Everett v Neale
[2012] NSWDC 73
•11 May 2012
District Court
New South Wales
Medium Neutral Citation: Everett v Neale [2012] NSWDC 73 Hearing dates: 18 and 19 April 2012 Decision date: 11 May 2012 Before: P Taylor SC DCJ Decision: 1. Pursuant to section 136 of the Evidence Act 1995, the use of exhibit 2 be limited so that the documents therein may not be used to determine any contested question of fact.
2. The proceedings be dismissed pursuant to UCPR 13.4(1)(b).
3. The plaintiff pay the defendant's costs of the proceedings including the notice of motion, those costs not to include any compensation for time spent by the defendant in preparing and conducting his case.
Catchwords: Application seeking dismissal of proceedings under UCPR r 13.4(1)(b) -mistaken repayment of loan - loan still outstanding - other monies owed - statute-barred - deed of release - disqualification of plaintiff's solicitors - solicitor witnesses - risk of disclosure of confidential information - costs of self-represented party Legislation Cited: Civil Procedure Act 2005
District Court Act 1973
Evidence Act 1995
Legal Profession Act 2005
Limitation Act 1969
Uniform Civil Procedure Rules 2005Cases Cited: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27
Australia and New Zealand Banking Group Limited v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662
Benecke v National Australia Bank 35 NSWLR 110
Cachia v Hanes [1994] HCA 14; 179 CLR 403
Cox v Journeaux (No 2) (1935) 52 CLR 713
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353
Devaynes v Noble (also known as Clayton's case) [1814-23] All ER Rep 1
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Hillebrand v Penrith Council [2000] NSWSC 1058
Jameel (Yousef) v Dow Jones & Co Inc [2005] EWCA Civ 75
Kallinicos v Hunt (2005) 64 NSWLR 561
Preston v Commissioner for Fair Trading [2011] NSWCA 40
Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222
Shaw v State of New South Wales [2012] NSWCA 102
Spencer v The Commonwealth [2010] HCA 28
State of NSW v Mulcahy [2006] NSWCA 303
Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514
Werrin v The Commonwealth [1983] HCA 3Texts Cited: Ritchie's Civil Procedure Rules Category: Interlocutory applications Parties: Peter Everett (plaintiff)
James Neale (defendant)Representation: Mr C Colquhoun (plaintiff)
Self-represented (defendant)
DibbsBarker (plaintiff)
Self-represented (defendant)
File Number(s): 2011/176981 Publication restriction: No
Judgment
A. Introduction
The plaintiff, Mr Peter Everett, a solicitor, commenced proceedings in 2011, claiming that in 1994 he paid $100,000 to his then client, Mr James Neale, the defendant, in respect of a debt incurred in 1987. The plaintiff asserts that he made the 1994 payment in the mistaken belief that the debt was still outstanding. He alleges that he had earlier repaid the debt in 1989, but that he had forgotten about that payment.
The defendant has filed a defence. He alleges that the debt had not been repaid but remained outstanding prior to the payment in 1994, that the claim is statute-barred, that the plaintiff in 1994 owed the defendant further monies in excess of the amount repaid in 1994, and that a deed of release signed by the parties in 2009 precludes the plaintiff's claim.
The defendant has filed a notice of motion seeking:
"1. That the Plaintiff's claim be dismissed pursuant to UCPR ["Uniform Civil Procedure Rules 2005"] 13.4 (1) (b).
2. That Dibbs Barker disqualify themselves from acting for the Plaintiff.
3. Indemnity costs and interest in favour of the Defendant."
The notice of motion is the subject of this judgment.
B. Background
Both parties gave evidence by way of affidavit and a bundle of documents referred to in one of the affidavits was also tendered, all largely without objection. The following history appears from this evidence.
The plaintiff and the defendant were once close friends. They met in 1959 whilst working for Dibbs Crowther Osborne, a law firm now known as DibbsBarker ("DibbsBarker"). The plaintiff was a solicitor at DibbsBarker and acted for the defendant from 1962 until at least 2001 and perhaps until 2008.
According to a deed executed by the plaintiff, the defendant and others in 2009, the defendant and his company acquired property in Avon Road, Pymble in about 1979.
The deed records at recital E:
On or about the 25th October 1983 Enterprise [Deveraux Pty Limited, a company associated with the plaintiff, hereafter called "Enterprise"] and a company of which Everett is a director and shareholder borrowed $100,000 from Neale and/or Ms Carol Neale [the defendant's wife] to invest $100,000 in the Avon Road project and Everett guaranteed this loan".
This recital largely reflects the contents of a letter on Enterprise letterhead dated October 25th, 1983 handwritten by the plaintiff to the defendant. The terms of the letter are as follows:
Dear Jim,
This is to confirm that as from 1st September this company has borrowed $100,000.00 from Carol J Neale at Bank Bill rate plus costs expenses stamps etc. The moneys will be invested as referred to hereunder but subject to those arrangements will be repayable on demand. As discussed I will make arrangements to service interest ASAP but on current projections this will not be before May 1984. You will arrange to roll bills at best rates and terms and advise me.
The funds are to be invested in the Avon Rd property on terms identical to those entered into with Donna Aldridge recently except that the $100,000 shall represent 5.5% of the site.
For purpose of determination of profit interest will be deemed to have run since 1 July 1983.
Naturally I personally guarantee the Company's obligations under this arrangement.
Thanks for the opportunity to participate.
Yours truly,
Peter Everett
In an affidavit read on the application the defendant asserted that only a "small fraction" of the interest on that loan was paid.
The defendant also tendered without objection an account in respect of this loan, which indicated that as at November 1987 an amount of approximately $83,000 interest remained outstanding, one payment of $5,750 having been made in about January 1986. No dispute to this material was raised by the plaintiff in his subsequent affidavit read on the application, and Mr Colquhoun of counsel, appearing for the plaintiff, did not contest that a significant amount of interest remained unpaid in the years following the loan. A letter from the plaintiff dated 15 November 1989 as set out below conceded that the plaintiff "did not service adequately" this loan.
In 1987 a further amount of $40,000 was borrowed by the plaintiff from the defendant. The defendant recorded this loan in his accounts as a further drawdown on the existing loan balance. The evidence before the Court included five letters from the plaintiff confirming this debt, two in 1988, one in 1989 and two in about early 1992.
The first 1988 letter was dated 27 June 1988 and stated:
James,
Apologies for delay - this is to confirm $40,000.00 which I borrowed from Neale associated entities as at 1st November repayable on demand at interest you see as appropriate.
Regards & thanks,
Peter Everett [underlining in original]
On 6 December 1988 the plaintiff again wrote to the defendant as follows:
Dear Jim,
The dates we were talking about. We agreed on $100,000 at 1 September 1983 on the same terms as Donna Aldridge. On two separate cash transactions on 28 June 1984 and 2 July 1984, I paid $11,000. I in fact drew more but my recollection is that I kept the balance over $11,000 on my cash cheques for other purposes.
9 December 1984 I drew a cheque to you for $7,500. If I recall our discussions, that covered payment of interest to 31 December 1984.
