Griffiths as trustee for the Griffiths HWL Practice Trust v Martinez as trustee for the Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers

[2019] NSWSC 664

Supreme Court

New South Wales

Medium Neutral Citation:

Griffiths as trustee for the Griffiths HWL Practice Trust v Martinez as trustee for the Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers [2019] NSWSC 664

Hearing dates:

31 October, 1-2, 19, 29-30 November, 14 December 2018

Date of orders:

06 June 2019

Decision date:

06 June 2019

Jurisdiction:

Equity

Before:

Robb J

Decision:

(1) Enter judgment for the plaintiff against the defendant for damages of $450,000.

(2) Order the defendant to pay the plaintiff's costs of the proceedings, without varying any other costs order that has already been made in these proceedings.

Catchwords:

CONTRACTS — Construction — Principles of interpretation relating to construction of partnership deed — Additional requirements for partners to vary constituent documents — Whether variation effected by consent within the meaning of s 19 of the Partnership Act 1892 (NSW), including by a course of dealing over time — Requirement for unanimity under s 19 — Whether non-voting partners are included in this requirement

 

CONTRACTS — Termination — Repudiation of contract — Whether termination effective — Reliance on information acquired after the date of termination in order to justify same — Such justification must in fact be available at the time of what would otherwise be a repudiation

 

CONTRACTS — Remedies — Damages — After repudiation — Past and future losses — Proper calculation of damages where individual was already serving notice period prior to repudiation — Complicating factor of termination on notice itself not effective

 

CONTRACTS — Remedies — Damages — After repudiation — Loss of chance — Principles governing damages for loss of chance to gain other employment while still a partner

 

INTERPRETATION — General rules of construction — Interpretation of resolutions of members of an organisation — Proper construction of resolution of partners bound by a partnership deed to vary that deed

 

EMPLOYMENT LAW — Principles governing validity of summary dismissal — Whether conduct sufficient to justify summary dismissal at common law

 

PARTNERSHIP — Rights and duties of partners inter se — Fiduciary relationship — Whether specified conduct breached the obligation of fidelity between partners in a workplace context

 

EVIDENCE — Course of evidence — Pleading principles — When parties may amend their pleadings during or after the trial — Forensic inappropriateness of a vague pleading — Effect of a party running a dishonesty case without adequate prior notice

  ESTOPPEL — Estoppel by convention — Mutual assumption — Course of dealing — Impact of a party not promptly demanding performance of its contractual rights

Legislation Cited:

Civil Procedure Act 2005 (NSW)
Partnership Act 1892 (NSW)

Cases Cited:

Adami v Maison de Luxe Ltd (1924) 35 CLR 143
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27
Aveo Group Ltd v State Street Australia Ltd [2015] FCA 1019
Bartlett v Australia & New Zealand Banking Group Ltd (2016) 92 NSWLR 639; [2016] NSWCA 30
Blatch v Archer (1774) 1 Cowp 63; 98 ER 969
Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34
British and Beningtons Ltd v North Western Cachar Tea Co [1923] AC 48
Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 176 ALR 693
Coope v LCM Litigation Fund Pty Ltd [2016] NSWCA 37; (2016) 333 ALR 524
Dare v Pulham (1982) 148 CLR 658
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523
Fishlock v Campaign Palace Pty Ltd [2013] NSWSC 531; (2013) 234 IR 1
Gunasegaram v Blue Visions Management Pty Ltd [2018] NSWCA 179; (2018) 129 ACSR 265
Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145
Ho v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168
In re Frank Mills Mining Company (1883) 23 Ch D 52
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Kriketos v Livschitz [2009] NSWCA 96; (2009) 14 BPR 26,717
Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666; (1976) 9 ALR 437
Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1; [2006] FCAFC 144
Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184
Malec v JC Hutton Pty Ltd (1990) 169 CLR 638
Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) 13 BPR 24,713
Morley v Australian Securities and Investments Commission [2010] NSWCA 331; (2010) 274 ALR 205
Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114
National Roads and Motorists’ Association Ltd v Parkin (2004) 60 NSWLR 224; [2004] NSWCA 153
New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4
Sgro v Australian Associated Motor Insurers Ltd (2015) 91 NSWLR 325; [2015] NSWCA 262
Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21
Stuart Pty Ltd v Condor Commercial Insulation Pty Ltd [2006] NSWCA 334
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35
Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381
Woodside Energy Ltd v Electricity Generation Corporation (2014) 251 CLR 640; [2014] HCA 7

Texts Cited:

Dr R. Austin and Professor I. Ramsay, Ford, Austin and Ramsay’s Principles of Corporations Law (17th ed, 2018, LexisNexis Butterworths Australia)
R.I. Banks, Lindley & Banks on Partnership (20th ed, 2017, Sweet & Maxwell)
K.L. Fletcher, The Law of Partnership in Australia (9th ed, 2007, Thomson Reuters Lawbook Co. Australia)
A.D. Lang, Horsley’s Meetings Procedure Law and Practice (7th ed, 2015, LexisNexis Butterworths Australia)
N.C. Seddon and R.A. Bigwood, Cheshire & Fifoot Law of Contract (11th ed (Australian), 2017, LexisNexis Butterworths)

Category:

Principal judgment

Parties:

Timothy Martin Griffiths as trustee for the Griffiths HWL Practice Trust (Plaintiff)
Juan Jose Martinez as trustee for the Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers (Defendant)

Representation:

Counsel:
S Donaldson SC and J Williams (Plaintiff)
M Kimber SC and G Fredericks (Defendant)

  Solicitors:
Pikes & Verekers Lawyers (Plaintiff)
HWL Ebsworth (Defendant)

File Number(s):

2016/386111

Judgment

1. The plaintiff, Mr Timothy Martin Griffiths, by these proceedings sues the defendant, Mr Juan Jose Martinez, for damages for breach of contract concerning events that occurred principally in July and August 2015.

2. The parties sue, and are sued, in their respective capacities as trustees for the Griffiths HWL Practice Trust and the Martinez HWL Practice Trust. That reflects the arrangements made by the relevant legal partnership, and is not material to these proceedings. I will simply refer to Mr Griffiths and Mr Martinez without reference to the trusts that they represent.

3. Mr Martinez is also sued as the representative of the partners trading as HWL Ebsworth Lawyers (which I will call either HWLE or the Firm). It will be convenient to proceed as if Mr Martinez was the defendant.

4. It will also be convenient to begin by setting out the relatively uncontroversial background facts, as that will assist in explaining the issues that arise in these proceedings.

Background

5. Mr Griffiths was admitted as a solicitor in this State in December 1980, and, after working in various legal positions, he became an equity partner of the firm Abbott Tout Lawyers on 1 July 1988.

6. Mr Martinez was admitted as a solicitor in Victoria in 1982, and in 1989 he was made a partner of the legal partnership Home Wilkinson Lowry (HWL). Mr Martinez became managing Partner of that firm in October 1998.

