Farrow-Pryke v Johnson

[2024] NSWDC 549

District Court

New South Wales

Medium Neutral Citation:

Farrow-Pryke v Johnson & Anor [2024] NSWDC 549

Hearing dates:

21 November 2024

Date of orders:

21 November 2024

Decision date:

21 November 2024

Jurisdiction:

Civil

Before:

Abadee DCJ (as List Judge)

Decision:

See paragraph [47]

Catchwords:

CIVIL PROCEDURE – imminent mediation and hearing dates – application for advance ruling on admissibility of documents recording settlement negotiations – applications for strike out or summary dismissal of cross-claim for abuse of process – application for interim payment from a solicitor’s trust account – referral of applicant for legal assistance

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 82

Evidence Act 1995 (NSW), ss, 87, 191, 192A

Uniform Civil Procedure Rules 2005 (NSW), rr, 7.36-7

Cases Cited:

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125

HNOE Limited v Angus & Julia Stone Pty Ltd [2024] NSWCA 271

UBS AG v Tyne (2018) 265 CLR 77

Texts Cited:

Nil

Category:

Procedural rulings

Parties:

Ms Natasha Farrow-Pryke (Plaintiff/Applicant)
Ms Elyse Johnson (First Defendant/Respondent)
Mr Leslie Farrow-Pryke (Second Defendant)

Representation:

Counsel:
Applicant (self-represented)
Mr P C Gledson (First Defendant/Respondent)

Solicitors:
Telemon Lawyers (First Defendant/Respondent)

File Number(s):

2023/00207069

Publication restriction:

Nil

Ex tempore reasons for judgment (REVISED)

Introduction

1. The proceeding was commenced in Tamworth. It concerns an unfortunate dispute between a daughter, her sister and her father, who, it is said, were partners to a business in Avalon established in 2014. The business ceased in about 2018 and the proceeding features a dispute following the fallout. The proceeding is listed for hearing on 18 March 2025 (with a 3 day estimate). Before that, however, the parties have been directed to participate in a court-annexed mediation set down for 9 December 2024.

2. By her amended statement of claim, the plaintiff asserts a veritable smorgasbord of actions or complaints against the defendants, including breach of contract (the partnership agreement), breach of fiduciary duty, defamation, embezzlement, misappropriation. The claims for relief were also varied. Reference is made to consequential loss and damages, but also to misappropriated funds and proceeds from the sale of the business. Some, but not necessarily all of the prayers for relief, may be characterised as “damages”. That point has significance for one of the applications now before me. This pleading was drafted by the plaintiff herself.

3. The matter has been defended (more actively by the first defendant). Materially, however, on 22 December 2023, the first defendant (who I will refer to as the respondent) filed a cross-claim. By the cross-claim, the respondent pleaded as a term of the agreement, a requirement for the applicant to pay annual instalments in the sum of $5,000 for goodwill for each year which were, to be $25,000 in the aggregate. In the events that occurred, it is alleged that only $10,000 was paid by the applicant, so that the applicant was allegedly in breach by failing to pay other instalments for 2017, 2018 and 2019. The quantum of the cross-claim is $15,000.

4. The applicant filed a defence to the cross-claim on 12 January 2024. Amongst other things, she denied (paragraph 1(i)) that there was a term that she would make payment for goodwill through instalments. Nevertheless, she said that she paid the respondent amounts of cash for goodwill (paragraphs 2, 4 and 11) through to 2018.

5. On 1 November 2024, the plaintiff (the ‘applicant’) filed a notice of motion. She relied upon an affidavit that she swore that day which, with annexures, runs to approximately 100 pages. In terms of its form, the motion represents an amalgam of different species of relief claimed, with justifications advanced in the document in favour of each species of relief. Generally, however, the applicant says that the relief is necessary since the outcome of the various applications she brings “will directly impact the potential or otherwise of a successful outcome with respect to” the mediation to occur on 9 December 2024. I will return to the details of the various applications shortly.

