Patelis v Sander (No 3) - [2021] SADC 146

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
PATELIS v SANDER & ORS (No 3)
[2021] SADC 146
Judgment of his Honour Judge Burnett
15 December 2021
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS - PARTICULAR PLEADINGS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS - OTHER MATTERS
The respondent has sought leave to file an amended defence and leave to file cross claims against the interested parties, Tolis & Co and Mr Munt. This application was heard following determination of a related application in which the respondent sought the production by the applicant of certain privileged material on the basis that the applicant had waived privilege to that material. The privileged material related to the conduct and advice given by Tolis & Co and Mr Munt to the applicant.
On 21 May 2021, I ruled that there had been no waiver of privilege by the applicant. The respondent then proceeded with this interlocutory application.
The applicant does not oppose the amendment of the defence, although Tolis & Co and Mr Munt both oppose leave being granted to file the cross claims.
Held:
1. The respondent is granted leave to file the proposed amended defence. The Court is required to rule on the relief sought on the pleaded case of the parties. Banque Commerciale SA (en liq) v Akhil Holdings Ltd, (1991) 169 CLR 279 and Kien Dan Luu Pty Ltd v AMP Society Ltd (1999) 75 SASR 345 applied. If the parties raise no objection, then the pleadings define the dispute to be determined by the Court.
2. There is a proper basis for the pleaded cross claim against Tolis & Co. It is not merely speculative. The normal discretionary principles set out in Aon Risk Services Australia Ltd v ANU, [2009] HCA 27; (2009) 239 CLR 175 and Channel Seven Adelaide Pty Ltd v Manock, [2010] SASCFC 59 do not suggest that leave should be refused. Any prejudice suffered by Tolis & Co in defending the cross claim because it cannot use the privileged material of the applicant is relevant to a stay application rather than the application for leave to amend: Arnold Bloch Leibler (a firm) v Slater & Gordon Limited [2020] FCA 1496 referred to.
3. Leave to bring a cross claim against Mr Munt is refused because there was not a reasonable basis for the allegations made as to the advice given by Mr Munt. No reasonable inference could be drawn as to the substance of the advice given by Mr Munt: Adelaide Brighton Cement Ltd v Hallett Concrete Pty Ltd & Ors [2020] SASC 161 applied.
4. The mere fact that advice has been received from Mr Munt and that following receipt of that advice the administrators of the applicant elected not to make Nationwide a named defendant in the action, nor make claims against Nationwide, does not give rise to a reasonable inference as to the substance of that advice: Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; (2004) 140 FCR 101, Adelaide Steamship Co Ltd v Spalvins [1998] FCA 144; (1998) 81 FCR 360 applied.
5. The pleading of a question of law in the statement of claim or the making of submissions as to the law in other interlocutory arguments do not give rise to a reasonable inference as to the substance of the advice given by Mr Munt. This was not a case where there were reasonable alternative competing hypotheses and the evidence adduced at trial would determine which hypothesis was to be accepted. In the present case, even if the cross respondent did not adduce any further evidence at trial, the hypothesis advanced by the respondent was merely speculative and lacking in foundation such that it did not form a proper basis for the pleading: Adelaide Brighton Cement Ltd v Hallett Concrete Pty Ltd & Ors (No 2) [2021] SASC 56 referred to.
Uniform Civil Rules 2020 (SA) ch 7, pt 7; r 63.1(6)(b); 67.3; 70.3, referred to.
Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1991) 169 CLR 279; Kien Dam Luu Pty Ltd v AMP Society Ltd (1999) 75 SASR 345; Adelaide Brighton Cement Ltd v Hallett Concrete Pty Ltd & Ors [2020] SASC 161; Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; (2004) 140 FCR 101; Adelaide Steamship Co Ltd v Spalvins [1998] FCA 144; (1998) 81 FCR 360, applied.
Aon Risk Services Australia Ltd v ANU [2009] HCA 27; (2009) 239 CLR 175; Channel Seven v Manock [2010] SASCFC 59; Arnold Bloch Leibler (a firm) v Slater & Gordon Limited [2020] FCA 1496; Patelis v Sander [2021] SADC 54; Australian Securities and Investments Commission v Australia and New Zealand Banking Group (No 2) [2020] FCA 1103; Schulman v Abbott Tout Lawyers (a firm) [2010] FCA 308; Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 70 ALJR 603; Nine Films & Television Pty Ltd v Ninox Television Ltd [2005] FCA 356; Ritz Hotel Ltd v Charles of the Ritz Ltd (No 21) (1988) 14 NSWLR 128; Neptune Oil Co Pty Ltd v Fowler (1963) 63 SR (NSW) 530; Adelaide Brighton Cement Ltd v Hallett Concrete Pty Ltd & Ors (No 2) [2021] SASC 56; Nitschke v Foraco Australia Pty Ltd [2014] SASC 88; Wunda Joinery Pty Ltd v Wunda Projects Australia Pty Ltd [2007] SASC 301; Pope & Ors v Harris Orchard [2010] SASC 354; Andrews v Australia and New Zealand Banking Group Ltd [2011] FCA 388; (2011) 281 ALR 113, considered.