On 15 December 1987 I drew $40,000 from your account by arrangement by way of advance.
Could you please put the numbers through in accordance with my letter of 21 October and let me get at least that bit of my affairs straightened out.
This letter indicates that the $40,000 was a further advance on the earlier loan.
In 1989 DibbsBarker sought from the defendant payment of some legal fees. The "trust statement" in evidence shows that a bank cheque for $46,000 was paid on 15 November 1989 into the DibbsBarker trust account. It was that same day transferred out of the trust account into the firm account in two tranches: the first to pay an account dated 15 August 1989 and the second to pay part of the costs and disbursements from accounts outstanding at 15 August 1989. It is common ground that the plaintiff or his associated entities made this payment.
That same day, 15 November 1989, the plaintiff sent a letter to the defendant, in the following terms:
In October 1983, I took up an interest in Avon Road which, because of intervening circumstances, I did not service adequately although various payments were made on account of interest.
In November 1987, you were good enough to advance me $40,000 to cover some problems and in September 1988, I asked if you could set one off against the other and let me know how the balances came up so that I could settle it completely. I have given you all the information I have in my cashbooks regarding payments and we discussed the matter on several occasions.
Last week, you suggested that accounts outstanding to Dibbs Crowther & Osborne should be paid out of the money I owed you, and I must confess I was surprised as I had considered (on the basis of your rough calculations on the back of a ticket at lunch) that the two balances between you and I were fairly close to cancelling out each other and on my part I expected that there might be a few thousand dollars either way to be settled to finalise the whole thing.
However, as a friend who you have helped in many different ways over 30 years, I welcomed the opportunity to return the compliment and, having regard to your current cash bind, I have drawn $46,000 which has been paid in to your account with the firm in respect of fees rendered for the period to July 1989. However, you will appreciate that, having regard to my blood pressure and other associated ills, fund on deposit are something of a security blanket for me and I would like to get the matters canvassed in my letter of 12 September 1988 finally resolved before too long.
I know you have a lot on your plate but you are not Robinson Crusoe in that regard.
I have advised my partners that after the account was sent in August 19 89 you indicated to me in September that I had authority to draw on your "call funds" but with the pressure of work and other problems I overlooked this until the matter was (somewhat improperly bluntly) raised by the recent correspondence to you from the firm.
The plaintiff submitted that the reference in the second paragraph to a request in September 1988 to "set one off against the other" was a request to set off the 1989 payment of $46,000 against the 1987 loan of $40,000 plus interest. However, that interpretation cannot be correct as the $46,000 payment was not made in "September 1988". Plainly enough the request is to set off the value of the plaintiff's interest in the Avon Road project (net of loan, capital and interest) against the loan of $40,000 plus interest made by the defendant in 1987. Although the defendant did not agree to credit the plaintiff's value in the Avon Road project, he did treat all the transactions as one borrowing and kept an updated balance according to the account referred to above.
A month later in December 1989 the plaintiff wrote to the defendant about the procedure to redeem the "investment in Avon Road" of a third person. The plaintiff also wrote "I'll also need to get my funds back", which appears to relate to his investment in Avon Road.
In his affidavit read on the application the plaintiff referred to a letter confirming the advance in 1987 of $40,000 and its purposes. That letter is an undated fax and reads as follows:
Dear Jim
Re: Loan
This will confirm my debt to you in an amount of $40 000.00 with interest at market rates presently accumulated from Dec '87.
I will make arrangements for this ASAP to clear hopefully by 30/6/92.
Regards Peter
It is apparent from the contents of this facsimile and the composition of the DibbsBarker firm shown at the foot of the document (when compared with the 1990 documents in the evidence) that the fax was sent after 1990, and probably early in 1992. Mr Colquhoun, for the plaintiff, accepted that this was a reasonable inference.
Perhaps at about the same time, but in any event on 2 March 1992, the plaintiff sent another letter to the defendant. Again the plaintiff referred to his request to set off his "interest in the Avon Road project less serviced interest against the $40,000" that had been borrowed "in December 1987". The relevant parts of the letter are as follows:
Dear Jim,
...
I did not attend to repaying money I owed you in a timely fashion simply because I did not think I owed you any money; or, if so, that it was of such small amount that you could hardly spare the time to calculate it. It was not until your extraordinary outburst that I appreciated for the first time that you rejected the concept of my "cashing in" my interest in the Avon Road project less unserviced interest against the $40,000 I had borrowed from you in December 1987.
Your view, I believe, is that unless I am prepared to bring all interest on the original $100,000 (?) purchase price for 5.5% of the original Avon Road up to date, and pay you the $40,000 plus interest, then we ignore the original Avon Road transaction in 1983 and settle accounts between us as if Avon Road and any capital gain therein had never existed. Not a particularly sound legal proposition but eminently understandable to one who knows you as well as I do.
I have had Tom Dock do the calculations. The payments I had made ($11,00 and $7,500) accumulated interest up to the date of drawing the $40,000 in December 1987. I have set one off against the other and accumulated interest on the balance from that date and it appears that I now owe you $20,000 approximately, as per Tom's figures, enclosed.
...
Yours truly,
Dictated by Mr Everett;
sent at his request in his absence.
The letter prompted a near immediate but lengthy response from the defendant. A letter four days later from the defendant to the plaintiff included the following paragraphs:
...
You know how I hate writing things down when a phone call will do but I have no option. I will take your letter of 2/3/92 para by para.
...
My position is much worse than yours was when you expected me to believe you needed money and borrowed $40,000 from me unsecured and "repayable on demand". You also had $millions in assets and a massive income (mine is negative). Although I have already demanded repayment verbally which should be sufficient between friends, I now demand repayment formally in case I have failed to comply with a legal technicality...
...
I believed you when, at the same time as you were charging me $200 odd per hour for dozens of matters concurrently, you said you needed to borrow $40,000 urgently to pay bills. You gave no serious reason for not approaching the Bank. I recall saying I would do it and then refraining from a protest when you simply removed the money from my account.
That $40,000 does not relate, and never has related to anything else - and if you had suggested at the outset that it did you would not have got the money.
I have always totally rejected the proposal that I buy you out and allow you to realise your capital gain ahead of myself and every other investor while I pay the income tax on the interest which you haven't paid, and for which you get a deduction. Further I wind up with an asset, previously a non capital gain asset, back in my ownership stripped of this desirable status. While I don't want to escalate this any more than necessary, I have said so every time the matter has been raised, and given compelling reasons with which you did not disagree.
...
...If I thought you borrowed the $40,000 from me with the intention of withholding repayment of it until I agreed to offset it as above against Avon Rd, I would happily sell the family home and devote the rest of my days to pursuing the matter through the courts. I have suffered real stress, for the first time in my life I think, and financial loss from this. I need your reassurance, it makes me sick.
Although I had no obligation to do so under the agreement you yourself drew, I did, as a friend and on no commercial basis, suggest that if you really couldn't pay the interest, it might be possible to forget that the investment had been made and treat the interest you paid as a loan to me; on the same basis as the loans I have made regularly to you and your friends. You have never proceeded with that. To do so you would have needed to give up your rights under the written agreement.
