Sanders-Pattinson v Brown
[2012] NSWSC 443
•31 May 2012
Supreme Court
New South Wales
Medium Neutral Citation: Sanders-Pattinson v Brown [2012] NSWSC 443 Hearing dates: 3 May 2012 Decision date: 31 May 2012 Jurisdiction: Common Law Before: S G Campbell J Decision: 1. Pursuant to r. 13.4 of the Uniform Civil Procedure Rules 2005, the proceedings be dismissed generally.
2. The plaintiff pay the defendant's costs of the proceedings on the ordinary basis.
Catchwords: PRACTICE AND PROCEDURE - application for summary dismissal - r. 13.4 and r. 14.28 Uniform Civil Procedure Rules 2005 - purchase of unit financed by unregistered second mortgage - caveat lodged - lapsing notice sent but not received by plaintiff or assignor - caveat lapsed - no trialable issue - order for summary dismissal made. Legislation Cited: Civil Procedure Act 2005 (NSW)
Civil Liability Act 2002 (NSW)
Conveyancing Act 1919 (NSW)
Corporations Act 2001 (Cth)
Federal Court of Australia Act 1976 (Cth)
Insurance Contracts Act 1984 (Cth)
Law Reform (Law and Equity) Act 1972 (NSW)
Law Reform (Miscellaneous Provisions) Act 1946 (NSW)
Legal Profession Act 1987 (NSW) (Repealed)
Real Property Act 1900 (NSW)Cases Cited: Agar v. Hyde (2000) 201 CLR 552
Astley v. Austrust Ltd (1999) 197 CLR 1
Breheny v. Cairncross and Two Ors [2002] NSWCA 69
Brimson v. Rocla Concrete Pipes Limited [1982] 2 NSWLR 937
Caledonian Collieries Limited v. Speirs (1957) 97 CLR 202
Crimmins v. Stevedoring Industry Finance Committee (1999) 200 CLR 1
Dey v. Victorian Railways Commissioners (1949) 78 CLR 62
Dickson v. Chaffey and Reddawn [2012] NSWSC 336
Equuscorp Pty Ltd v. Haxton [2012] HCA 7
Expo International Pty Ltd (in liq) v. Chant [1979] 2 NSWLR 820
FAI General Insurance Co. v. Australian Hospital Care Pty Ltd (2001) 204 CLR 641
Florgale Uniforms Pty Ltd v. Orders (2004) 11 VR 54
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Graham Barclay Oysters Pty Ltd v. Ryan (2002) 211 CLR 540
Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd [1995] NSW ConvR 55-731
Henderson v. Merrett Syndicates Limited [1995] 2AC 145
Mutual Life & Citizens Assurance Co. Limited v. Evatt (1970) 122 CLR 628
Owners - Strata Plan 50530 v. Walter Construction Group Ltd (in liq) [2007] NSWCA 124
PAO & Ors. v. Trustees of the Roman Catholic Church [2011] NSWSC 1216
Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676
Penthouse Publications Limited v. McWilliam (1991) (Unreported, NSWCA BC9102223)
Perpetual Trustees Victoria Ltd v. Malouf [2008] NSWSC 834
Pollnow v. Garden Mews - St. Leonards Pty Ltd (1984) 9 ACLR 82
Pyrenees Shire Council v. Day (1998) 192 CLR 330
Re; Custom Card (NSW) Pty Ltd & The Companies Act [1979] 1 NSWLR 241
Spencer v. Commonwealth of Australia (2010) 241 CLR 118
State of New South Wales v Paige (2002) 60 NSWLR 371
Stuart v. Kirkland-Veenstra (2009) 237 CLR 215
Sullivan v. Moody (2001) 207 CLR 562
Tzaidas v. Child (2004) 61 NSWLR 18
Voli v. Inglewood Shire Council (1963) 110 CLR
Wickstead v. Browne (1992) 30 NSWLR 1Category: Interlocutory applications Parties: Plaintiff: Paul Sanders-Pattinson Representation: In person (Plaintiff)
Mr. I. Griscti (Defendant)
In person (Plaintiff)
Mullane & Lindsay (Defendant)
File Number(s): 2010/425204
Judgment
His Honour: Two related proceedings were listed before me on 3 May 2011. These were the present matter and matter no. 2010/32737, being proceedings brought by the plaintiff against a former solicitor, Charles Goldberg ("the Goldberg matter"). The matters are related because they each concern the same financial transaction, which I will describe below, but each defendant had a different part to play.
The Goldberg matter although listed was not the subject of any application. However, I had the matter called outside the Court and there was no appearance on behalf of the defendant. This is unsurprising because an inspection of the file shows that it was necessary for the plaintiff to obtain an order for substituted service (with which, he informs me, he has complied), and Mr. Goldberg has taken no active part in the proceedings. In the present case there are two applications. The plaintiff's motion filed on 29 April 2011 seeks to join Mr. Goldberg and his putative insurer, LawCover Insurance Pty Ltd as additional defendants in the present matter, purportedly pursuant to the provisions of s.6 Law Reform (Miscellaneous Provisions) Act 1946 (NSW). Orders for expedition and costs are also sought.
The defendant's motion, filed on 16 May 2011, seeks an order that the Statement of Claim be struck out pursuant to r. 14.28 Uniform Civil Procedure Rules 2005 ("the Rules"), or alternatively that the proceedings be dismissed pursuant to r. 13.4 of the Rules.
I should say the apparent delay in the matter coming before the Court for determination was due to serious ill health suffered by the plaintiff in 2011. The parties, as appropriate, so it seems to me, agreed that the hearing should be delayed to allow the plaintiff to undergo necessary medical treatment.