PATELIS v SANDER & ORS (No 3)
[2021] SADC 146
Civil
Introduction

In a revised interlocutory application dated 23 December 2020, the respondent sought orders:
(1)that the applicant produce to the respondent all communications between the applicant and her former solicitors and counsel, Messrs Tolis & Co (Tolis & Co) and Mr Christian Munt (Mr Munt), in the period between 4 December 2012 and 8 August 2018 that relate to the demand made upon the applicant by Nationwide Capital Pty Ltd (Nationwide).
(2)that he be granted leave to file cross claims against Tolis & Co and Mr Munt.
The respondent had earlier sought, by way of an interlocutory application dated 21 February 2020, leave to file an amended defence. In opposition to that application, the applicant filed an affidavit of Joseph Behar sworn 19 May 2020 (the Behar affidavit) and filed written submissions. It is those documents that the respondent submitted gave rise to the waiver of privilege in that they disclosed the substance of advice given by Tolis & Co and Mr Munt. The applications were interrelated in that the parties agreed that I should first deal with the application for waiver before dealing with the application to amend the defence and the application to file cross claims.
I heard argument on the waiver application on 17 February 2021 and delivered judgment on that part of the application on 21 May 2021.[1] In my judgment, I ruled that there had been no waiver of privilege by the filing of the Behar affidavit or the written submissions.
[1] Patelis v Sander [2021] SADC 54.
The respondent now proceeds with the application to amend his defence and his application for leave to file a cross claim against the fourth interested party, Tolis & Co and the second interested party, Mr Munt. The final form of the proposed amended defence was annexed to the affidavit of Spiros Andrew Piliouras sworn 11 August 2021 and entitled “Third Defence – Revision 2”. The proposed cross claims repeated paragraph 27 of the proposed amended defence which set out the alleged negligence of the solicitors, Tolis & Co and the barrister, Mr Munt.
The applicant does not oppose the application to amend the defence. The interested parties, Tolis & Co and Mr Munt, both oppose the application for leave to file a cross claim against them on two grounds; first, the pleading against them is speculative in that there is not a proper basis for the allegations made against them; and secondly, the application should be refused in the exercise of the Court’s discretion.
Background facts
I set out in my earlier judgment the background facts relevant to that application.[2] I have reproduced some of those paragraphs below, interspersed with further evidence that is relevant to this application.
[2] Ibid at [4]-[13] and [99].
In 2018, the applicant instituted proceedings against the respondent in relation to the execution and witnessing of mortgage documents and a guarantee. The basis of the claim is set out below, which I have extracted from the statement of claim.
The applicant was married to Angelo Patelis. Angelo Patelis was the sole director and shareholder of Adelaide Vehicle Inspections Pty Ltd (AVI) which carried on the business of the inspection of motor vehicles. The applicant suffered a stroke in 2010 and on 5 December 2013, Ms Helen Doufos and Ms Kassiani Sergiou were appointed as administrators to her estate.
In December 2012, AVI sought to borrow the sum of $82,520 from a financier, Nationwide. Interest was payable on the amount outstanding at the rate of 10% per month or 5% per month if there was no default. As security for that loan, AVI was required, inter alia, to provide a mortgage over land owned as joint tenants by the applicant and Angelo Patelis at 3 Magnolia Avenue, Happy Valley (the Happy Valley Property) and 9 Morgan Street, Aldinga Beach (the Aldinga Beach Property).
Angelo Patelis arranged a meeting with the respondent, who is a solicitor, on 12 December 2012 for the purpose of executing the security documents. At that meeting, Angelo Patelis was accompanied by a Poppi Kokoroyiani (Poppi). Angelo Patelis held out Poppi to the respondent as being the applicant. Poppi proceeded to execute the security documents in the name of the applicant. The respondent was unaware that Poppi was not the applicant and that she did not have any authority to execute the documents. Poppi, purporting to be the applicant, executed, inter alia, a mortgage over the Happy Valley and Aldinga Beach Properties and a deed of guarantee and indemnity in favour of Nationwide.
The respondent witnessed a Statutory Declaration and an Acknowledgement of Legal Advice in which he stated that the applicant had received independent legal advice and had freely and voluntarily signed the Loan Agreement, the Mortgage and the Guarantee. The respondent also executed a Witness Certificate (which was required by Nationwide) to the effect that he had interviewed the applicant and had identified her through her driver’s licence and Mastercard and had provided her advice.
The applicant did not agree to the Loan Agreement, the Guarantee or the Mortgage or even know of their existence.
AVI defaulted under the terms of its loan agreement with Nationwide. Nationwide issued notices of default in about July 2013, inter alia, to the applicant, who at that time first became aware of the mortgage of the properties and of the loan.