Given my willingness to ensure that you couldn't lose, you actually had a free option - if Avon Rd bombed out you could rely on my assurance, whereas if Mr. Webster lets us build 200 units on it, as he well may, you could rely on your document. I would feel better if you assured me that you didn't plan it.
When we were last at lunch, you agreed with me that it would be crazy to give up your position of very substantial capital gain and your tax deductions. You confirmed your previously foreshadowed intention to proceed and said you would get Tom Dock to work out the interest owing to me and that you would pay the interest soon and leave the capital unreduced. You said the payment would mean you couldn't invest in the other projects we discussed. Your suggestion that the interest on compounded at the rates I pay for 9 years might come to $120,000 (instead of $300,000) upset me and coloured my later reactions. I am always amazed at the fact that your terrible maths always err in your favour.
I accepted this idea and have always accepted the tax liability - I did expect to be able to use the money on which I would have to pay tax - and there is a huge difference between my buying from you and a third party doing so. I have found such a third party if you want to sell out - the situation now is urgent - he has waited a long time for you to return my calls.
...
In 1993 the defendant provided to the plaintiff a calculation of the outstanding amount payable on the 1987 loan of $40,000. It totalled $105,477.40 as at July 1993.
In about June 1994 the plaintiff paid the sum of $95,000 (according to the defendant's accounts) or "approximately $100,000" according to the plaintiff's recent affidavit, in repayment (of the whole or part) of this debt. At that stage the $40,000 loan plus interest calculation had reached almost $116,000. The defendant credited $95,000 to the loan account. The plaintiff alleges in the statement of claim that these amounts were paid from the account of Enterprise and paid at the direction of the defendant to Carol Joan Neale, the defendant and to McCaughan Futures, a company presumably connected to the defendant.
The evidence does not disclose any further matter of significance until 2005. On 1 June 2005 the plaintiff wrote to the defendant, which omitting the irrelevant first and last paragraphs, reads as follows:
...
In 1987 you advanced me $40,000 to cover some rather pressing problems which, I think, had to do with Anthony's health, etc. In 1988I [sic] asked you if we could settle up Avon Road, set one off against the other and call it quits, but you refused.
In 1989 Geoff Sutherland wrote and told you that if you did not pay the costs and disbursements owing to the firm, he would sue you. You said I owed you money personally, so why did the firm chase you for costs you owed. By arrangement with my partners, I then paid $46,002.89 to the firm which was credited against your outstanding fees account.
I enclose a copy of my letter to you of 15 November 1989. I have checked and the accounting records show that this sum was paid by me to DCO on your behalf.
Five years later you dunned me for payment of the $40,000. Although I had a feeling I had attended to it, I could not find the evidence because, of course, I was looking for a cheque payable to you rather than a cheque payable to DCO. To give you the benefit of the doubt (although I do not know why), you would have had no record of receiving a cheque from me, simply a receipt from DCO for the $46,002.89 worth of accounts I had paid for you.
Nonetheless, you proceeded again to mix up personal affairs with DCO matters, and you approached Jan Osborne and Geoff Sutherland to tell them I owed you a considerable sum of money and refused to pay it.
This whole nasty business culminated in my borrowing at bank overdraft rates enough money to pay you $97,091, being a figure calculated by Tom Dock as having accrued since the original advance in November 1987.
You will recall Tom making the calculation, my being appalled by the amount and you saying it should have been more.
In May and June, 1994, this amount was paid by various cheques at your direction to JWN, CJN & JWN and to McCaughan Futures. The total in fact was $99,400 (the extra being interest which you accrued from the time of Tom's original calculation to the time of payment.)
This was obviously a gross error. You had already had your loan repaid in 1989.
Therefore, you owe me $94,000 plus interest from July 1994 to date at bank rate of interest - and I rather think you are better qualified than I to calculate the amount involved.
...
The following year on 23 October 2006, the defendant commenced proceedings in the Supreme Court against the plaintiff, DibbsBarker and Enterprise seeking, amongst other things, $653,359 for interest payable upon the 1983 loan for $100,000 guaranteed by the plaintiff. The claim refers to a 2001 deed and a release which were not in evidence.
Almost two years passed. On 13 March 2008, whilst the 2006 proceedings remained on foot, the plaintiff sent the defendant an email repeating the claim that the 1994 payment was made by the plaintiff because he "could not trace the earlier payment" as he had "forgotten" that it was paid to DibbsBarker:
... - In November 1987 you lent me $40K to sort out a problem of Anthony's motor accident when insurance was refused.
In September 1988 I asked you to wind up any interest I might have in Avon Rd. and net everything out; you refused.
At lunch in November '89 you pointed out that you were being dunned for costs owing to DC&O. by GHS. and that, with interest added, my debt to you was $46K which was just about the amount of the costs outstanding. You asked me to pay what I owed you, to DC&O. to clear the account and we would speak about Avon Rd. later.
I transferred $46K. to your account with the firm, clearing your indebtedness up to the end of July that year, advised you by letter 15/11/89 and asked if we could sort out Avon Rd. You declined.
In early 1994 you asked me to repay the $40K. and I could not trace the earlier payment as I had forgotten that I paid it to DC&O not direct to you. I said it was a perfect opportunity to clear everything up in one hit but you insisted that you would not consider any netting off and you wanted your debt with interest. You then spoke with Ian Osborne and Geoff Sutherland saying that I was refusing to repay to a client of the firm a just debt and that you would take it as far as necessary; I was prevailed upon to have Tom Dock make the interest calcs. which he cleared with you, compounding interest at Bank rate on $40K from the original date of November 1987.
The amount came to @$97K, which I borrowed at bank rates, and disbursed in accordance with your directions in May/June 1994 to McCaughan futures, yourself and your joint acc. with Carol adding up in all to $99400.(the extra being% you accrued on and from Tom's calcs.)
The $40K debt was obviously paid twice and each time with a slug of interest at commercial rates; I have all the Bank Statements and my cash Book entries which evidence these facts, copies of Tom's calcs and my correspondence with you. The facts are incontrovertible: -I have paid you $99400. in error and I request that it be repaid to me with interest which should represent a figure in excess of $200,000 now due and owing.
I do not want any commission if we proceed to obtain your finance, the firm does not want to represent you in anything other than this transaction and I only want what I am owed paid out of the proceeds.
...
On 13 July 2009 the parties to the Supreme Court proceedings signed a deed of release. The final recital reads as follows:
J. Without admission of liability the parties have agreed to settle their differences and all claims on the terms set out in this deed".
Recital D reads:
D. Neale has informed Everett, DCO and the subsequent firms by this Deed that Mrs. Carole Neale transferred the whole of her benefit or interest in the Avon Road project and the causes of action in the proceedings, if any, to him on or about 13th June, 2007.
Amongst the releases in the deed is clause 4, which provided a release by the plaintiff:
4. Everett releases and forever discharges Neale and JW Neale from all Claims he may now have or at any time may have had, or which, but for the execution of this deed, he might have had in connection with or incidental to the provision of Legal Services, the Loan, the Avon Road project, the Proceedings and the recitals to this Deed.