Factual Background
As I have said, both proceedings arise substantially from the same transaction. This summary of fact is drawn from the statements of claim. There are some differences in the material facts pleaded, but for present purposes nothing turns on this.
Depending on the version considered, on either 26 November 2001 or 6 December 2001 Anita and Adam Whitton ("the Whitton's") purchased a home unit for either $528,000 or $660,000. On 17 June 2002, the Whitton's borrowed $650,000 from the St. George Bank secured by a registered first mortgage over the property.
Anthony Samek (and his father, Valerian) had money to loan and instructed Charles Alroy Goldberg (the defendant in the Goldberg matter), as his solicitor to act on his behalf in relation to the provision of a loan to the Whitton's in the sum of $125,000 secured by an unregistered second mortgage over the property. The loan agreement, or mortgage (it is not clear which, the documentation having gone missing) was signed on or about the 5th of February 2004. In accordance with instructions given by Mr. Samek, Mr. Goldberg prepared and registered a caveat over the property to reflect this interest. This legal work was done on the 9th and 10th of February 2004.
On the 20th of April 2004 the Whitton's borrowed again. They entered into a further loan agreement with World Wide Diamonds and Alight Financial Services Pty Ltd in the sum of $70,000, again secured by an unregistered (third) mortgage over the property. Mr. Goldberg acted for both mortgagor and mortgagee. On 14 May 2004 Mr. Goldberg prepared and registered a caveat to protect the third mortgage.
The Whitton's total indebtedness of $845,000 exceeded the value of the property. For reasons that it is not necessary to delve into now, on 15 July 2004, the Council of the Law Society of New South Wales resolved to cancel Mr. Goldberg's practising certificate and to refuse his application for a renewal. At the same meeting, the defendant in the present matter, Andrew Stuart Brown, a solicitor, was appointed manager of Mr. Goldberg's practice pursuant to s.114B Legal Profession Act 1987 (NSW) (LPA). At the same meeting Mr. Xuereb, a solicitor, and Mr. Louttit, a Chartered Accountant, were appointed under s.55 LPA to investigate the affairs of Mr. Goldberg.
At it's meeting on 21 April 2005 the Council of the Law Society of New South Wales received the final report of Mr. Brown relating to his management pursuant to s.114H of the Act, and noted that all records relating to his management had been lodged with the Council. The Council noted that Mr. Brown's management of Mr. Goldberg's practice is terminated pursuant to s.114K of the Act.
Although it will be necessary to say more about this, solicitors then acting for the Whitton's, Nemes Thomas & Co, purported to serve a lapsing notice in respect of the caveat protecting Mr. Samek's unregistered second mortgage, at Mr. Goldberg's former office (the address for service recorded on the caveat). The evidence before me, which I will turn to in a moment, tended to prove that at that date, Goldberg's former office was unoccupied and the notice was returned to the solicitors unopened.
One may question whether the notice can be said ever to have been served, but however that may be, apparently the caveat was taken to have lapsed either on 24 May 2005, or in June of the same year, depending upon which pleading one considers. (In fact it was August.)
In 2006, the precise date is not clear, the Whitton's reached an agreement with the first and third mortgagees leading to the sale of the property and the recovery, of at least part of their debt, by the first and third mortgagees.
In parallel, unrelated steps with the assistance of the plaintiff, Mr. Samek sued the Whitton's for his debt and obtained default judgment in the sum of $ 329,371.93, together with $ 1,158.00 in scale costs, on 14 June 2006. Mrs. Whitton alone appealed, and her proceedings were settled by her agreement, on terms, to pay $60,000 in full discharge of her indebtedness, leaving a considerable shortfall in Mr. Samek's entitlements.
The Plaintiff's title to sue
By memorandum in writing dated 3 February 2010 signed by the creditor, the present plaintiff took an assignment of all causes, claims or actions whether at law or in equity that may be available to the creditor against Charles Alroy Goldberg (former solicitor) or any successors in title including but not limited to Anthony Brown (sic). The defendant's proper name is Andrew Stuart Brown. As I point out later the quoted portion is from one of two versions of the "assignment" before me.
The Proceeding
In reliance on this assignment, the plaintiff commenced proceedings by Statement of Claim filed on 5 February 2010 against Mr. Goldberg. And on 23 December 2010 separate proceedings were commenced in the present matter by the filing of the Statement of Claim.
The cause of action relied upon against Mr. Brown is set out at paragraphs 56 and 60 which I set out in full below. It will be seen first that the allegations against the defendant relate to an alleged breach of his retainer and ... duties only, and secondly, on a natural reading, most of the proffered particulars, in my judgment, can only relate to the conduct of Mr. Goldberg, rather than Mr. Brown. On my reading, only [56.6] - and [56.7] can relate to the conduct of Mr. Brown.
56.In the circumstances, Brown was in breach of his retainer and following duties owed to the Assignor.
56.1Failure properly to advise of the risks associated with the loan to Anita and Adam Whitton.
56.2Failure properly to advise the Assignor to make appropriate enquiries as to the value of the subject property before advancing the loan funds.
56.3Failure properly to advise the Assignor to make appropriate enquiries of the amount secured by the first registered mortgage before advancing the loan funds.
56.4Failure to advise the Assignor of the subsequent loan by Worldwide Diamonds & Alight Financial Services Pty Limited secured over the subject property.
56.5Failure to advise the Assignor of the importance of preventing the caveat lodged on 10 February 2004 from lapsing in light of the subsequent loan by Worldwide Diamonds & Alight Financial Services Pty Limited and the caveat lodged by Worldwide Diamonds & Alight Financial Services Pty Limited on 14 May 2004 over the subject property.
56.6Failure to advise the Assignor that any lapsing notices would be sent to the Defendant's registered office and not the Assignor's address.