7. The partners of HWL entered into a partnership deed dated 9 October 2005 (Partnership Deed) to govern their affairs.

8. The Partnership Deed distinguished between “Capital Partners”, who were effectively equity partners who contributed to the capital of the partnership and were entitled to vote on resolutions binding the partnership, and “Fixed Draw Partners”.

9. Fixed Draw Partners are “partners appointed by the Capital Partners who do not contribute capital and are ineligible to vote upon partnership resolutions and have a fixed draw of profits as determined by the Capital Partners by Extraordinary Resolution” (cl 1.1 of the Partnership Deed). As appears from cl 8.5, Fixed Draw Partners are members of the partnership entitled to a fixed proportion of the net profit of the partnership.

10. There is room for doubt about the true legal status of Fixed Draw Partners. Notwithstanding the definition of that term as set out above, cl 2.1 of the Partnership Deed refers to: “The partnership of the Capital Partners”; and cl 2.2(a) states: “The Capital Partners will carry on the Practice under the Firm Name”. Clause 2.5 implies that only the Capital Partners are members of the partnership. Clause 7.3(c) provides for the Capital Partners to indemnify Fixed Draw Partners in respect of any losses, for which the Fixed Draw Partners shall have no liability.

11. The Partnership Deed contemplates the existence of an Executive, which is defined in cl 1.1 as being “the executive from time to time appointed pursuant to Clause 12.1”. That provision provides that the Executive “shall be appointed, be dismissed and have a membership in accordance with a Majority Resolution of the Capital Partners from time to time”.

12. Clause 12.2 provides: “Subject to clause 12.1, the authority and responsibilities of the Executive are as set out in Schedule 3”. As mentioned above, cl 12.1 provides for the Capital Partners by Majority Resolution to determine the membership of the Executive. That provision only concerns membership, and does not authorise a change in the authority and responsibilities of the Executive as set out in Schedule 3.

13. The Partnership Deed provides in cl 1.1 for the position of Managing Partner, being the person from time to time elected to that position pursuant to cl 11.1. Mr Martinez has at all material times been that person.

14. Clause 10 of the Partnership Deed includes the following provisions:

10. Conduct of Partnership

10.1 How decisions are to be made

(a)   All questions that arise concerning the conduct of the Practice and all decisions to be made and consents to be given by the Capital Partners under this Deed, if there is no provision in this Deed to the contrary, must be made or given by a Majority Resolution of the Capital Partners. The Capital Partners may by Majority Resolution from time to time delegate the powers and authorities referred to in this Deed as they see fit.

(b)   As at the date of this Deed the Capital Partners have delegated the powers and authorities to the Executive and the Managing Partner described in Schedules 2 and 3.

…

15. Relevantly, Schedule 2 contains the authority and responsibilities of the Managing Partner, and states in par 1: “Employment and termination of all solicitors, support staff, finance staff and administration staff.” Schedule 2 lists in total 16 functions of the Managing Partner.

16. Schedule 3 gives the Executive authority and responsibility for, among others: “1. Employment and termination of all Fixed Draw Capital Partners.” Note that the inclusion of the word “Capital” is an error. The schedule lists in all 12 functions of the Executive.

17. There is a tension between cl 12.2 and cl 10.1(a), concerning the powers and authorities of the Executive. The former implies that they will remain as stated in Schedule 3. The second sentence of cl 10.1(a) provides that the Capital Partners may by Majority Resolution delegate the powers and authorities referred to in the Partnership Deed as they see fit. However, the general power created by the first sentence is subject to the requirement that “there is no provision in this Deed to the contrary”.

18. The Partnership Deed does not contain a provision authorising the Capital Partners to vary the Partnership Deed by any resolution that does not have the unanimous support of the Capital Partners.

19. As at 2006, Mr Griffiths was a member of the Abbott Tout Management Committee and Practice Group Leader in the Commercial Dispute Resolution Group.

20. With effect from 5 March 2007, HWL merged with a substantial part of the firm Abbott Tout.

21. The merger was governed by a Memorandum of Understanding (MOU) dated 6 December 2006 between the Capital Partners of HWL and the Equity Partners of Abbott Tout.

22. The effect of clause 4.1 of the MOU was that nominated Equity Partners of Abbott Tout were admitted as Capital Partners of the merged practice pursuant to the Partnership Deed.

23. Clause 8.1 of the MOU had the effect that the merged firm would substantially adopt the HWL executive management structure as set out in the Partnership Deed.

24. At the time of the merger, the partners of Abbott Tout who joined the merged firm were provided with various policies that had previously been adopted by HWL, on the basis that those policies would be implemented by the merged firm. I will refer to the various policies upon which Mr Martinez has relied below in context where I deal with the issues to which they relate.

25. On 26 October 2007, at a combined meeting of the Executive and Capital Partners of HWL, at which Mr Griffiths was present, a resolution was passed by those present that had the apparent effect of abolishing in a practical way the Executive, and thereafter members of the Executive were not appointed by the Capital Partners, and did not meet to perform the functions listed in Schedule 3 of the Partnership Deed. I will set out the resolution in full below when I deal with the significance of this issue.

26. A merger took place between HWL and Ebsworth & Ebsworth Lawyers from 5 May 2008, at which time the Firm became known as HWL Ebsworth Lawyers.

27. On 9 December 2009, a deed of agreement was entered into between Mr Martinez, for and on behalf of HWLE, and Mr Griffiths (the December Deed). The deed was signed by Mr Griffiths on that date but was dated 1 December 2009. The effect of this deed was that Mr Griffiths ceased to be a Capital Partner of the Firm and became a Fixed Draw Partner from 1 December 2009.

28. The December Deed was entered into in the following circumstances. In his capacity as Managing Partner, Mr Martinez decided that Mr Griffiths no longer satisfied the criteria that were appropriate for him to continue as a Capital Partner, and Mr Martinez effectively put it to Mr Griffiths that, if he did not agree to transition to a Fixed Draw Partner on terms to be negotiated with Mr Martinez, Mr Martinez would recommend to the Capital Partners that they resolve to expel Mr Griffiths from the partnership. Mr Griffiths elected to conform to Mr Martinez’ demand and, accordingly, he executed the December Deed.

29. Mr Martinez executed the December Deed on behalf of HWLE without any resolution of the Capital Partners or the Executive (the latter of which had ceased to operate in practical terms since the making of the resolution on 26 October 2007 that is set out above).

30. By clause 3.2 of the December Deed, Mr Griffiths became entitled to a share of the profit of the Firm fixed at $250,000 per annum. Over time, this share of the profit was increased, so that by August 2015 Mr Griffiths’ share of profit was $435,000 per annum.

31. Relevantly, the December Deed contained the following terms:

…

3.4   Either party may terminate this Deed by giving the appropriate period of notice specified below: [Relevantly, the period of notice in this case was 3 months].

3.5   HWL Ebsworth may at its absolute discretion terminate this Deed by making a distribution of profit in lieu of notice.

