraser the sum of $170,000. Mr Fraser had previously recovered a total of $58,245 from Walstab, King and Adminis and has to date recovered $42,294 from Houston’s estate.
5 Mr Fraser alleges that:
a.
Leo Dimos & Associates were negligent in failing to personally serve Mr Hill with the partnership action;
b. as a consequence of the negligence: i. Mr Dimos should pay damages;
ii. the balance of legal costs claimed by Leo Dimos & Associates for the work performed in the proceeding, including for the enforcement application against Mr Hill, should have deducted from it the amount of any legal costs wasted as a consequence of the failure by Leo Dimos & Associates to act with reasonable competence.
c. further, the Bill of Costs rendered by Leo Dimos & Associates on 8 December 2004 did not comply with the requirements of the Legal Practice Act 1996 and the claim based on that bill must fail. 6 At the request of the parties, the trial was limited to questions of liability. The issues for determination at this stage of the proceeding are:
a.
whether the processes followed by Leo Dimos & Associates in relation to recovery from the remaining members of the partnership after Mr Fraser retired, and particularly the failure to serve the partnership action upon Mr Hill
personally, amounted to negligence;
b.
whether Leo Dimos & Associates were entitled to recover the balance of the legal costs in respect of the work performed in the proceeding, including for the application to enforce the judgment against Mr Hill.
Plaintiff’s claim for legal costs
7 Leo Dimos & Associates was engaged by Mr Fraser in September 1998 and continued to perform legal work on his behalf in relation to the partnership action until about July 2006, when Mr Fraser terminated the retainer after the filing of an appeal from the order of Master Efthim. Between 1998 and 2004, Leo Dimos & Associates rendered a number of accounts for legal fees, all of which were paid and are not in dispute in this proceeding. The following further invoices were rendered but remain unpaid:
Date Invoice No. Amount 8 December 2004 8899 $25,968.33 1 March 2006 9423 $32,404.35 11 July 2006 9519 $5,378.34
The defendant asserts the following defences in relation to the outstanding accounts:
a. when the bill dated 8 December 2004 was rendered, no Costs Agreement had been entered into between the parties; b. In respect of each of the bills:
i. the plaintiff should not be entitled to recover costs where the work performed was “wasted” as a consequence of Leo Dimos & Associates’ failure to properly serve the partnership action on Mr Hill; ii. any damages arising from the plaintiff’s negligence in failing to properly serve Mr Hill should be set off against any legal costs properly adjudged to be due and owing. 8 The claim by Leo Dimos & Associates for legal costs is covered by the Legal Practice Act 1996. Section 93 provides that legal costs are only recoverable, relevantly:
“(a) under a Costs Agreement made in accordance with Division 3 [of the Act]; or (b). in the absence of a Costs Agreement, in accordance with the applicable practitioner remuneration order or scale of costs …”
9 In the present case, there is no dispute that:
a.
in relation to the Bill of Costs dated 8 December 2004, covering work performed between 24 July 2003 and 19 November 2004, that there was no Costs Agreement in existence until 23 December 2004;
b.
the Supreme Court Scale of Costs had application to the work performed by Leo Dimos & Associates covered by the Bill dated 8 December 2004.
10 Pursuant to s.106(1), “a legal practitioner or firm must not commence legal
proceedings to recover legal costs from a person until at least 30 days after the
practitioner or firm has given a Bill of Costs to the person in accordance with section107. applies whether or not the legal
costs are the subject of a Costs Agreement”. Section 107(1) provided that “a Bill of”Sub-section (4) provided that section 106 ““Within 30 days after receipt of a lump sum bill, a person may request the legal practitioner or firm to give them an itemised bill”. Sections 115 and 116 provide procedures by which the recipient of a Bill of Costs might have the bill assessed by the Taxing Master, if application is made within limited time frames.
11 In the present case, there is no dispute that:
a. the Bill of Costs dated 8 December 2004 was in the form of a lump sum bill and not an itemised bill; b. Mr Fraser did not request Leo Dimos & Associates to give him an itemised bill or that the lump sum bill be assessed by the Taxing Master. 12 In my view, there is no impediment to the present costs recovery action by Leo Dimos & Associates. The plaintiff’s entitlement will be determined during the quantum hearing and will be subject to any setoff or counter claim or other deduction by reason of any alleged “wastage” as a result of the decisions made by Leo Dimos & Associates in the conduct of the partnership action.