56.7Failure to advise the Assignor to lodge a Notice of Change of Address for Service of Notices on Caveator to change the Defendant's address as the address for service and to record the Assignor's address or another appropriate address.
56.8Failure to obtain appropriate instructions with regard to the disbursement of the loan funds.
56.9Failure to retain sufficient documentary records in relation to the loan by the Assignor to Adam and Anita Whitton, including a singed (sic) copy of the Loan Agreement.
...
60. Alternatively, if Brown had not breached his duty and retainer, the Assignor would have taken proper steps to ensure that the caveat lodged on 10 February 2004 did not lapse, and as a consequence, the Assignor's equitable interest in the subject property would have been secured and the sum owed to him by the Whitton's (or part thereof) would have been paid from the proceeds of the sale of the subject property.
I pause to record that during the course of oral argument the plaintiff pressed particulars 56.4 and 56.5 as available against the defendant.
The course of the oral hearing
When the matter was called on, I suggested to the parties that logically, although heard together, the defendant's application for summary dismissal should be decided first, for if successful, the plaintiff's application would be rendered otiose. Both parties agreed with this general approach.
The Evidence
The evidence lead was entirely documentary consisting of the following:
(a)The affidavit of Anthony David Cavanagh sworn on 2 February 2012 and filed on the 6th ("ADC");
(b)The affidavit of Paul Sanders-Pattinson sworn on 29 April 2011 and filed on the same day ("PS-P 1");
(c) The affidavit of Paul Sanders-Pattinson sworn on 27 May 2011 and filed in Court pursuant to leave on 14 June 2011 ("PS-P 2");
(d)The affidavit in reply of Paul Sanders-Pattinson sworn on 14 March 2012 and filed on 15 March 2012 ("PS-P 3");
PS-P 1 was filed in the Goldberg matter, apparently in error. With the consent of the parties I removed it from file no. 2010/32737, amended the case number and the name of the defendant, initialled those changes, and placed it with the papers in file no. 2010/425204, the present matter. The affidavits read by the parties respectively contain a great deal of evidence, however, as the issues were refined during the course of the hearing, it became apparent that the plaintiff's case against the defendant revolves around the lapse in the caveat lodged by Mr. Goldberg to signal or protect the unregistered second mortgage. This permits me to focus on the material relevant to that issue.
Summary Dismissal
The principle to be applied is not in doubt. It has been authoritatively stated in Dey v. Victorian Railways Commissioners (1949) 78 CLR 62 at 91 per Dixon J; and General Steel Industries Inc. v. Commissioner for Railways(NSW) (1964) 112 CLR 125 at 130, per Barwick CJ. It has been restated in these terms in Agar v. Hyde (2000) 201 CLR 552 at 575 per Gaudron, McHugh, Gummow and Hayne JJ at 575 [57]:
It is, of course, well accepted that a court whose jurisdiction is regularly invoked in respect of a local defendant (most often by service of process on that defendant within the geographic limitations of the court's jurisdiction) should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways (citations omitted), but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.
The defendant invoked r. 14.28 and r. 13.4 of the Rules, as has been stated already. As I understood the argument of learned counsel for the defendant, Mr. Griscti, the Rules were invoked concurrently and ultimately summary dismissal pursuant to r.13.4 UCPR was sought. Mr. Griscti accepted that the defendant bore the onus of clearing the high bar established by the authorities to which I have referred. No argument was addressed that the phrase no reasonable prospects of success introduced a permissive or discretionary approach by analogy with Spencer v. Commonwealth of Australia (2010) 241 CLR 118, concerned with s.31A(2) Federal Court of Australia Act 1976 (Cth). I do not mean to suggest that any such argument was open: Spencer at 139 [53] - [54].
Spencer, however, remains relevant, if only, because the joint judgment to which I have referred emphasises that the presently applicable test should be understood as requiring formation of a certain and concluded determination that a proceeding would necessary fail as a precondition to the enlivenment of the summary dismissal power: 135 [53]; and in considering whether that legal standard has been achieved, the court is to exercise exceptional caution: 140 [55]; see also General Steel Industries at 129.
Although not mentioned by the parties, I think it apposite to consider whether the principle expressed in Wickstead v. Browne (1992) 30 NSWLR 1 at [11] - [22] intrudes on the power invoked by the defendant in the context of the present application. The principle expressed by Handley and Cripps JJA is:
... [O]ne of a number of defendants cannot be entitled to summary dismissal before trial because of evidentiary deficiencies in the plaintiff's case. If at the close of the plaintiff's case at the trial there was no evidence against this [defendant] he would not be entitled at that stage to judgment if any of the other defendants intended to go into evidence (citations omitted). .... The court will not entertain a motion for judgment by some only of the defendants because of any gaps in the plaintiff's case against those defendants because any gaps in the plaintiff's case against those defendants may be filled when the other defendants go into evidence. In particular, one or more of the defendants going into evidence may seek to exculpate themselves by inculpating defendants against whom the plaintiff had no admissible evidence at the close of this case.
This principle may have application, because as I have said, although the related proceedings have not been consolidated or otherwise joined, they are being case managed together and, one would expect, in due course would be listed for hearing together with evidence in one standing as evidence in the other. I observe that in his letter to the defendant's solicitors dated 18 March 2011 (annexure "L" to PS-P1), the plaintiff foreshadowed seeking an order when the matter was before the Court on 4 April 2011 joining together the proceedings. That letter attached a copy of the Statement of Claim in the present matter. In the event, no such order was either sought or made. I bear in mind also the plaintiff's application to join Mr. Goldberg as a defendant in the present proceedings, which I will discuss later.