3.6   HWL Ebsworth may terminate this Deed and expel [Mr Griffiths] from the HWL Ebsworth Legal Practice summarily for any cause for which HWL Ebsworth is entitled to dismiss an employee summarily at common law, in which case [Mr Griffiths] will have distribution of profit in accordance with this Deed up to the date of termination only. For the purposes of this Deed and this clause, the conduct of the Trustee will be the relevant conduct.

…

32. In the period between about 2011 and mid-2014, Mr Griffiths wrote a novel about the exploits of the real-life Australian photographer and explorer Frank Hurley, which he named “Endurance”. This novel was researched and written in Mr Griffiths’ time during a period when he had succeeded in increasing the level of fees that he brought into the Firm to about $2.3 million by 30 June 2014. Consequently, the Firm had agreed to increase his entitlement to share in the profits.

33. Unfortunately for Mr Griffiths, his billings were largely dependent on a particular type of work that he did for a single large insurer, and, in about February 2015, the insurer took that work in-house and ceased to give ongoing instructions to Mr Griffiths. Consequently, Mr Griffiths’ monthly billings effectively collapsed, and by mid-2015 the total fees for which he was responsible had reduced to about $1.5 million for that financial year. Mr Griffiths had not succeeded by that time in acquiring any significant new work, and his fees on an annual basis for the period after he lost the insurer’s work were likely to be substantially less than even the amount of $1.5 million. Mr Griffiths had attempted over the preceding period to persuade various partners within the Firm to include him in the legal teams for which they were responsible, but without any significant success.

34. On 20 July 2015, Mr Martinez wrote an email to Mr Griffiths by which he purported to give Mr Griffiths three months’ notice of termination of his Fixed Draw Partnership. Such notice period was set out in cl 3.4 of the December Deed. Mr Martinez did not act with the authority of the Executive, as from 26 October 2007 the Executive had been practically defunct. The Partnership Deed provided in Schedule 3 par 1 that the Executive had authority and was responsible to the Capital Partners for the termination of employment of all Fixed Draw Partners. Mr Martinez only had authority under Schedule 2 par 1 for the termination of all solicitors and other staff of the Firm.

35. Arrangements were made for the launch of Mr Griffiths’ novel, “Endurance”, by Prof Ron McCallum AO at the State Library of New South Wales on 29 July 2015. Mr Griffiths became heavily involved in organising the book launch and he engaged in part of this activity while at the Firm’s office, using the Firm’s email system, and to a limited extent with the assistance of staff employed by the Firm.

36. On 12 August 2015, Mr Martinez sent an email to Mr Griffiths in which he said, among other things: “…I do not want you in the practice any longer. I wish to propose you leave tomorrow and on a without prejudice basis pay you a month’s notice in full settlement of any other notice period…” Mr Martinez gave reasons including Mr Griffiths’ low billings in July and August; that he had used staff and firm resources to work on his book activities, including the launch “and that 90% of your activity is for your book”; and also that Mr Griffiths was “requesting staff to print off precedents”.

37. Email correspondence then ensued between Mr Griffiths and Mr Martinez about the reasons given by Mr Martinez for the termination of the December Deed and Mr Griffiths’ Fixed Draw Partnership, when Mr Griffiths would actually be required to leave, and the payments to which Mr Griffiths would be entitled. Mr Griffiths was required physically to leave the Firm’s premises on 17 August 2015, after Mr Martinez had sent him an email that said: “I have had other things on my mind BUT you should be packing.”

38. There is a question about when the act of termination of the December Deed and Mr Griffiths’ Fixed Draw Partnership by Mr Martinez took place, but it is clear that Mr Martinez purported unilaterally to exercise the Firm’s right under cl 3.6 of the December Deed to terminate it on the basis that there were grounds that would permit the Firm summarily to dismiss an employee at common law.

32. On 28 August 2015, Mr Griffiths, by email addressed to Mr Martinez, purported to accept the act of summary termination by Mr Martinez as being a repudiation of the December Deed that entitled Mr Griffiths to terminate the December Deed, which he did, reserving his rights to claim damages from the Firm.

33. Mr Griffiths sought alternative employment as a solicitor, and from 23 May 2016 he was employed in the role of Special Counsel by a substantial Australian and international firm of solicitors in its Papua New Guinea office, for a salary of $300,000 per annum.

34. These proceedings concern Mr Griffiths’ claim to be entitled to damages from Mr Martinez, and through him the Firm, for the wrongful repudiation of the December Deed, and the summary termination of his Fixed Draw Partnership that occurred in August 2015.

35. Mr Martinez has denied that his summary termination of the December Deed was wrongful and ineffective, and contended that Mr Griffiths’ conduct justified Mr Martinez exercising the right of the Firm under cl 3.6 of the December Deed.

36. Alternatively, Mr Martinez contends that, if his summary termination of the December Deed was wrongful, so that he is liable in damages to Mr Griffiths, his exercise of the Firm’s right to give Mr Griffiths three months’ notice of termination on 20 July 2015 was effective, so that Mr Griffiths will only be entitled as damages to the share of the profits of the Firm to which he would have been entitled between 20 July 2015 and 20 October 2015.

37. Mr Griffiths has challenged this response by contending that the three months’ notice given to him on 20 July 2015 was not effective because, the Executive being defunct, the power to terminate the December Deed in exercise of the right contained in cl 3.4 resided exclusively in the Capital Partners, because it was not delegated to Mr Martinez as Managing Partner by Schedule 2 of the Partnership Deed. Consequently, according to Mr Griffiths, his claim for damages should be assessed on the basis that his Fixed Draw Partnership would have continued indefinitely.

38. If Mr Griffiths succeeds in establishing his contentions, it will be necessary for the Court to assess an amount that is appropriate to be awarded to him as damages, having regard to all relevant possibilities and contingencies and applying a common sense approach.

Application to further amend defence

46. It will be necessary to interrupt the flow of these reasons to deal now with an application made by Mr Martinez to further amend his defence.

47. On 30 November 2018, the last day of the hearing, immediately before the Court reserved its judgment, Mr Martinez foreshadowed an application to further amend his defence, in response to submissions made by Mr Griffiths to the effect that some of the matters relied upon by Mr Martinez in his final submissions were outside his pleaded defence.

48. On 12 December 2018, Mr Martinez filed a notice of motion, by which he sought an order giving him leave to amend his existing amended defence in the manner set out in the draft further amended defence that was annexed to the notice of motion. The notice of motion was supported by an affidavit of Mr Martinez' solicitor, dated 11 December 2018.

49. The Court heard the notice of motion on 14 December 2018, and at the completion of the submissions the Court reserved its judgment. For practical reasons, it was necessary for the Court to deal with Mr Martinez' application for leave to amend as part of its reasons for judgment in the principal proceedings. These are the reasons of the Court dealing with the notice of motion.

50. Mr Griffiths consented to leave being granted by the Court to Mr Martinez making a number of the amendments that he wished to make. It is not necessary to refer further to the amendments for which consent has been given.