6. The applicant’s motion first came to my attention on 7 November 2024, when sitting as the List Judge. On that occasion the applicant did not appear. She subsequently indicated that this was not for want of trying: located as she was in Tamworth, she had tried to ring in to telephone the Judicial Registrar, who she thought was dealing with the motion. The motion was adjourned to today, and the applicant was given the AVL contact details. That is the way in which she appeared today.

7. On the same day, the defendants (or more accurately the first defendant, given that the second defendant has been inactive) was granted the opportunity to serve evidence in response to the motion. The first defendant (the ‘respondent’) relied upon an affidavit of her solicitor, Mr Cameron Shaw (filed 18 November 2024) (Exhibit 1), and also filed submissions yesterday morning. Those submissions are MFI 3.

The applications

8. I mentioned the difficulty with the form of the motion earlier. But in substance, three applications are brought:

1. An order to ‘admit into evidence’:

1. an affidavit of Mr Rodney Gordon Dry, described as an ‘intermediary’ regarding ‘negotiations’ occurring with the respondent on 5 January 2024; and

2. the content of a Calderbank offer the respondent served (through her lawyer) on 6 September 2024;

2. An order for the striking out, or alternatively, summary dismissal of, of the respondent’s cross-claim dated 22 December 2023; and

3. An order for an interim payment (by the respondent and the second defendant) in the sum of $50,000 pursuant to s 82 of the Civil Procedure Act 2005 (NSW) (‘CP Act’).

9. The somewhat narrower purpose of the first application is to aid the second of the applications: the applicant seeks to prove what may generically be described as misconduct by the respondent in order to persuade the Court to strike out or summarily dismiss her cross-claim.

10. The respondent opposes each of these applications.

Submissions

11. The applicant did not file any written submissions. These were made orally although in fairness much of the body of her affidavit in support amounted to submissions (rather than evidence) and have been received on that basis. The affidavit also annexes the confidential communications the subject of the first of the applications, to admit evidence.

12. The respondent relied upon written submissions of her Counsel, and these were marked MFI 3. At the conclusion of the applicant’s argument, Counsel for the respondent indicated his wish simply to rely upon what was put in his written submissions.

Consideration

13. Given that the application to admit evidence is in aid of the application for summary dismissal or striking out of the cross-claim, I will consider those applications together.

14. Counsel for the respondent did not object to me having regard, on this application, to the communications that the applicant wishes to have ‘admitted’. I have considered Mr Dry’s affidavit. I have also considered the Calderbank offer made on the respondent’s behalf by her solicitors on 6 September 2024.

15. The applicant is seeking, in effect, an advance ruling on the admissibility of evidence. The Court is empowered to provide such advance rulings under s 192A(a) of the Evidence Act 1995 (NSW), in its discretion.

16. The intended use of the documents appeared ambiguous on the applicant’s application. During an exchange with her in argument, she appeared to indicate that she wanted to be able to use the affidavit of Mr Dry and the Calderbank offer at both the forthcoming mediation and the hearing scheduled to occur in March 2025.

17. I explained to the applicant that there was no impediment to her relying upon both documents at the mediation: that is to say, she needs no order to entitle her to rely upon those documents at mediation. However, the question of her reliance upon them at the hearing was another question. That is what is truly in dispute today.

18. At any rate, whether the advance ruling is sought now (as the applicant would prefer) or only after the mediation but before the hearing (as the respondent’s solicitor has suggested), in either case, the applicant is seeking an advantage, of trying to obtain certainty with a concomitant reduction in costs by obtaining a ruling now upon the admissibility of evidence she proposes to adduce at the hearing.

19. There is no reason in principle, and the statutory provision itself does not provide any express impediment to, an advance ruling on the admissibility of evidence in a civil proceeding; even if, in my personal experience, the provision is usually invoked in a criminal proceeding.

20. A critical factor, however, in determining whether the Court in its discretion should determine an application for an advance ruling is that the dispute is in fact ripe for determination.