Court rules relating to proceedings against partners
13 Leo Dimos is the principal of Leo Dimos & Associates. He had overall responsibility for the conduct of Mr Fraser’s court action although a number of senior employees had the day-to-day handling of the file. It is necessary to examine what occurred in the action, particularly in relation to Mr Hill, in order to determine whether Leo Dimos & Associates acted with appropriate care, having regard to what at that time could reasonably be expected of a person professing the skill of an experienced commercial litigator. At the trial, evidence was given on behalf of Mr Dimos by George Leonidas, an employee solicitor and later senior associate with Leo Dimos & Associates. Mr Leonidas was also responsible for the preparation of the Bills of Costs in dispute in the proceeding.
14 Mr Fraser also gave evidence. Although he was a very experienced litigation solicitor his practice was apparently confined to personal injury matters. Neither witness gave evidence of “peer professional opinion” or whether what was done by Leo Dimos &
Associates in the partnership action was widely accepted as “competent professional practice” in the circumstances.
15 By his defence to counterclaim, Mr Dimos admitted the defendant’s allegation that, it was necessary “as a matter of law, that the plaintiff [Mr Dimos] know the relevant procedures and rules of court applicable to the defendant’s claim”. In the present case, the relevant rule was Order 17 of the County Court Rules of Procedure in Civil Proceedings (and later the equivalent Supreme Court rule which was, relevantly, in precisely the same terms). Order 17 provides special procedures for the conduct of an action by or against partnerships. A similar rule has existed in the court rules both in Australia and England for many years. The rule permits a proceeding to be commenced against partners in the name of “the firm of which they were partners when the cause of action accrued” (Rule 17.01). In the partnership action the defendant was named as “Rogers & Gaylard (a firm)”.
16 The critical issues which arise in relation to Rule 17 in the present proceeding are as follows:
a.
whether Leo Dimos & Associates complied with the procedures in the Rule which provided an alternative to personal service on each of the partners pursued?
b.
whether the alternative procedure for serving the partners was not available because Mr Fraser was aware that the partnership had been dissolved at an earlier date?
c.
Whether, in circumstances where there had been a failure to comply with the alternative process, Mr Fraser’s solicitors were entitled to make application pursuant to Rule 17.07 to enforce against Mr Hill the judgment obtained against the firm?
Service of the partnership action
17 Rule 17.03(1) provides that service on partners sued in the firm name may be on “(a)
any one or more of the partners; or (b) any person at the principal place of business of the partnership within Victoria who appears to have control or management of the
partnership business there”.
18 The writ in the partnership action was served by a process server, Mr Chris Belden, by “delivering the same to the receptionist of Rogers & Gaylard, Level 13, 31 Queen Street, Melbourne” on 20 December 1999.
19 There was apparently non-compliance with Rule 17.03(4) which required the service of a written notice with the writ informing the person served “whether he is served as
a partner or as a person having the control or management of the partnership
business or in both characters”. The rule provided, however, that “in default of such
notice, the person served shall be taken to be served as a partner”.20 Rule 17.04 provided that, “partners sued in the name of their firm shall appear
individually in their own names, but the proceedings shall, nevertheless, continue in
the name of the firm”. In the partnership action, an appearance was filed on 14 firm), not by the individual partners in their own names.
Whether the partnership had been “dissolved” before service
21 In the present proceeding, Mr Fraser relied upon Rule 17.03(3) which provides that, “Where a partnership has to the knowledge of the plaintiff been dissolved before the
proceeding against the partners has commenced, the originating process shall be
served on every person sought to be made liable in the proceeding”.
22 Mr Hill retired from the partnership of Rogers & Gaylard in about February 1998. Mr Fraser found that out the following month. He informed his solicitors by letter dated 16 December 1998 that, “I can advise that my former partner, Murray Hill, has left a
message for me to call. You may recall Murray has left the partnership and is
employed by TAC Law”.
23 It was submitted that:
a. the retirement of Mr Hill “dissolved” the partnership; b.
