Jones v Chelvathurai
[2019] WADC 87
•28 JUNE 2019
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: JONES -v- CHELVATHURAI [2019] WADC 87
CORAM: PRINCIPAL REGISTRAR MELVILLE
HEARD: 3 MAY 2019
DELIVERED : 28 JUNE 2019
FILE NO/S: CIV 1739 of 2018
BETWEEN: TABATHA JONES
Plaintiff
AND
ANDREW CHELVATHURAI
First Defendant
AA LEGAL PTY LTD t/as iLAW BARRISTERS & SOLICITORS
Second Defendant
Catchwords:
Application for summary judgement, Application to strike out statement of claim, Meaning of likely to prejudice embarrass or delay the fair trial of the action, Legal practitioner duties to a third party
Legislation:
Rules of the Supreme Court 1971 (WA), O 16 r 1, O 20 r 19
Result:
The statement of claim be struck out
Representation:
Counsel:
| Plaintiff | : | In Person |
| First Defendant | : | Ms J K Taylor |
| Second Defendant | : | Ms J K Taylor |
Solicitors:
| Plaintiff | : | Not applicable |
| First Defendant | : | Jackson McDonald |
| Second Defendant | : | Jackson McDonald |
Case(s) referred to in decision(s):
Apache Energy Ltd v Alcoa of Australia Ltd (No 2) [2013] WASCA 213
Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281
Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62
Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87
Glew v Frank Jasper Pty Ltd [2010] WASCA 87
Hardie Finance Corporation Pty Ltd v Ahern (No 3) [2010] WASC 403
Hospital Products Ltd v United States Surgical Corporation (1984) 157 CLR 41
Kidd v Artus trading as Downing Legal [2013] WASC 264
Lampson (Australia) Pty Ltd v Fortescue Metals Ltd [No 3] [2014] WASC 162
Murchison Zinc Co Pty Ltd v Thiess Contractors Pty Ltd [2000] WASCA 167
Townsend v Roussety & Co (WA) Pty Ltd [2007] WASC 40
PRINCIPAL REGISTRAR MELVILLE:
The plaintiff pleads she was involved in Family Court proceedings with her then estranged husband David Stewart. Mr Stewart was represented by the first defendant who was a legal practitioner qualified and entitled to practice law in the State of Western Australia and who was employed by the second defendant.
By a writ dated 15 May 2018 the plaintiff commenced proceedings against the two defendants for losses she alleges to have been suffered as a result of an alleged breach of a duty of care they owed to her, an alleged breach of a fiduciary duty they owed to her, and their alleged breach of an implied retainer with the plaintiff.
The defendants have now brought an application for summary judgment or alternatively for the striking out of the plaintiff's statement of claim. Both applications are based on a short point, being that even assuming the facts pleaded by the plaintiff are true, as a matter of law the defendants cannot owe any duty to the plaintiff and that there cannot be any implied retainer in these circumstances.
An application for summary judgment should be made within 21 days after an appearance is filed or at any later time by leave of the court. An application to strike out the statement of claim should be made within 21 days of the service of the statement of claim failing which an extension of time is required.
In this case the statement of claim was filed on the 7 February 2019. I am not told when it was served but it is apparent the application brought by the defendants made 27 March 2019 was not made within time. Nevertheless, it cannot be more than 27 days out of time.
The application is supported by an affidavit of Ashley Sarah Weaver annexing correspondence addressed to the plaintiff dated 11 March 2019, which correspondence set out the defendants' views as to the deficiencies of the plaintiff's application and invited her to discontinue. In my opinion the approach by the defendants was reasonable and the relatively short delay does not appear to prejudice the plaintiff. Further, for the reasons set out below, it seems to me there is some merit in the defendants' submissions and in the circumstances I consider it appropriate to extend the time and to grant leave for the bringing of the application.
The plaintiff's case
The plaintiff's case, to the extent it can be distilled from the statement of claim, is that on the 12 December 2012 she and Mr Stewart transferred $662,000 from Scotland to a joint Westpac bank account. On 11 January 2013 the plaintiff and Mr Stewart separated and four days later, on the 15 January 2013, Mr Stewart transferred that sum of $662,000 from the Westpac bank account to an account in the Royal Bank of Scotland in his sole name and without the plaintiff's consent. Proceedings then commenced in the Family Court. From the date of issue of the Family Court proceedings on 29 January 2013 until about 29 October 2013 the plaintiff was represented by solicitors Cleveland & Co and thereafter by WA Family Legal.