By letter dated 5 December 2013 from the applicant’s solicitors (who were by this stage, Tolis & Co) to Nationwide’s solicitors, the applicant stated that the properties would be sold so that all outstanding liabilities could be discharged.
Some time prior to 15 January 2014, the applicant had entered into contracts for the sale of the Aldinga Beach and Happy Valley Properties.
By email dated 15 January 2014, from Nationwide’s solicitors to Tolis & Co (as solicitors for the applicant), the solicitors for Nationwide advised that they required payment in full to discharge their mortgage.
By a further email dated 21 January 2014 to Tolis & Co, the solicitors for Nationwide advised that in addition to payment in full, they required a Deed of Release to be signed by the applicant.
Settlement of the Aldinga Beach Property occurred on about 24 January 2014.
By email dated 24 January 2014 to, inter alia, Tolis & Co, Nationwide’s solicitors noted the confirmation (from Tolis & Co) that they, Nationwide would be paid out in full and that the payout figure as at that date was in the sum of $310,029,20. Nationwide’s solicitors further noted that although the applicant was not obliged to provide a Deed of Release, if they did not do so, they would seek the sum of $25,000 as security for their costs.
By a further email dated 28 January 2014 from Nationwide’s solicitors to, inter alia, Tolis & Co, the solicitors for Nationwide advised that they required the provision of either the Deed of Release or the payment of security of costs in the sum of $25,000 (as well as payment in full) to allow settlement of the Happy Valley Property.
A telephone call between the applicant’s solicitors, Tolis & Co, and Mr Lazarevich of counsel took place on 28 January 2014. It is apparent from the terms of this communication that Mr Lazarevich had not been retained as counsel at the time of the conversation (and in fact was never retained). The note was in the following terms:
Conduct of bank/mortgagee?
Consumer Credit Code?
RPA s69(b) - ? Not applicable
- only if bank implicated in forgery
Counsel willing to accept brief on understanding that he will be paid at the end, contingent upon favourable outcome
- provided that client takes advice
By email dated 28 January 2014 from Tolis & Co to Nationwide’s solicitors, Tolis & Co advised that the applicant would not be signing the Deed of Release and reserved the right to sue. The email stated:
Your client has already received the sum of $91,587.54 from the sale proceeds of the property at Aldinga Beach...
Our client maintains that she is not liable to your client in any amount...
Our client will not sign any release in favour of your client and reserves her right to sue your client as a result of your client’s loans to Adelaide Vehicle Inspections and/or Angelo Patelis. We are currently in the process of obtaining counsel opinion in that regard.
We demand that your client provide the discharge of mortgage at settlement for the Happy Valley property on 30 January 2014.
On 30 January 2014, there was a telephone conversation between Tolis & Co, as the applicant’s solicitors, and the solicitors for Nationwide. The note of that telephone conversation records that:
Nationwide stand by position – indefeasible title – will not settle;
Reject fraud exception and s69(b);
We have instructions not to pay out Nationwide or sign release.
By email from Nationwide’s solicitors dated 30 January 2014 to Tolis & Co, two different figures were provided, the sum of $218,441.66 if a Deed of Release was provided and the sum of $243,441.66 if the Deed was not provided. Ultimately the lesser figure was paid, even though a Deed of Release was not provided.
On 30 January 2014, Tolis & Co had two telephone conversations with the solicitors for Nationwide in relation to the settlement of the proceedings and one telephone conversation with one of the administrators. In that latter conversation, the following is recorded:
Option? Pay out Nationwide liquidated sum (ie $218k) – offer no security for costs
OrIf Nationwide do not budge, then offer to pay security to Tolis trust account pending agreement or court order.
Still leave options open to sue Nationwide but instead of monies held in trust or court, Nationwide will hold it.
Nationwide unlikely to be unable to pay damages if required to by court or settlement
Instructions to place offer as detailed above
Make settlement happen
On 30 January 2014, an email was sent by Tolis & Co to one of the administrators of the applicant’s estate who was appointed on 5 December 2013 in which the following was stated:
We have negotiated a compromise with Nationwide Capital in respect of settlement of the sale of Magnolia Avenue, which is scheduled for tomorrow, 31 January 2014;
Nationwide has agreed to discharge the mortgage at settlement provided they are paid in full the liquidated amount of approximately $218,441.66, without the need to provide them with a signed Deed of Release or security for costs;
We confirm that this will allow settlement to take place as scheduled and avoid complicating matters by breaching the sale contract and incurring any further liability in respect of the purchasers and Nationwide;
Peta will retain her right to sue for her losses;
We advise this is a good outcome in the circumstances because it mitigates Peta’s potential losses whilst preserving her rights at law and in equity to recover the losses she may sustain.