Mr Fraser was aware of the dissolution, and had informed his solicitors of that fact on 16 December 1998;
c. the writ was not issued until 13 December 1999; d. the writ was not served personally on Mr Hill. 24 Further, Mr Fraser had in a communication with Leo Dimos & Associates expressed his concern that Mr Hill had not been personally served with the writ in the partnership action. In an email dated 10 May 2004, Mr Fraser wrote, “I also had a
recent thought, are we sure that Murray Hill has been served? We served Rogers
and Gaylard, which covered 5 of the 6 defendants (as they were partners at the time).
By the time that we issued proceedings, Murray had left the firm. Could you pleasecheck this”.
25 In a letter dated 26 May 2003 ( in fact sent in 2004), Leo Dimos & Associates responded as follows, “Regarding service on Murray Hill, we confirm that good
service has been effected on him notwithstanding that he had already left the
partnership at the time of service. By the terms of Order 17.01, the members of the
firm at the time of accrual of the cause of action are the parties, whether or not they
had left the firm by the date of the Writ. Service on any partner (or by other means
allowed for under order 17.03) is taken as service on all partners, ie as defined, allpartners as at the date of the accrual of the cause of action”.
26 Defendant’s counsel, Mr Warne, submitted that Rule 17.03(2) applied, as Mr Fraser had, before the service of the partnership action, known of Mr Hill’s retirement and, therefore, the “dissolution” of the partnership effected by the retirement. This
submission was made notwithstanding the fact that Mr Fraser had sworn an affidavit
on 19 December 2005 in support of the application before Master Efthim to enforce
the judgment against Mr Hill, which included the following paragraph:
“21. At no time prior to the issue of the proceeding in the County Court was I aware
that the partnership of Rogars and Gaylard had been dissolved or that the
partnership between Murray Thompson Hill, Anthony Hine Walstab, Michael
Robert Gaylard, Michael Nairn Houston, Roger John King and SandraAdminis had been dissolved”.
27 The affidavit was sworn following the preparation of a memorandum of advice on 30 September 2005 by Mr Mattin of counsel in which he stated in paragraphs 15 and 16 that, “Fraser has instructed that after he resigned from the firm on 30 June 1997 he
became aware that Hill was no longer with the firm but was never aware or made
aware of the status of Hill’s relationship with the remaining five partners … he was not
aware expressly or impliedly or had actual or constructive notice of the dissolution ofHill’s partnership”.
28 The Deed of Partnership which governed the relationship between Mr Fraser and his other partners and, after his retirement, between Mr Hill and the other remaining partners, provided that the partnership would continue with the remaining partners and that consequently, as was argued by the plaintiff, the partnership was not dissolved but was reconstituted by the non-retiring partners who had ongoing responsibilities to the retiring partner.
29 Clause 2(c) of the Deed of Partnership provided that, “The retirement or death of any
partner or the admission of any new partners shall not determine the partnership which shall continue according to the provisions of the deed subject only to such
modifications as are necessarily incidental to such retirement, death or admission”.
30 By reason of the nature of a partnership, as a collection of individuals or companies without separate legal personality, a change in the composition of the partnership by the addition or deletion of one or more partners effectively “dissolves” the partnership.
On the other hand, substantial businesses are conducted by partnerships comprised
of large numbers of partners. Notwithstanding changes in the composition of such
partnerships, they appear to continue their operations unaffected by those changes.
This appears to be what the partners intended by the inclusion of Clause 2(c) in the
Deed of Partnership.31 There has been much debate in the authorities about the meaning of the word decided that any change in the composition of the partnership, whether from retirement, death or bankruptcy, results in a “dissolution” of the partnership for the purpose of the rule. No authority was cited to me on the question of what was meant by the phrase “to the knowledge of the plaintiff” in the Rule; whether what is necessary is simply knowledge of the essential facts or an understanding of their legal consequences.
32 Mr Fraser knew at the time the partnership action was served that Mr Hill had retired from the partnership. He said in the affidavit he swore later in the proceeding that he did not know that Mr Hill’s retirement had effected a dissolution of the partnership for the purposes of service of the writ by the methods allowed in Rule 17.03. I am
satisfied in this case that Mr Fraser should not be regarded as having had knowledge
that the partnership has been dissolved before service of the writ for the following
reasons:
a.