As Beech-Jones J demonstrated in Dickson v. Chaffey and Reddawn [2012] NSWSC 336 the principle is referrable to evidentiary gaps in the plaintiff's case (at [26]) and even where it applies it has its limits: Breheny v. Cairncross & Ors. [2002] NSWCA 69 at [7] per Hodgson JA; and see also Dickson at [26] - [28].
I will not retrace the steps of Beech-Jones J's analysis of the relevant cases with which, with respect, I agree, and with gratitude, I adopt. The principle discussed in Wickstead can be excluded if the applicant for summary judgment demonstrates that the evidentiary gap in the plaintiff's case, which the applicant has exposed, will not be closed at the trial. Presumably, this demonstration must achieve the same high degree of certainty required to be achieved by the applicant for summary dismissal for the application to be made good. For instance, in one of the authorities reviewed by Beech-Jones J, PAO & Ors. v. Trustees of the Roman Catholic Church(2011) NSWSC 1216, Hoeben J at [102] said the following:
In the negative sense, the evidentiary position is that the Archdiocese trustees have closed the door on likely sources of further evidence and the plaintiffs have not been able to point to any other source of evidence which has not been met by the evidence of the Archdiocese trustees [my emphasis].
I am conscious, however, that the defendant's argument in the present case is directed to the following matters:
(a)There was no retainer between the defendant and the plaintiff's assignor, and accordingly no duty, whether in contract or in tort, to support the allegations of breach at [56] of the Statement of Claim;
(b) That the defendant's involvement with the practice of Mr. Goldberg was limited to, and by, the statutory office of manager to which he had been appointed;
(c) There was no loss;
(d)And if there was a loss, causation could not be demonstrated;
(e)The purported assignment was ineffective to transfer to the plaintiff the cause of action upon which he relied.
To make good these arguments, the defendant relied upon "ADC" and some of the documents annexed to the plaintiff's affidavits.
I am satisfied to the requisite high degree of certainty that if the case were allowed to go to trial in the ordinary way the plaintiff cannot establish a retainer in the sense used in the Statement of Claim between the defendant and the plaintiff's assignor. On any reading of the Statement of Claim the word 'retainer' is used in its usual sense of a contract between a legal practitioner and client for the provision of legal services. If one reads the words, and following duties, used in conjunction with the word 'retainer' as extending the plaintiff's case beyond one limited to breach of contract, the extension can do no more than take the matter into a case based on negligence rather than breach of contract. In that event, the duty must be determined by reference to a relationship very much like solicitor and client, say, where the defendant has undertaken to perform legal work on behalf of the defendant. The detailed evidence about the relationship between the defendant, on the one hand, and the plaintiff and his assignor, on the other, satisfy me that there is no triable issue about this.
The starting point is ADC-04, the minute of the resolution of the Council of the Law Society of New South Wales appointing the defendant manager of Mr. Goldberg's practice pursuant to s.114B, Legal Profession Act 1987. ADC-05 is the minute of the resolution terminating Mr. Brown's appointment (see [10] - [11] hereof). It is necessary to set out the relevant statutory provisions from the Legal Profession Act 1987 (repealed):
92 Supreme Court may appoint receiver
...
(2) An opinion of the Law Society Council in relation to a solicitor is an opinion for the purposes of subsection (1) (a) if it is:
...
(b) an opinion that a person is unable to obtain payment or delivery of property of the solicitor because the solicitor:
(i) is mentally or physically infirm,
(ii) is bankrupt, has applied to take the benefit of any law for the relief of bankrupt or insolvent debtors, has compounded with his or her creditors or has made an assignment of his or her remuneration for their benefit,
...
(vii) has ceased to hold a practising certificate
(3) An action of the Law Society Council in relation to a solicitor is an action for the purposes of subsection (1) (b) if it is:
(a) a refusal to issue a practising certificate to the solicitor,
(b) the cancellation of the solicitor's practising certificate, or
...
114C Powers of manager
(1) The manager of a solicitor's practice may, subject to the terms of his or her appointment:
(a) act as a solicitor and barrister on behalf of the existing clients of the practice,
(b) accept instructions from, and act as a solicitor and barrister on behalf of, new clients,
(c) dispose of, and otherwise deal with, any property in relation to the solicitor,
(d) exercise any right in the nature of a lien over property held by the manager on behalf of the clients of the practice,
(e) incur such expenses as are reasonably related to the conduct of the practice, and
(f) do all such things as are ancillary to the exercise of the powers referred to in paragraphs (a)-(e),
as if he or she were the solicitor to whom the practice belongs.
(2) The manager of a solicitor's practice may not exercise any of the functions conferred by this section in relation to the affairs of a client of the practice unless the consent of the client has been obtained to the manager's exercise of those functions.
114D Management continues under receivership
(1) The manager of a solicitor's practice may continue to exercise his or her functions under this Part even if a receiver is appointed under Part 8 in respect of the solicitor's property.
(2) The manager of a solicitor's practice for which a receiver is appointed must comply with any lawful direction given by the receiver in connection with the conduct of the practice.
114E Acts of manager to be taken as acts of solicitor
(1) An act done by the manager of a solicitor's practice is, for the purposes of any proceedings or transaction that relies on that act, to be taken to have been done by the solicitor.
(2) Nothing in this section subjects a solicitor to any personal liability in relation to any act done by the manager of the solicitor's practice.
114F Manager may be reimbursed for damages
(1)The Law Society may reimburse a manager for any damages and costs recovered against the manager, or an employee or agent of the manager, for an act or omission in good faith and the purported exercise of a function under this Act.
(2) (Repealed)
(3) Neither the manager of a solicitor's practice nor the Law Society Council are liable for any loss incurred by the solicitor as a consequence of any act or omission of the manager or the Council in the conduct of the solicitor's practice if it was done or omitted in good faith and in purported exercise of a function under this Act.