Settlement of the Happy Valley property occurred on 31 January 2014 and following settlement, the mortgages were discharged and Nationwide received the sum of $218,441.66 from the sale of the Happy Valley Property. Nationwide had already received the sum of $91,587.54 in respect of the sale of the Aldinga Beach Property and therefore received from the sale of the two properties the sum of $310,029.20 (which included costs and interest).
Mr Munt was briefed in late 2014, well after the properties had been sold and the proceeds of sale had been distributed. The Behar affidavit records that advice was received from Mr Munt, then counsel for the applicant, in late 2014 concerning, inter alia, the validity of the mortgages. The Behar affidavit then goes on to state that after receiving Mr Munt’s advice, the administrators of the applicant’s estate specifically elected to not make Nationwide a named defendant in this action nor make any claims against Nationwide on behalf of the applicant.
Interlocutory history
The applicant instituted these proceedings on 8 August 2018. The respondent filed a defence on 4 October 2018 and a second defence on 30 November 2018.
The applicant took out an interlocutory application dated 8 April 2019 in which she sought to strike out certain paragraphs of the second defence. The paragraphs sought to be struck out included the paragraphs that dealt with the advice given by Tolis & Co and Mr Munt. A Master of this Court refused the application to strike out those paragraphs. On 16 January 2020, Judge Bochner upheld an appeal from that decision and ordered that those paragraphs be struck out.
On 21 February 2020, the respondent filed an interlocutory application to amend his defence to allege that the loss suffered by the applicant was caused wholly or in part by the negligence of her lawyers in failing to advise her that she was not bound by the mortgage document on which the signature was forged. In opposition to that application, the applicant filed the Behar affidavit in May 2020 which gave rise to the issue of waiver of privilege and the proposed cross claims against Tolis & Co and Mr Munt.
Following further hearings, the respondent took out an interlocutory application on 23 December 2020 in which he sought orders for the production of the privileged documents and leave to file a cross claim. I heard the argument as to the wavier of privilege on 17 February 2021 and delivered judgment on 21 May 2021 dismissing that application.
The Proposed Amended Defence
The applicant takes no position in relation to the proposed amended defence. Although the complaint might be made that the allegations against Mr Munt are speculative for the reasons that I will later elaborate on, in the absence of opposition to the proposed amended defence from the applicant, I am prepared to grant the respondent leave to file the proposed amended defence. The Court is required to rule on the relief sought in the pleaded case of the parties.[3] If the parties raise no objection to a pleading, then there is no reason why that document should not form part of the pleadings that define the dispute that must be determined by the Court.
[3] Banque Commerciale SA (en liq) v Akhil Holdings Ltd (1991) 169 CLR 279 at 286-7; Kien Dam Luu Pty Ltd v AMP Society Ltd (1999) 75 SASR 345 at 355.
The Cross Claim against Tolis & Co
Although the proposed cross claim against Tolis & Co repeats the factual allegations in the defence, that is merely a shorthand way of recording the facts upon which the cross claim relies. The issue of whether leave to file the cross claim is granted is an independent issue from the application to file an amended defence. For the purpose of the application for leave to file a cross claim, I will consider the proposed cross claim as including paragraph [27] of the revised defence.

Paragraph [27] pleads in some detail the alleged negligence of Tolis & Co. That plea is not speculative. The plea of negligence is set out in paragraphs 27(a)-(e) of the proposed defence. Paragraphs 27(a) and (b) set out non-contentious matters or a legal conclusion as to a duty of care. Paragraph 27(c) pleads the period of time over which Tolis & Co negotiated a compromise with Nationwide, culminating in the agreement that was reached as recorded in the email dated 30 January 2014. Paragraph 27(d) records that Tolis & Co recommended to the applicant to accept the compromise. Again, that recommendation is implicit from the telephone conversation between Tolis & Co and the administrator of the applicant on 30 January 2014 and from the email dated 30 January 2014 from Tolis & Co to the administrator. Paragraph 27(e) then pleads reliance upon that advice. That reliance is evident through the chronology of events. Paragraph 27(f) pleads why the advice that was given was negligent. That plea is based on allegations which are either matters of law (such as the Nationwide claim was unlawful) or matters of fact (such as the applicant gained no advantage from the compromise or that the Nationwide claim was founded on the forged signature etc.).
Counsel for Tolis & Co properly conceded that the proposed cross claim against her client was not subject to objection on the ground that there was an inadequate basis for the claim and accepted that the claim could not be characterised as being merely speculative.
Tolis & Co submitted that in the exercise of its discretion, the Court should refuse to grant leave to the respondent to file the cross claim. Two bases for this submission were advanced, although ultimately neither were pursued vigorously. First, it was submitted that leave should be refused on the normal discretionary grounds, including the delay in bringing the cross claim. In my view, there was no operative delay. Until the Behar affidavit was filed in May 2020, the applicant did not have access to the documents necessary to plead its cross claim. The respondent pleaded the first iteration of its proposed cross claim on 23 December 2020. During the period from May 2020 to December 2020, the respondent was also pursuing the production by the applicant for the waiver of privileged material. It was agreed between the parties that the question of waiver of privilege would be determined first and then the issue of leave to file a cross claim. I gave judgment in that matter in May 2021 dismissing the application for production. Only then could this application be heard.
