Marshall v Prescott (No 2)
[2013] NSWSC 1254
•30 August 2013
Supreme Court
New South Wales
Medium Neutral Citation: Marshall v Prescott (No 2) [2013] NSWSC 1254 Hearing dates: 30 August 2013 Decision date: 30 August 2013 Jurisdiction: Common Law Before: Beech-Jones J Decision: Plaintiff directed to file further amended statement of claim reflecting findings in the judgment.
Catchwords: PRACTICE AND PROCEDURE - application to amend amended statement of claim - where application made after hearing - Civil Procedure Act, s.64. Legislation Cited: - Civil Procedure Act 2005
- Court Procedures Rules 2006 (ACT)Cases Cited: - Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 239 CLR 175
- Beach Petroleum NL v Abbott Tout Russell Kennedy [1999] NSWCA 408; 48 NSWLR 1
- Cropper v Smith (1884) 26 Ch D 700
- Marshall v Prescott [2013] NSWCA 152
- Tildesley v Harper (1878) 10 Ch D 393Category: Interlocutory applications Parties: Margaret Lesley Marshall (First Plaintiff)
Kim Neil Marshall (Second Plaintiff)
Michael Prescott (Defendant)Representation: Counsel:
C.J. Bevan, E.W. Young (Plaintiffs)
J.C. Kelly SC, B. McManus (Defendant)
Solicitors:
Turner Freeman (Plaintiffs)
Colin Biggers & Paisley (Defendant)
File Number(s): 2009/297404
EX TEMPORE Judgment
On application by Plaintiffs to amend
Before me is an application by the plaintiffs to amend their amended statement of claim. The application has been made after a five day hearing and most of the submissions were filed or presented. Although some minor amendments are not opposed by the defendant, he opposes the bulk of the application.
Background
These proceedings arise out of the death of the late Neil Marshall in an aircraft accident near Whyalla in May 2000.
At some point the defendant, Mr Prescott, a solicitor based in South Australia, received instructions to act on behalf of Mr Marshall's de facto wife, Ms Linda Carruthers, and various relatives of other persons who died in the air crash. One of the plaintiffs, Mrs Marshall, was the wife of Mr Marshall. They were still married at the time of his death. Mrs Marshall was also the executor of his estate. The other plaintiff, Mr Kim Marshall, is the late Mr Marshall's son.
In May 2001 Mr Prescott called Mrs Marshall. He advised her that he acted for Ms Carruthers. Mrs Marshall referred Mr Prescott to her solicitors, Turner Freeman. Thereafter Mr Prescott played a co-ordinating role with a view to commencing proceedings against the manufacturer of the engine of the plane that crashed. Eventually proceedings were commenced against that manufacturer in Pennsylvania. To that end, a New York law firm, Kreindler & Kreindler, was retained to act. At this point it suffices to state that there is a dispute as to exactly who out of Mrs Marshall, her son and Ms Carruthers retained Kreindler & Kreindler and on behalf of whom the proceedings in Pennsylvania were conducted.
In February 2003 the various proceedings that had been commenced on behalf of the estates of the deceased persons in Pennsylvania settled in principle. Between March and May 2003 a dispute broke out concerning to whom the settlement amount referable to Mr Marshall's death should be paid. Ultimately in June 2003 Kreindler & Kreindler distributed the funds to Turner Freeman upon their provision of an undertaking to commence proceedings to determine who, between Mrs Marshall and perhaps her son on the one hand and Ms Carruthers on the other, was entitled to the proceeds.
It is important to note that it is common ground that, in the interim, on 23 May 2003 Mr Prescott's retainer to act on behalf of Mrs Marshall was terminated.
The events subsequent to the giving of the undertaking by Turner Freeman can be briefly described. Proceedings were commenced by Mrs Marshall. Ms Carruthers was a defendant. Mr Prescott entered an appearance for her. It is alleged that he procured funding from the GIO for her defence and a cross claim. The GIO had previously paid a benefit to Ms Carruthers and was apparently seeking recovery. At some point Mr Prescott ceased acting for Ms Carruthers, but it is alleged he continued to assist her in defending Mrs Marshall's proceedings.
Eventually Mrs Marshall brought proceedings against Mr Prescott to restrain him from assisting Ms Carruthers. She obtained interim relief. Ultimately Mr Prescott consented to a declaration which recorded that he had a retainer to act on behalf of Mrs Marshall. He also consented to an injunction. Mr Prescott agreed to a costs order which was payable on a party/party basis in favour of Mrs Marshall. Mrs Marshall also succeeded in the proceedings against Ms Carruthers. She obtained a costs order against Ms Carruthers which was paid in an agreed sum.