Clause 2(c) of the partnership deed made it clear that the partnership was to continue notwithstanding the retirement of a partner;
b.
other cases, where similar issues were raised, did not contain such a clear indication in the partnership deed that a “dissolution” of the partnership not was to follow upon the retirement of a partner;
c. Mr Fraser asserted that this was his state of “knowledge” at the relevant time; d. Partnership Act
“determine the partnership”, and in s.36 for a partner to give notice ofThe provides in s.30 for a partner to give notice of intention to partnership agreement may contain a provision to the contrary. Clause 2(c) indicated such a contrary intention.
Whether the partnership action writ was appropriately served
33 In regards to the purported compliance by Leo Dimos & Associates with the provisions of Rule 17, I am satisfied that service upon the receptionist at Rogers & Gaylard could not in any circumstances be regarded as service on a person “who appears to have control or management of the partnership business” at the “principal place of business of the partnership”. Further, the failure of the solicitors to serve the notice required by Rule 17.03(4)(i) suggests that Leo Dimos & Associates were unaware of the requirements of the Rules, particularly that the only alternative to personal service was compliance with Rule 17.03(1)(b)(ii). The method of service employed made it impossible to identify any particular partner who was “taken to be served” as a result of the failure to serve the notice.
34 By Rules 17.04 and 17.05 only a partner may enter an appearance. The appearance filed on 14 January 2000 by Rogers & Gaylard, purportedly on behalf of the firm, was incompetent as the receptionist was not a partner of the firm. Rule 17.06 has no
application as no person was “served as a partner”.
35 Rule 17.02 provides that a party may require the partnership to disclose details of the partners at the time the cause of action accrued and any change in membership of the firm since that time. Although there may be some doubt as to whether a party who was a partner of the same firm can serve such a notice, Leo Dimos & Associates served a notice under Rule 17.02 on Rogers & Gaylard on 23 February 2004. It required the firm to “disclose in writing within 14 days after service of this notice, the
name and address of the usual or last known place of residence or of business of each person constituting the defendant firm at the time when the cause of action accrued and whether since that time there has been any and what change in the
membership of the firm?”
36 On 16 March 2004, a response was received notifying Mr Fraser’s solicitors of the place of business of King, Walstab, Gaylard and Adminis, the last known place of residence of Houston and Hill, that Hill and Houston “retired as a partner after the cause of action accrued, [and] there have not been any further changes in the
membership of the firm. The firm ceased trading on 19 December 2003. ”On 16 partnership action on behalf of the firm. There is also evidence that Mr Hill was being kept informed by the remaining partners of the course of the partnership action and Mr Hill was being indemnified in respect of any liability he may have to Mr Fraser as a result of that proceeding.
37 not permit the defendant to rely upon a failure to comply with the requirements of
Rule 17.03(1)(b). When the matter was raised in defence counsel’s closing
submissions, Mr Stuckey submitted that, if the plaintiff had been aware that such an
argument would be put, the plaintiff may have called the process server, Mr Belden,
to give evidence of the “appearances” when he delivered the writ to the receptionist at
Rogers & Gaylard on 20 December 1999 or, alternatively, the receptionist or some
other person from Rogers & Gaylard could have given evidence as to the “control andPlaintiff’s counsel, Mr Stuckey, submitted that the pleadings in the present action did point would appear to have no substance, unless in fact the receptionist was a partner of the firm.
38 The defendant’s counterclaim dated 7 August 2007 raised the relevant breach of duty in paragraph 8, by pleading, “In breach of the tortious duty of care, and the implied contractual duty of care, the plaintiff failed to serve Hill”. Whilst the allegation in the defence that certain of the work charged for by the solicitors had been wasted was particularised (without reference to the solicitor’s non-compliance with Rule 17.03(1)(b)), no further and better particulars were sought of the allegation of breach of duty.
39 In the circumstances, I consider that there is little basis for complaint. The broad pleading of the defendant was generally sufficient, as the only alternative to personal service on Mr Hill was service under Rule 17.03(1)(b) which the solicitors believed they had complied with. Further, it was apparent during the course of the present hearing that the method of service relied upon by Leo Dimos & Associates as an alternative to personal service was in issue.
