Magoffin v Anobis Pty Ltd
[2023] QDC 102
•20 June 2023
DISTRICT COURT OF QUEENSLAND
CITATION:
Magoffin v Anobis Pty Ltd & Ors [2023] QDC 102
PARTIES:
JOHN EDWARD MAGOFFIN
(plaintiff)
v
ANOBIS PTY LTD ACN 169 138 130
(first defendant)
and
ASSIK TOMMY JORDAN TOMSCOLL AND SIBONA KEMA
(second defendants)FILE NO:
Cairns District Court 68 of 2018
DIVISION:
Civil
PROCEEDING:
Application
ORIGINATING COURT:
Cairns District Court
DELIVERED ON:
20 June 2023
DELIVERED AT:
Brisbane
HEARING DATE:
17 March 2023
JUDGE:
Byrne KC DCJ
ORDERS:
1. The applications filed on 9 March 2023 are dismissed.
2. The defendants are to pay the plaintiff’s costs of, and incidental to the hearings of 28 February 2023, 3 March 2023 and 17 March 2023 on the standard basis, as agreed or as assessed.
3. The matter is to be mentioned in the Brisbane District Court at 9.30am on 6 July 2023 for the purposes of case management.
4. The parties have liberty to appear by videolink or telephone at that hearing.
CATCHWORDS:
PROCEDURE – JUDGMENTS AND ORDERS – AMENDING, VARYING AND SETTING ASIDE – GENERAL RULES – Where the plaintiff sues for money owed under a guarantee – where a defence was filed in a timely manner which did not include a counterclaim – where just over 4 years later the defendants solicitor was given leave to withdraw - where 4 months later the plaintiff successfully applies to dispense with the defendants’ signatures on a Request for Trial Date – where days before the next mention the defendants engage new solicitors – where the defendants now apply to set aside the order dispensing with their signatures and for leave to file an amended defence and counterclaim – where there are no new facts – where there is an arguable case for differing defences and a counterclaim – whether leave should be granted given the delay on the part of the defendants.
LEGISLATION:
CASES:
Competition and Consumer Act 2010 (Cth) Sch 2, s 18, s 20, s 30
Property Law Act 1974 (Qld) s 71, s 72, s 75
Uniform Civil Procedure Rules 1999 (Qld) r 5, r 376, r 430, r 667, r 668
Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175
Nationwide News Pty Ltd [2013] NSWCA 335
Port of Melbourne Authority v Anschun Pty Ltd (1981) 147 CLR 589
Twigg v Twigg [2022] NSWCA 68Younan v Nationwide News Pty Ltd [2013] NSWCA 335
COUNSEL:
Mr D.T. Forbes for the applicants/defendants.
Mr C. Ryall for the respondent/plaintiff.
SOLICITORS:
Strategic Lawyers for the applicants/defendants.
Walkers Lawyers for the respondent/plaintiff.
Introduction
The defendants apply to set aside an order dispensing with their signatures on a request for trial date and for leave to file an amended defence including, for the first time in the litigation, a counterclaim. They accept that the second application cannot succeed unless the first does. Both applications are opposed.
Background
For some of the material period, the plaintiff and Mr Lagois were solicitors and partners of a law firm styled The Law Office Cairns (“TLO”). They also jointly owned, as trustees, a certain commercial property in Cairns (“the subject property”). A tenant of the subject property was a corporate entity that was the service company for TLO. Another corporate entity was a tenant of a different part of the premises, and it operated a real estate agency. The director of that second entity was Mr Smith.
A chronology of events will be of assistance:
Date
Event
Unknown date in August 2007
The plaintiff and a corporate entity purchase the subject property, as trustees, for $2.8 million.
Unknown date in 2009
The property is transferred to the plaintiff and Mr Lagois as trustees.
14 April 2014
The first defendant is incorporated. TLO is involved in that process. Mr Smith is made a director of the first defendant.
17 April 2014
A discretionary trust concerning the first defendant is settled. TLO is involved in that process.
On or about 21 April 2014
First contract for the subject property is signed. The settlement amount is $4,264,000, with a settlement date of 30 July 2014. The contract is subject to finance from two nominated providers, with an approval date of 30 May 2014.