Other relevant provisions of the deed are as follows:
Covenant not to sue
7. The parties covenant not to sue in any jurisdiction any other person, entity or corporation not a party to this deed in respect of any Claims which they have or may have in connection with or incidental to the provision of Legal Services, the Loan, the Avon Road project or the Proceedings.
Dismissal of proceedings
8. The parties agree to the dismissal of the Proceedings with an order that each party bear their own costs in accordance with the Short minutes of order attached.
Definitions
9. In this deed:
9.1 Claim means any past, present or future action, arbitration, award, cause of action, claim, damages, declaration, cross claim, demand, judgment, proceedings, litigation, loss, suit, third party proceedings or verdict whatsoever at law or In equity or pursuant to the provisions of statute Including any legal costs or associated expense;
9.2 Loan means the loan made on about the 1 September 1983 and confirmed by letter Of the 25th October 1983;
9.3 Avon Road project means the property particularised at paragraph 3,2 and as otherwise described In the Statement of claim In the proceedings.
9.4 Legal Services means actual or alleged legal services provided by DCO and the subsequent firms to Neale, JW Neale and Mrs. Carol Neale In connection with investors in the Avon Road project, borrowings an the Avon Road project and in particular the ANZ Bank and the affairs of Neale and JW Neale In any other matters;
9.5 Proceedings means the Supreme Court of NSW proceedings commenced by Neale given court file number 20420 of 2006,
Miscellaneous
Bar to proceedings
10. A party may plead this Deed, as a complete bar to any Claim in connection with any of the matters in this Deed commenced or continued by or on behalf of another party,
C. Pleadings and affidavits
On 30 May 2011 the plaintiff commenced proceedings to recover the 1994 payment plus interest. The terms of the statement of claim are as follows:
1. On or about 15 December 1987, the defendant loaned to the plaintiff the sum of $40,000 ("Loan").
2. By arrangement made between the plaintiff and the defendant, on or about 15 November 1989 the plaintiff paid a debt owed by the defendant to the law firm known as, Dibbs Crowther and Osborne in the sum of $46,002.89 by way of repayment of the Loan.
PARTICULARS
The amount of $46,002.89 was comprised of the principal amount of the Loan being $40,000, plus $6,002.89 for interest.
3. In or about 1994, the defendant again sought repayment of the Loan from the plaintiff, contrary to the arrangement made between the plaintiff and the defendant referred to in paragraph 2 above.
4. In May and June 1994, owing to the plaintiff being under the mistaken belief that he still owed the Loan to the defendant, the plaintiff paid to the defendant the sum of $100,000, being the amount he believed at that time he was obligated to pay to the defendant as the principal amount of the Loan, plus compound interest ("Mistaken Payment").
PARTICULARS
NAB account statements in the name of Enterprise Devereux Pty Limited dated 1 and 15 June 1994 recording four separate debits of $5,000 on 30 May 1994, $30,000 and $20,000 on 1 June 1994 and $45,000 on 9 June 1994 paid at the direction of the defendant to Carol Joan Neale, the defendant and to McCaughan Futures.
5. The plaintiff became aware of the mistake referred to in paragraph 4 above on 1 June 2005. On becoming aware of the mistake, the plaintiff wrote to the defendant notifying him that he had become aware of the Mistaken Payment and sought the prompt repayment of the Mistaken Payment from the defendant.
PARTICULARS
Letter dated 1 June 2005 from Peter Everett to James Neale.
6. The defendant failed to repay the Mistaken Payment.
7. By email dated 13 March 2008 and by letter dated 16 May 2011 from the plaintiff to the defendant, the plaintiff again sought repayment of the Mistaken Payment from the defendant.
8. The defendant has failed to repay all or any of the Mistaken Payment.
9. In the circumstances the plaintiff says that the defendant has been unjustly enriched in the sum of $100,000.
10. Further, the plaintiff was required to borrow the amount of the Mistaken Payment at bank overdraft rates in order to repay the Loan, which Loan had already been repaid in 1989. The plaintiff says that it was unconscionable of the defendant to seek repayment of the Loan in circumstances where the Loan had already been repaid or alternatively, upon being notified of the Mistaken Payment by the plaintiff, it was unconscionable of the defendant to refuse to repay the Mistaken Payment to the plaintiff, plus the amount of interest paid by the plaintiff on the amount he was required to borrow, at bank overdraft rates, in order to make the Mistaken Payment.
11. The plaintiff claims the amount of:
(i) $100,000,
(ii) plus interest on $100,000 from 9 June 1994 to date or alternatively , plus interest from the date the plaintiff demanded repayment of the Mistaken Payment from the defendant, being 1 June 2005, at bank overdraft rates from time to time or alternatively, at rates determined by the Court.
The defence pleads the following matters:
1. This matter was settled by Order of the Supreme Court of New South Wales on the 14th July 2009. The Deed of Release dated 13th July 2009 which caused me to consent to the above orders released me from any claim the Plaintiff might make. I say that the Plaintiff is estopped from proceeding against me by virtue of the Deed of Release and in particular clause 4 thereof which contains a release of all claims by the Plaintiff against me which includes this claim.
2. This matter is stale. The matter relates to a debt incurred by the Plaintiff in 1983 and added to by unpaid interest and by a capital increase of $40,000 in December 1987. The alleged cause of action did not accrue within six (6) years before the commencement of this action and the plaintiffs cause of action is therefore statute barred.
3. The $46,000 was repaid by me in full. The Plaintiffs loan account with me was credited with $46,000 as at November 1989.
4. In relation to the Plaintiffs Claim I reply using the paragraph numbers in his Statement of Claim as follows;
1. Agreed. The amount advanced was in addition to a loan of $100,000 plus interest made by me to the Plaintiff in 1983 on which he had paid very little of the promised interest. When the Plaintiff borrowed the $40,000 in 1987 it increased the amount owing by him to me from $185,584 to $225,584.
2. Denied. The Plaintiff paid exactly $46,000 in reduction of his firm's fees in November 1989. It was not $46,002.89. It was not a computed amount. It was a round figure. I did not ask him to make this payment in this way. At the time the Plaintiff made the $46,000 payment to his firm he had unilateral access to a Societe Generale account of mine which had over $100,000 in it. He wrote to me and his partners confirming that at the time. The Plaintiff paid no interest on any of the loan and owed me $308,939 at the time the $46,000 payment to me was made. The $46,000 was credited by me to this balance. The Plaintiffs agreement with me provides that he would pay me interest at the rate I was paying to my bankers so that I would make neither a profit nor a loss on my loan to the Plaintiff. I in fact charged him at the bank indicator rate which was less than I was paying. I note that during 1988 and 1989 calendar years the indicator rate varied from 13% to 20.25%. That rate was provided to me by the Plaintiffs accountant. I did not calculate the interest on the $40,000 separately. Had I done so the interest from December 1987 to November 1989 on $40,000 would have been approximately $13,820 not $6,000.