40 Justice Bongiorno entered judgment against the firm on 17 November 2004. It is apparent from the transcript of the trial that the judge was satisfied the firm had been served although on 22 March 2004, M R Gaylard Solicitor had filed a Notice of ceasing to act on behalf of the firm. On 13 October 2004, Leo Dimos & Associates notified Mr Hill, by registered post addressed to his place of employment, that the trial was listed for hearing on 17 November 2004 and enclosed some court documents. On 21 October 2004, Mr Hill wrote to Leo Dimos & Associates stating, “As you know,
I am not a defendant to the proceeding. The documents delivered to level 13, 31
Queen Street, Melbourne were not documents served on me and this is not anaddress for service on me”.
41 There is evidence that Mr Hill had knowledge of the dispute with Mr Fraser and the partnership action:
a. immediately following the dispute arising and claims being made by Mr Fraser against Rogers & Gaylard, the initial responses in correspondence from the firm on 17 and 25 September 1997, 23 January and 2 March 1998, were written by Mr Hill; b. on 23 February 1999, Leo Dimos & Associates sent a letter of demand to Mr Hill at TAC Law Pty Ltd, where he was then employed, demanding Mr Fraser’s entitlements pursuant to the partnership agreement; c. according to information gained by Mr Fraser at the creditors’ meetings of King, Walstab and Adminis in October 2004, Hill was kept advised of developments in the partnership action and the remaining Rogers & Gaylard partners had indemnified Hill against any liability he may face in the proceeding. 42 Subsequently, Leo Dimos & Associates on behalf of Mr Fraser made application to the Court on 18 January 2006, pursuant to Rule 17.07 to enforce the judgment against both Mr Hill and Mr Houston. On 21 January 2005, Maddocks, on behalf of Hill, wrote to Leo Dimos & Associates noting that their client had never been personally served and that “prior to the date on which the proceeding was
commenced our client resigned from the partnership, and your client knew that this
had occurred”. Subsequently, the application to enforce the judgment against Mr Hill
was served personally upon him and the return of the application before Master
Efthim on 20 February 2006 was contested on behalf of Mr Hill.43 On 23 June 2006, Master Efthim gave judgment, and on 3 July 2006 made formal orders, refusing the application to enforce the judgment and ordered that there be a trial of the question of Mr Hill’s liability. A notice of appeal was lodged in respect of the Master’s order. Shortly after Mr Fraser terminated the retainer of Leo Dimos & Associates and engaged other solicitors. Before the appeal was determined, Mr Fraser and Mr Hill resolved their differences resulting in the payment of the sum of $170,000 to Mr Fraser.
44 The conclusions I have reached in relation to the solicitors’ compliance with the rules are as follows:
a. Leo Dimos & Associates were entitled to use the alternative process provided for in Rule 17.01 rather than effecting personal service on individual partners; b. although Mr Hill had retired from the partnership, there was no dissolution of the partnership and Leo Dimos & Associates were not precluded from using the alternative method because of Rule 17.03(3); c. the solicitors had failed to comply strictly with the procedure set out in Rule 17.03 because there was: i. no service on the person appearing to have control or management of the partnership business at the principal place of business;
ii. no notice as required by Rule 17.03(4) was served with the writ and as a consequence the writ could only be regarded as having been served on a partner;
iii. an appearance was filed on behalf of the firm and not on behalf of individual partners as required by Rule 17.04.
45 Further, Mr Hill had previously himself or through his solicitors informed Leo Dimos & Associates that he had not been personally served. On a number of occasions, the solicitors reviewed the procedure that had been followed in serving the firm and
determined that there was nothing wrong with what had been done. These
processes, on occasion, had involved Mr Fraser. Counsel had supported the
conclusions reached in the reviews undertaken by the solicitors.46 Mr Dimos has not pleaded the specific defence that there had been “reliance upon counsel”. During the course of the hearing, plaintiff’s counsel, Mr Stuckey, was alerted to this matter and was given the opportunity to seek leave to amend the defence to counterclaim, but declined to make application to do so.
47 before the trial conducted by Justice Bongiorno, then he would have been bound by
any judgment. However, it is difficult to anticipate what might have occurred if serviceIt might be the fact that, if Mr Hill had been served personally with the writ, at least solicitors dated 21 October 2004. There may have been an application to further adjourn the trial, the trial may have proceeded (with Mr Hill appearing) either in November 2004 or later, the proceeding may have been compromised or the quantum allowed by Justice Bongiorno may have been reduced. Although Mr Hill could not have argued that he was not a partner at the relevant time Mr Fraser retired from the partnership, there were other defences which were foreshadowed in the correspondence between Mr Hill, on behalf of Rogers & Gaylard, and Leo Dimos & Associates.