In accordance with the principles set out in Aon Risk Services Australia Ltd v ANU[4] (as applied in this State by a range of Full Court decisions, including Channel Seven Adelaide Pty Ltd v Manock),[5] the proposed cross clam should be permitted. What Aon made clear is that an amendment application is still governed by the guiding principles that a just resolution of the proceedings is the paramount objective. However, wider considerations must be taken into account in determining what is a just resolution. These include confidence in the administration of justice (and that undue delay can undermine that confidence), waste of public resources and inefficiencies associated with delays including vacating trial dates and revisiting interlocutory processes.
[4] [2009] HCA 27; (2009) 239 CLR 175.
[5] [2010] SASCFC 59.
As I have described above, I am satisfied that the respondent has good reason to bring the cross claim. There has been no undue delay in bringing the claim given that the cross claim against Tolis & Co could not be drafted with the required precision until the Behar affidavit was filed. No trial date has been set. There is no identified prejudice to Tolis & Co if leave is granted. In these circumstances, the just resolution of the proceedings requires that leave be granted.
Secondly, Tolis & Co submitted that if leave were granted to file the cross claim, it would be prevented from using the privileged material of the applicant to defend the claim. Counsel for the respondent referred to the decision by Middleton J in Arnold Bloch Leibler (a firm) v Slater & Gordon Limited.[6] In that case, Slater & Gordon had engaged Arnold Bloch to act as their lawyers in relation to a renounceable entitlement offer intended to partly finance the purchase price for the proposed acquisition by Slater & Gordon of a law firm in the United Kingdom.[7] As a consequence of that transaction, Arnold Bloch were sued by a Mr Hall who acted in a representative capacity.[8] Middleton J held that Slater & Gordon were entitled to protect the confidentiality of its privileged material, notwithstanding that Arnold Bloch required it for the purposes of their defence. He held:[9]
The mere fact (without more) that a solicitor faces a civil claim from a third party (other than the client) does not mean that the solicitor is entitled to disclose the client’s privileged information even if required for the solicitor’s defence. This is on the assumption that there has been no waiver, or no implied term in the retainer between the solicitor and the client allowing disclosure in these circumstances. Circumstances would be different if, for instance, a plaintiff (being a client) in proceedings opens up the question of the authority of her lawyers to act as they did on a previous occasion— see Benecke v National Australia Bank (1993) 35 NSWLR 110 (‘Benecke’).
[6] [2020] FCA 1496.
[7] Ibid at [3].
[8] Ibid at [32].
[9] Ibid at [59].
His Honour went on to hold that this was not a case (at least yet) where Slater & Gordon were picking and choosing between attacking Arnold Bloch and at the same time trying to conceal relevant, albeit confidential information.[10]
[10] Ibid at [91].
The above statements do not preclude the third party, in this case the respondent, from instituting proceedings against the solicitors who may be subject to constraints in defending the proceedings. The respondent must be able to exercise his legal right to bring a cross claim. It may well be that Tolis & Co, as the cross respondent to such a claim, will seek a stay of that proceeding on the basis that they cannot defend the claim, being denied the opportunity to rely on documents that are essential to their defence. That however is another matter, the determination of which will depend on other considerations. It will, in the present case, depend in part at least upon the attitude of the applicant as to whether it will agree to the release of privileged material. It will also depend on the foreshadowed argument of the respondent that by instituting proceedings and by the subsequent institution of the cross claim (if permitted), the applicant has indirectly brought the content of the legal advice into issue, such that Tolis & Co, in their capacity as the former lawyers for the applicant, are freed from their obligation to maintain confidentiality.[11]
[11] Australian Securities and Investments Commission v Australia and New Zealand Banking Group (No 2) [2020] FCA 1013 at [36]; Schulman v Abbott Tout Lawyers (A Firm) [2010] FCA 308.
I therefore consider that the fact that Tolis & Co may be prevented from using confidential material does not provide a basis for refusing the respondent leave to bring the cross claim against Tolis & Co.
I grant the respondent leave to bring the cross claim against Tolis & Co.
The Cross Claim against Mr Munt
In relation to the proposed cross claim against Mr Munt, two questions arise. First, is there a proper factual basis for the claim. Secondly, if not, what are the consequences of that deficiency.
In this case, the proposed cross claim relies on inferences to be drawn from certain facts (discussed below) that Mr Munt gave advice to the applicant that the mortgage was enforceable against the applicant and that Nationwide should not be sued. Whether that plea is maintainable depends on whether there is a reasonable basis for that claim, relying on the inferences that can be drawn from the known material. In Adelaide Brighton Cement Ltd v Hallett Concrete Pty Ltd & Ors,[12] Doyle J considered the use of inferences to support a plea and held:[13]
It is true that courts routinely permit parties to plead cases with full particulars not provided until after discovery. Whether that is appropriate in a given case depends upon the circumstances of the case; it is a matter of fact and degree.