30 July 2014
Settlement does not occur. Finance had not been approved. Subsequently extensions are granted, and the contract remains on foot.
4 September 2014 – 28 October 2015
A total of $1,745,927 is paid to the sellers by way of 16 payments by the first defendant. These were not required by the contract.
14 January 2016
The second contract for the subject premises is executed. The settlement amount is $2,540,000 with a settlement date of 29 January 2016. The contract is not subject to finance.
On the same date, a Deed of Rescission is executed. By its terms the first defendant forfeited $1,725,900.22. It also provided that the first defendant pays the sellers default interest in the sum of $500,000 on settlement of the second contract.
On the same date a Guarantee was executed by both of the second defendants.
29 January 2016
The second contract did not settle. Subsequently various extensions were granted, and it remained on foot.
1 August 2016
The defendants engage solicitors to act on their behalf in respect of the conveyance in the second contract. At that time settlement was expected to be on 14 August 2016.
31 October 2016
The partnership between the plaintiff and Mr Lagois is dissolved. There does not appear to be any evidence that the defendants were aware of this. It appears that Mr Lagois continued to operate under the name of TLO, with others.
1 December 2016
The second contract settles. No claim is made at that time for the default interest under the Deed of Recission.
17 February 2017
Powers of Attorney granted by each of the defendants in favour of Mr Smith are revoked.[1]
24 February 2017
Mr Smith’s appointment as property manager for the subject premises and another premise, both on behalf of the defendants, is terminated.[2]
28 February 2017
The female second defendant seeks advice from Mr Lagois, by email, about a demand for money made by Mr Smith.
2 March 2017
TLO, under the hand of Mr Lagois, writes to Mr Smith on behalf of all defendants demanding that no direct contact be made with the defendants and that his business vacate the subject premises forthwith.
Unknown date in March 2017
The second defendants, for the first time and after receiving a letter of demand from the plaintiff, tell their solicitor of the existence of the first contract and of the Deed of Recission.[3]
24 April 2017
Counsel’s advice in respect of the defendants’ position is provided to the defendants’ solicitor.
23 April 2018
Claim and Statement of Claim filed.
3 May 2018
Letter sent by solicitor to second defendants suggesting a tactical approach to the conduct of the litigation and seeking instructions.[4]
12 June 2018
Defence filed.
3 June 2018
Reply filed.
7 May 2019
Plaintiff’s list of documents filed.
26 August 2019
Plaintiff sends a Request for Trial Date to the defendants’ solicitor.
9 September 2019
Defendants’ list of documents filed.
7 May 2020
Mediation is unsuccessful.
19 November 2020
Defendants’ solicitor notified the plaintiff’s solicitor that he expected to receive instructions to amend the Defence.
8 June 2022
Defendants’ solicitor applies for leave to withdraw.
5 August 2022
Leave to withdraw granted by Morzone DCJ.
29 November 2022
Plaintiff applies for an order that the defendants’ signatures on a Request for Trial Date be dispensed with.
9 December 2022
Order by Fantin DCJ that the defendants’ signatures be dispensed with. Listed for mention 3 February 2023 to list for trial.[5] The male second defendant appeared in person on the application.
28 January 2023
Defendants engage Strategic Lawyers (the current solicitors on the record for the defendants).
8 February 2023
Strategic Lawyers receive the file from the previous solicitors. It is comprised of two boxes of material that is not indexed.
28 February 2023
Mention before Porter KC DCJ to case manage the matter.
3 March 2023
Orders made for filing of documents concerning the hearing before me on 17 March 2023.
9 March 2023
Present applications filed.
[1]Affidavit of Anthony Ian Sturgeon dated 14 March 2023, exhibit AIS-13 at page 3 of that letter.
[2]Affidavit of Anthony Ian Sturgeon dated 14 March 2023, exhibit AIS-13 at page 2 of that letter.
[3]Affidavit of Anthony Ian Sturgeon dated 9 March 2023, exhibit AIS-8 at page 2 of that letter.
[4]Some of the contents of this letter will be described in more detail later in these Reasons.
[5]It is unclear on the material before me what, if anything, happened on 3 February 2023. In any event, there were subsequent mentions and the trial date has not been set, pending the determination of this application.