On the 12 February 2013, the Family Court made interim orders requiring Mr Stewart to transfer $100,000 from moneys held in the Royal Bank of Scotland to a Westpac Bank account to be opened in joint names of the plaintiff and Mr Stewart, restraining each of them from withdrawing, transferring or otherwise dealing with the funds held in the Royal Bank of Scotland or the Westpac Bank bank account, and finally, until further order of the court, restraining Mr Stewart from disposing, selling, transferring or otherwise dealing with the property situated at 2 Sergeants Park, Newtown St Boswells, Scotland.
On 15 February 2013 solicitors in Scotland acting for Mr Stewart wrote to him requesting he sign dispositions (transfers of title) for 2 Sergeants Park and 10 Sergeants Park.
On the 18 February 2013 the Defendants commenced acting for Mr Stewart and went on the court record on 28 February 2013. They came off the record on 27 March 2013.
On 26 February 2013 Mr Stewart signed the dispositions which are alleged to have then been dispatched back to the Scottish solicitors by the first defendant.
On 5 March 2013 the first defendant witnessed Mr Stewart's signature on two declarations of solvency said to be required pursuant to Scottish law in respect of 2 Sergeants Park and 10 Sergeants Park.
By a letter dated 7 March 2013 signed by the first defendant and posted 7 March 2013 by the second defendant, unspecified documents were sent to the Scottish solicitors.
By letter dated 18 March 2013 the Scottish solicitors acknowledged receipt of the dispositions and declarations of solvency for 2 Sergeants Park and 10 Sergeants Park.
On 19 March 2013 10 Sergeants Park was registered in the name of Doreen Stewart, who is pleaded to be Mr Stewart's mother and on 27 March 2013 the second defendant filed a notice of ceasing to act.
It is further alleged that on 2 February 2016 Mr Stewart borrowed money which was secured by a 'standard security' over 2 Sergeants Park.
It is alleged that the transfer of 10 Sergeants Park without consideration to Mr Stewart's mother, and the borrowing of money against the security of 2 Sergeants Park, resulted in the diminution of the matrimonial asset pool and, in turn, a reduction in the amount the plaintiff received by way of property settlement of some $569,400.
The plaintiff also alleges that the defendants could have avoided or limited the harm the plaintiff suffered by seeking Mr Stewart's instructions to inform the plaintiff's solicitors of the 'pending dispositions or inaccuracies in the Affidavit' or by ceasing to act for Mr Stewart and not returning the signed dispositions to Scotland. Apart from inviting the general inference that by doing so the subsequent dealing with the properties would not have occurred and the pool of matrimonial assists would not have been diminished, how the harm the plaintiff alleges she suffered could have been avoided by doing this is not made clear in the pleadings.
The complaint about the accuracy of the affidavit appears to be that the defendants knew or ought reasonably to have known that the sum of $580,000 referred to in the affidavit of Mr Smith which was prepared by the defendants on the 28 February 2013 and which deposed to being money held in the Royal Bank of Scotland in an interest bearing account upon trust for his children was false because in fact it was part of the money transferred from the Westpac Bank in Western Australia to the Royal Bank of Scotland referred to above. It is not pleaded that the affidavit was drafted in light of this knowledge and is not pleaded when the first and second defendants knew or reasonably ought to have known that statement was false, or how it was they ought to have known that statement was false. Nor is it clearly set out how this alleged failing caused the losses claimed.
The plaintiff says the defendants' involvement in the mailing of the dispositions, the witnessing of the declarations of solvency, and the preparation of an affidavit that she alleges was false, breached the duties the defendants owed her as someone who could foreseeably suffer economic loss as a result of their actions, a duty owed to her notwithstanding the duties they clearly owed to their client. The duties the defendants owed Mr Stewart were:
(a)limited by the need to discharge them lawfully which did not result in a conflict with any duty they owed to the plaintiff;
(b)limited by the paramount duties that the defendants owed to the court and the administration of justice; and
(c)limited by the defendants' need to be honest in their dealings with the plaintiff and her advisors, and the requirement not to attempt to further Mr Stewart's matter or interests by unfair or dishonest means pursuant to the provisions of the Legal Profession Conduct Rules r 5, r 6(1)(a) and r 6(1)(d) and r 16(1).
Principles relating to summary judgment applications
By the Rules of the Supreme Court 1971 O16 r 1 (the RSC) the court may, if satisfied that an action is frivolous or vexatious, that the defendant has a good defence on the merits, or that the action should be disposed of summarily, order that judgment be entered for the defendant. However, the power should be exercised with exceptional caution. In Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87it was said the power:
[s]hould never be exercised unless it is clear that there is no real question to be tried
The fact that a transaction is intricate does not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. In Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62, 91 it was said:
But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.