51. Mr Griffiths opposed Mr Martinez' application in respect of three subject matters, being: (1) the addition of a ground justifying Mr Martinez' summary dismissal of Mr Griffiths from the partnership, being the improper provision of legal services to Mr Griffiths' brother, and a related ground to support Mr Martinez’ allegation that Mr Griffiths had breached his obligation of fidelity; (2) the introduction of a new estoppel claim by Mr Martinez; and (3) an amendment to add a defence based upon s 5 of the Partnership Act 1892 (NSW) (Partnership Act). It will be convenient to deal with these three matters in turn.

Claim concerning work done for Mr Griffiths' brother

52. It is appropriate to begin by setting out the relevant parts of Mr Martinez’ draft further amended defence. They are set out in par 8. In setting out the relevant parts of that paragraph below, I have omitted immaterial parts, not identified amendments to which consent has been given, and underlined the parts for which leave is opposed:

8.   Based on the information the Defendant had on 17 August 2015 and on the further information the Defendant has acquired after that date, a proper basis existed as the Plaintiff had:

…

d.   improperly provided legal services to his brother between 3 August and 11 August 2015 (including by not opening a client file in his name and by recording the work in an administrative file); and

e.   had breached his obligation of fidelity to the Practice by engaging in the above conduct and by not being honest and candid with the Defendant in his explanations as to his improper conduct, in that when confronted about that conduct he did not disclose and/or was dishonest about:

…

iv.   the fact that he had been improperly providing legal services to his brother.

53. In order to put this application to amend in context, it is appropriate to start by setting out the terms of par 8 of the defence to amended statement of claim filed on 22 December 2017, which was the defence as filed at the time of the commencement of the hearing.

54. Paragraph 8 of that pleading set out the grounds upon which Mr Martinez relied for effectively terminating Mr Griffiths' partnership in a summary manner. It provided:

8. A proper basis existed as the Plaintiff:

a.   improperly used resources of the Practice for private purposes in spite of directions not to do so and in breach of policies of the Practice with which the Plaintiff was obliged to comply;

b.   improperly continued to use resources of the Practice to promote the book he had written in spite of directions not to do so with which the Plaintiff was obliged to comply;

c.   improperly used a significant number of working hours to promote his book, being hours that were only to be used to undertake work for the Practice, in spite of directions not to do so with which the Plaintiff was obliged to comply; and

d.   had breached his obligation of fidelity to the Practice by engaging in such conduct.

55. Paragraph 8 provided little detail of the allegations. Sub-pars (b) and (c) related to the promotion of Mr Griffiths' book, but the nature of the improper use of resources for private purposes in sub-par (a) and the breach of the obligation of fidelity in sub-par (d) were not clearly explained.

56. The justification Mr Martinez pleaded for summarily terminating Mr Griffiths’ Fixed Draw Partnership was limited to various types of conduct by Mr Griffiths, and did not include dishonesty or failing to supply candid answers to inquiries made by Mr Martinez.

Course of the hearing

57. Before the commencement of the hearing, Mr Martinez, in accordance with the usual order for hearing, served a written outline of submissions dated 26 October 2018.

58. Paragraph 4(d) of the outline set out a fact that Mr Martinez had discovered in relation to Mr Griffiths' activities, that apparently Mr Martinez would rely upon to justify his summary termination of Mr Griffiths' partnership. The sub-paragraph provided:

(d)   Mr Griffiths had, on the morning of 12 August 2015, sought and had printed out in Word format, four precedents being confidential and valuable work product of the defendant contrary to the defendant's well-established policy with respect to the use of precedents and enlivening legitimate concerns about his intended use of those precedents given that he was in his 'notice' period.

59. The outline of submissions also set out in par 5(b) the following additional fact upon which Mr Martinez relied for the purpose of summarily terminating Mr Griffiths' partnership:

(b)   Mr Griffiths had been performing, at the same time, but without candid disclosure, further "foreign order" work to assist a family member.

60. In the context of the pleadings and the manner in which the hearing was conducted, the allegation in par 4(d) related to the instruction that Mr Griffiths gave to a subordinate to email to him a number of the Firm's precedents, which Mr Griffiths subsequently instructed his personal assistant to print out.

61. The use of the expression "foreign order" in par 5(b) was evidently intended to refer to work done by Mr Griffiths for one of his brothers, in which Mr Griffiths prepared a draft deed to assist the brother in relation to the termination of a commercial venture in which the brother had been engaged.

62. For completeness, it should be mentioned that Mr Martinez' statement of issues, also served in accordance with the usual order for hearing, was couched in very general terms that did not throw any light on the specific matters the subject of the application by Mr Martinez to further amend his defence.

63. Following senior counsel for Mr Griffiths opening his case, senior counsel for Mr Martinez made a brief opening. The Court indicated that it wished to hear from Mr Martinez as to his claim that, by reason of Mr Griffiths' conduct, he was properly summarily dismissed (T16.41, T24.17). It will be seen to be of some moment that the Court, during the opening for Mr Martinez, indicated that the Court would decide the case on the basis of the pleadings (T23.34).

64. Senior counsel outlined Mr Martinez' case concerning the justification for the summary termination of Mr Griffiths' partnership primarily by reference to the four dot points in Mr Martinez' 12 August 2015 email to Mr Griffiths, whereby he purported summarily to dismiss Mr Griffiths. Relevantly, the email stated the following grounds:

Performance for July $7K

Performance for August to date $7K

You have used staff and firm resources to work on your book activities including the launch and 90% of your activity is for your book

You are requesting staff to print off precedents

65. In this way, it is clear that Mr Martinez' case was opened to include reliance upon Mr Griffiths having requested the Firm's staff to print out precedents.

66. However, nowhere in the opening do I see any reference to Mr Martinez relying upon Mr Griffiths having done unauthorised legal work for his brother.

67. Perhaps motivated by the warning given by the Court during the opening that the parties would be held to their pleadings, on 2 November 2018, the third day of the hearing, Mr Martinez was given leave, by consent, to file an amended defence. Relevantly, the amended defence amended sub-par 8(d) to Mr Martinez's defence as follows, with the added words underlined:

8. A proper basis existed as the Plaintiff:

…

d.   had breached his obligation of fidelity to the Practice by engaging in such conduct and by not being honest and candid with the Defendant in his explanations as to his improper conduct regarding:

i.   his use of the Practice's precedents;

ii.   his use of the Practice's resources to promote his book.

68. The addition of sub-par (d)(i) introduced an allegation that the summary termination of Mr Griffiths' partnership was justified by his misuse of the Firm's precedents (augmenting the fourth dot point in Mr Martinez' 12 August 2015 email to Mr Griffiths).

69. The amendment did not introduce, or refer to, a justification for the summary dismissal based upon the work that Mr Griffiths did for his brother. That is so, notwithstanding that, at par 5(b) of his outline of submissions, Mr Martinez referred to Mr Griffiths as having performed "foreign order" work to assist a family member.