Additionally, TLO acted for the defendants, in various capacities, in unrelated matters both before, during, and after the sale.
Also, in addition to those events tabled above, there were various attempts by the plaintiff to progress the matter at different times which were resisted on a number of bases but most regularly the border closures and travel restrictions around COVID-19. The plaintiff seems to have acted cautiously in light of the explanations given.
The plaintiff’s claim is for $250,000, namely half of the default interest amount as against the first defendant which the two sellers were owed. Alternatively, the same amount is sought as against the second defendants on the Guarantee.
The filed defence was prepared by solicitors, seemingly in light of the advice received from Counsel dated 24 April 2017. It can be accepted that it is not an exemplar of drafting excellence and is lengthy and repetitive, but it does attempt to comprehensively deal with the defence of the claim in light of Counsel’s advice. It can be accepted that it does not raise some of the matters now said to be important, and it does not plead a counterclaim as against the plaintiff, Mr Lagois or Mr Smith.
Broadly speaking, it asserts that:
a)Both Mr Lagois and Mr Smith acted for both sellers in the two contracts and the Deed of Recission.
b)Mr Lagois and TLO acted as a solicitor for all defendants in various legal matters prior to and after the first and second contracts and the Deed of Recission being executed.
c)The day after paying $2000 to “take the property off the market” the female second defendant said she did not want to proceed with the purchase. Mr Smith refused to refund the money and said he would arrange finance to facilitate the purchase.
d)The sellers and Mr Smith represented the value of the property to be $4 million. The second defendants indicated that they would offer a purchase price once a valuation report was provided.
e)The settlement did not occur as finance was not approved. Subsequently, Mr Lagois wrote agreeing to an extension of the settlement date, without penalty, on 17 occasions. The contract did not become unconditional during this time.
f)Mr Lagois led the second defendants to believe that the second contract had to be signed. The various documents, including the Deed of Recission and the Guarantee, were not explained to them and they were not given the opportunity to read them. The second defendants were advised that the purchase price in the second contract would meet the bank valuation, thereby facilitating the provision of finance to complete the contract. The second defendants did not have legal representation at that time, although Mr Lagois had been retained by them previously.
g)The second defendants had no understanding of the obligations of the first defendant under the Deed of Recission, nor of their obligations under the Guarantee. In particular, they were unaware that the Guarantee required them to pay money on completion of the second contract.
h)Mr Smith became aware that that the valuations would not reflect the $4 million figure represented to the defendants. One, obtained in July 2016, valued the property at $2,540,00, the same figure as the settlement price in the second contract signed 6 months earlier. A later valuation obtained by the defendants valued the property at $2,000,000.
i)At the time of signing the first contract, the sellers represented that the property earned gross rental income of about $300,000 p.a. At the time of signing the second contract, the sellers represented that the property was fully tenanted and earned gross rental income of about $350,000 p.a. In fact, it was never fully tenanted and at the time of the second contract the rental income was a little under $150,000 p.a. The service company for TLO had negotiated a reduction in rent prior to that time from $265,882 p.a. to $120,000 p.a.
j)The sellers and their agent also misrepresented the outgoings for the property, which also affected the decision to proceed with the purchase.
k)There were other misrepresentations made in the course of their dealings of which the plaintiff, Mr Lagois and Mr Smith must have been aware.
l)On or about 8 July 2016 Mr Smith, as agent for the sellers, wrote to the defendants to the effect that there would be no penalties for the delayed settlement of the second contract.
m)The plaintiff and Mr Lagois elected not to require payment of the default interest at the time the second contract settled.
n)As to the claim against the first defendant, defences of misleading and deceptive conduct[6], unconscionable conduct within the meaning of the unwritten law[7], false or misleading representations about sale of land[8], common law unconscionable conduct and unjust enrichment arise. It is further asserted that the relevant clause in the Deed of Recission is a penalty clause and unenforceable. In any event, there had been an election to waive and an estoppel by the failure to claim the default interest at the time of the settlement of the second contract.
o)As to the claim of the Guarantee against the second defendant, defences arise of misleading and deceptive conduct[9], common law unconscionable conduct, and unconscionable conduct within the meaning of the unwritten law[10].
p)Further it is said that both the Deed of Recission and the Guarantee are void and unenforceable.