3. I deny that there was any connection between the $46,000 payment and the $40,000 loan. The $40,000 loan was repayable by the Plaintiff on demand and I made that demand in 1994. The Plaintiff paid approximately $95,000 to me. A correct calculation based on our written agreement would have been $118,000. After that $95,000 payment was credited the Plaintiff owed me $397,593 on the original $100,000 loan on which he had paid practically no interest since 1983. The Plaintiff had borrowed this $100,000 to purchase from me an interest in real property worth $100,000 at the time the Plaintiff drew down the loan. That property had appreciated in value.
4. In the period 1989 to 1994 the Plaintiff was my solicitor and handled many matters for me. We were in regular contact. I deny that the Plaintiff banking law specialist and the most senior external solicitor for the National Australia Bank could have believed that his payment of $46,000 was sufficient to repay my $40,000 loan plus interest after two years at the interest rates prevailing in those days. I deny that we ever discussed that possibility. I would not have agreed to it as it would have amounted to my having lent the Plaintiff, on an unsecured basis, $40,000 at half the rate I was paying on my fully secured borrowings. That was contrary to our written agreement.
5. I responded to those letters in the context of proceedings commenced by me against the Plaintiff. The proceedings were settled as set out above.
6. Denied.
7. Agreed.
8. Denied.
9. Denied.
10. Denied.
11. Denied.
The plaintiff has filed an amended statement of claim which makes an inconsequential amendment to the second paragraph of the statement of claim.
The defendant, who was self-represented, read two affidavits on the application sworn in November and December 2011. Apart from documents to which reference has already been made, the affidavits contained the following paragraphs (omitting rejected material and references to documentary exhibits):
5. In 1959 I worked for my uncle Max Edwards as a clerk in the law firm now known as DibbsBarker ("Dibbs") in which he was a partner. I met the Plaintiff there. DibbsBarker has acted for me in dozens of matters from then until 2008.
6. In 1983 the Plaintiff drew agreements for me with Donna Aldridge (...) whereby Donna invested in my development property at Avon Rd Pymble. That site was zoned for housing however it had the potential for rezoning to medium density residential with substantial capital gains which were not taxable in 1983.
7. Later in 1983 I lent the Plaintiff 100% of the purchase price of $100,000 to make the same investment (...) as Donna had made. The Plaintiff only paid a small fraction of the interest on the loan (...). I tolerated this because he was a good friend (...), I could then afford it and the loan was secured by his entitlement to shares in a property I owned.
8. By 1987 I had given the Plaintiff as my friend and solicitor authority to withdraw funds from a cash deposit with Societe Generale (...) using his signature alone. I owned and operated, as a sole trader, a large equity and options trading business on the floor of the Sydney Stock Exchange. The Plaintiff had advised me, and I agreed, to give him unilateral access to my account to provide necessary liquidity in the event of my sudden death or disability.
9. In or about October 20th 1987 the World stock markets crashed. I made a substantial and immediate "paper" profit from this however my funds and the proceeds of that investment were with my stockbroker and their parent company Elders Finance and Investment Corporation ("ELFIC") who funded me. I had to sue them both to get paid. I instructed the Plaintiff as my solicitor on that day and he acted for me through to settlement in late 1989. ELFIC paid my costs to Dibbs in 1990 (...).
10. The day after the crash, I received a phone call from the Plaintiff while I was on the trading floor. We exchanged words to the following effect;
PE "My bank is being difficult - could you lend me some money?"
JN "Well, as you know, I've got plenty of problems myself, how much?"
PE "$40,000 would probably tide me over until this crisis passes".
JN "OK"
11. There was no reference at the time to any car accident relating to the Plaintiff s son although I did learn of that later.
12. The Plaintiff drew $40,000 from my Societe General account on about 15th November 1987. He sent me a handwritten note on 27/6/88 confirming it (...) with interest running from 1st November. He sent me an undated fax (...) on his firm's letterhead again confirming the loan but stating that interest ran from December 1987 and that he hoped to clear the debt by 30/6/92. My recollection is that that acknowledgement was sent many months later than the previous one.
13. I recorded the transaction in my computer as an increase of $40,000 in the 1983 loan of $100,000 (...). No additional security was provided. The plaintiff gave express personal guarantees in both cases (...).
14. On 6th December 1988 the Plaintiff wrote to me (...) asking to offset the asset represented by his interest in my Avon Rd property against the loans I had made to him plus interest. The terms on which the Plaintiff proposed this were contrary to the exit provisions of the agreement he had signed with me (...) and greatly favoured him at my expense.
15. We continued to discuss and correspond on this issue for several years (...). The Plaintiff wanted to exit from his 1983 contract on a basis very different from that expressed in the contract. He wanted to value his interest on the basis that a DA had been approved when it had not been approved.
16. The ELFIC matter was settled in about November 1989. A month or so before settlement the Plaintiffs managing partner wrote to me requesting payment of legal fees of over $40,000. This surprised me as the Plaintiff still had unilateral access to over $100,000 of my money and was several hundred thousand dollars in arrears in paying his interest on the two loans referred to above (...).
17. In early November 1989 after receiving the above letter I telephoned the Plaintiff and had a conversation to the following effect;
JN "I've just had a letter from Geoff Sutherland threatening to stop acting for me if I don't pay your firm some $40,000. If it was that desperate you could have drawn the money from the Soc Gen account. And you haven't been paying the interest on your loan which is now several hundred thousand dollars behind."
PE "I've been away. I'll sort it out with Geoff. I'll pay the bill myself."
JN "It's about time you paid some interest on the Avon Rd loan."
PE "I'll have to think about the tax but I'll make the payment myself."
18. On 15th November 1989 the Plaintiff paid $46,000 exactly into my trust account with the firm (...). The amount was not $46,002.89 as stated in the Plaintiffs affidavit. That amount may have included Financial Instrument Duty...There had been no reference prior to payment that this $46,000 was related only to the $40,000 loan (...). The magnitude of the amount arose from the fees allegedly owing to Dibbs.
...
24. I recall that my accountant, Carolyne Dunsford, in about 1992 had a conversation with me to the following effect in the context of preparing my income tax returns;
CD "Peter Everett paid $46,000 to his firm towards your costs in the Elders matter, how do you want me to deal with it?"
JN "Are you sure he didn't deduct it when Elder's paid my costs? They were paid to his firm." -
CD "Yes -I checked that. He didn't recover them in that way."
JN "OK then credit his interest account on Avon Rd. It's what we agreed."
CD "I'll have to declare it as income then?
JN "Yes"
25. Based on discussions with the Plaintiff over many years I believe the $46,000 personal payment which he says he has forgotten would have represented about 25% of his personal income. I cannot accept that his accountant would not have raised such a large amount when the Plaintiff was preparing his tax return.
26. In or about 1992 I asked the Plaintiff to repay the $40,000 plus interest and he eventually agreed to do so.
27. In 1993 I sent him the calculation of the $40,000 loan principal and interest (...) on the basis that I would make no profit and merely recover my costs of having effectively borrowed the money which I lent to him.