114K Termination of management
When a solicitor's practice ceases to be under management, any money held by the manager in connection with the practice is (after re-imbursement of any money paid by the Law Society or out of the Public Purpose Fund in satisfaction of claims and amounts paid or payable under Parts 7, 8 and 8A and after payment of the expenses of the management of the practice) to become the property of the solicitor.
211 Protection from liability
No liability is incurred by:
(a) the Bar Association or the Bar Council, or their committees,
(b) the Law Society or the Law Society Council, or their committees, including a Management Committee to which a function is delegated under section 74
(c) an investigator, or an investigator's assistant, appointed under section 55, or
(d) the company referred to in Division 2 of Part 3 or its directors,
or an employee or agent of any of them for anything done, suffered or omitted to be done in good faith in the exercise, or purported exercise, of a function under this Act.
Annexure P to PS-P3 is an undated but sworn affidavit of the plaintiff's assignor, Mr. Anthony Samek. He deposes to his engagement of Mr. Goldberg as his solicitor in relation to mezzanine finance (see P2 [4]). He was aware of the application for temporary finance by the Whitton's (page 3[7]), and that the amount of the loan was $125,000. He was also aware of the caveat lodged by Mr. Goldberg to protect the loan: page 4[9]. Mr. Samek spoke to Mr. Goldberg on the 20th of May 2004 about his concern with the loan to the Whitton's but, inferentially, he relied upon Mr. Goldberg's reassurances. About the time the Law Society cancelled Mr. Goldberg's practising certificate Mr. Samek heard that the Society had taken over his office. He had some subsequent contact with Mr. Goldberg who again reassured him. Inferentially, he relied upon those assurances. He received a letter from the Law Society on 3 September 2004 that made no mention of the Whitton loan or the caveat. Contact was made with the defendant at about the same time, who told Mr Samek that he could not advise him on the matter of Mr. Samek's business with Mr. Goldberg.
Mr. Samek says that on 5 February 2005 we wrote to Mr. Brown and in response he forwarded copies of trust ledgers around 13 April 2005 (page 5 [13]). This may be a mistake. The use of the plural personal pronoun suggests the involvement of Mr. Sanders-Pattinson and the evidence is that they met on 21 February 2005 (PS-P 2 [18] Annexure P). It is clear from Annexure P, the plaintiff's letter to Mr. Samek of 21 February 2005, that the former was acting for the latter as a kind of commercial agent, or other representative, for reward. Legal proceedings against Mr. Goldberg were already in contemplation at that stage. The plaintiff suggested a further meeting on 25 February 2005.
On 4 March 2005 a further letter, clearly drafted and signed by the plaintiff as agent for Mr. Samek and his father, was sent to the defendant. From this, the natural inference is that the Samek's were relying upon the plaintiff and that the plaintiff "was acting" on their behalf. The letter sought the return of all business documents and information about monies deposited with Mr. Goldberg (PS-P 2 Annexure Q).
The defendant replied on 9 March 2005. He informed the plaintiff that he had been appointed Manager by the Law Society Council and stated that Mr. Goldberg's practice is now closed (PS-P 2 Annexure R). Mr. Brown set out his requirements for the release of files and trust monies. The list of files did not include any file relating to the loan to the Whitton's. This is because, notwithstanding an earlier search, the defendant had not located such a file: PS-P 2, Annexure K, L, N and O. These annexures are correspondence passing between the defendant and the solicitor then acting for the Whitton's, Nemes, Thomas & Co.
It is notable that in the correspondence I have referred to, passing between the plaintiff and the defendant, no specific request for information or documents relating to the loan to the Whitton's was raised.
Following receipt of the defendant's letter of 9 of March 2005, the plaintiff wrote to him again in his capacity as agent for the Samek's. He requested specific files, which did not include any file relating to the Whitton's.
The plaintiff attended the Law Society, not Mr. Goldberg's office at 99 Elizabeth Street Sydney, on 19 March 2005 to uplift files and cheques due to the Samek's. He had a short conversation with the defendant. Files and cheques were delivered into the plaintiff's possession and he signed for them. There was no conversation about the Whitton matter, nor was there any conversation from which one could infer that Mr. Brown was being engaged to act pursuant to s.114B of the Act (PS-P 2 [21]).
The plaintiff wrote to the defendant again on 29 March 2005 (PS-P 2 Annexure T) seeking information about specific matters, but again not including the Whitton matter. As with other correspondence this was a request for information to be provided to the plaintiff and not for the provision of legal services or advice.
On 5 April 2005 (Annexure U PS-P 2) the plaintiff wrote to the defendant seeking further information from Goldberg's accounts. At PS-P 2 [23] he acknowledges no mention was made of the Whitton matter. The reference to a unit is a reference to the Whitton's home unit. This, the plaintiff says, was a non-event. Certainly, it was not raised with the defendant.
On the same day the plaintiff wrote to his principals, the Samek's. The penultimate paragraph reads:
In regard to the pro-rata percentage from the Trust, the funds will be due at the end of the month with the retainer agreement. [PS-P2 Annexure V].
I would infer this is a reference to the plaintiff's retainer agreement with the Samek's and to a commission due to him. There was certainly not a reference to any retainer with the defendant. The attached Proposed Action Schedule Stage 1 is a proposed strategy for further conduct of the Sameks' affairs by the plaintiff, not by the defendant. It is notable it makes no mention of the Whitton matter.
The defendant wrote on 13 April 2005 (PS-P 2 W) providing copies of ledger cards. It can be seen from the foot of the first card attached to the letter, the general affairs card, that there is a reference to registration fees on Caveat re. mtge from Whitton. The defendant does not refer to it in the body of the letter, and this is the first mention of Whitton in the correspondence between the plaintiff and the defendant.