[6]S 18(1) of the Australian Consumer Law (“ACL”).
[7]S 20(1) of the ACL.
[8]S 30(1)(c) of the ACL.
[9]S 18(1) of the ACL.
[10]S 20(1) of the ACL.
Those matters were pleaded by way of defence and not by way of counterclaim.
As the emphasis in these reasons primarily concerns the defendants’ position, the Reply can be dealt with broadly and in short compass:
a)Mr Lagois did not act under a conflict of duty.
b)If Mr Smith did, it was outside the knowledge of the plaintiff, and hence he was not acting as the plaintiff’s agent.
c)If some of the second defendants’ assertions are to be accepted, they acted contrary to their duty to the first defendant and the plaintiff was not responsible for that.
Some of the contents of the letter dated 3 May 2018, referred to in the chronology above, and the defendants answer to that before me require elucidation.
The letter was addressed to all defendants. It touched on the purchase of the subject property and the defendants’ request that all communications about the matter be directed to Mr Smith, the fact that the defendants had not informed the solicitor of the existence of the first contract and the Deed of Recission until March 2017, issues touching on the tenancies at the subject premises and the availability of actions open to be taken against the plaintiff, Mr Lagois, and Mr Smith, as well as the availability of a counterclaim in the proceedings brought by the plaintiff.
The letter suggested there were causes of action open against all three. It suggested actions for breach of fiduciary obligations would be available against Mr Smith, and may be available against Mr Lagois but did not avert to the plaintiff being liable in that regard.
It suggested that no counterclaim be pleaded and instead evidence be gathered before commencing any such claim, including through non-party disclosure in the plaintiff’s action. If sufficient evidence was revealed, proceedings could then be started separately and the actions joined, if necessary. The issue of time limitations was addressed. The letter also sought instructions as to how to proceed.
The defendants’ solicitor has deposed to his belief based on what he has been told by the second defendants. It is:
a)That “at no stage were they informed by their former lawyers in this proceeding that Magoffin and Lagois owed the defendants fiduciary duties or that they might have a defence against the claim in this proceeding based on breach of those duties and a counterclaim also based on breach of those duties”[11]; and
b)That “they do not know why (the matter of Mr Lagois’ possible liability for breach of fiduciary duties) was not further pursued by” the solicitors.[12]
[11]Affidavit of Anthony Ian Sturgeon dated 9 March 2023 at paragraph 43.
[12]Affidavit of Anthony Ian Sturgeon dated 9 March 2023 at paragraph 44d.
The parties’ submissions
The defendants’ lengthy submissions can be distilled into the following propositions:
(a)The plaintiff owed the defendants a fiduciary duty due to the nature of the relationship between them both before and after the subject transactions, and especially at the time of the signing of the Deed of Recission and the Guarantee.
(b)The plaintiff acted under a conflict of interest, given the existence of that fiduciary duty, in a number of ways, including:
(i)entering into the various transactions;
(ii)failing to advise the defendants that their payments may have resulted in the contract becoming an instalment contract with the associated rights to enforce the conveyance and thereby gained the benefit of rental income; [13] and
(iii)failed to advise the defendants of a right to seek relief from forfeiture.
(c)Accordingly, there is at least an arguable case that the whole of the transaction should be set aside, and while an equitable defence of laches may be raised given the delay the success of that needs to be left to the judge finally determining the matter.
(d)While the defendants accept that some of the delay is attributable to them, they should not be held responsible for much of it where they had not been advised of a viable series of defences and the availability of a viable counterclaim.
(e)Although the applications are brought at a late stage, Nationwide News Pty Ltd[14] demonstrates that, in the present circumstances, it is appropriate to grant the application and effectively allow the amendment to the filed defence.
(f)In response to a submission from the plaintiff, amendment to allow fresh pleadings would not be statute barred because the limitation period does not attach two actions in equity. Further, separately commenced proceedings in the nature contemplated by the proposed counterclaim would be likely, if now commenced, to be set aside or stayed om an application of Anschun-type principles.[15]
[13]Sections 71, 72 and 75 of the Property Law Act 1974.
[14][2013] NSWCA 335.