It has also been said that where a case involves a novel cause of action, a measure of caution must be exercised in entering summary judgment, especially if the facts, adduced at trial, might cast 'light and colour' upon the resolution of the legal questions: Apache Energy Ltd v Alcoa of Australia Ltd (No 2) [2013] WASCA 213 [90].
The defendant in its submissions made the point that a solicitor acting for a party who is engaged in hostile litigation owes a duty to his client and the court but not normally a duty to his client's opponent. Further, in the context of adversarial litigation, public policy usually requires a solicitor be protected from a claim of negligence brought by his client's opponent. The authorities to which I was referred closely limit the extent to which a solicitor acting for a party might owe a duty to a non‑party and make it clear they do not arise where the third party interests conflict with those of the client.
It is generally implicit in the defendant's submissions that in the context of these proceedings it is impossible for a duty to be owed to the plaintiff because it would constitute a conflict with the duty that the defendants owed to Mr Stewart. I would accept that if in fact there was a conflict between the duties the defendants owed Mr Stewart and any alleged duty owed to the plaintiff, the duty owed to Mr Stewart would prevail and result in the conclusion that in the circumstances no duty was owed to the plaintiff. However, the submission made on behalf of the defendants seem to assume the very fact in issue, namely that there is, or would be, a conflict in interests. Whether or not there is a conflict requires consideration to be given to the nature and extent of any duty of care the defendants owed Mr Stewart and to the nature and extent of any alleged duty of care owed to the plaintiff.
It would seem that most of the cases in which the courts have found a duty was owed to a third party involve those who would have been beneficiaries pursuant to a will where the instructing testator's interests and the third party's interests are not in conflict but in parallel.
However, in my view there is no principle of law that categorically limits the situation which a solicitor acting for a litigant may owe duties of care to a third party who may be a beneficiary or a potential beneficiary of a will.
In Hardie Finance Corporation Pty Ltd v Ahern (No 3) [2010] WASC 403 [354] ‑ [376] Pritchard J summarised considerations to be taken into account in relation to establishing a duty of care in cases of economic loss. She said [354]:
Since the decision of the High Court in Caltex Oil (Australia) Pty Ltd v The Dredge 'Willemstad' (1976) 136 CLR 529 there has been no absolute rule in the Australian common law against the recovery of damages in negligence for economic loss which is not consequential upon injury to person or property. The general rule remains that no duty of care to found such an action will ordinarily be found to exist: Caltex Oil (Australia) v The Dredge 'Willemstad' (555, 558 - 559, 592, 598); Perre v Apand Pty Ltd (1999) 198 CLR 180 [4] (Gleeson CJ), [71], [101] (McHugh J). However, in some circumstances a duty of care has been found, so as to permit the recovery of economic loss which does not derive from physical injury or damage to property (sometimes referred as 'pure economic loss'): Perre v Apand [4] (Gleeson CJ), [24] (Gaudron J), [70] (McHugh J), [166] (Gummow J).
She said [355]:
The decisions of the High Court in this area reveal a continuing caution about expanding the circumstances in which a duty of care will be found in cases of pure economic loss. Certainly the law has not yet developed to a stage where there has been enunciated a governing principle applicable in all cases of negligence, or even to all cases involving economic loss, and it has been suggested that perhaps there never will be: Sullivan v Moody (2001) 207 CLR 562 [53] (the Court); Perre v Apand [25] (Gaudron J), [71], [76] (McHugh J), [405] (Callinan J); see also J Stapleton, Duty of Care Factors: a Selection from the Judicial Menus in P Cane & J Stapleton (eds), The Law of Obligations: Essays in Celebration of John Fleming (1998)
In my opinion it is arguable that in these circumstances the solicitors for Mr Stewart also owed the plaintiff a duty a care. The duty Mr Stewart's solicitors owed to him was never their paramount duty. Their paramount duty was always to the court. The court demands its officers to conduct themselves with the utmost candour and honesty. This in turn begs the question why does the court insist on this? One answer might be that the requirement is designed to serve no purpose other than to protect the reputation of the court and to maintain public respect and faith in the integrity of the court as an institution and its officers (including legal practitioners). In circumstances where legal practitioners fail to maintain the standards that are expected of them in their capacity of officers of the court, the only remedy is to make them accountable to the Legal Practice Board. However, another answer might be that this requirement serves not only this limited purpose but that the need to maintain the public confidence in the courts as an institution and the administration of justice encompasses the need to ensure the protection of the rights and interests of the parties who come before it for the resolution of their dispute. The disciplinary process of the Legal Practice Board and the Supreme Court's power to strike a practitioner from the roll are all invoked to protect the public including those members of the public who are litigants.