The plaintiff obviously picked up that reference because he had a meeting with Mr. Samek where it was discussed: PS-P 2 [25]. It is again notable that what was discussed between them was action to be taken by them, not the defendant on the Samek's behalf, to recover a debt.
From P S-P 2, Annexure X, I infer that this action included obtaining a copy of the caveat. It appears in PS-P 2 immediately before Annexure Y. The copy was obtained, I infer, from the matter at the very top of the first page, at 1:11 p.m. on 26 April 2005, probably before the letter of demand to Mr. and Mrs. Whitton was written on the same (Annexure X). The point about Annexure X itself is that it records the appointment of the defendant as a manager of Mr. Goldberg's practice, not as solicitor retained by the Samek's. On the contrary, it goes on to state:
I [the plaintiff] have been appointed as agent for Anthony, Anita, and Valerian Samek for all matters relating to their trust investments.
It makes a demand for a repayment of the debt, suggests a meeting, and requests the Whitton's contact the plaintiff, not the defendant, for the purpose of setting it up. Between that letter and a copy of the caveat is a document entitled a formal demand for payment dated 7 July 2005. Curiously the plaintiff does not refer to this document in his affidavit or say whether it was ever dispatched. He makes no statement one-way or the other about whether he received any response from the Whitton's.
On the 2nd of May 2005 (PS-P 2 Annexure Y) the plaintiff wrote to the defendant about some discrepancies in the trust account. No request for help or information was made, nor was the Whitton matter so much as mentioned. On 26 May 2005 (PS-P 2 Annexure A3), the defendant responded with an explanation of the apparent discrepancies.
On 3 August 2005 the plaintiff filed a Statement of Claim on behalf of Valerian Samek against the Whitton's (PS-P2 [31]; Annexure A4). The address for service was the address of the plaintiff not of the Samek's, nor of the defendant.
On 25 November 2005, Valerian Samek, the named plaintiff in the proceedings against the Whitton's, signed a document entitled Authority authorising the plaintiff to act on his behalf in all matters relating to the:
(a)Supreme Court proceedings No. 31429 of 2005 against the Whitton's;
(b)Pertaining to the caveat protecting that loan;
(c)Pertaining to the loan agreement between Samek and the Whittons (PS-P3 Annexure FF).
Around the time that this occurred, the defendant in his capacity as manager wrote to Mr. V. Samek about a discrepancy in the trust accounts relating to another client (letter 15 November 2005 PS-P2 Annexure A5). Mr. Samek responded on 22 November 2005 directing correspondence or further documentation to the plaintiff: PS-P2 Annexure A6. It is not clear which of two versions was dispatched. The correspondence did not mention the Whitton matter in any way. As already recounted, default judgement against the Whitton's was obtained on 14 June 2006 in the sum of $329,371.93 (PS-P2 A8; [35]). The defendant had not been involved in obtaining this judgment in any way.
It was only after this that the plaintiff specifically raised with the defendant the question of the mortgage from Whitton: PS-P2 A9. The timing is not explained in any way by the affidavit evidence. The plaintiff wrote a follow-up on 6 July 2006 (PS-P 2, Annexure A10) to which the defendant responded on 27 July 2006. The defendant said that he had considered the material, but he was unable to further assist (PS-P 2, Annexure A 11). The plaintiff persisted, rejoining on 1 August 2006 (PS-P 2, Annexure A12). On 8 August 2006, the defendant wrote back:
Please note that I was appointed to the practice of Mr. Goldberg and that practice was closed. It's office premises vacated and my management of the practice concluded some time ago. Mr. and Ms. Samek must take steps to ensure, for example, that any documents lodged on their behalf by Mr. Goldberg which stated that his office address was the address for service are appropriately amended.
On 15 August 2006, the plaintiff wrote to the defendant (PS-P 2, Annexure A14) noting, inter alia, that he had been in regular correspondence with the offices of Charles Goldberg & Co. up until 22 November 2005. He pointed out that the lapsing notice, to which I will return, had been sent to those offices on 27 May 2005. He asserted that we, presumably the Samek's and him, had requested that all correspondence be directed to the latter's address. He asserted that the correspondence dated 5 April 2005 included the Whitton mortgage documentation. This is not so; it included a ledger card only which referred to the caveat which the plaintiff and Mr. Samek followed up without reference the defendant.
It is necessary to return to the circumstances in which the caveat lapsed, so far as they are discernible from the evidence before me on this application. Some of this material has been touched on before. As I have recounted in the background facts, the Whittons' home unit was subject to three mortgages. One registered first mortgage to the St. George Bank, the unregistered second mortgage to the Sameks and the unregistered third mortgage to World Wide Diamonds & Alight Financial Services Pty Limited.
A copy of the caveat prepared by Mr. Goldberg to protect the second mortgage is at PS-P 2, Annexure D. The nominated address for service is the address of the solicitor, Mr Goldberg. It contains a standard notation on the printed form:
Note: If the caveator's name or address for service of notices changes, LPI must be notified on form 08CX.
From the caveat it can be seen that the consent of the registered proprietors was not obtained. A real property search dated 21 April 2005 apparently forms part of the same exhibit, for it is not separately marked. The source of that search is not disclosed in PS-P2, but it shows the registered first mortgage, the caveat by Valerian Samek, and a further caveat protecting the unregistered third mortgage. Annexure F is an offer of a further loan, the unregistered third mortgage to a company related to Mr. Whitton. Annexure F, item 9, contains this material:
Brokerage fee payable: Carl Nilsson
Although item 8 suggests no fee is payable, it is interesting to observe that Mr. Nilsson is an employee of Mr. Samek's company: PS-P 3, Annexure P, p.3[7]. This suggests to me that at all material times the Sameks must have been aware that the Whittons had raised further borrowings. The plaintiff asserts that on the 17th of May 2004 Mr. Goldberg wrote to the third mortgagee noting the Sameks' caveat: PS-P 2 [8]. He refers to Annexure G which is a real property search dated 6 February 2004 with a handwritten endorsement about that caveat. From this evidence I infer that each of the second and third mortgagee were aware of the other.