The proceedings
In 2009 Mrs Marshall and Kim Marshall commenced these proceedings against Mr Prescott. They seek recovery of the solicitor/client component of the costs of the proceedings that were brought against Ms Carruthers and the proceedings against Mr Prescott, as well as exemplary and punitive damages.
These proceedings have an extensive interlocutory history which I will not describe. It suffices to state that the plaintiffs have had every opportunity to closely consider the precise allegations that they wish to make. It is evident that very significant cost and expense has been incurred in preparing the matter for trial.
Only one new fact or item of evidence has recently come into the plaintiffs' possession. On 6 June 2013 the Court of Appeal partially allowed an appeal from a judgment of this Court at first instance to the extent of allowing Mrs Marshall access to the litigation funding agreement between Ms Carruthers and the GIO (Marshall v Prescott [2013] NSWCA 152).
The existing amended statement of claim
The structure of the current form of the amended statement of claim should be noted. It adopts the approach of defining some matter or event as misconduct by Mr Prescott, calling it, for example, "Prescott's first Marshall misconduct". It then pleads that the defined misconduct constituted a tortious conspiracy, a breach of fiduciary duty, a breach of a duty of care said to have been owed to the plaintiffs or a breach of Mr Prescott's retainer.
Generally the definitions of misconduct identify some conduct of Mr Prescott but in some cases something is defined as misconduct in circumstances where there is no express pleading of any act or omission on his behalf.
Further, a review of the pleading in its current form does not suggest that any distinction is sought to be drawn between the duties owed by Mr Prescott to the plaintiffs before and after they terminated his retainer. To the contrary, the current form of pleading reads as though the full scope of the fiduciary duty said to be owed by a solicitor to their client continued to be owed by Mr Prescott after his retainer was terminated. This approach appears to be inconsistent with the statement of the Court of Appeal in Beach Petroleum NL v Abbott Tout Russell Kennedy [1999] NSWCA 408; 48 NSWLR 1 at 48. That said, the discussion in Beach Petroleum does indicate that, notwithstanding the termination of a retainer, a solicitor owes some form of continuing obligation of confidence to their former client.
The trial
The trial commenced on Monday, 12 August 2013. Counsel for the plaintiffs, Mr Bevan, opened his clients' case. Nothing in that opening suggested any departure from the pleaded case. To the contrary, at one point I queried some aspect in the amended statement of claim, which was addressed. There were some brief opening remarks by senior counsel for Mr Prescott, Mr Kelly SC.
After the conclusion of opening remarks the plaintiffs read their affidavits. Mrs Marshall was then called. She was cross examined over a number of days. At the conclusion of her evidence her solicitor, Mr Goldberg, was called. Mr Goldberg is a partner of Turner Freeman and has been involved in the matter from at least 2002. Mr Goldberg was briefly cross examined and in a careful manner. An expert witness was then called by the plaintiffs. On the third day of the hearing the plaintiffs closed their case.
Mr Kelly SC then sought and was granted a brief adjournment to consider his client's position. After that adjournment Mr Kelly SC announced that he was not calling his client. He tendered some further documents and the evidence concluded.
The proceedings were then adjourned to Friday, 16 August 2013. The Court ordered the parties to exchange written submissions during the afternoon of Thursday, 15 August 2013. In fact, submissions were exchanged late on that Thursday evening.
On Friday, 16 August 2013, Mr Bevan commenced his oral submissions. At one point he made a submission to the effect that Mr Prescott had no reasonable basis for believing that at any time Ms Carruthers had an arguable claim in respect of the amount recovered in the Pennsylvania proceedings that was referable to Mr Marshall's death. The following exchange then occurred:
"KELLY: Your Honour, I am troubled by this. My learned friend seems to be moving to a whole new case. There's no such factual allegation in the claim in these proceedings.
HIS HONOUR: Well, it may be because I asked a question about it. We will just hear it. But rest assured that it's the pleading that I will be directing my mind to and only that Mr Bevan."
Mr Bevan then continued his submissions. There was no disagreement expressed by any of the counsel as to the statement I made concerning the case being conducted on the pleadings.
Mr Bevan's submissions continued until the end of that day. Mr Kelly SC commenced his submissions just before the conclusion of proceedings on Friday, 16 August, and continued on the following Monday morning. During the course of his submissions he submitted that a number of allegations made on behalf of the plaintiffs, especially in their written submissions, were outside the pleaded case. In the meantime, on the morning of Monday, 19 August 2013, the plaintiffs had served thirty pages of written submissions in reply to the defendant's written submissions which Mr Kelly SC addressed, but only briefly. At the conclusion of Mr Kelly SC's oral submissions Mr Bevan commenced his oral submissions in reply. They concluded on the afternoon of Monday, 19 August. At the conclusion of those submissions directions were made for the filing of brief written submissions responding to the plaintiffs' written submissions in reply.