70. This is all in the context that, in his 17 August 2015 response to Mr Martinez' 12 August 2015 email, Mr Griffiths gave the following explanation concerning his use of the precedents:

The Precedents

The precedents were printed to see if I could assist my brother. They did not leave my room. They are still here. I told my brother I was unable to assist.

71. Senior counsel for Mr Martinez cross-examined Mr Griffiths about the circumstances in which Mr Griffiths caused the Firm's precedents to be printed out, and also on the issue of the work done by Mr Griffiths for his brother: see in particular T133.18 to about T153. As I saw it, this cross-examination primarily took place in relation to the use to which Mr Griffiths intended to put the precedents that he had printed out.

72. This issue was made relevant by par 8(e)(ii) of the further amended defence, which was an amendment to which Mr Griffiths did not object, by alleging that it was a breach of his obligation of fidelity by Mr Griffiths not being honest and candid with Mr Martinez, in that, when confronted about his conduct, he did not disclose and/or was dishonest about:

ii.   the real reason for printing off Practice Precedents on 12 August 2015, namely to give them to his brother for his brother's use;

73. In response to senior counsel for Mr Martinez' pursuit in cross-examination of Mr Griffiths of the work done for Mr Griffiths' brother, in the context of the precedents being printed out, senior counsel for Mr Griffiths made a number of objections as follows. First, at T144.4:

DONALDSON: Yes, I object as to relevance, your Honour. Firstly in circumstances where my learned friend is foreshadowing some sort of application to amend to bring his application within the evidence. I'm anxious that he not expand his case further by way of cross examination but if it turns out to be relevant to the case that he's pleaded then so be it.

HIS HONOUR: No, I think I will allow this question.

74. I took the view that the line of questions was relevant to the claim pleaded by Mr Martinez in his amended defence, whereby he specifically raised the fact that Mr Griffiths had caused the Firm’s precedents to be printed out. It also appeared that the questions may have relevance to Mr Griffiths’ credit, given that he had been accused of breaches of his obligation of fidelity to the Firm.

75. By his objection, senior counsel for Mr Griffiths made it clear that he objected to the line of questioning on the ground of relevance, if it was intended to support a claim outside Mr Martinez’ existing pleading, but the objection would not be pursued if the questions went to the existing pleaded case.

76. Following this exchange, Mr Griffiths was shown a four-page draft deed that he had prepared for his brother, together with a printout of data from the Firm's timekeeping records (T144.23), and Mr Griffiths was asked questions concerning how he recorded the time that he spent preparing the draft deed as non-chargeable administrative time.

77. It is in this context that the Court is required to decide whether Mr Martinez should be given leave to further amend his defence to add par 8(d) and par 8(e)(iv) after the end of the hearing and the close of submissions by the parties.

Pleading principles

78. In support of his application, Mr Martinez submitted that it is well-established that a party may amend its pleadings during (or even at the end of) the trial to reflect the evidence, in order to determine the real questions in controversy. He contrasted that situation with one where a party seeks to set up, by amendment, a new case at trial.

79. Mr Martinez relied upon the decision of the High Court in Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666 at 668-669, (1976) 9 ALR 437 (Leotta) per Stephen, Mason and Jacobs JJ:

…

But the duty of the trial judge was clear. If in the cause of action upon which the plaintiff sued there had emerged at the conclusion of the evidence facts which, if accepted, established that cause of action, then it was the duty of the trial judge to leave the issue of negligence to the jury. The pleadings should have been amended in order to make the facts alleged and the particulars of negligence precisely conform to the evidence which had emerged. Part 20, r 1(2) of the New South Wales Supreme Court Rules provides that all necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings. Now, and for many years past, a plaintiff does not fail by being refused leave to amend or through failure formally to apply for amendment, where the evidence has disclosed a case in the cause of action fit to be determined by the tribunal of fact. Particularly is this so when the action finally determines the rights of the parties in the cause of action.

In a case where the question arose whether an amendment ought to have been requested and allowed in order to raise breach of a different duty of care the court in Mummery v Irvings Pty Ltd (1956) 96 CLR 99 at 112; [1956] ALR 795 at 802, said: “There is, of course, no doubt that the question of extending the issues at the trial was peculiarly within the discretion of the trial judge. But, on the assumption that there was some evidence upon which the jury could have reached a conclusion on this additional issue, there was every reason why it should have been submitted to the jury. If, as the members of the Full Court appear to have thought, the present judgment precludes the appellant from bringing any further action that was an additional reason why that course should have been adopted. We find it unnecessary to express any view upon that question but our doubts on this point do not lessen our belief that, if there was evidence upon this additional issue, a refusal to extend the issues was not, in the circumstances, justifiable.”

These observations apply a fortiori to a case where amendment would not raise a fresh issue based on a different duty of care but would only amend the expression of the course of events so that the facts pleaded would conform with the evidence given. An amendment to allege a different duty of care, namely, that of occupier to invitee, was rightly refused by the trial judge upon the ground that there was no evidence to support an issue of breach of that different duty.

It is further to be observed that there was no suggestion made at the trial on behalf of the Commissioner that the case proposed to be left to the jury required the giving of further or other evidence and no application was made for an adjournment. It was no ground of appeal to the New South Wales Court of Appeal that a case contrary to the pleadings or the particulars had gone to the jury. The grounds of appeal were that there was no evidence of negligence, that the verdict was against the evidence and the weight of evidence, that there was an error in the trial judge's direction to the jury, and that the damages were excessive.

…

80. Mr Martinez also relied upon the following aspects of the decision in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 (Aon), per French CJ at [14] and per Gummow, Hayne, Crennan, Kiefel and Bell JJ at [82] (footnotes omitted):

[14] There is a distinction between the discretion of a court to allow a party to amend its pleading on that party's motion and the requirement to make all such amendments as may be necessary to determine the real questions in controversy. That requirement engages with the authority conferred on the court to make amendments of its own motion. The point was made in 1887 by the Full Court of the Supreme Court of Victoria in Dwyer v O’Mullen in relation to O XXVIII, r 1 of the 1875 Rules. Higinbotham CJ said of the last clause of the rule that it:

“makes an amendment mandatory. The judge is under the obligation of making an amendment, but only for a certain purpose and in certain cases – for the purpose of determining the real question in controversy between the parties – that being expressed in many cases to be the question which the parties had agitated between themselves, and had come to trial upon.”

The position is different where a party seeks to set up, by amendment, a new case at trial.

81. And:

[82] The need for amendment will often arise because of some error or mistake having been made in the drafting of the existing pleading or in a judgment about what is to be pleaded in it. But it is not the existence of such a mistake that founds the grant of leave under rules such as r 501(a), although it may be relevant to show that the application is bona fide. What needs to be shown for leave to amend to be given, as the cases referred to above illustrate, is that the controversy or issue was in existence prior to the application for amendment being made. It is only then that it is necessary for the court to allow it properly to be raised to enable a determination upon it.

82. Further, Mr Martinez relied upon the terms of s 64(2) of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act), which is as follows:

Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings.