The third mortgagee became aware that Mr. Goldberg was no longer practising and requested the release of files from the practice including the file relating to the Whitton's and related companies. Three such requests form Annexure J to PS-P 2.
I have already recounted the evidence that solicitors acting on behalf of the Whitton's made a similar request on 7 September 2004 (PS-P 2 Annexure K) which extended to the Samek loan. Clearly, the Whittons and their lawyers were aware of its existence. They also requested the third mortgagee's file, but that undoubtedly had already been released to the third mortgagee. The Samek to Whitton file and two other loan files could not be located by the defendant (PS-P 2 Annexure L). Nor could he locate any relevant loose papers. But it would be pure speculation to suppose that all of the Whitton loan files had been released to the third mortgagee in response to its request ( P S-P 2, Annexure J), and there is no evidence to suggest that that is so.
In October 2004 the third mortgagee issued a notice under s.57(2)(b) of the Real Property Act 1900 (NSW) ("RPA") to enliven its power of sale. The Whittons' solicitors responded seeking time (PS-P 2 Annexure M). Those solicitors corresponded again with the defendant at his 170 Phillip Street address asking for documentation. As has already been relayed, the defendant again said that searches indicate that I do not hold any of the loan documents referred to: PS-P 2 Annexure O.
From this material, I infer that there is likely to be evidence at any trial of this matter that as at May 2005 the Whittons and their solicitor were well aware of the fact of the Whittons' indebtedness to Samek, the unregistered second mortgage, and the caveat protecting the Sameks' position. The solicitors were also aware that Goldberg was no longer in practise, the office was closed, and the manager after searching could not find the files or other relevant papers.
A person may not procure the lapsing of a caveat without reasonable cause: s.74P(1) RPA, so it is curious that on the 2nd of May the Whittons' solicitor lodged an application for preparation of a lapsing notice (s.74J RPA), which was granted (PS-PZ), and which he purported to serve under cover of letter dated 24 May 2004 to be delivered by registered post to the former offices of Mr. Goldberg. No courtesy copy was sent to the manager whom the solicitor knew to operate from the Law Society's premises at 170 Phillip Street.
It is notable that under s.74N(1) RPA a number of different modes of service are permissible, other than service at the address in New South Wales at which notices may be served specified under s.74F(5) (viii) RPA.
It is curious that the statutory declaration referred to in s.74J(2) RPA was not lodged until at least 5 July 2005 declaring that:
The letter was subsequently returned "left address/unknown 31/5";
with the return to sender endorsement exhibited as evidence of service, as if the former could prove the latter.
It is even more curious that the statutory declaration was taken as evidence of the due service of the notice on the caveator within the meaning of s.74J (2), and that in accordance with s.74J (4) RPA, the Registrar General made a recording in the register to the effect that the caveat had lapsed, having the legal effect of lapsing it: see search dated 19 August 2005 forming part of PS-P Annexure A2.
Perhaps if there is to be a trial, evidence may be led which explains some of these matters. However, it is important for me to observe that the evidence satisfies me, to the degree of certainty necessary, that plaintiff and his assignor were aware of the cessation of practice by Mr. Goldberg and that the defendant, as manager, operated out of the Law Society premises: after all, it is clear from the evidence I have already referred to that the plaintiff had attended upon the defendant there more than once. Further, as I have previously observed, the plaintiff and his assignor obtained a copy of the caveat on 26 April 2005. From that they would have seen the address for service of notices and a notation requiring notification of changes in that address: s.74N(3) RPA.
Notwithstanding the commencement of proceedings No. 13429 of 2005, and the prior steps taken to recover the debt, it appears that the Sameks were out of the loop thereafter in relation to steps taken by the other creditors for recovery from the Whittons. It was as though the various attempts by the creditors to secure recovery were operating in parallel universes. PS-P3 Annexure T is a letter dated 15 September 2005 from the Whittons' solicitors to the solicitors for the third mortgagee. T[he] second caveator is mentioned, although by then the caveat had lapsed by dint of s.74J(4) RPA. PS-P2 Annexure A7 and PS-P3 Annexure K are the same direction to pay issued by the third mortgagee's solicitors to the purchasers conveyancer. Settlement took place on 25 May 2006 at 12 noon. The balance payable on settlement was $811,115.61. The amount of the deposit is not known as the contract is not in evidence. If the deposit was the usual 10 per cent, the sale price was around $906,000; if 5 per cent then a little over $859,000. From the valuation attached to each annexure, I infer that the sale occurred pursuant to the exercise by the third mortgagee of a power of sale: The valuation is addressed to one of them. Items 7 - 10 on the direction to pay relate to interests associated with the third mortgagee and total $91,107.33. The deposit, I assume, was released to the third mortgagee or at its direction, and brings the amount received by or on behalf of the third mortgagee to a figure in excess of $100,000. From this it is possible to infer, and for the purpose of this interlocutory application I do infer, that had the Samek's caveat not lapsed those funds would have been available to recoup the losses of the second mortgagee.