I have set out the history of the trial at perhaps unnecessary length. In my view that history makes it absolutely clear, if clarity is required, that throughout the case was conducted in a manner that was based on the existing pleadings. Until the defendants received the plaintiffs' written submissions there was no occasion for them to make any objection that any particular allegation was outside the pleaded case. Nevertheless, at the very earliest opportunity Mr Kelly SC took that point. So as to ensure that Mr Bevan's submissions continued uninterrupted, I made it clear that the pleaded case was a matter that the Court would be addressing.
It is to be remembered that the proceedings have a long history. Almost ten years have passed since the events in question. Serious allegations have been made. The underlying factual substratum is relatively complex. All these factors combine to ensure that precision in the allegations made is required.
The application to amend
Two days after oral submissions were completed the plaintiffs filed a notice of motion seeking leave to amend the amended statement of claim. It was accompanied by an affidavit from Mr Goldberg which attached a marked-up further amended statement of claim and a letter sent to the defendant's solicitors on 20 August 2013.
The body of Mr Goldberg's affidavit did not provide any explanation for the delay in making the application to amend. The only explanation for the delay was in the letter that was attached to the affidavit and had been sent to the defendant's solicitors. It stated:
"5. The explanation for delay is twofold. First, the case was conducted in accordance with the proposed further amended pleadings. The first objection taken to the plaintiffs' written or oral submissions was at the end of the defendant's closing address yesterday when Senior Counsel for the defendant gave notice of a desire to lodge 'a note' as to the departure of the plaintiff's written and oral submissions from the pleadings. All of the plaintiffs' written and oral submissions were addressed on the merits by the defendant in his written and oral submissions, it is to be noted. The plaintiffs assumed, in their conduct of the trial, that the defendant accepted that the case put against him was supported by the pleadings in the amended statement of claim. See Aon Risk Services at 215-216 [103], [106].
6. Secondly, we only came into possession of the GIO litigation funding agreement within 3 weeks of the trial commencing because of the embargo placed on our clients' access to it to permit the GIO to consider making an application for leave to appeal the decision setting aside the privilege determination of Bellew J in respect of it, and Turks Legal delayed for a fortnight after that 35 day embargo ended before sending us an incomplete copy of the document and another week passed before we received the complete copy of the document. That delay prevented us from properly pleading the GIO litigation funding agreement breaches in the amended statement of claim. That is a relevant consideration in exercise of the discretion to grant leave to amend. The delay in making this category of amendments was not the plaintiffs' fault. See Aon Risk Services at 215-216 [103], [106]."
I will address the various amendments shortly. However at the outset I record that I reject the explanation proffered in paragraph 5 of this letter. It does not give any real explanation for the late making of the application to amend. I have described the history of the proceedings and the trial in considerable detail. In my view no reasonable observer of the trial could have been under any misapprehension that the case was being conducted, not on any "proposed further amended pleading", but on the existing pleading. This was made absolutely clear by my intervention, as well as by Mr Kelly SC's submissions.
In relation to that part of the "explanation" set out in paragraph 6, very few of the amendments sought relate to the GIO litigation funding agreement. In any event, to the extent that any of the proposed amendments solely relate to that document, leave to amend is not opposed.
The notice of motion seeking leave to amend was initially returnable before a registrar on 27 August 2013. I brought this forward to 23 August 2013 and listed it before me. However, the matter was adjourned for a week to allow the defendant to consider his position.
Amendments not objected to
The final form of the proposed further amended statement of claim was set out in an attachment to an email dated 23 August 2013 from Mr Bevan to my associate, copied to the other parties. This version has been marked as exhibit A.
A number of amendments are sought to be made which are of a cosmetic nature in that they correct dates and supplement the particulars and the like. In most cases those changes are so inconsequential that it was really not necessary to make them. In any event, the defendant has not taken objection to this category of amendments, subject to the plaintiffs paying any costs thrown away by reason of them being granted.
Accordingly, the amendments that will be allowed on that basis are those proposed to paragraphs 12(c) and 27, the addition of a proposed paragraph 27A, the proposed amendments to paragraph 66 with the deletion of the words "the commencement of the Carruthers proceeding" in the second line, the proposed amendments to paragraph 68, the addition of particulars (aa) and (ab) to paragraph 71, the addition of proposed paragraph 71A with particulars (a) and (b) (but not (c)), the addition of proposed paragraph 71B, the reference to "injunctions" in the opening words of paragraph 86 and those parts of the proposed amendments to the substantive parts of paragraphs 103, 104, 105 and 106 which refer to the "Prescott's fourth GIO misconduct".