Enforcement application against Mr Hill
48 There is uncertainty as to the powers the court has upon an enforcement application under Rule 17.07(2). It was submitted by Defence counsel that if a trial were ordered “of the question of liability”, the trial would be limited to a dispute as to whether, if the rule otherwise applied, the respondent to the application was liable as a partner and did not entitle the respondent to dispute the liability of the partnership in the
proceeding. Mr Warne of counsel for the defendant submitted that on “the trial on the
question of liability” ordered by Master Efthim, Mr Hill would have been limited to an
argument that he was not a partner at the relevant time and that there could not have
been the possibility of a judgment being entered against him inconsistent with the
judgment ordered by Justice Bongiorno against the firm.49 The closest statements of authority are in two decisions of the English Court of Appeal :
a. In Davis v Hyman & Co. [1903] 1 KB 854 at 856 Stirling LJ said, “It is suggested that, if this form of order is adopted, the defendant in the issue might be deprived of some defence that he might have had if he had been served with the writ and had an opportunity of appearing in the action. As to
this I would say that under the rule the question to be determined is the
general one of the liability, as a member of the firm, of the person sought to be
charged, and it seems to me that an issue could, in a proper case, be soframed as to include any proper defence. No such defence is suggested in
the present case”.
b. In Weir & Co. v McVicar & Co. [1925] 2 KB 127 at 133 Scrutton LJ said, “If the writ has been served on other members of the firm and judgment has been
recovered against the firm, Order 48a r.8 provides that an issue may be
directed to try the question whether the alleged partner is in fact a partner or
not. But it seems clear that in that issue he cannot raise the question of the
liability of the firm, for if he could you might have two separate judgments on
the same cause of action, the one already obtained for a specified amount in
the action against the firm, and the other, for possibly a reduced amount or for
nothing at all, on the trial of the issue under rule 8. The only question that can
be raised on the trial of that issue is whether the person against whomexecution is sought was a partner at the material time or not”.
50 Both cases can be distinguished on their facts from the present case:
a. in Davis v Hyman, there was no defence raised apart from the issue of whether the respondent was a member of the partnership at the relevant time; b. in Weir & Co v McVicar & Co., the respondent had been served with the writ and had entered an appearance under protest denying that he was a partner. This was done pursuant to the procedure now available in a different form in Rule 17.06. 51 Master Efthim said, in his Reasons for Decision dated 23 June 2006, that his order that “there be a trial of the question whether or not Murray Thompson Hill is liable to satisfy the judgment herein given on 15 November 2004 as a partner, “was given” ‘in accordance with Davis v Hyman and Co”. Master Efthim had quoted the passage above from the judgment of Stirling LJ (although he wrongly attributed the passage to one of the other appeal judges, Vaughan Williams LJ). Master Efthim had before him an affidavit of Mr Hill sworn 13 February 2006. In the affidavit Mr Hill admitted that he was a partner at the time Mr Fraser’s cause of action arose. He stated, however, in paragraph 3(d), “I say that Fraser’s claim (if any) against me is for only a portion of
Fraser’s entitlement (which is disputed) under the partnership deed referred to in paragraph 8 below (that is to say, if I am liable to Fraser at all – which is denied –
such liability is several and not joint)”.
52 Later in his affidavit, Mr Hill also referred to disputes about the quantum of “Fraser’s entitlements” including “issues of Fraser’s responsibility and share of contingent liabilities”. Master Efthim was prepared to give Mr Hill the opportunity to dispute these matters at “a trial of the question of liability”. The reason for this decision was that, in his view, there had “been no service upon Mr Hill either actual or constructive”.
53 In my respectful opinion, this seems an entirely appropriate approach to take. The Master was satisfied that notwithstanding the involvement of Mr Hill in negotiating on behalf of Rogers & Gaylard with Mr Fraser in late 1997 and early 1998 and the firm keeping him informed of the developments in the partnership action, that Mr Hill had insufficient formal notice of the proceeding. In these circumstances, Mr Hill was entitled to contest his liability to Mr Fraser and any trial of the question of his liability should not be constrained. If a judgment were obtained that was inconsistent with the decision of Justice Bongiorno, that might be unfortunate but in the circumstances should not have limited the rights of Mr Hill.