21. Having seen the evidence relied upon by the applicant and respondent, I am not satisfied that it is. Assuming the mediation is unsuccessful and the case proceeds, the proceeding will come to the trial judge in the ordinary course. The applicant, whether she continues to represent herself or if she becomes represented, will not have lost the opportunity of arguing that the contents of the documents she wants to tender are of such as to help her prove that there has been conduct by the respondent which is of such character to amount to an abuse of process such that it might sustain the applications for strike out or summary dismissal. Now, however, is not the occasion. The applicant herself argued that the subject matter of the cross-claim is closely associated with her own claims in the Statement of Claim, which the defendant/cross-claimant has defended. There will not, therefore be any substantial savings in time or cost if arguments about the admissibility of the evidence are determined, as in the ordinary way, at a hearing.

22. I have reviewed the documents the applicant wishes to tender. I do not wish to make any final determination or say anything particularly specific about their contents. I will however point out that the affidavit of Mr Dry in substance arguably comprises hearsay and to the extent the applicant relies upon the truth of representations Mr Dry made, there is no evidence of his actual authority to speak on the respondent’s behalf in a way that might make that hearsay evidence admissible as admissions by the respondent (pursuant to s 87 of the Evidence Act 1995 (NSW)). Further the content of the Calderbank letter is not uncommon in litigation, at least in this Court. Accompanied by the terms of the proposed offer are matters that the respondent, through her solicitor, have relied upon in an attempt to persuade the applicant, as offeree, of the merits of the offer. Calderbank offers of that type are commonplace. Whatever the respondent’s state of mind, the application was not forced to do anything and, in the events that occurred, plainly she rejected the offer.

23. At least at this level, before the List Judge, strong evidence would be required to persuade me that the evidence sought to be admitted is of such strong or overwhelming probative value as to justify the rather drastic remedies of strike out or summary dismissal, centred upon an asserted abuse of process by the respondent. Particularly, in relation to summary dismissal, the power to dismiss a pleading as an abuse of process is customarily exercised with exceptional caution. In UBS AG v Tyne (2018) 265 CLR 77, the plurality said that it is exercised where the use of the court's procedures occasion unjustifiable oppression to a party, or where the use serves to bring the administration of justice into disrepute. The plurality emphasised further that case management principles must be taken into account.

24. The power to summarily dismiss was recently considered in the Court of Appeal, in HNOE Limited v Angus & Julia Stone Pty Ltd [2024] NSWCA 271, where the Court considered the General Steel test, albeit in the context of later authority which posited a “high degree of certainty” before the power could be invoked. On the facts of that case, the power was capable of being exercised because there were no mixed issues of fact and/or law and the action alleged was determined to be bad in law.

25. Prima facie, it would be instinctively surprising if the content of settlement negotiations on a without prejudice basis, be they verbal or be they written, would justify the striking out of this cross-claim; which, as I have explained, is a simple action for breach of contract. I say nothing about its effect upon the respondent’s defence to the applicant’s own statement of claim. Parts of the applicant’s defence to the cross-claim indicates assertions that she did make payments for goodwill. The issue of whether she did so is clearly joined. It is a factual question inappropriate for summary dismissal in advance of a hearing.

26. On the basis of the limited, even bare facts, I do not envisage that verbal or written communications in settlement negotiations would indicate such a high degree of certainty that an abuse of process has arisen through the respondent’s pleading or prosecution of her cross-claim.

27. There are additional and powerful discretionary factors against giving an advance ruling. If every party, facing a mediation, was permitted to obtain advance rulings on evidence at a subsequent hearing (if the mediation fails to resolve the dispute), that they perceive is or are contentious, in terms of its admissibility, that would certainly clog up the list to be administered by the Civil List Judge, consuming court resources and front-loading certain costs upon litigants.