Proposed paragraph 30A
The first substantive amendment that is objected to is proposed paragraph 30A. This proposed paragraph seeks to allege as follows:
"On 13 April 2003 Greenwell, on instructions from Prescott, after being provided with a copy of the 22 March letter, sent an email to Mr Green at Kreindlers confirming and expanding on the terms of a telephone conversation held on 11 April 2003 (the 11 April telephone conversation) in which Greenwell notified a claim on the net settlement amount for Carruthers, advised Green that, by virtue of the terms of the 22 March letter, Mrs Marshall would, upon receipt of the net settlement amount, hold it as a fiduciary for Kim Marshall and Carruthers, and convinced Mr Green thereby that Kreindlers would be liable to Carruthers as a fiduciary if Mrs Marshall accounted to herself, or herself and Kim, for the net settlement amount without regard to the interest of Carruthers (Prescott's April 2003 misconduct)."
Subsequent parts of the proposed further amended statement of claim allege that the "Prescott's April 2003 misconduct" involved a tortious conspiracy, was a breach of Mr Prescott's retainer and constituted negligence and a breach of fiduciary duty.
The gravamen of proposed paragraph 30A appears to be that it seeks to allege that Mr Greenwell, a barrister retained by Mr Prescott, acted on behalf of Mr Prescott to take various steps to notify Kreindler & Kreindler that Ms Carruthers was making a claim on that part of the settlement monies that was referable to the death of Mr Marshall.
Proposed paragraph 31A alleges that, as a consequence, Mrs Marshall's solicitors "lost the opportunity" to persuade Kreindler & Kreindler to distribute the funds to her without the need to proffer an undertaking to bring proceedings to determine who was entitled to the funds.
Prior to this amendment being sought there had been discussed during the submissions the legal significance, if any, of an email sent by Mr Greenwell to Kreindler & Kreindler on 13 April 2003. The email attached a letter sent by Turner Freeman to Mr Prescott in May 2002 which indicated Mrs Marshall had signed a retainer agreement with Kreindler & Kreindler "on behalf of", inter alia, Ms Carruthers.
However, subject to considering the scope of paragraph 41 of the further amended statement of claim, there was no pleaded allegation of a breach of any legal duty by Mr Prescott by reason of that email being sent or any other alleged conduct on his part in relation to Mr Greenwell's communication to Kreindler & Kreindler on 13 April 2003. Instead, the only relevant pleaded allegation was set out in paragraph 34 of the amended statement of claim which alleged that on 25 April 2003 Prescott, Greenwell and Kreindler & Kreindler entered into some form of agreement or understanding to keep secret from Mrs Marshall the "fact of the making" of a claim by Ms Carruthers and pursuant to which Kreindler & Kreindler agreed to facilitate the making of a claim by Ms Carruthers. The email of 13 April 2003 was referred to in the particulars to that paragraph.
Although Mr Kelly SC's written and oral submissions address this email in a number of places they did so by way of a response to the pleaded case of an agreement or understanding reached on 25 April 2003. In that regard I note that one part of the plaintiffs' written submissions, paragraph 97, attempted to allege a breach of fiduciary duty by Mr Prescott by the actions of Mr Greenwell in "... communicat[ing] a positive claim on behalf of Carruthers on the net settlement amount to Kreindlers founded upon nothing more than Mr Goldberg's letter dated 22 March 2002". In his oral submissions Mr Kelly SC pointed out that that contention was outside the pleaded case.
Thus I consider it beyond question that this amendment must be approached on the basis that, while aspects of the factual substratum of the allegation have been addressed in the proceedings, it is an entirely new allegation. The first occasion anything similar to it was raised was in the plaintiffs' written submissions which were filed after the evidence closed.
In his written submissions in support of the amendment Mr Bevan contended, inter alia, that, "[t]he plaintiffs could not seek leave to amend until the issues they seek to amend on had become issues at the trial", citing the judgment in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 239 CLR 175 at [71], [82] and [83]. The passages from Aon that are relied on relate to so much of the appeal in that case which concerned r 501(a) of the Court Procedures Rules 2006 (ACT). The equivalent rule for this Court is s 64(2) of the Civil Procedure Act 2005 which provides:
"Amendment of documents generally
...
(2) 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."
It is noteworthy that s 64(2) is made subject to s 58 of the Civil Procedure Act which obliges the Court to "act in accordance with the dictates of justice". In turn this requires the Court to consider the objectives set out in s 56 and s 57 of the Civil Procedure Act, as well as the factors in s 58(2). Further, the passages from Aon cited by Mr Bevan do not support the proposition he asserted. Instead, they are to the effect that, to invoke s 64(2) and its equivalents, it is necessary to demonstrate that the controversy sought to be agitated by the amendments "was in existence prior to the application for amendment being made" (Aon at [82]). This can arise, for example, because another party to the proceedings may have by its pleading raised the controversy, such as in Cropper v Smith (1884) 26 Ch D 700 (discussed in Aon at [73] to [78]), or the controversy is otherwise clearly in play but the pleadings are not clear, as in Tildesley v Harper (1878) 10 Ch D 393 (discussed in Aon at [79]).