On the one hand, courts should not allow a party without a tittle of evidence to make a broad allegation with the hope that by ransacking the other party’s documents through the discovery process which the allegation generates, they will find a case. On the other hand, a party does not need to know, and indeed often will not know, every detail of the claim they wish to pursue. They must have a reasonable basis for making their claim, but this basis may rely upon inferences that can properly be drawn from the limited information available to them prior to discovery. They may then plead a case based upon inference, the precise ambit of which will fall to be articulated with more precision once discovery has taken place.
The former is often described as ‘mere’ fishing, or impermissible fishing. To stay with the fishing analogy, the former involves a situation where the party is in reality speculating as to the existence and location of the fish it hopes to catch, and is in effect utilising the court’s processes to trawl for those fish. The latter involves a situation where the party has a sound basis for inferring the existence of the fish it wishes to catch, but cannot be precise about the detail of the fish it expects to catch. It involves a more focussed use of the court’s processes.
Doyle J reached the following decision:[14]
Ultimately, I am satisfied that the pleading does not disclose a proper basis for Hallett’s allegation of widespread breaches. The particulars of breach that have been pleaded do not provide a reasonable basis for an allegation of the breadth made by Hallett in its counterclaim. Properly understood, and even when considered cumulatively, they are not reasonably capable of sustaining an inference of widespread breaches throughout the almost six year period covered by the counterclaim. It follows, in my view, that the pleading of widespread breaches is no more than an attempt to trawl for a case of breaches throughout the relevant period. Consistently with the objects of the Uniform Civil Rules, I do not think that the Court should lightly permit a party without a proper basis for believing in widespread breaches to make an allegation to this effect with a view to generating a significant discovery obligation that might reveal some basis for a case. It follows, in my view, that the case as presently pleaded by Hallett in its counterclaim is not reasonably sustainable. It should be struck out as either an abuse of process or on the basis that the pleading does not disclose a reasonable cause of action.
[12] [2020] SASC 161.
[13] Ibid at [26]-[28].
[14] Ibid at [143].
There is no direct evidence as to the substance of the advice from Mr Munt. The evidence is that the advice from Mr Munt was given at a much later date in 2014 and after the properties had been sold and the proceeds distributed. The only information provided to the respondent (by way of the Behar affidavit) about the advice from Mr Munt was that in late 2014, he was briefed by Tolis & Co and provided advice concerning the validity of the mortgages and that after receiving that advice, the administrators specifically elected not to make Nationwide a named defendant in the action nor make any claims against Nationwide on behalf of the applicant.
In my opinion, this information does not disclose the substance of the advice and therefore does not provide a basis for the plea that the advice given was negligent. As Tamberlain J held in Bennett v Chief Executive Officer of the Australian Customs Service:[15]
It may perhaps have been different if it had been simply asserted that the client has taken legal advice and that the position which was adopted having considered the advice, is that certain action will be taken or not taken. In those circumstances, the substance of the advice is not disclosed but merely the fact that there was some advice and that it was considered…
[15] [2004] FCAFC 237; (2004) 140 FCR 101 at 104 [6].
The Full Court of the Federal Court in Adelaide Steamship Co Ltd v Spalvins[16] reached the same conclusion when it held that the mere reference to legal advice followed by a statement that he soon after commenced drafting the statement of claim did not constitute disclosure of that advice[17] (referring to Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd).[18] In Spalvins, the Court went on to reject a finding by the primary judge that an inference could be drawn as to the content of that advice by what in fact was pleaded in the statement of claim.
[16] [1998] FCA 144; (1998) 81 FCR 360.
[17] Ibid at 376.
[18] (1996) 70 ALJR 603 at 607.
Tamberlain J reached the same conclusion in Nine Films & Television Pty Ltd v Ninox Television Ltd[19] where he held:[20]
Even assuming that this statement had in fact been made by Mr McEwen, I still do not consider that it would amount to a waiver of legal professional privilege. Whilst I accept that, in some circumstances, a clear disclosure of the "bottom line" of the advice, and the course of conduct taken thereafter, may be sufficient to amount to waiver of legal professional privilege, I do not think these matters have been established in the present case. On a fair and reasonable reading, the statement to the effect that senior counsel had been engaged and that he had reviewed matters in detail and that steps were being taken based on his recommendations is not sufficient to amount to a waiver of the legal advice. The substance or content of the advice is not disclosed with specificity or clarity. Questions of waiver are matters of fact and degree and, in this instance, I am not persuaded that the conduct, assertions or admissible evidence are sufficient to warrant the necessary implication that legal professional privilege has been waived.