[15]Port of Melbourne Authority v Anschun Pty Ltd (1981) 147 CLR 589.
The plaintiff submits that:
(a)The defendants are bound by the implied undertaking to conduct the litigation expeditiously.[16]
[16]Rule 5 of the UCPR.
(b)The Court has the power to grant the present applications, but should be loath to do so where:
(i)the defendants appeared at the hearing in which the order was made;
(ii)there is no evidence that circumstances have materially changed since the order was made; and
(iii)there is no, or insufficient, evidence to explain the failure to act earlier, or to explain the delay generally.
(c)There are reasons to doubt that a fiduciary duty as between the plaintiff and the defendant could be established in any event.
(d)Any action of the type now contemplated by the defendants is time barred and, separately, would be met with a defence of laches.
(e)Allowing the amendment to occur would notably increase the time and expense of determining the matter which was commenced over five years earlier.
(f)In circumstances where there has not been a draft of the amended defence and counterclaim provided, it is unknown the precise basis on which it would be pursued and, given the history of the matter, it cannot be assumed that it would be expeditiously pursued if the applications were granted.
Consideration
The defendants correctly concede that leave to file an amended defence and counterclaim cannot be granted unless Fantin DCJ’s order to dispense with their signatures is set aside. However, that does not mean that the strength of any case based on the amended defence and counterclaim is irrelevant to the precedent issue.
I consider that there is an arguable case involving a breach of fiduciary duty against the plaintiff, although clearly not as strong as that against each of Mr Lagois and Mr Smith. I accept that any such action, whether brought against any or all of the three possible defendants and whether pleaded as a separate cause of action or as a counterclaim would likely be met with a pleaded defence of laches. While not adjudicating on the success of any such defence, the delay in the present matter means it is not without, at least, some merit.
Further, it may be that a limitation period would be applied to any separate action now commenced in equity[17] and that is a relevant consideration in determining whether to effectively allow the defendants to amend their defence and plead a counterclaim.[18] The applications were not argued on the basis that r 376 of the UCPR was relevant, either directly or indirectly, and so that need not be further considered, especially where the defendants have not provided a draft of the proposed amended defence and counterclaim.
[17]Twigg v Twigg [2022] NSWCA 68 [172]-[197].
[18]Rule 376 of the UCPR.
In summary, there is an arguable case based on breaches of fiduciary duty but it is not without its difficulties.
Turning now to the other aspects of the application to set aside Fantin DCJ’s order, somewhat surprisingly, neither party has expressly referred to the power to set aside the order, namely rr 667 and 668 of the UCPR.
Rule 667(1) cannot apply. The subject Order was filed on 12 December 2022 and the present application on 9 March 2023. Rule 667(2) also cannot apply. The male second defendant appeared before Fantin DCJ, no doubt appearing in person for both of the second defendants and, presumably, by leave for the first defendant. None of the other paragraphs of r 667(2) are raised by the evidence before me.
As to r 668, there are not said to be any facts that have arisen or are discovered since her Honour’s order of 9 December 2022. Certainly, there are new or fresh conclusions sought to be drawn from the facts, but no new or fresh facts. That rule does not apply.
The outcome is no better for the defendants if the applications are approached on a broader “interests of justice” approach, as the parties seem to be content to do.
I accept that the defendants received their former solicitor’s letter dated 3 May 2018, which contained pertinent advice. The receipt of that letter is not specifically denied in the material put before me and it is, I consider, inconceivable that a Defence would have been filed without instructions. Once that is accepted, the weight to be given to the present solicitor’s information and belief assertions at paragraph 14 herein diminishes. While his belief is admissible in the present proceedings, [19] those assertions do not necessarily carry the same weight as they might have had they been more fully expressed or exposed to and maintained under cross-examination.
[19]Rule 430(2) of the UCPR.
In making that observation I accept that the advice did not expressly refer to any fiduciary duty being owed by the plaintiff. Nonetheless, there was reference to a fiduciary duty arguably being owed by Mr Lagois and the denial of that affects the weight to be given to the denial overall.