28. In 1995 he repaid $95,000 which was $21,000 less than my cost of funds. I credited this sum to his loan account (...).
29. In 2006 I commenced proceedings against the Plaintiff to recover the balance of the loan account.
30. That matter was settled and a Deed of Release dated 13th July 2009 (...) entered into by the Plaintiff and myself which included settlement of all matters between the Plaintiff and myself.
On 29 February 2012 the plaintiff swore an affidavit which was read on the application. Omitting references to documents already discussed, that affidavit is in the following terms:
3. I first met Mr Neale in 1959 when we were both employees of Dibbs Crowther Osborne (now DibbsBarker).
4. I have remained with DibbsBarker since this time, as an employee, partner and more recently as a consultant.
5. Mr Neale and I became close friends and remained friends until around 1993.
6. In 1983, Mr Neale was involved in a property development at Avon Road, Pymble (Development). A company associated with me, Enterprise Devereaux Pty Limited (Enterprise Devereaux), borrowed $100,000 from Mr Neale's wife, Carol Neale, to invest in the Development.
...
8. In 1987, my son was involved in a car accident which damaged another vehicle.
9. Pursuant to the Loan, Mr Neale advanced $40,000 to me to pay the owner of the other vehicle involved in the accident.
10. My understanding was, and remains, that the Loan was a separate transaction from my investment in the Development, and the two were unrelated.
...
12. From 1969 to 1990 DibbsBarker acted for Mr Neale in respect to several matters.
13. In 1989, Mr Neale had an outstanding account with DibbsBarker in the amount of approximately $46,000.
14. I was advised by Mr Geoff Sutherland, the managing partner of DibbsBarker at that time that Mr Neale had refused to pay his account because I owed the Loan to him.
15. I agreed to pay Mr Neale's account with DibbsBarker in satisfaction of the Loan. I paid DibbsBarker $46,002.89 on or around 15 November 1989 (1989 Payment).
16. I had not discussed a specific rate of interest on the Loan with Mr Neale, however I considered approximately $6,000 to be reasonable interest.
...
18. In 1994, Mr Neale approached me and demanded payment of the Loan.
19. Mr Neale claimed interest on the Loan in the amount of approximately $60,000.
20. I paid Mr Neale approximately $100,000 by way of 4 separate bank transfers on 30 May 1994, 1 June 1994 and 9 June 1994 to accounts nominated by Mr Neale (Mistaken Payment).
21. At the time I made the Mistaken Payment I did not recall having made the 1989 Payment in satisfaction of the Loan.
...
22. By statement of claim filed on 23 October 2006 in the Supreme Court of New South Wales, Mr Neale commenced proceedings against Enterprise Devereaux, myself and the Partners of DibbsBarker at the time (the Proceedings).
23. The Proceedings related to legal services provided to Mr Neale by myself in relation to the refinancing of Mr Neale's borrowings with Australia and New Zealand Banking Group Limited to Macquarie Bank Limited, and Mr Neale's dealings with investors in the Development.
24. The Proceedings arose out of a release given by Mr Neale in respect to those legal services. The Proceedings claimed that the release was obtained because of my alleged influence and my alleged breach of fiduciary obligation to Mr Neale.
25. The Proceedings were dismissed on 14 July 2009 at the mutual agreement of Mr Neale and myself.
26. The Proceedings did not relate in any way to the Loan, the 1989 Payment or the Mistaken Payment.
...
27. On 1 June 2005,1 was reviewing some old paperwork and became aware of the Mistaken Payment.
28. On 1 June 2005, I wrote to Mr Neale requesting repayment of the Mistaken Payment...
29. I also wrote to Mr Neale requesting repayment of the Mistaken Payment by email on 13 March 2008 and by letter dated 3 June 2011...
30. Mr Neale has refused to repay the Mistaken Payment.
The plaintiff's affidavit also annexes a letter dated 3 June 2011. This letter contains the following paragraphs:
3. In 1993 you pressed me for repayment of the original $40,000 advance (which had already been repaid) and canvassed my partners with suggestions that the matter should be taken up by the Law Society. Much had happened in the interim and I overlooked the fact that you had already been repaid, of course, the entry in my cash book showed a cheque payable to DC & O not JWN.
4. At the urging of my partners, I had my accountant Tom Dock speak to you and he recalls discussing with you the basis upon which he should calculate the amount "now due" in accordance with then current interest rates. I have his calculations and his note indicating that they were discussed with and agreed by you. The calculations commence with a capital sum of $40,000 on 15 December 1987.
5. Accordingly, I paid $100,000 to you or at your direction, being the (supposedly) outstanding principle of the 1987 advance together with accrued and compounded interest. I have the bank records indicating my transfers to your account and accounts nominated by you. Tom's calculations indicated an amount of $97,000 in December 1993, an additional $3,000 was added to cover interest to repayment in May 1994.
6. It was not until 2005 when I was running through old files with the intention of throwing out all irrelevancies that I came upon this sequence of transactions and realized that the original debt had, in fact, been discharged and that you had subsequently been paid that debt plus accrued interest on a compounded basis at very considerable expense to me (I found it necessary to borrow $100,000 to clear what I thought was still outstanding debt). I wrote to you on that occasion - 1 June 2005 - advising you of the double payment and you suggested that I was paying interest on the Avon Road, Property, which is patently ridiculous as we both know but because I have had rather a difficult time since then I have not got around to resolving this issue.
7. I have all of the necessary evidence to recover this payment in error of $100,000 plus (as you insisted upon) interest at commercial rates, compounded for the interim period. My maths was never very good and has not improved but on a compound interest basis, taking $100,000 as a start in 1993,I figure we should be somewhere north of $500,000 by now.
There was no cross-examination of either deponent.
A further 122 page bundle of documents was tendered by the defendant. The documents had been expressly referred to in correspondence between the parties that became part of the evidence in this application, and the plaintiff received a copy of the documents, but there remained a dispute as to whether the plaintiff was properly put on notice of the use to be made by the defendant of the documents. Ultimately, I admitted the documents as part of the history of correspondence that was already in evidence, but granted liberty to the plaintiff to make an application limiting the use to be made of those documents.
The plaintiff availed himself of that liberty, and sought an order under section 136 of the Evidence Act 1995 that the documents not be used to determine any contested question of fact, because, it was submitted, the plaintiff had had no opportunity to put before the Court evidence contrary to those documents. I reserved that question until I had heard the defendant's final submissions and had reviewed the documents. The defendant made no submission referring to any of the documents despite my express invitation for him to do so if he wished to rely upon them, and on my review of the further documents I found some of them to be already in evidence and the others to be of no assistance in deciding the notice of motion.
Accordingly, I propose to make the order sought by the plaintiff, which has the effect in the application of limiting the use of the documents in exhibit 2 to the purpose only of evidencing the history of correspondence between the plaintiff and the defendant.
D. UCPR 13.4
UCPR 13.4 is as follows:
13.4 Frivolous and vexatious proceedings
...
