Kemp v Tiirikainen and Sutherland
[2018] ACTSC 287
•17 October 2018
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Kemp v Tiirikainen and Sutherland |
Citation: | [2018] ACTSC 287 |
Hearing Date: | 12 October 2018 |
Decision Date: | 17 October 2018 |
Before: | McWilliam AsJ |
Decision: | See [29] |
Catchwords: | PRACTICE & PROCEDURE – application to strike out whole or part of pleading – whether pleading discloses reasonable cause of action – whether aspects of pleading embarrassing – whether pleading an abuse of process – application dismissed |
Legislation Cited: | Court Procedures Rules 2006 (ACT) r 425 |
Cases Cited: | Coe v Commonwealth (1979) 24 ALR 118; 53 ALJR 403 |
Parties: | Graham Ronald Kemp (Plaintiff) Mark Martin John Tiirikainen and Ian Alistair Sutherland Trading as S&T Lawyers (First Defendant) Charles Filgate Giles (Second Defendant) |
Representation: | Counsel D Hassall (Plaintiff) J Pappas (Second Defendant) |
| Solicitors Nelson & Co Solicitors (Plaintiff) Sparke Helmore (Second Defendant) | |
File Number: | SC 328 of 2018 |
The plaintiff in this proceeding is a former client of the first defendant, a law firm in the Australian Capital Territory, practising in partnership under the name S&T Lawyers. The second defendant, Mr Charles Giles, was a solicitor previously employed by the first defendant. Since 2012, he has practised on his own account, and the plaintiff alleges that he retained Mr Giles directly from October 2012 to March 2015.
By Amended Statement of Claim filed 19 June 2018, the plaintiff is now suing his former solicitors in negligence, breach of contract and breach of fiduciary duties arising out of that previous representation. He seeks remedies of damages, equitable compensation or equitable damages, interest and costs.
The interlocutory application presently before the Court solely concerns the second defendant. The first defendant has no interest in the application and did not appear at the hearing. Before turning to the procedural issue for determination, it is necessary to first understand the substantive allegations.
The pleaded case against the second defendant
The plaintiff alleges the second defendant acted in relation to two proceedings, described in the amended pleading as the “Elrington proceedings” and the “O’Brien proceedings”.
The plaintiff claims that the second defendant owed him a number of fiduciary duties, which may be summarised as follows:
(i) a duty to avoid conflicts of interest and disclose them if they arose;
(ii) a duty to maintain the confidence of information and privileged documents and communications he obtained through acting for the plaintiff; and
(iii) a duty to advise or warn the plaintiff that he was entitled to claim and maintain client legal privilege in respect of certain specified documents, including providing advice as to waiver.
The plaintiff further pleads a duty to exercise reasonable care and skill in tort, and similar contractual obligations by virtue of a retainer.
The plaintiff alleges the second defendant breached those duties by (again, in summary):
(i) sending correspondence regarding the O’Brien proceedings in 2009 to an ACT Government Minister, which may have resulted in a loss or waiver of communications which had attracted client legal privilege;
(ii) failing to warn or advise the plaintiff about the possible consequences of sending the letter in terms of the potential loss or waiver of the said privilege; and
(iii) providing to opposing solicitors in the Elringtons proceedings a bundle of 476 pages of documents which were confidential to the plaintiff and included communications such as counsel’s advices, summaries of those advices, solicitors’ notes and documents pertaining to matters that were in issue in the Elringtons proceedings and which related to the plaintiff’s prospects of success in the Elringtons proceedings.
The plaintiff alleges he suffered loss and damage “by reason of, arising from or resulting from the breaches”, as follows:
(i) He had to obtain further legal advice from different solicitors in progressing and resolving the Elringtons Proceedings, which caused him to incur further legal costs.
(ii) ‘But for’ the disclosure of the bundle of documents, the plaintiff had good prospects of achieving, through the litigation in the Elringtons Proceedings, the sum of $1,160,415.28.
(iii) The disclosure of the bundle of documents meant that his opponent in the Elringtons proceedings was informed of the contents of counsel’s advices. This “prejudiced and compromised” the plaintiff’s position. He lost the opportunity of pursuing the said sum and instead settled the case for $292,500.