I also accept that it is likely that a deliberate decision was made by the defendants not to plead a counterclaim in the Defence. The advice given to the defendants to not proceed with a counterclaim at that time, and to gather evidence for a separate claim was not the only course of action open, but it was a legitimate proposal. That no separate action was later taken could be explained on many possible bases, including the defendants own dilatory pattern of conduct. In any event, it was not for the solicitors to unilaterally commence proceedings as the second defendants now seem to have expected.
Further, the previous solicitor expressed an expectation on 19 November 2020 that instructions would be obtained to amend the filed Defence. This is suggestive of discussions occurring on that topic, although it does not reveal in what respect it might be amended. That no such amendment occurred seems likely to be attributable to the defendants refusing to pay the outstanding legal fees and place that solicitor in funds for the future conduct of the matter, at least until it was too late.[20]
[20]Affidavits of Martin Kevin Treston filed 8 June 2022 and 4 August 2022.
The defendants’ slow approach to this litigation is also evidenced by the defendants’ late disclosure to the previous solicitor of the first contract and the Deed of Recission, and by the manner in which they sought to retain new legal representation after the former solicitor was given leave to withdraw on 5 August 2022. The current solicitors were not retained until 28 January 2023, only six days before the then next allocated mention date to set a trial date. There is nothing before me to indicate that they acted with any expedition to obtain new representation.
I accept that the proposed amendments, as best as they can be understood in the absence of a draft pleading and given that it is unclear if Mr Smith would be joined as a defendant in the counterclaim,[21] will add notably, if not substantially, to the complexity of any trial, and hence add to its time and expense. This is a relevant consideration given that the application is made so late in the piece.
[21]TS 1-10, ll 23-30.
Applications which have the effect of delaying the trial’s progress must, amongst other things, justify the delay for the lateness of the application.[22] I accept that the COVID-19 border closures would have impeded the ability of the second defendants to come to Australia for the purposes of conferring with legal representatives and preparing for trial. But there is no satisfactory explanation for why most, if not all, of that process could not have been done by videolink, or through some alternative arrangement. There is in fact no evidence that anything of substance was done during that time. The delay here is unacceptable and much of it seems to be attributable to the defendants. The plaintiff’s apparently cautious approach to progressing the matter is explicable, but at least he was making efforts. The defendants’ lackadaisical approach to the litigation is evidenced by their engagement of solicitors at the last minute before the matter was to be set for trial, after having personally attended the hearing where the order dispensing with their signatures was made.
[22]Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175, especially at [103].
Further, the fact that a counterclaim was not pleaded in the original defence, or any amended defence in the four or so years later is left unexplained, other than on the basis that it was a deliberate tactical decision. It may be that it is one that is now regretted, but earlier steps on their part may have better placed them to amend the defence.
Younan v Nationwide News Pty Ltd[23] is an example of when it was, on appeal, considered appropriate to allow an amendment to particulars prior to trial where the sufficiency of the particulars had been known to all parties for some time and where the amendment did not raise any substantial new issues. That is not the case here. Notwithstanding the statement of practice at the end of [34] in Younan, it is not authority for the proposition that an application such as this will necessarily be allowed if brought at the interlocutory stage. All relevant factors must be assessed.
[23][2013] NSWCA 335 [30]-[34].
I am satisfied that the setting aside of Fantin DCJ’s order of 9 December 2022 is not warranted either by an application of the express powers in the UCPR, nor on a broader interests of justice approach.
Accordingly, the first application must be dismissed. It follows, as is conceded by the defendants, that in that event the second application must also be dismissed.
Costs
In the event of succeeding on the applications, the plaintiff submits that the costs of this application and the two previous mentions should be awarded in its favour, and asks that I “consider” granting them on the indemnity basis. The defendants do not oppose an order on the standard basis.
There does not seem to me to be any relevant delinquency of such a nature that would justify an indemnity costs order. Costs will be granted on the standard basis for the hearings on 28 February 2023, 3 March 2023 and 17 March 2023.
Orders
1.The applications filed on 9 March 2023 are dismissed.
2.The defendants are to pay the plaintiff’s costs of and incidental to the hearings of 28 February 2023, 3 March 2023 and 17 March 2023 on the standard basis, as agreed or as assessed.
3.The matter is to be mentioned in the Brisbane District Court at 9.30am on 6 July 2023 for the purposes of case management.
4.The parties have liberty to appear by videolink or telephone at that hearing.
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