In this case I am not satisfied that the amendments sought to be raised by proposed paragraph 30A reflected any existing controversy raised between the parties. It follows that if these amendments are to be allowed it must be pursuant to the power conferred by s 64(1) of the Civil Procedure Act.
Regardless of the source of the power to allow the amendment the provisions of s 58 and in turn s 56 and s 57 operate upon any decision to allow them. In that regard the following passage from Aon is apposite to the exercise of the power to allow the amendments:
"[102] The objectives stated in r 21 do not require that every application for amendment should be refused because it involves the waste of some costs and some degree of delay, as it inevitably will. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked. Whilst r 21 assumes some ill-effects will flow from the fact of a delay, that will not prevent the parties dealing with its particular effects in their case in more detail. It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment.
[103] The fact that an explanation had been offered for the delay in raising the defence was regarded as a relevant consideration in J L Holdings. [reference omitted] Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case."
Applying these statements to the application to add paragraph 30A I find as follows.
First, if this amendment was allowed then there is significant potential for there to be extra costs and delay occasioned as well as prejudice to the defendant. Mr Prescott made a considered and no doubt difficult decision not to give evidence. Mr Kelly SC cross examined both Mrs Marshall and her solicitor, Mr Goldberg. In particular the cross examination of Mr Goldberg appeared to be designed to obtain specific concessions on specific topics.
There is no reason to doubt the suggestion that the decision to not call Mr Prescott and the manner in which the cross examination of Mrs Marshall and Mr Goldberg were conducted or undertaken bearing in mind the specific issues raised by the existing pleadings. In that regard it is to be borne in mind that the current pleadings only raise one specific allegation of misconduct by Mr Prescott in the period prior to the termination of his retainer.
If this amendment was to be allowed then, at the very least, Mr Prescott would be entitled to reconsider his decision not to give evidence, to further reconsider whether he wanted to further cross examine the plaintiffs' witnesses and reconsider whether he wanted to call other witnesses. In addition to those decisions there are also decisions to be made about the provision of further submissions. It follows that, at the very least, these possibilities raise the very real spectre of extra cost and delay. In that regard it seems to me apparent that this is a case where the costs are already likely to be disproportionate to the amount in issue, which in itself mostly comprises legal costs.
Needless to say, further delay has the obvious potential to affect the position of other litigants. Such further delay would also be potentially unfair to Mr Prescott. In the ordinary course he should not have to face further allegations of unprofessional conduct ten years after the event.
Most significantly, however, there is a risk of irremediable prejudice being occasioned to the defendant from having to consider again whether it needed to cross examine the plaintiffs' witnesses. I have already referred to the nature of the cross examination that was undertaken of Mr Marshall and Mr Goldberg. In my view it is not a complete answer to say that it is open for the defendant to have them re-called and to cross examine them further. Cross examinations, if done properly, are not so easily put together. Even in the absence of evidence of counsel, a matter I do not think should be required, I can reasonably infer that there is a likelihood, albeit not a certainty, that the entire approach to the cross examination from the outset would have been different had a wider set of allegations been made.
Second, I will approach the application to amend to raise this allegation on the basis that it is important to the plaintiffs to make it.
Third, the above extracts from Aon note that "[m]uch may depend upon the point the litigation has reached" in determining an application to amend. Needless to say, this application has been made very late in the life of the litigation.
Fourth, I have already addressed the proffered explanation for the late application. Leaving aside the late receipt of the GIO funding agreement, which is of no present relevance, in my view there is, in substance, no explanation and certainly no adequate one.
Notwithstanding the potential significance of this amendment to the plaintiffs' interests, in my view the application to add paragraph 30A must be refused. To paraphrase Aon at [102] it is simply "far too late for a further amendment having regard to the other party" and other litigants.
Accordingly I refuse the application to add paragraph 30A. It also follows that the application to add proposed paragraph 31A and to make the consequential amendments to paragraphs 103, 104, 105 and 106 that refer to the "Prescotts' April 2003 misconduct" will also be refused.