In the circumstances, if the allegations contained in the statement of claim are correct, it might be found a duty of care is owing to the plaintiff which is not inconsistent with the duty Mr Stewart's solicitors owed to him.
In my view the plaintiff's case raises a somewhat novel, arguable and undecided question of fact and law. Accordingly, it is my view that this is an issue that should go to trial and the application for summary judgment is dismissed.
General principle relating to strike out applications
This application to strike out is brought pursuant to the provisions of the RSC O 20 r 19(1)(a) and r 19(1)(c) on the basis it discloses no reasonable cause of action and on the basis it may prejudice embarrass or delay the fair trial of the action.
The principles and authorities in relation to bringing an application to strike out a claim on the basis it fails to disclose a cause of action are brought together in Lampson (Australia) Pty Ltd v Fortescue Metals Ltd[No 3] [2014] WASC 162 [44].
It can be seen that once again the court at first instance should be careful not to risk stifling the development of the law by summarily rejecting a claim where there is a reasonable possibility that, as the law develops, it will be found that a cause of action will lie. To that extent the sentiments echo those that relate to applications for summary judgment.
However, it is submitted that even if a duty of care might be found to be owing by the defendants to the plaintiff, on the facts as pleaded in the statement of claim no cause of action based on a breach of duty of care arising out of negligence, breach of fiduciary duty, or breach of an implied retainer is disclosed.
The question of whether the statement of claim should be struck out on the basis that it is pleaded in such a manner that it may ‘prejudice embarrass or delay the fair trial of the action' requires consideration to be given to what those words mean. In Kidd v Artus trading as Downing Legal [2013] WASC 264 [26] the court said:
The ground that a plea may prejudice, embarrass or delay the fair trial of the action evokes a composite phrase. Pleadings may be struck out on this ground 'because they are evasive, they conceal or obscure the real questions in controversy, they are ambiguous or not reasonably intelligible, they raise immaterial or irrelevant issues, they fail to confine the issues or state the case of the party in question with reasonable particularity, or they raise a case in terms which are simply too general': see HartRoach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998).
General principles relating to pleadings
In Murchison Zinc Co Pty Ltd v Thiess Contractors Pty Ltd [2000] WASCA 167 [38] it was said:
It is important to bear in mind the basic function of pleadings. This was described by Isaacs and Rich JJ in Gould v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490 at 517 (in a passage quoted with approval by Dawson J in Banque Commerciale SA (In Liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 293) in the following way:
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.
Martin CJ in Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281 [7] said:
In my view, it follows that provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and appraising the parties of the case that has to be met, the Court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the Court to be spent extensively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment.
Duties the court owes to unrepresented litigants
It can be difficult for an unrepresented person to plead out a cause of action, a process which assumes that the person pleading the case knows what the material facts of the cause of action are and is able to set them out in a clear, concise and intelligible way. In Glew v Frank Jasper Pty Ltd [2010] WASCA 87 [10] it was said:
Due allowance must, of course, be made for the fact that Mr Glew is unrepresented. A court should always be careful to see that the rights of an unrepresented litigant have not been 'obfuscated by their own advocacy': Neil v Nott [1994] HCA 23 [5]; [1994] HCA 23; (1994) 121 ALR 148, 150. It must be alert to the possibility that beneath inadequately expressed and often irrelevant material there may lurk an arguable case. And some leniency may be required in relation to compliance with the rules. But in the end the allowances that can be made for a litigant in person are necessarily limited, both as a matter of fairness to the other party, who must be adequately informed of the case they have to meet, and because the provision of acceptable grounds of appeal is fundamental to the exercise of the appellate function by the court.
With those considerations in mind I turn to the defendants' submissions that the statement of claim should be struck out either entirely or in part on the basis that no cause of action for breach of fiduciary duty, breach of an implied retainer or breach of duty of care not to injure the plaintiff by causing financial loss is demonstrated in the case as pleaded by the plaintiff or, alternatively, that the case as pleaded may prejudice embarrass or delay the fair trial of the action.
Breach of fiduciary duty and breach of an implied retainer
The defendants submit that a critical feature of a fiduciary relationship is that the fiduciary agrees or undertakes to act for or on behalf of the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The defendants cite the High Court decision of Hospital Products Ltd v United States Surgical Corporation (1984) 157 CLR 41, 96 ‑ 97 and more recently a decision of the Court of Appeal of Western Australia in Townsend v Roussety & Co (WA) Pty Ltd [2007] WASC 40 [124] ‑ [129] as authority for that proposition.