The quantum of the damage has been set out in accountants’ reports, which do not need to be considered here.
Present application to strike-out the pleading
10. The interlocutory application presently before the Court was filed by the second defendant on 27 August 2018 and seeks to strike out the amended pleading in whole or in part, pursuant to r 425(1) of the Court Procedures Rules 2006 (ACT) (Rules).
11. The application is based on each of the four limbs of that rule, namely that the amended pleading either discloses no reasonable cause of action, tends to cause embarrassment or delay, is otherwise unnecessary, or is an abuse of the process of the Court.
12. The second defendant complains that the amended pleading does not plead any causal connection between the allegations of negligence or breach of duty and the loss or damage which the plaintiff asserts he suffered.
13. In written submissions filed for the second defendant, it was argued that the amended pleading failed to plead all of the material facts necessary to establish the plaintiff’s several causes of action against him, which is a requirement of r 406(1)(b) of the Rules. A further complaint was that the amended statement of claim omits facts which, if not stated specifically, would be likely to take the second defendant by surprise, which is a requirement of r 406(1)(c) of the Rules.
Applicable principles
14. The principles applying to an application to strike out a pleading are well established, deriving from General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125,130. The rule is discretionary and to be sparingly applied: Twining v Curtis [2009] ACTSC 106; 3 ACTLR 174 at [3]. It is not enough that the case pleaded is weak or has a low prospect of success: Coe v Commonwealth (1979) 24 ALR 118; 53 ALJR 403,407. There is a need for exceptional caution: see McColley v Commonwealth of Australia [2014] ACTCA 21 at [30]-[34] and the authorities there-cited, including Galovac Pty Ltd v Australian Capital Territory [2010] ACTSC 132 per Jagot J (at [5]).
Consideration
15. The defects alleged by the second defendant are:
(a)A failure to plead any factual connection between the settlement of the Elrington proceedings and the asserted compromise of his client legal privilege, nor any delay in settling the proceedings, nor any devaluation of, or inability to recover, the loss asserted in consequence of the breaches alleged.
(b)A lack of an assertion that the plaintiff lost his client legal privilege, but merely that he was exposed to claims that he had lost or waived that privilege.
(c)A lack of any other pleaded breach of duty which could reasonably be viewed as having resulted in such a loss simply by reason of the nature of the duty breached.
16. The second defendant contends that what is missing from the plaintiff’s pleadings are the allegations of facts which, because of the second defendant’s alleged breach of fiduciary duties, or breach of contract or tortious wrongdoing, resulted in or caused the losses of which he complains. The second defendant says that it is not enough to merely assert that there is a connection and leave the defendant and the Court to guess at what that connection might be.
17. In White Industries Aust Ltd v Commissioner of Taxation [2007] FCA 511; 160 FCR 298, Lindgren J said at [47] (quoted with approval by French CJ and Gummow J in Spencer v Commonwealth [2010] HCA 28; 241 CLR 118 at [23]), there is a distinction between evidence disclosing that a party has a reasonable cause of action and a pleading disclosing a reasonable cause of action.
18. As I have endeavoured to demonstrate through the above summary of the plaintiff’s pleaded facts, the elements necessary to establish causes of action in tort for negligence, in contract, and in equity for breach of fiduciary duty, have all been pleaded.
19. In respect of the claim in negligence, a causal link pleaded (through [45]-[47] of the amended pleading) is that the disclosure caused the plaintiff’s opponent in the Elrington proceedings to be informed of certain information, that information being what was contained in counsel’s advices (or summaries of such advice). The pleading alleges that the plaintiff’s opponent should not have been ‘armed with’ that information, to use the phraseology of counsel for the plaintiff in oral submissions, when continuing the litigation or settling the proceedings with the plaintiff. That meant that instead of pursuing the proceedings or seeking to settle for a higher amount, the plaintiff was in a position where his good prospects and the opportunity of achieving a certain figure was “prejudiced and compromised”, meaning that he instead had to settle the proceedings for a lesser amount.