Proposed paragraph 41
The next substantive amendment sought by the plaintiffs is to amend paragraph 41 as follows:
"On 23 May 2003 the plaintiffs terminated Prescotts retainer and threatened to commence proceedings against Prescott to injunct him from breaching the plaintiffs' confidence in them by disclosing confidential information they received under their retainer to Carruthers' lawyers and from acting against their interests for the reasons given in their letter to him of that date, which reasons are relied upon by the plaintiffs as conduct amounting to breaches of his equitable and common law duties to the plaintiffs (Prescotts' May 2003 misconduct)." (proposed amendments italicised)
Various consequential amendments are proposed which allege that the Prescott's May 2003 misconduct constituted a tortious conspiracy, a breach of Mr Prescott's fiduciary duty, a breach of his retainer and negligence.
As stated it is common ground that the letter of 23 May 2003 referred to in this paragraph terminated Mr Prescott's retainer on behalf of at least Mrs Marshall. The letter alleged that it was a breach of "client/legal professional privilege" and otherwise "improper" for Mr Prescott to have sent a copy of the letter of 22 March 2002 that has already been noted to Ms Carruthers' Sydney solicitor.
During final submissions Mr Bevan asserted that the existing form of paragraph 41 made substantive allegations against Mr Prescott. In his submissions Mr Kelly SC contended that it clearly did not. I have no doubt that Mr Kelly SC was correct. The structure of the existing pleading is quite clear in defining what is said to be the actionable conduct of Mr Prescott as "misconduct" and then alleging a breach of some legal standard by his engaging in that misconduct. The existing paragraph 41 contained no such definition. There was no subsequent paragraph of the pleading which attempted to tie any conduct of Mr Prescott alleged in paragraph 41 to the breach of any legal standard. The proposed amendments to paragraph 41 now seek to achieve that.
In my view this amendment must be refused for two reasons.
First, as a matter of form it is clearly objectionable. It is not a proper approach to pleading to allege some form of misconduct by reference to the contents of a letter without pleading what the substance of the conduct is.
Second, in any event, the allegations raise serious and wholly new allegations against Mr Prescott. The observations and findings I have made in relation to proposed paragraph 30A apply with equal force to this proposed amendment.
Accordingly, I refuse leave to amend paragraph 41 of the further amended statement of claim. As a consequence, leave to amend paragraphs 103 to 106 to the extent that they refer to the "Prescott May 2003 misconduct" will also be refused.
Allegations involving breach of confidence
The next set of amendments objected to all concern allegations that, after the termination of his retainer, Mr Prescott allegedly deployed what was said to be confidential information he had obtained while retained as Mrs Marshall's solicitor. While it will be necessary to address each amendment shortly, the gravamen of the problem raised by these amendments is best addressed by considering proposed paragraph 77 in its amended form which provides:
"Prescotts' second Marshall misconduct constituted:
(a) ...
(b) ...
(c) ...
(ca) a breach of the fiduciary duty he owed to the plaintiffs as their former solicitor to maintain their confidence in all confidential information which came into his possession during his retainer from them in his conduct of the Pennsylvania proceedings or any other proceedings;
(d) a breach of the obligation to keep confidential the information he had obtained during his retainer from them either under the terms of the retainer or as an obligation of conscience; ..." (proposed amendments italicised)
The proposed amendment to paragraph 77 is to include sub-paragraph (ca).
What is at the core of the dispute between the parties is whether what is alleged in sub-paragraph 77(ca) is truly raising a new allegation against the defendant, or is in fact clarifying the existing allegation in sub-paragraph (d).
Consistent with the findings that I have already made, I am not inclined to allow the plaintiffs to make amendments to raise new allegations. However, if what is sought to be done is to clarify an existing one, then that is a different matter altogether.
The submissions of the plaintiffs concerning the alleged misuse of confidential information evolved over the course of the hearing. The written submissions of the plaintiffs barely touched upon the subject. There was reference to it in their oral submissions in chief. There was much more detailed reference to it in their written submissions in reply. The oral submissions in chief only barely described the confidential information. The written submissions in reply described the confidential information in a footnote as being the "confidential information referred to in or located at" a very significant number of documents. As best as I can ascertain, the nature of the confidential information sought to be picked up by 77(ca) is that which Mr Prescott is said to have acquired about the conduct of the Pennsylvania proceedings generally.
The defendant made a number of submissions that addressed the substance of the complaint that Mr Prescott wrongly deployed that information and thereby abused the confidence placed in him. Amongst other matters, it is submitted that the information was not in fact confidential vis-à-vis Mrs Marshall and Ms Carruthers, but was in effect common to both of them. Nevertheless, junior counsel for Mr Prescott, Mr McManus, submitted that his side had read the existing allegation in 77(d) as containing a reference only to confidential information that it was alleged that Mr Prescott had obtained "from them", being a reference to Mrs Marshall and Kim Marshall.
Mr Bevan submitted that the existing sub-paragraph 77(d) in fact refers to Mr Prescott's "retainer from them" and thus encompasses whatever confidential information Mr Prescott obtained during the course of that retainer.