I agree with the defendants' submission. I also agree that there is nothing pleaded in the statement of claim to suggest there was an undertaking or an agreement by the defendants to act for the plaintiff. However, the plaintiff also alleges that there was an implied retainer between the defendants and herself. In my view, if it could be established that there was an implied retainer, the possibility that a fiduciary duty thereby arises cannot be discounted.
However, in my opinion there are no facts pleaded in the statement of claim to demonstrate there was an implied retainer between the defendants and the plaintiff. According to the facts set out in the statement of claim the plaintiff was represented by her own solicitors from the 29 January 2013. The plaintiff does not plead any meeting or communication, either orally or in writing, between her and the defendants from which one can even start to wonder whether there was any course of dealings between the parties that might give rise to an implied contract of retainer. To the contrary, the facts as pleaded show that there was not an implied retainer.
In my opinion the statement of claim insofar as it seeks to plead a cause of action based on the breach of an implied retainer and the breach of a fiduciary duty should be struck out.
Breach of a duty of care giving rise to a claim in negligence
With respect to the claim that the defendants breached a duty of care owed to the plaintiff, it is to be noted a breach will only give rise to a cause of action if the plaintiff is injured or suffers loss or damage as a result of the breach. It is said that damage is an essential ingredient to such a cause of action. In this regard the causal link between the acts of which the plaintiff complains and the loss, being more particularly the reduction in value of the matrimonial assets available for distribution to the plaintiff, is not demonstrated in the pleading.
Firstly, the plaintiff pleads she suffered a loss as a result of the transfer of 10 Sergeants Park and that the defendants contributed to this loss by dispatching the dispositions for the transfer of 10 Sergeants Park back to the Scottish solicitors. However, whilst the plaintiff pleads that Mr Stewart was restrained from disposing, selling, transferring or otherwise dealing with 2 Sergeants Park, no such pleading is made in respect of 10 Sergeants Park. On the face of the pleading Mr Stewart was free to transfer 10 Sergeants Park. That being the case, in my view nothing is pleaded to show the defendants breached any duty owed to the plaintiff in facilitating this. Even assuming the transfer of 10 Sergeants Park reduced the total pool of matrimonial assets available to be shared between the plaintiff and Mr Stewart, nothing has been pleaded to show how this was not taken into account, and the necessary adjustment made, if it fact it was not taken into account, when the final distribution was made.
At par 8 of the statement of claim the plaintiff pleads that Mr Stewart borrowed against the title of 10 Sergeants Park such that there is no equity in that property. It is not known what is meant by this pleading. It is difficult to see how on the face of the pleadings Mr Stewart could borrow against the equity and exhaust the equity in 10 Sergeants Park when it had been transferred to another person. Further, the pleading seems to be inconsistent with the plea that the property was transferred to Mr Stewart's mother for no consideration. However, if in fact this did happen, the facts need to be more clearly disclosed in the statement of claim.
With respect to the property at 2 Sergeants Park it appears from the pleading that the defendants had not been acting for Mr Stewart for several years prior to the property being encumbered on the 2 February 2016. In my opinion it is not clearly set out in the statement of claim how the conduct of the solicitors for Mr Stewart in mailing the dispositions and witnessing a declaration of solvency nearly three years earlier resulted in 2 Sergeants Park being used as security for a loan to Mr Stewart and, further, how and why the proceeds of the loan to Mr Stewart were not taken into account in the final distribution of the matrimonial assets, if in fact they were not taken into account.
Finally, no facts are pleaded to show how the alleged breach of the alleged duty owed to the plaintiff by the defendants constituted by their alleged involvement in the preparation of an affidavit that contained allegedly untruthful or misleading statements, namely the sum of $580,000 being in an interest-bearing account upon trust for Mr Stewart's children rather than being the money transferred from the Westpac Bank to the Royal Bank of Scotland and being part of the matrimonial assets, resulted in a diminution of the matrimonial assets pool and the final distribution to the plaintiff.
In my opinion the statement of claim insofar as it seeks to plead out the cause of action in negligence fails to do so with sufficient clarity and as such fails to disclose a cause of action and is likely to prejudice embarrass or delay the fair trial of the action. Accordingly, the statement of claim insofar as it pleads a cause of action in negligence should be struck out and the plaintiff be given an opportunity to file an amended statement of claim on this aspect of her cause.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
LF
Court Officer28 JUNE 2019
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