28. As another discretionary matter, as pointed out on the respondent’s behalf, the cross-claim was on foot for a substantial period of time. There is nothing put to the Court to indicate complaint about the cross-claim before this motion was filed. The applicant explained that it was not until her receipt of the Calderbank offer (in September) that she perceived that communications which Mr Dry says occurred in January this year could be utilised to support an argument that the cross-claim amounts to an abuse of process. Whether or not that is so, with a mediation to occur imminently and, if that is unsuccessful, a hearing not far away (excluding the Court vacation), it is inapposite to apply for a ruling now from the List Judge. I emphasise again, however, that the applicant is not prevented from bringing such application at the hearing and if she does, that will be adjudicated by the hearing judge who will have the benefit of considering the application in a broader context than that which can occur in an application brought relatively urgently to the attention of the Civil List Judge.

29. That being so, I refuse the applications for strike out or summary dismissal and the ancillary application for an advance ruling about whether evidence of settlement negotiations should or could be admissible at the hearing if and when it occurs next year.

The application for interim payment

30. It is undisputed that there is a sum of $50,000 in a trust account of E & A Lawyers at Mona Vale. According to the respondent’s submissions, the Court has been informed that the trust account was referred to in a client service agreement dated 6 September 2018. The respondent further explains that the funds represent the proceeds from the sale of the subject business. The respondent points out that there is a fight between the parties to the amount in that account.

31. As I understand her argument, the applicant submits that the respondent has no genuine entitlement, not only to bring a cross-claim for damages but also to contest the applicant’s right to immediately access the trust fund. She referred me to a client service agreement (which relates to the solicitor’s retainer to assist in relation to the sale of the business), and a trust account and ledger. She has also emphasised, on multiple occasions, the circumstance that she is homeless and unrepresented. As I understand it, she has a child to care for as well.

32. Based upon what she argued before me, and how she says she is entitled to access part or all of the trust fund, I seriously doubt whether her entitlement to an interim payment could be said to be justified on the ground that it is “part of the damages” sought to be recovered in accordance with s 82(1) of the CP Act as distinct from some other relief to which she says she is entitled. An additional concern is the nature of the client service agreement that the applicant referred to, which appears in her affidavit. This was the agreement between the lawyers and the applicant, the respondent and the second defendant. I am concerned that payment by the firm (which was not apparently served by the motion) to the applicant may implicate the firm in a breach of contract, if not a breach of trust or fiduciary duty toward the respondent and the second defendant.

33. Section 82(3) of the CP Act sets out, in effect, certain preconditions before the Court can order a defendant to make an interim payment to a plaintiff as part of damages sought to be recovered in a proceeding.

34. Contrary to the applicant’s submissions, whether or not the expression ‘admitted liability’, for the purposes of s 82(3)(a) of the legislation, extends to admissions outside of a pleading to formal admission of facts (in response to a notice to admit facts) or even agreement as to facts (under s 191 of the Evidence Act), I am not satisfied that hearsay statements attributed to the respondent by Mr Dry can, in the circumstances be treated as an admission, or admissions of liability by the respondent for the purpose of that provision.

35. The consideration in s 82(3)(b) is also not engaged.

36. That leaves alternative (c), being that the Court is satisfied that if the proceeding went to trial, the plaintiff would obtain judgment for substantial damages. The consideration in s 82(3)(c) is distinct from (a) and (b), both of which deal with the aspect of liability. In my view, uninstructed by authority, that directs the Court to a predictive exercise as to whether the plaintiff, on the assumption that she proves liability, is likely to recover damages that are ‘substantial’. I do not consider, with respect, that this represents an especially high bar. In the context of contractual law, substantial damages are usually distinguishable from nominal damages. Prima facie, as I read and perceive her complaint, and uninstructed by authority, the applicant would satisfy a prospect that she could recover substantial damages.

37. In saying that, the respondent brought to my attention the observations of Macfarlan JA in Forster v Hunter New England Area Health Service (2010) 77 NSWLR 495 at 501, which emphasised that the state of satisfaction is to be reached on the balance of probabilities, having regard, amongst other things, to the seriousness of the consequences that may flow from the order ie. the Briginshaw standard.