If the pleading was to be read as Mr Bevan suggested it should be, then there is perhaps less scope for contending that sub-paragraph 77(ca) contains a new allegation. More significantly, Mr Bevan appeared to submit that if that position was clarified his client did not need sub-paragraph 77(ca).
I think I can only approach the matter on the basis of first clarifying for the sake of the parties how I read sub-paragraph 77(d). In that regard, I read sub-paragraph 77(d) in the manner contended for by Mr Bevan.
The next question which arises is what should be done with 77(ca). At present, I have considerable unease about allowing any further allegation expressed in those terms because of the potential for it to be used as a basis to raise some new allegation which is not fairly raised by 77(d). The only matter that Mr Bevan pointed to that is in 77(ca) that is not in 77(d) is the reference to a breach of fiduciary duty. That seems to me to be purely a legal matter.
Accordingly, I will approach the application to amend on this basis, namely that the proper construction of 77(d) is as I have suggested. Further, I will allow an amendment to the extent of adding the words "fiduciary duty he owed to the plaintiffs and the" between "the" and "obligation" in the opening words to sub-paragraph 77(d). On that basis I will disallow the proposed amendment to 77(ca). It could only have utility if it sought to raise a new allegation, which for the reasons outlined I will not permit.
Against that background it is then necessary to consider the other amendments concerning confidential information that are objected to. The first is to the amendment to particular (a) to paragraph 71. Paragraph 71 alleges that:
"The entry of Carruthers into the GIO litigation funding agreement was made secretly, in that knowledge of it was withheld from the plaintiffs until discovery of documents was given to them in respect of the defendant's files and other records in 2006 in the Prescott proceedings pleaded in paragraph 82 below. (Prescott's third GIO misconduct)".
On its face this paragraph does not appear to allege any conduct on behalf of Mr `Prescott, much less misconduct. At a stretch it appears to be alleging that he misconducted himself by withholding from the plaintiffs the existence of the litigation funding agreement. In any event, the amendment to proposed particular (a) to paragraph 71 seeks to allege a failure on the part of Mr Prescott:
"... to seek their consent to use, the information about the Pennsylvania proceedings that was confidential to them that he deployed in procuring the GIO litigation funding agreement."
As a matter of form this particular is objectionable because it seeks to expand the substantive allegation to the extent there is one in paragraph 71. For that reason that amendment will be disallowed.
Proposed paragraph 71A seeks to allege a form of misconduct by Mr Prescott defined as "Prescott's fourth GIO misconduct". That paragraph in its terms is not objected to, nor are particulars (a) and (b) to the paragraph. However, particular (c) of that paragraph is objected to for the same reason that the amendment to particular (a) to paragraph 71 is objected to. For the same reason I have given, I will disallow it.
The next amendment objected to in this category is paragraph 79.
The current paragraph 79 defines the "Prescotts' third Marshall misconduct". This paragraph should be read with paragraph 80 which includes a proposed (ca) and existing (d) which are in the same terms as paragraph 77, which I have already dealt with.
The proposed amendments to paragraph 80 will be dealt with in the same way as the proposed amendments to paragraph 77. That is, the proposed addition of paragraph 80(ca) will be disallowed. The words "fiduciary duty he owed to the plaintiffs and the" will be inserted between "the" and "obligation" in sub-paragraph 80(d). I will make it clear from this point that I read the words "from them" in sub-paragraph 80(d) as a reference to the retainer from Mrs Marshall and Kim Marshall.
The amendments proposed to paragraph 79 appear to attempt to expand the definition of the Prescott's third Marshall misconduct by picking up uses and alleged abuses of confidential information. Consistent with what I have already stated, to guard against the risk that any new allegation is being made, those proposed amendments will be disallowed.
The position will be that henceforth the matter will proceed on the basis that the pleading of a breach of fiduciary duty and/or an obligation to keep confidential information confidential will be set out in 77(d) and 80(d) which are to be read in the manner that I have stated.
The last proposed amendment under this heading of confidential information is to paragraph 87. It is proposed that paragraph 87 will read:
"It was necessary for Margaret [Marshall] to bring the Prescotts [sic] proceedings because of the need to ensure the success of the Carruthers proceedings for the benefit of the plaintiffs, to restrain Prescott from assisting Carruthers in her defence and cross-claim in the Carruthers proceedings to the detriment of the plaintiffs and to restrain Prescotts [sic] from breaching his continuing fiduciary obligation to the plaintiffs to maintain confidence in their confidential information arising from his retainers from them. (Prescotts' fourth Marshall misconduct)." (proposed amendments italicised)
In its unamended form this paragraph purports to define something as misconduct engaged in by Mr Prescott without clearly identifying what the conduct is. It might be thought that it was a reference to Mr Prescott's conduct in "assisting Carruthers in her defence and cross claim in the Carruthers proceedings", but that has already been defined as the Prescott's third Marshall misconduct. Thus on its face the existing form of the pleading is objectionable. The additional words that are proposed do not assist. They only add a reference to Mr Prescott "breaching his continuing fiduciary obligation to the plaintiffs" without identifying how. Given these difficulties with the paragraph I will disallow this amendment.