54 In my view, the power the Master exercised under Rule 17.07(2)(b) to order a “trial of the question of liability” was enlivened, “if the liability is disputed” by the person against whom a judgment was sought to be enforced, and would not have restricted the trial judge who determined the liability of Mr Hill.
55 Rule 17.06 gave a partner served with the writ the opportunity to file an “appearance under objection” on the basis “that he denies that he was a partner at any material time or is liable as such”. As a matter or interpretation, there seems no basis for re- restricting “the trial of the question of liability” under Rule 17.07(2)(b) if liability is disputed, to only the question of whether the person “was a partner at any material time” and not to the broader issue of the liability of that person as a partner.
56 No real difficulty would arise, in my view, if the decision on the trial of the question of liability were different to the decision against the firm reached in the judgment of Justice Bongiorno. The application under Rule 17.07 to make a person “liable to satisfy the judgment” against the firm could only be made against a person who did not fit one of the categories in Rule 17.07(1)(b), i.e. a person who might be regarded as having had appropriate notice of the proceeding before the judgment was obtained at trial.
57 The issue in the present proceeding is not, however, whether Master Efthim was correct in his decision including:
a. his decision to make an order pursuant to Rule 17.07(2)(b) notwithstanding Mr Fraser’s knowledge that Mr Hill had resigned as a partner before the partnership action writ was served; b. his decision to allow Mr Hill to contest matters of liability wider than whether he was responsible as a partner which might have led to an inconsistent decision with Bongiorno J’s decision in relation to the firm. 58 owed by Leo Dimos & Associates to Mr Fraser in the conduct of the partnership
The issue in the present case is whether there had been a breach of a duty of care he is entitled to recover. If Mr Hill had been served personally with the writ in the partnership action, it is likely that the course of the proceeding would have been substantially different. It is probable that Mr Hill would have contested the proceeding and at some stage would have sought to compromise the dispute with Mr Fraser.
59 Leo Dimos & Associates chose not to serve the individual partners (as might have been done under Rule 17.03(1)(a)) but rather chose to follow the alternative process under Rule 17.03(1)(b). Unfortunately, that process was not properly followed as I have previously discussed. To an extent, the defective service was overcome in relation to all the partners other than Mr Hill by the appearance filed on behalf of the firm and by the steps taken in the partnership action by the solicitors acting on their behalf. In relation to Mr Hill, he was no longer a partner and could not be bound in this way. Eventually, though, he was made an active participant in the partnership action and this soon led to a resolution between himself and Mr Fraser.
60 Mr Hill settled with Mr Fraser before the appeal against Master Efthim’s order could be determined. It seems likely that Mr Hill would have settled with Mr Fraser at some time and that the critical factors which would have determined the parameters of settlement would be:
a. Mr Hill’s liability as a partner to Mr Fraser; b. his financial ability or willingness to pay money to Mr Fraser; c.
an assessment of the likelihood that Mr Fraser would be able to, and would, pursue Mr Hill to final judgment.
d. the potential for recovery from the other partners. 61 In this proceeding, the questions of liability and quantum have been separated. Both counsel agreed that the issues of causation should be left to the quantum hearing. This is perhaps unfortunate as professional negligence actions are often decided on questions of causation or remoteness of damage rather than the issue of whether a duty of care has been breached. These matters would have been better considered in a single hearing.
62 In the present hearing on the questions of liability, I can simply conclude that:
a. on the plaintiff’s claim, Mr Dimos is entitled to recover legal costs on the Supreme Court scale for the work performed by the firm subject to appropriate adjustment for any costs “wasted” by the method of service adopted or which should otherwise be set off or allowed as a result of the breach of the duty of care; b. 17.03(1)(b), as an alternative to personal service on Mr Hill, breached the duty
on the defendant’s counterclaim, the failure to follow the procedure in Rule Mr Fraser’s behalf.
63 The consequences of these findings will be further explored in the quantum hearing.
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I certify that these 17 pages are a true copy of the reasons for decision of His Honour Judge
Anderson delivered on 6 May 2010.
Dated: 6 May 2010
Caroline Dawes
Associate to His Honour Judge Anderson
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