83. Mr Martinez submitted that, in accordance with these principles, he could show that that the "controversy or issue was in existence prior to the application for amendment being made"; and that "consideration of [the] cases does not suggest that an unduly narrow approach should be taken to what are the real issues in controversy, although they are not, or are not sufficiently, expressed in the pleading": see Aon at [82] and [83].

84. Mr Griffiths relied upon the following passage from the joint judgment of the High Court in Dare v Pulham (1982) 148 CLR 658 (Dare v Pulham) at 664 (footnotes omitted):

…

Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it (Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (in liq)); they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial (Miller v Cameron); and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings (Gould and Birbeck and Bacon; Sri Mahant Govind Rao v Sita Ram Kesho). But where there is no departure during the trial from the pleaded cause of action, a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence. Particulars may be amended after the evidence in a trial has closed (Mummery v Irvings Pty Ltd), though a failure to amend particulars to accord precisely with the facts which have emerged in the course of evidence does not necessarily preclude a plaintiff from seeking a verdict on the cause of action alleged in reliance upon the facts actually established by the evidence (Leotta v Public Transport Commission (NSW)).

…

85. Finally, Mr Griffiths relied upon the judgment of Gleeson JA in Gunasegaram v Blue Visions Management Pty Ltd [2018] NSWCA 179; (2018) 129 ACSR 265 (Gunasegaram), as follows:

…

[255] The function of pleadings is “to state with sufficient clarity the case that must be met”; this reflects “the basic requirement of procedural fairness that a party should have an opportunity of meeting their case against him or her”: Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286; [1990] HCA 11 (Banque Commerciale); Dare v Pulham (1982) 148 CLR 658 at 664; [1982] HCA 70.

[256] A party is entitled to have the opposing party confined to that party’s pleadings because parties are entitled to come to trial to meet only the issues raised on the pleadings. However, pleadings are but a means to an end and not an end in themselves: Banque Commerciale at 293 (Dawson J). Thus, a case may be decided on a basis different from that disclosed by the pleadings where the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities: Banque Commerciale at 287.

[257] Here, the defendants’ pleadings did not adequately put Blue Visions on notice that they were contending that Blue Visions had given informed consent to the alleged breaches of fiduciary duties. The particulars given under the estoppel defence are not fairly to be read as asserting a defence of informed consent. There is no error in the primary judge’s analysis of the defendants’ case as disclosed on the pleadings.

[258] In Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356; [2010] FCAFC 133 at [52], the Full Court of the Federal Court referred to the remarks of Isaacs and Rich JJ in Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490 at 517:

Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest. (Emphasis added)

[259] Viewed in these terms, the question is whether Blue Visions knew the nature of the case it had to meet. In my view, absent an oral opening by the defendants expressly drawing attention to their reliance upon the informed consent defence (which had not been pleaded), the fleeting reference in par 38 of the defendants’ written opening that mentioned informed consent was insufficient to put Blue Visions on notice that the defendants intended to depart from their pleadings and raise such a defence. Nor do I consider that it should be inferred from the way in which the trial was conducted that Blue Visions acquiesced in the defendants advancing their case at trial as including the informed consent defence.

…

Application of principles

86. Care must be taken in the present context in how the principles relied upon by Mr Martinez are to be applied.

87. First, the application of s 64(2) of the Civil Procedure Act will be circumscribed by practical considerations when it is sought to be relied upon by a party at the end of the hearing. The manner in which the hearing has been conducted is likely to restrict the scope for the unimpeded application of the provision. In any event, it is expressed to be subject to s 58, which requires by sub-s (1)(a)(i) that, in deciding whether to make an order for the amendment of a document, the Court must seek to act in accordance with the dictates of justice.

88. Secondly, care must be taken when seeking to transpose the actual result in Leotta to the circumstances of a present day commercial claim. As the majority stated at 668: "The only question which arises on this appeal is whether there was any evidence of negligence upon which the jury might find a verdict in favour of the appellant". Barwick CJ, who dissented, said at 667 that "the case involves no question of law which must be decided in order to dispose of the case other than the question whether the evidence adduced was such as to entitle a jury to find a verdict for the plaintiff".

89. Barwick CJ at 667 described the claim as follows: "The cause of action was negligence on the part of the respondent in the care, control and management of the electric train". At the end of the hearing, there was no evidence before the Court to support the case set up in the pleadings and particulars, but there was evidence upon which the jury could find the respondent liable in negligence on a different basis. Thus, the majority said at 668 that "the case which the appellant at the trial sought to have submitted to the Jury was factually different from that alleged in the statement of claim and the particulars of negligence included therein.” The majority found at 668 that "a plaintiff does not fail by being refused leave to amend or through failure formally to apply for amendment, where the evidence has disclosed a case in the cause of action fit to be determined by the tribunal of fact."

90. The discussion of the majority at 668-669 seems to allow for an amendment where the evidence supports a different duty of care, but in the case before the Court, the necessary amendment "would not raise a fresh issue based on a different duty of care but would only amend the expression of the course of events so that the facts pleaded would conform with the evidence given." Their Honours noted at 669 that: "An amendment to allege a different duty of care, namely, that of occupier to invitee, was rightly refused by the trial judge upon the ground that there was no evidence to support an issue of breach of that different duty."

91. It was significant to the majority, as they noted at 669, that the respondent had not suggested at the trial "that the case proposed to be left to the jury required the giving of further or other evidence and no application was made for an adjournment."

92. The Chief Justice also noted at 668: "It is, of course, proper to allow a plaintiff to amend pleadings during the course of the trial provided the interests of the defendant can be adequately safeguarded by adjournment and otherwise. That is one thing and a matter of common enough experience.” The Chief Justice also noted at 668 that an appropriate response to an amendment being allowed might be a consideration of "what witnesses already called should be recalled."

93. The approach to the allowance of amendments adopted by the courts many decades ago in personal injury jury trials based on claims of negligence may not now easily translate into modern commercial claims, where the proceedings have been conducted applying up-to-date case management principles. In my perception, modern courts require the parties to take their obligations in readying the case for hearing most seriously and, indeed, one of the factors that s 58(2)(b)(ii) of the Civil Procedure Act permits the Court to have regard to in determining the dictates of justice in a particular case is "…the degree to which [the respective parties] have been timely in their interlocutory activities…" At least in the usual case, the Court will not readily grant an adjournment to enable the parties to deal with new evidence that a party seeks to introduce that is outside the claim that has been pleaded and for which particulars have been given. That observation is not put as a generalisation, as in each case the relevant rules must be observed. But, in the interests of the proper administration of justice, modern courts will often resist cases taking on a new life that is inconsistent with their proper determination in the period for which they have been set down for hearing.