[19] [2005] FCA 356.
[20] Ibid at [26].
Although those statements were made in the context of the waiver of privileged material, they address whether in the circumstances a mere reference to the obtaining of legal advice, followed by some form of action, permits an inference to be drawn as to the substance of the advice. Those cases all suggest that such an inference cannot be drawn in those circumstances.
In a slightly different context, McClelland J held in Ritz Hotel Ltd v Charles of the Ritz Ltd (No 21)[21] that the mere description of a document as a budget (or as in the present case, as advice) did not permit any inference to be drawn as to the content of that document.
[21] (1988) 14 NSWLR 128 at 131.
These cases are, in my opinion, apposite to the present case. They deal with what inferences can be drawn from the fact of legal advice and in particular whether the substance of that advice can be inferred from the fact of that advice, followed by some action.
I do not consider that the substance of that advice can be inferred from the above matters. The basis of the plea in the proposed cross claim is at paragraph 27(m) where it is alleged that “Mr Munt ought, in presenting his opinion, to have apprehended, and to have advised, that the forged mortgage was invalid and his opinion ought to have recommended that the applicant sue Nationwide for recovery of the said proceeds pursuant to the applicant’s reservation of rights”. Paragraph 27(n) then goes on to plead that negligently and in breach of that duty, Mr Munt failed to advise that the forged mortgage was invalid and failed to recommend that the applicant sue Nationwide.
In my view, it is pure speculation to reach the conclusion from the receipt of his advice in 2014, the institution of the proceedings and the filing of the statement of claim in 2018, that Mr Munt (1) advised that the forged mortgage was valid (or that he omitted to give advice on that topic) or (2) advised the applicant not to sue Nationwide or omitted to advise that the applicant should sue Nationwide for recovery of the proceeds pursuant to the applicant’s reservation of rights.
In analogous circumstances, the Court in Adelaide Steamship, held that the fact of an advice and then an analysis of what was pleaded in the statement of claim did not give rise to an inference as to what the advice said about particular causes of action that were pleaded and more particularly were not pleaded in the statement of claim. In the present case, an advice given some four years prior to the institution of proceedings makes it even more difficult to argue that the inference should be drawn.
Counsel for the respondent further submitted that a number of further matters support the drawing of an inference as to the substance of the advice from Mr Munt. First, reference was made to paragraphs [44] and [45] of the statement of claim, which was settled by Mr Munt. Those paragraphs state:
[44]By reason of the operation of section 69 of the Real Property Act 1886 (SA), the Memorandum of Mortgage could not be avoided as against Nationwide on the grounds that the plaintiff’s signature in [sic] the Memorandum of Mortgage was a forgery.
[45] The plaintiff ultimately agreed to the Properties being sold in order to discharge the debts to Nationwide and National Australia Bank, the first mortgagee of the Properties, and mitigate her loss in respect of ongoing substantial interest charges and legal fees.
In my view, these paragraphs do not permit any inference to be drawn about the advice given by Mr Munt in 2014. When a pleader puts forward a pleading or certifies a pleading, they are certifying that the pleading is in accordance with their instructions and that there is a proper basis for each allegation of fact.[22] The decision in Adelaide Steamship supports that conclusion where the Court held that the pleading of some causes of action and not others did not give rise to any inference about the substance of previous advice. There may be a myriad of reasons why an applicant may choose to run its case in a particular way, electing to proceed against some respondents and not others and electing to pursue some causes of action and not others. These reasons include costs, an assessment of the risks of a claim against a party and whether the relief that the applicant seeks can be obtained from another respondent.
[22] UCR 67.3.
The plea in paragraph [44] of the statement of claim is an allegation of law, its truth depending on the answer to a question of law.[23] The question of law in the above pleading is whether the forged mortgage is binding because of registration. The plea in paragraph [45] is of a slightly different nature. It is a plea of fact - the applicant agreed to the sale of the properties to discharge the debts and mitigate her loss. That is the plea of fact as to why the applicant undertook a particular course, well prior to the engagement of Mr Munt. Why the applicant took certain action at that stage does not permit an inference to be drawn as to Mr Munt’s advice.
[23] Neptune Oil Co Pty Ltd v Fowler (1963) 63 SR (NSW) 530 at 537.
Secondly, the respondent (in support of his contention that an inference could be drawn as to the substance of Mr Munt’s advice), relied upon the submissions made to this Court by the applicant on the instructions of Tolis & Co to the effect that it was not reasonably arguable that the forged mortgage did not bind the applicant so as to make her liable to the Nationwide claim. These submissions were made in an argument before Judge Bochner who was hearing an appeal from a Master of this Court who refused to strike out certain paragraphs of an earlier iteration of the defence (prior to the Behar affidavit).

Again, I do not consider that these matters permit the necessary inference to be drawn as to the substance of the advice. The submissions simply reflect a legal position taken by Tolis & Co on the appeal and in the proceedings more generally.