38. It is apparent, on the evidence before the Court, that there is a vigorous contest on liability, but as I have sought to explain, the focus in s 82(3)(c) appears not so much on liability, but on quantum. On this, the respondent said little.

39. Even if that consideration is engaged, a defendant may persuade the Court not to make such order if the matters in s 82(4) are satisfied. In this case, there is no dispute that the respondent has satisfied the Court as to the matters in s 82(4)(a) and (b). The remaining question is whether the respondent has satisfied the Court that, having regard to the applicant’s means and resources, she would suffer undue hardship if such payment was made.

40. In my opinion, on the balance of probabilities, she has. I place weight upon the submission that she, like the applicant, has prima facie joint entitlement, or at least competing claims, upon what is currently in the fund. It is not disputed that the applicant is homeless and appears only partially employed on a part time basis. The inference is powerful that she will devote the payment for personal purposes. That is, the payment may be expected to be readily dissipated. It is also likely that she would devote part of what she receives to legal representation. That particular aspect may be put aside until later. The applicant countered by arguing that the respondent was ‘privileged’ or ‘well off’. These assertions were not substantiated independently. The only evidence the Court really has to go on was the likely irrecoverability of monies held on trust. On the evidence, that satisfies me of the requirement.

30. For the purpose of s 82(4) I am satisfied of each of the three matters. That conclusion would be dispositive on the application. But if am wrong in that conclusion, I would have declined the application since it may implicate the law firm, EY Lawyers, in a breach of trust and/or fiduciary duty.

31. The result, therefore, is that all of the applicant’s applications by her notice of motion dated 1 November 2024 are refused. There is, in my view, no reason why costs should not follow the event. In this regard, a party’s impecuniosity does not confer immunity upon the party being subject to an order for costs after unsuccessfully bringing an interlocutory application.

32. Before I make final orders, I will deal with a matter I raised in argument. That is the status of the applicant’s status as being unrepresented.

33. With no disrespect to her and without wishing to sound condescending, my perception is that the applicant was genuinely trying to assist the Court. She struck me also as being intelligent and articulate. She also indicated her industriousness in apparently availing herself of publicly available information concerning statutory provisions, court rules and certain propositions of law. But she clearly (and unsurprisingly) struggled to understand the intricacies of procedure as well as evidence.

34. The respondent herself pointed to the applicant’s impecuniosity and homelessness. The litigation the applicant brings is complex in nature, embracing different causes of action in common law and equity. The Court itself would be assisted by a lawyer to argue the case for her. I am in the circumstances satisfied that it is in the interests of the administration of justice for the plaintiff to receive legal assistance from a barrister or solicitor on the Pro bono Panel. The respondent did not suggest that the plaintiff had previously had the benefit of a referral.

35. In the circumstances I propose to make a referral of the applicant’s case to a barrister. I doubt very much, especially at this time of year, that a barrister could represent her at the mediation slated to occur within a matter of weeks. However, I do not see it as futile to attempt to see if she can receive representation for the hearing currently scheduled to occur in March 2025. If a lawyer is engaged for her, conceivably, fresh applications might wish to be made and if that occurs, they should come to the attention of the List Judge.

36. The Court orders:

1. The plaintiff’s notice of motion dated 1 November 2024 is dismissed with the plaintiff to pay the first defendant’s costs of and occasioned by the motion.

2. Pursuant to rr 7.36 and 7.37, of the Uniform Civil Procedure Rules 2005 (NSW), I refer the plaintiff to the Registrar for referral to a barrister and/or solicitor on the Pro Bono Panel for legal assistance in the form of: (a) advice in relation to the proceedings; and (b) representation of the plaintiff on the final hearing scheduled for 2025.

3. Liberty is granted to restore the matter on 3 days’ notice.

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Decision last updated: 22 November 2024