94. The observations of the High Court in Dare v Pulham that are extracted above that: “Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings", have special force, given the modern approach of the courts to the management of cases. So too has the observation of Gleeson JA in Gunasegaram at [256]: "A party is entitled to have the opposing party confined to that party's pleadings because parties are entitled to come to trial to meet only the issues raised on the pleadings." An exception, recognised by Gleeson JA, that "a case may be decided on a basis different from that disclosed by the pleadings where the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities" demonstrates, by the use of the expression "deliberately chosen", how the circumstances in which the Court may be required to decide the case on a basis not covered by the pleadings are irregular and limited. In the particular case under consideration, Gleeson JA found at [259] that, in the absence of an oral opening by the party seeking to rely upon the defence that had not been pleaded "expressly drawing attention to their reliance upon" that defence, the plaintiff was not put "on notice that the defendants intended to depart from their pleadings and raise such a defence."

95. In my view, it is true to say that in the modern era the courts will be astute to ensure that, if a party seeks leave to amend its pleadings at the end of the hearing to make a claim based upon evidence that has emerged during the hearing, that party has drawn the attention of the other party clearly and early enough to give that other party an effective opportunity to contest the issue. Before the amendment will be granted, the Court will need to be satisfied that the other party, having had a proper opportunity to contest the issue, has in reality, and perhaps "deliberately", accepted the challenge to contest the new issue. It will rarely, if ever, be sufficient to justify the amendment that evidence has emerged during the hearing that is capable of supporting the new claim. That is especially so where the new evidence is admissible in any event because it is relevant to an existing issue that arises on the pleadings. The difference between the modern position, which takes support from the legislation as well as from Dare v Pulham and Gunasegaram, and the approach to procedural issues adopted by the majority in Leotta, may be seen in a consideration of the nature of the new evidence in Leotta, which was described by the Chief Justice at 668 as being "a single and, one might almost say, a chance answer of a witness called to support the case as pleaded."

96. The basis of the approach adopted by the Court is now one of procedural fairness, and is not dependent on the distinction between pleadings and particulars. However, in the present case it is of some moment that the claim pleaded by Mr Martinez, that Mr Griffiths breached his obligation of fidelity, by not being honest and candid regarding his use of the Firm's precedents, involves a different breach of duty to that relating to the improper provision of legal services to Mr Griffiths' brother. Had Mr Martinez been the moving party, the two claims would have raised different causes of action.

Conclusion

97. For the reasons that follow, it is not appropriate that the Court give Mr Martinez leave to make the amendment, after the completion of the hearing, concerning the provision of legal services by Mr Griffiths to his brother.

98. Mr Martinez' defence, as it stood at the commencement of the hearing, was imprecise as to the basis of his claim that Mr Griffiths had breached his obligation of fidelity. Paragraph 5(b) of Mr Martinez' written outline foreshadowed a claim based upon a "foreign order", in Mr Griffiths having done work to assist a family member. However, Mr Martinez' case was not opened in a way that expressly drew attention to his reliance upon the case now sought to be made. In response to an indication from the Court that the parties should attend to their pleadings, Mr Martinez was given leave to amend his defence to specifically plead a claim based upon the way that Mr Griffiths used the Firm's precedents. Mr Martinez did not seek to introduce a claim based upon Mr Griffiths doing work for his brother. That was consistent with his opening, which restricted the claim to the misuse of the precedents. Mr Martinez applied for leave to amend his defence on the morning of the third day of the hearing. That was effectively at the end of the cross-examination of Mr Griffiths (senior counsel for Mr Martinez was permitted to complete his cross-examination briefly after the amended defence was filed in court). Mr Griffiths was not given any fair opportunity to lead evidence in his case on the issue now sought to be raised, and he did not do so. Before the cross-examination of Mr Griffiths concerning the facts relevant to the new claim, senior counsel for Mr Griffiths made a relevance objection. As appears from the extract from the transcript set out above, senior counsel for Mr Martinez was permitted to proceed, because the questions were relevant to the case as pleaded, and were capable of going to Mr Griffiths' credit. Mr Martinez did not clearly raise the claim that he now seeks leave to make against Mr Griffiths at a time or in a manner that would make it procedurally fair for the Court to give that leave. In all of the circumstances, I am of the clear view that it would not be procedurally fair to Mr Griffiths for the Court now to permit the amendment sought by Mr Martinez, and it will therefore not do so.

Additional grounds for estoppel defence

99. In his original defence, Mr Martinez raised a defence of estoppel in pars 18 to 20. The apparent reason for Mr Martinez having raised an estoppel defence is that Mr Griffiths foreshadowed that he would plead that Mr Martinez did not have authority to give Mr Griffiths three months’ notice to expel or otherwise terminate him as a Fixed Draw Partner from the partnership.

100. In par 18, Mr Martinez alleged that the Firm and Mr Griffiths entered into the December Deed on the common understanding or assumption that Mr Martinez had authority to execute, terminate and take all steps in connection with the December Deed on behalf of the Firm. He alleged in par 19 that the Firm relied on that common understanding or assumption in entering into the December Deed, and in accepting Mr Martinez’ decisions to bestow benefits thereafter on Mr Griffiths pursuant to the December Deed. Then, in par 20, Mr Martinez alleged that, by reason of these matters, Mr Griffiths is estopped from denying that Mr Martinez had the authority to execute and terminate the December Deed.

101. Whatever might be thought about the logical structure of this estoppel claim, it clearly related only to Mr Martinez' authority to terminate the December Deed in accordance with its terms.

102. Mr Martinez now seeks leave to add the following additional estoppel claims to his pleaded defence:

21.   From 20 July 2015, being the date on which the Plaintiff was given notice of termination, until immediately prior to the (aborted) hearing of these proceedings in the District Court on 26 September 2017, the Plaintiff did not raise any challenge to the authority of the Defendant to terminate the December Deed on notice or otherwise.

22.   By reason of the Plaintiff's failure to raise the issue of authority as set out above:

a.   the Defendant was not put on notice that, to terminate the Plaintiff lawfully on notice, he needed to:

i.   have his decision to terminate the December Deed on notice ratified or authorised by a meeting of the Capital Partners; or

ii.   in the alternative, have the Capital Partners pass a resolution to terminate the December Deed on 3 months' notice or payment in lieu thereof;

b.   the Defendant thereby lost the opportunity to convene a meeting of the Capital Partners and to put a resolution to that meeting:

i.   to have his decision to terminate the December Deed on notice ratified or authorised; or

ii.   in the alternative, to terminate the December Deed on notice or by payment in lieu thereof; and

iii.   to have the Capital Partners pass such a resolution.

23.   By reason of the matters set out in paragraphs 21 and 22 above:

a.   it is now unconscionable or unconscientious for the Plaintiff to assert or otherwise rely on any lack of authority to terminate the December Deed on notice in accordance with clause 3.4 of the December Deed; and

638. I would conclude that Mr Griffiths continued to be an experienced and competent lawyer, but he did not have the advantage of a substantial clientele that he could take with him to any new firm.

639. I am prepared to infer that it is probably an advantage when seeking new employment to be able to do so having the benefit of existing employment, as that would tend to comfort and be viewed favourably by prospective employers.