The third matter relied upon by the respondent was the decision by the applicant not to sue Nationwide. That does not take the matter any further than the pleading in paragraphs [44] and [45] of the statement of claim. As I have said, there are many reasons why a party, who has potential remedies against a number of parties, may choose to sue one and not the other. No inference as to how the statement of claim is drawn can give rise to an inference as to the substance of advice given some four years previously.
The respondent submitted that it did not have to prove the allegations that it made in the cross claim at this stage of the proceedings, rather its allegations must only be reasonably sustainable by way of inference from known facts. The respondent went on to submit that he did not need to know precisely what Mr Munt said in his advice, all he needed to assert is what Mr Munt should have said and what he didn’t do. The respondent says that there is an inference as to what Mr Munt didn’t do for the reasons that I have discussed. The respondent submits that Mr Munt’s objections to the proposed cross claim trespass into the realm of proof at trial.
I accept of course the distinction between proof at trial and the proper basis for the pleading of the cross claim. Kourakis CJ referred to that distinction in Adelaide Brighton Cement Ltd v Hallett Concrete Pty Ltd & Ors (No 2)[24] (which was a decision on the repleading of the proposed cross claim in that matter, following the decision of Doyle J, discussed earlier, to refuse leave and require the cross claim to be repleaded). Kourakis CJ held that the pleas were not merely speculative and that it would not be an abuse of process to allow them to proceed.[25] In coming to that conclusion, Kourakis CJ held that although there were alternative explanations for the loss that was claimed, if the cross respondent failed to adduce evidence at trial supporting that alternative hypothesis, the case outlined by the cross applicant could not be said to be so lacking in foundation that leave to replead should be refused.[26] The proposed cross claim was coherent and had substance and was not merely speculative.[27]
[24] [2021] SASC 56.
[25] Ibid at [28].
[26] Ibid.
[27] Ibid.
However, I do not consider that there is pleaded a reasonable basis for drawing the inference that Mr Munt provided advice to the affect alleged. It is not sufficient to plead a possibility from a known fact. Unlike in Adelaide Brighton Cement Ltd (No 2), the inference could not be drawn from the pleaded facts even if Mr Munt failed to adduce evidence to the contrary. That is, the known and pleaded facts were incapable of giving rise to the inference.
It follows from the above analysis that I do not consider that there is a sufficient basis to plead a cause of action against Mr Munt that the legal opinion that he provided was negligent. Under the Uniform Civil Rules 2020 (UCR), the statement of claim must comply with the pleading rules set out in Chapter 7, Part 7.[28] The pleading must, inter alia, contain a certificate from the responsible solicitor that there is a proper basis for each allegation of fact.[29] In my view, there is not a proper basis for the plea regarding the substance of the advice given by Mr Munt. A proper pleading must contain all material facts and not merely a cause of action based on a hypothesis.[30] In the present case, the pleading against Mr Munt falls into the latter category.
[28] UCR 63.1(6)(b).
[29] UCR 67.3.
[30] Nitschke v Foraco Australia Pty Ltd [2014] SASC 88 at [33].
Another way of putting the matter is that even taken at its highest, the respondent cannot establish a reasonable cause of action. Allowing for all inferences to be drawn, the respondent cannot show a reasonable cause of action because, in my view, he is simply speculating as to the advice given by Mr Munt. As the proposed cross claim would be liable to be struck out under UCR 70.3(c), permission would not be granted to file the cross claim.[31] The respondent cannot plead, as required, the effect of the advice from Mr Munt. He cannot say that he will be able to do so after discovery. As Judge Lunn held in Wunda Joinery Pty Ltd v Wunda Projects Australia Pty Ltd:[32]
There is no doubt that the Court has a discretion to allow a party to defer giving particulars until after it has had disclosure and inspection of the other parties’ documents: Chapman v Conservation Council of SA, Debelle J, [1998] SASC S6973; Electricity Trust of SA v Union Insurance Company, Perry J, 9 July 1997, Judgment No S 6241; Ross v Blake [1951] 2 All ER 689 at 695. In order to exercise that discretion the Court should have some factual basis on which to act which causes it to conclude that the plaintiff does not have the documents it needs to give the necessary particulars, the other party does have those documents and the justice of the case requires that there should be disclosure of them before the particulars are given.
[31] Pope & Ors v Harris Orchard [2010] SASC 354 at [24].
[32] [2007] SASC 301 at [26].
If there is no factual basis, then the proceeding is essentially speculative in nature.[33] Leave should not be given to the respondent to file the proposed cross claim against Mr Munt.
[33] Andrews v Australia and New Zealand Banking Group Ltd [2011] FCA 388; (2011) 281 ALR 113 at [50].
Conclusion
I grant leave to the respondent to file an amended defence.
I grant leave to the respondent to file a cross claim against Tolis & Co.
I refuse leave to the respondent to file a cross claim against Mr Munt.