20. With regard to the cause of action based on breach of contract, I accept the submissions of the plaintiff that a causal link is not essential to the pleading, as nominal damages may be awarded. However, in any event, the same causal link is sufficient, at least for the very high threshold required for the second defendant to succeed on an application of this kind.
21. In respect of the claim for breach of fiduciary duties, again it is not always necessary to establish a causal link between the breach of fiduciary duty and the relevant loss in respect of which equitable compensation is sought (as is the case here), an example being in Gemstone Corp of Australia Ltd v Grasso (1994) 62 SASR 239, where the Full Court of the Supreme Court of South Australia found (at 243 per Matheson J, 246 per Prior J and 253 per Olsson J) that the accountability arises at the moment of the commission of a breach of duty; proof of subsequent causative consequences is not a precondition to a cause of action. Subsequently, in Maguire v Makaronis (1997) 188 CLR 449, the High Court, per Brennan CJ, Gaudron McHugh and Gummow JJ, at 467-468, confirmed that issues of ‘causation’ by analogy with those found with the recovery of damages in tort or contract did not emerge in the case before it. Where recovery of a particular loss is sought by a plaintiff, a ‘necessary connection’ is to be identified. In this case, insofar as a specific loss is to be claimed, the necessary connection has been pleaded, as discussed above.
22. Further, I do not accept that it is necessary for the plaintiff to prove that through the disclosure of the documents, the client legal privilege over those documents was lost. The purpose of pleading that the documents attracted the privilege was plainly to plead the confidential nature of the documents. It was the disclosure of the documents to the plaintiff’s opponent and the potential disclosure of the substance of the documents to the ACT Government minister that is material to the various causes of action pleaded, not the legal consequence of the disclosure, or whether the said privilege was lost at law.
23. For these reasons, I consider that the facts pleaded are sufficient to support each element that was required to be pleaded for each of the claims in equity, tort and contract. As the claims are reasonably disclosed, it is not appropriate to strike out any of the pleaded claims. Nor is it appropriate to strike out any particular paragraph in the amended pleading. Having reviewed the particular paragraphs the second defendant sought to strike out as an alternative to the claim in its entirety, I have been unable to discern any separate reason why any of those paragraphs would be individually struck out.
24. It follows that the arguments that the amended pleading is an abuse of process or is otherwise unnecessary will also be rejected. It appeared that they were really different characterisations of the same point.
25. In my view, what the second defendant is really seeking is further particulars of what the plaintiff says precisely was the information disclosed in the bundle of documents that “compromised or prejudiced” the plaintiff’s position, pleaded at [47] of the amended pleading, but such fact is also picked up through the words “by reason of” pleaded in each of paragraphs [45]-[46A]. In that regard, I agree that the second defendant should not be in a position where it has to trawl through the documents to guess at what information the plaintiff says “prejudiced or compromised” his position.
26. Even if it may confidently be assumed that counsel’s advice about a client’s true prospects and any strategy consequent upon that risk is obviously a matter the plaintiff would be concerned to keep confidential from an opponent, the second defendant is entitled to the necessary detail and I will direct that such further particulars be provided. To that extent, it is perhaps a matter that would take the second defendant by surprise, although that is not a basis for the relief sought in the application, being a strike out of the amended pleading under r 425 of the Rules.
27. If, having received further and better particulars of the relevant information disclosed which is said to have compromised the plaintiff’s position in the Elrington proceedings, the second defendant still maintains that it cannot plead to a particular paragraph, that discrete issue can be dealt through a further direction for particulars.
Conclusion
28. For the above reasons, the application will be dismissed. I consider that the plaintiff is the substantially successful party on the application and accordingly is entitled to an order for costs. If either party seeks a variation to the costs order, he is to make such an application within 7 days of the making of these orders, through contacting my associate in the first instance.
29. The orders of the Court will be:
(1) Within 14 days, the plaintiff is directed to provide further particulars of the Amended Statement of Claim dated 19 June 2018, in accordance with paragraph 25 of these reasons.
(2) The application is otherwise dismissed.
(3) The second defendant is to pay the plaintiff’s costs.
| I certify that the preceding twenty nine [29] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Date: |
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