640. In my view, it is self-evident that the summary termination of Mr Griffiths' Fixed Draw Partnership, for an alleged breach warranting summary dismissal, would be likely to have a damaging effect on Mr Griffiths' prospects of obtaining a satisfactory alternative position. The damage to Mr Griffiths' prospects would necessarily be enhanced as a result of the summary dismissal occurring only one month after the issue to Mr Griffiths of a three months' termination notice, as prospective employers could only wonder about the seriousness of Mr Griffiths' conduct, if the Firm was not prepared to wait a further two months for Mr Griffiths' notice period to expire. While it is a matter for judgment, I consider that the damage done by the repudiation to Mr Griffiths' prospects of securing a satisfactory alternative position was relatively extreme. How could Mr Griffiths have explained to prospective new employers why he no longer had a position without disclosing that he had been summarily terminated with only two months remaining of his notice period? Mr Griffiths was not even in a position to explain or attempt to defend himself, because the grounds given by Mr Martinez for the summary termination were cursory and inexplicable, apart from being unsupportable. Furthermore, the effect of the repudiation on Mr Griffiths' prospects of obtaining a better position than he was in fact able to obtain has not abated. It may abate to some degree when these reasons for judgment are published.

641. Mr Griffiths' prospects of obtaining satisfactory alternative employment in the absence of the repudiation of the December Deed by Mr Martinez must be judged against the background that, notwithstanding the repudiation, Mr Griffiths was able to obtain alternative employment, albeit at lesser remuneration, and only in February 2016 in circumstances where he had to relocate to Port Moresby, and could only take up employment on 23 May 2016. The alternative employment that Mr Griffiths was able to secure essentially places a floor under the possibilities of what Mr Griffiths could have achieved in the absence of the repudiation. The natural and logical conclusion is that Mr Griffiths would have had a significant chance of doing better than what he actually achieved if the repudiation had not taken place.

642. Notwithstanding that consideration, the fact remains that Mr Griffiths has not been able to obtain any evidence of the attitudes actually adopted by the potential employers from whom he sought employment, that may have justified the Court in arriving at a positive conclusion that Mr Griffiths had a high chance of achieving much better than he actually achieved. Although Mr Griffiths' prospects were in my view much higher than speculative, circumstances require that the Court evaluate those chances in a conservative way. This is especially so given that Mr Griffiths’ practice had dropped off significantly since February 2015.

643. The evaluation exercise should in my view be addressed first for the period up to 23 May 2016, when Mr Griffiths took up his position in Port Moresby. This period must be taken to start on about 18 December 2015, as I have already separately assessed Mr Griffiths' loss of income up to that time. The period is therefore about five months.

644. If Mr Griffiths had been able to secure an identical opportunity in Australia to the one that he did obtain in Papua and New Guinea, he would have been able to start in February 2016, and he would have enjoyed approximately an additional three months of salary at $300,000 per annum. That fact tends to show that Mr Griffiths' experience and reputation was valuable in the employment marketplace. The additional amount Mr Griffiths would have received would have been about $75,000 for the period. That may reasonably be considered as a measure of his loss for the period, because the only difference would have been that, absent the repudiation, he could have obtained the same position as he did obtain, but in Australia.

645. Having regard to the effect of the delay in Mr Griffiths being able to begin his employment in Port Moresby, I consider that it is reasonable to assess the value of the chance lost by Mr Griffiths of obtaining more satisfactory employment in Australia during the first period at 40% of the value of his share of profits from the Firm. That relatively low percentage is intended to reflect, among other things, the inherent uncertainty in Mr Griffiths' level of remuneration, but accepts that he had a significant prospect of achieving better than the $300,000 per annum that he actually achieved, and obtaining employment in Australia at an earlier time than he did.

646. On that basis, for the period up to 23 May 2016, Mr Griffiths' damages would be calculated as $435,000 × 40% × 5 months equals $72,500.

647. The next issue is the evaluation of Mr Griffiths' loss for the period after he commenced employment in Port Moresby on 23 May 2016. This requires an evaluation of the likelihood that Mr Griffiths would have secured alternative appointment at a remuneration greater than the $300,000 per annum that he has enjoyed since 23 May 2016, and maintained that additional remuneration until he retired at age 65.

648. I have taken the view that it would have been difficult for Mr Griffiths, at his then age, to secure partnership. However, there is also the consideration that, as time goes by, particularly after it is established that Mr Griffiths ought not to have been summarily dismissed by Mr Martinez, Mr Griffiths should be free to apply for more remunerative employment than he presently has. It is reasonable to proceed upon the basis that it will have been difficult for Mr Griffiths to obtain an equivalent position in Australia from his base in Port Moresby. Furthermore, although in theory there has been nothing stopping Mr Griffiths from obtaining better employment than his present position, the Court should not ignore that the effect of the repudiation of the December Deed is likely to have continued, and, as I have explained above, will do so until the publication of these reasons for judgment.

649. In these circumstances, I have concluded that the Court should take a relatively conservative approach, and I have allowed that Mr Griffiths has lost a 30% chance of securing the same remuneration as he enjoyed as a Fixed Draw Partner of the Firm over the period of 69 months from May 2016 to his assumed retirement at age 65. In formulating the possibility in this way, I do not mean to make a positive finding that a position at a salary of $435,000 was available, and Mr Griffiths had a 30% chance of obtaining it. My statement of the probability is intended to cover the full gamut of possibilities between a much higher chance of securing remuneration closer to the $300,000 that was secured, and a much lower possibility of securing remuneration close to, or above, $435,000. It can be no more than a broad allowance that seems appropriate in all of the circumstances. I note that these statements of principle also apply to my formulation of the loss of chance for the period between December 2015 and May 2016 above.

650. The calculation of Mr Griffiths' damages for this period is ($435,000 - $300,000) × 69/12 x 30% equals $232,875. That is about $40,000 more per year than Mr Griffiths actually earned, and does not appear to me to be an excessive estimate of the value of the chance that he lost for the period after 23 May 2016.

651. I will not discount this amount further for contingencies, as I have adopted the 30% figure to take into account that factor. Further, a reduction for unknown contingencies is likely to be balanced out to some degree by the fact that I have not allowed for any escalation of remuneration in accordance with inflation.

652. Given the broad nature of the assessment of the value of the chance lost by Mr Griffiths, I do not think that it is appropriate to allow interest on past losses, or to further discount the future losses to assess the present value of those losses.

653. Accepting the inexact nature of the assessment exercise, I conclude that it will be appropriate to assess Mr Griffiths' damages at $450,375, say $450,000.

Orders

716. For the reasons given above, the Court makes the following orders:

1. Enter judgment for the plaintiff against the defendant for damages of $450,000.

2. Order the defendant to pay the plaintiff's costs of the proceedings, without varying any other costs order that has already been made in these proceedings.

717. I will hear from Mr Griffiths if he wishes to apply for an order that his costs be paid on any basis other than the ordinary basis.

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Decision last updated: 06 June 2019