Issue estoppel amendment
Paragraph 86 of the existing amended statement of claim pleads that certain declarations and orders made in the proceedings brought against Mr Prescott gave rise to issue estoppels concerning the existence and terms of his retainer with the plaintiffs, and the nature and extent of the duties he owed.
A proposed amendment to this paragraph seeks to assert that an "interim" injunction gave rise to issue estoppel (as well as a final injunction). Another amendment seeks to allege that, not only did the declaration and injunctions give rise to issue estoppels concerning the existence and terms of Mr Prescott's retainer, but also to estoppels concerning breaches of the retainer.
It is accepted that the issues raised by these proposed amendments are purely legal ones that concern the terms of various declarations and consent orders that were made in the proceedings against Mr Prescott.
Mr McManus has submitted that the amendments should be disallowed as they are hopeless. I do not propose to resolve that issue on an amendment application.
With some misgivings I am prepared to allow these amendments as there does not appear to be any possibility that any further evidence is required if they are allowed or that any forensic decisions taken by the defendant could be affected by them.
Accordingly, I will allow the proposed amendments to paragraph 86 of the further amended statement of claim.
Remaining matters
The remaining amendments all concern paragraphs 103 to 106 of the amended statement of claim. They can be conveniently separated into three categories.
The first includes the items of misconduct pleaded as involving a breach of retainer, negligence, a breach of fiduciary duty or a tortious conspiracy. It follows from what I have already found that the references to Prescott's April 2003 misconduct and the Prescott May 2003 misconduct will be disallowed. The references to the Prescott fourth GIO misconduct in those paragraphs is, as I have already stated, not objected to.
The second category of proposed amendments is to the particulars to paragraph 104. It appears to attempt to expand the implied terms of Mr Prescott's retainer and in part seeks to do so by reference to the Law Society of South Australia Rules of Professional Conduct and Practice. To date there have been no submissions of any kind directed to these matters. In the absence of knowing the legal basis for these allegations I am not inclined to grant them. This lack of inclination is reinforced by some suggestion in the wording that what might be sought to be expanded is the scope of the duties owed after the termination of Mr Prescott's retainer. In those circumstances I will not allow those amendments.
The final category of amendments under this heading is to the particulars to paragraph 106 which concern the alleged breaches of fiduciary duty. The proposed amended particular is as follows:
"Prescotts [sic] owed the plaintiffs a fiduciary duty to act only for the plaintiffs insofar as they were retained to bring the Pennsylvania proceedings in respect of the death of the deceased on their behalf, including his continuing fiduciary obligation to the plaintiffs to maintain confidence in their confidential information arising from his retainers from them." (proposed amendments italicised)
As I read these amended particulars all that is sought to be contended is a legal proposition that there was an aspect of a continuing fiduciary obligation owed by Mr Prescott that he would "maintain confidence" in certain confidential information. I do not understand this to make any additional allegation of fact. In this sense I think this amendment only clarifies something that the plaintiffs have been asserting for some period and upon which issue has been joined. I will allow this amendment.
Further disposition and orders
I have now heard from the parties as to the course of action to take in light of the amendments that I have allowed and disallowed. Instead of formulating orders that reflect my rulings, I will direct the plaintiffs to file and serve a further amended statement of claim that reflects those rulings. In addition there will be time allowed for further submissions so as to enable the completion of the matter. The matter will be reserved for judgment at the end of that process of filing submissions.
Accordingly the Court orders as follows:
(1) I direct the plaintiffs to file and serve a further amended statement of claim that reflects the amendments allowed and disallowed by this judgment on or before 5pm on 6 September 2013.
(2) I direct the defendants to file and serve any further submissions, including those by way of response to the amendments to the further amended statement of claim, such submissions not to exceed 20 pages, on or before 5pm on 20 September 2013.
(3) I direct the plaintiffs to file and serve their final submissions in reply, such submissions not to exceed 20 pages, on or before 4 October 2013.
(4) I order the plaintiffs to pay the defendant's costs thrown away by reason of the amendments that have been allowed.
(5) I order the plaintiffs to pay the defendant's costs of the notice of motion filed 20 August 2013.
(6) I grant liberty to apply on one day's notice.
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Decision last updated: 05 September 2013
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