(1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings:
(a) the proceedings are frivolous or vexatious, or
(b) no reasonable cause of action is disclosed, or
(c) the proceedings are an abuse of the process of the court,
the court may order that the proceedings be dismissed generally or in relation to that claim.
(2) The court may receive evidence on the hearing of an application for an order under subrule (1).
The circumstances for the application of an order under rule 13.4 have been considered on many occasions. The most quoted decision in the area is General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 where Barwick CJ held that a lack of a cause of action needed to be clearly demonstrated. In that case the Chief Justice was specifically dealing with paragraphs (a) and (c), but the principles stated have commonly been applied to UCPR 13.4(1)(b) also. In General Steel, the Chief Justice countenanced the possibility of extensive argument to demonstrate whether the plaintiff's case is sufficiently untenable.
Assistance may also be derived from the judgment of Dixon J, as he then was, in Cox v Journeaux (No 2) (1935) 52 CLR 713, who decided in an application under the equivalent provision to UCPR 13.4(1)(b) that the Court:
"...may consider the undisputed facts. Further, it is not limited to cases where there is no dispute of fact."
In the present matter, evidence has been received on the factual matters in accordance with subrule 13.4(2).
Section 56 of the Civil Procedure Act 2005 ("CPA") may also have some application. It provides:
56 Overriding purpose
...
(1) The overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings.
(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.
...
These provisions raise the question of whether the discretion in rule 13.4(1), or the proper interpretation of rule 13.4(1)(b), is affected by the overriding purpose of facilitating the just, cheap and quick resolution of the real issues in the dispute.
In State of NSW v Mulcahy [2006] NSWCA 303, a case referred to with apparent approval by the High Court of Australia in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27 at [91], the Court of Appeal determined that section 64 of the CPA now controlled the power of amendment. The Court also referred to sections 56 to 58 of the CPA, and concluded at [29]:
29 When regard is paid to all these provisions of the Civil Procedure Act the relative importance of changes in the way the action was conducted at earlier stages ...is significantly altered.
Mulcahy differs from the present case in that it was a case involving a proposed amendment. In Shaw v State of New South Wales [2012] NSWCA 102 the Court of Appeal considered whether the General Steel test required revision or reappraisal in the light of sections 56 and 58 of the CPA. That question was not ultimately decided by the Court, which found in that case that:
"134...it is not shown that the Civil Procedure Act provisions warrant any result different from that indicated by the General Steel test."
In Spencer v The Commonwealth [2010] HCA 28 the High Court, speaking of a related but differently worded provision under the Federal Court Rules granting to the Court a power of dismissal if the proceedings had "no reasonable prospect", stated in a judgment of Hayne, Crennan, Kiefel and Bell JJ that the provision:
53 ...departs radically from the basis upon which earlier forms of provision permitting the entry of summary judgment have been understood and administered. Those earlier provisions were understood as requiring formation of a certain and concluded determination that a proceeding would necessarily fail. That this was the basis of earlier decisions may be illustrated by reference to two decisions of this Court often cited in connection with questions of summary judgment: Dey v Victorian Railways Commissioners and General Steel Industries Inc v Commissioner for Railways (NSW).
54 In Dey, the defendants moved for summary judgment on the grounds that the action was frivolous, vexatious and an abuse of process. In a passage often later cited, Dixon J said that "[a] case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury". What Dixon J meant by "very clear" was identified by his observation that "once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process". And there would be a "real question" unless the defendant could "show that it was so certain that [the question] must be answered in the [defendant's] favour that it would amount to an abuse of the process of the court to allow the action to go forward for determination according to the appointed modes of procedure". The test identified by Dixon J in Dey can thus be seen to be a test requiring certain demonstration of the outcome of the litigation, not an assessment of the prospect of its success.
55 In General Steel Industries, Barwick CJ pointed out that previous decisions about summary termination of actions on the motion of a defendant had been given in cases in which the so-called "inherent" jurisdiction of a court to protect itself and its processes from abuse had been invoked, and in cases where the defendant had relied upon a particular rule of court permitting the court to strike out pleadings or dismiss an action on it being shown that a pleading "does not disclose a reasonable cause of action" or the action "being shown by the pleadings to be frivolous or vexatious". The material available to the court might differ, depending upon which power was invoked, but all the cases emphasised the need for "exceptional caution" in exercising a power to dismiss an action summarily. As Barwick CJ also pointed out in General Steel Industries, the test to be applied was expressed in many different ways, but in the end amounted to different ways of saying "that the case of the plaintiff is so clearly untenable that it cannot possibly succeed". As that formulation shows, the test to be applied was one of demonstrated certainty of outcome.
56 Because s 31A(3) provides that certainty of failure ("hopeless" or "bound to fail") need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different enquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression "no reasonable prospect of successfully prosecuting the proceeding" by reference to what is said in those earlier cases.
57 Likewise, it is dangerous to apply directly what has been said in the United Kingdom about the application of a test of "no real prospect" or what has been said in United States decisions about summary judgment. The United Kingdom cases are directed to a different test. The controversies in the United States about what is sufficient to resist a motion for summary judgment, reflected in the recent decisions of the Supreme Court of the United States in Ashcroft v Iqbal and Bell Atlantic Corp v Twombly and in that Court's earlier decision in Conley v Gibson, turn upon the requirements of the Federal Rules of Civil Procedure applied to a system of "notice" pleading. The notion of what is not a "plausible" claim, discussed in Iqbal and Twombly, may in some cases overlap, but does not coincide, with the notion of "no reasonable prospect".
58 How then should the expression "no reasonable prospect" be understood? No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is "no reasonable prospect". The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like "no reasonable prospect" is to be avoided. Consideration of the difficulties that bedevilled the proviso to common form criminal appeal statutes, as a result of judicial glossing of the relevant statutory expression, provides the clearest example of the dangers that attend any such attempt.
59 In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like "clearly", "manifestly" or "obviously") as "frivolous", "untenable", "groundless" or "faulty". But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word "reasonable", in the phrase "no reasonable prospect", be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a "frivolous", "untenable", "groundless" or "faulty" claim.
60 Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is "no reasonable prospect" of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to "no reasonable prospect" can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase "just and equitable" when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes. [emphasis added in Spencer]
The relevant power relied on in the present case involves an assessment of whether the cause of action is "reasonable", a different test from whether the cause of action "has reasonable prospects of success". Yet as is recorded by the author of Ritchie's Civil Procedure Rules at [13.4.15], when commenting on rule 13.4(1)(b) and referring to Spencer:
"...there was no ground on which the court could properly intervene unless two conditions were satisfied: (i) that the solicitor was in possession of information which was confidential to the former client and (ii) that such information was or might be relevant to the matter on which he was instructed by the second client. This makes the possession of relevant confidential information the test of what is comprehended within the expression 'the same or a connected matter...
My Lords, I would affirm this as the basis of the court's jurisdiction to intervene on behalf of a former client."
The defendant was not able to identify with precision any particular matter of confidence known by DibbsBarker which would be relevant to the litigation, when the defendant was invited to do so during the hearing of the application. However, I do not think that this failure is fatal to his application. It is, of course, difficult for any person to identify with precision what they may have discussed with their legal representatives more than two decades ago.
I can readily accept that confidential and indeed privileged matters were revealed by the defendant to DibbsBarker in the period 1987 to 1994. The difficulty is in ascertaining whether any of those matters are relevant to the present dispute and at risk of disclosure. In this matter the defendant bears the onus of proof.
The judgment of Lord Millett in Prince Jefri Bolkiah at 235E, agreed to unanimously by the other members of the House of Lords, dealt with the onus of proof in these words:
"...it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious. I do not think that it is necessary to introduce any presumptions, rebuttable or otherwise, in relation to these two matters. But given the basis on which the jurisdiction is exercised, there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case."
I have indicated that I am prepared to infer the satisfaction of the first condition. With some hesitation, due to the matter being finely balanced, I am also persuaded that I should favour the defendant on the second issue. I can readily foresee that confidential matters concerning the structuring of the various loans, involving at different times, or to different degrees, the defendant, his former wife and his companies, on the one hand, and the plaintiff and his company (and perhaps his firm) on the other, may have been done for taxation and other consequences. These are private and confidential matters, yet they seem to me potentially to be relevant to the case the plaintiff wishes to make about the arrangements in respect of the 1987 loan, the 1989 payment and the 1994 payment. This is not idle speculation, for the plaintiff has argued with some force on this application that the parties to the various loans is a matter of significance.
For these reasons, I am satisfied on the balance of probabilities that DibbsBarker is possessed of information confidential to the defendant, and that information may be relevant to this matter.
Once it is established that DibbsBarker were in possession of confidential information, the burden lies on the plaintiff to establish that there was no real risk of disclosure: Prince Jefri Bolkiah at 237G. The plaintiff advanced no evidence or submissions on this issue and I am not persuaded that the risk is non-existent. I refer to the words of Lord Millett in the Prince Jefri Bolkiah decision at 237F:
"...In my view no solicitor should, without the consent of his former client, accept instructions unless, viewed objectively, his doing so will not increase the risk that information which is confidential to the former client may come into the possession of a party with an adverse interest."
It might be thought that there is some inconsistency between the decision to dismiss the proceedings as not disclosing a reasonable cause of action and a finding that the solicitors should not continue to act because they may be witnesses in the proceedings. The latter finding is conditioned on my decision in respect of dismissal being found to be incorrect. If it is incorrect, it seems to me to be likely that it is because, contrary to my findings, the plaintiff and members of his firm can give relevant evidence of conversations some 20 or more years ago to displace the plain meaning of the plaintiff's correspondence. In that event, the evidence of the plaintiff's solicitors becomes relevant and raises the issues canvassed in Prince Jefri Bolkiah and Kallinicos.
(c) Question of costs, inconvenience and impracticality
As this is at an early stage of proceedings, issues of costs and convenience are not large. It may be that as a consultant of DibbsBarker, the plaintiff is favoured with an economical costs arrangement, although again there is no evidence of this matter.
However, there is one remaining issue of concern, that of practicality. Does it make a difference that the plaintiff himself was the primary legal representative of the defendant during the relevant time?
An action by a client against a solicitor may operate as a waiver of privilege. In Benecke v National Australia Bank 35 NSWLR 110 Gleeson CJ stated (at 111E and F):
The rule that prevents an unauthorised disclosure of confidential communications between a client and a legal adviser, when such communications are for the purpose of obtaining legal advice, or for use in existing or anticipated litigation, constitutes a restriction upon the capacity of courts to ascertain the truth in certain circumstances. That restriction, however, is regarded as acceptable on the ground that it promotes the public interest, and assists the administration of justice, by facilitating the representation of clients by legal advisers. It does this by encouraging uninhibited communication. Thus, in cases where the rule operates, one aspect of the public interest is preferred against another (discovering the truth).
It would be inconsistent with the reason for the existence of the privilege to permit it to operate in the manner for which the appellant contends. But for her own actions, the privilege would have enabled the appellant to insist that nobody should be able to give evidence of the confidential communications between the appellant and her senior counsel about the settlement of the first proceedings, without the consent of the appellant. However, it did not enable the appellant to make public her version of those communications and, at the same time, to enforce silence on the part of others who disagreed with that version. The law permits the search for the truth in legal proceedings to yield, in certain circumstances, to the public interest in preserving the secrecy of communications between lawyer and client. In the present case, however, the appellant herself lifted the veil of secrecy by giving her version of the communications. Thereafter, there was no reason in principle why the pursuit of the truth should not take its course, or why the court should be inhibited in seeking to ascertain the true facts concerning those communications.
It follows from this passage that the privilege belongs to the client and an action by the solicitor against the client is ineffective to waive it. If disclosure of the privileged material is necessary for the solicitor plaintiff's action to succeed, the action must fail.
The current proceedings have not been commenced by the defendant. At this stage, neither party has suggested that privilege has been waived. Unless that occurs or has occurred there remains a real prospect that the plaintiff will be limited in the evidence he can disclose. Whilst this may remain a problem potentially of some significance to the plaintiff, I do not see it as a reason for a different order in respect of the solicitors.
For these reasons, were the proceedings to continue I would grant the injunction sought. I do not, however, think that the injunction should be granted in respect of an appeal made against the decision to dismiss the proceedings or the decision in respect of the disqualification of the plaintiff's solicitor. In such an appeal the members of the firm are not likely to be witnesses, nor is there any real prospect of disclosure of confidential material. Accordingly, no order is necessary in view of the decision I have made in respect of the application under UCPR 13.4(1)(b).
H. Costs
The defendant also sought an order for "indemnity costs and interest".
The defendant made no submissions seeking a special costs order, and I do not see any circumstances attaching to the present application that warrant either an order for indemnity costs, or interest.
UCPR 42.20(1) provides that in the ordinary case of dismissal of proceedings under UCPR 13.4 the plaintiff must pay the costs. However, a "litigant in person who is not a lawyer is not entitled to receive an order for costs to compensate him for time spent in preparing and conducting his case": Preston v Commissioner for Fair Trading [2011] NSWCA 40 at [183], applying Cachia v Hanes [1994] HCA 14; 179 CLR 403.
During his submissions the defendant made reference to having received some assistance from a solicitor. Whether costs arose from that assistance, and whether they are recoverable, seems to me to be a matter to be determined on an assessment if not otherwise agreed.
Accordingly, I propose to order that the plaintiff pay the defendant's costs of the proceedings, including the costs of the notice of motion, but that those costs not include any compensation for time spent by the defendant in preparing and conducting his case.
The orders of the Court shall be:
(1) Pursuant to section 136 of the Evidence Act 1995, the use of exhibit 2 be limited so that the documents therein may not be used to determine any contested question of fact.
(2) The proceedings be dismissed pursuant to UCPR 13.4(1)(b).
(3) The plaintiff pay the defendant's costs of the proceedings including the notice of motion, those costs not to include any compensation for time spent by the defendant in preparing and conducting his case.
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Decision last updated: 22 May 2012
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