Recapitulation Concerning Retainer
On this analysis of the facts, and treating the material before me for present purposes as indicative of the evidence likely to be led at the trial, I am satisfied that the plaintiff must fail on the only legal cause of action pleaded. As I have said already, it is now firmly established in Anglo-Australian common law that the obligations or duties of a solicitor acting as such may arise in contract as well as in tort: Astley v. Austrust Ltd (1999) 197 CLR 1 at 20 [44]; approving Henderson v. Merrett Syndicates Limited [1995] 2AC 145 at 193 - 194. In Astley the High Court of Australia noted that [t]he two causes of action have different elements, different limitation periods, different tests for remoteness of damage and, as will appear, different apportionment rules (at 23 [47]). In contract, the source of the solicitor's obligation is an implied term of reasonable care which arises by operation of law (Astley at 22[47]). Where there is no retainer - that is, where there is no contract - the basis of the duty which falls upon a skilled person by dint of the law of negligence to exercise reasonable care in the performance of work is explained by Windeyer J in Voli v. Inglewood Shire Council (1963) 110 CLR 74 at 85: That duty is cast upon [the defendant] by law ... because he entered upon the work.
However, in my judgment, as I have attempted to demonstrate by the foregoing analysis of the evidence before me, the defendant had no contract, or retainer, with the plaintiff's assignor, nor did he enter upon any work on behalf of the plaintiff's assignor. Accepting, as I must, the concurrent basis of obligation in a case such as the present, the evidence enlivens no possible basis of liability on the part of the defendant. Accordingly, were this the only matter agitated before me I would summarily dismiss the proceedings.
Before turning to the other matter that was addressed in the evidence, I should say something more about Wickstead. Assuming that Mr. Goldberg gives evidence at any trial, his evidence could not close the gap in the plaintiff's case concerning retainer, or a delictual basis of liability on the part of the defendant by his assumption of the role of solicitor without a contract for the performance of legal services. Mr. Goldberg ceased to practise on the 15th of July 2004 and has not been located since. One can safely assume that he was not present at his offices during, and played no part in, the defendant's management under s.114B LPA.
An Alternative Argument
In Penthouse Publications Limited v. McWilliam (1991) (Unreported, NSWCA BC9102223), Priestley JA with whom Meagher JA and Waddell AJA agreed, said at [11]:
As Chitty J said in Republic of Peru v. Peruvian Guano Co. (1887) 36 Ch-D-489, under the Judicature Act rules "the pleading will not be struck out unless it is demurrable and worse than demurrable" (at 496). From Chitty J's subsequent observations it seems clear, as is noted in the The Supreme Court Practice 1991, (London 1991) Volume 1 page 362, that by "worse than demurrable" he meant beyond saving by legitimate amendment; see also Mutual Life & Citizens Assurance Co. Limited v. Evatt (1970) 122 CLR 628 at 631 (pc). It seems to me that this difference in approach may properly be expressed by saying that under the present system a "demurring" party is in the position not only of having to accept the truth of all allegations in a statement of claim, but also the truth of the ranges of meaning of the assertions of fact in the Statement of Claim which those assertions are reasonably capable of bearing.
Although Mutual Life & Citizens Assurance Co. Limited v. Evatt (1970) 122 CLR 628 is frequently cited in this context, it's hard to derive the principle usually attributed to the passage at 631, from a grammatical reading of the text, with great respect: see also Brimson v. Rocla Concrete Pipes Limited [1982] 2 NSWLR 937 at 942C. In that latter case, Cross J said, in this context the pleading must be so bad that no legitimate amendment could cure the defect. He made reference to the same dictum of Chitty J, referred to by Priestley JA.
In Brimson Cross J made clear that he was addressing the predecessor to r. 14.28 UCPR rather than the predecessor of r.13.4 UCPR: see 943-944. And as I read his judgment he did not specifically refer to the possibility of amendment in the context of an application for summary dismissal.
Moreover, it should be borne in mind, that these decisions predate the enactment of the efficiency provisions of the Civil Procedure Act 2005 (NSW) ss.56 - 60. But, however that may be, it seems to me that the right of a member of the community to bring the controversy to trial is so fundamental that no change to that principle could be worked by the CivilProcedure Act 2005, at least in the absence of express terms or necessary intendment. Also, the emphasis upon, among other salient features, the identification of the real issues in the dispute and the dictates of justice suggests that the former approach has not been eliminated.
I have already had reference to [56.6] - [56.7] of the Statement of Claim. The facts that underpin those "particulars", such as they may be, seem the only available allegations that might affect the position of the defendant. Part [60] of the Statement of Claim does not take the matter further, except to the extent to which it may be understood as an averment of breach causing loss, an essential ingredient in a negligence case.
The content of [56.7] and [56.8] seems to be that at some point in time the defendant should have told the plaintiff's assignor about the risk of the lapsing of the caveat being brought about if notice of change of the address for service was not given to the Registrar General under s.74N(3) RPA. Page 8 [27], and page 9 [19] of PS-P3 may be read as an allegation of negligence in the performance of the defendant's appointment as manager under LPA. These documents, of course, are not pleadings.
Moreover, during the course of his oral argument (76 T.5 - 35), the plaintiff raised the failure of Mr. Brown to redirect delivery of mail addressed to Mr. Goldberg's practise from its address to his address at the Law Society. The plaintiff pointed out that notwithstanding the termination of Mr. Brown's appointment on 21st April 2005, he continued to correspond with the plaintiff under the style of Manager - s.114B Legal Profession Act 1987, after that date: see for example PS-P3 Annexure J.
From these matters one might deduce that the plaintiff is relying upon a case based on the following matters:
(a)the defendant continued to hold himself out as manager after the termination of his appointment;
(b)the defendant failed to redirect the mail to his address after Mr. Golberg's offices closed. This case runs on the unspoken premise that had the lapsing notice been re-directed to Mr. Brown he would have drawn it to the attention of Mr. Samek or the Samek's;
(c)the defendant failed to advise the Samek's of the need to change the Notice of Address for service on the caveat.
In his written submission and in his "brief", the plaintiff employed words such as "reckless", "deceitful" and "misleading". However, these expressions seemed to me to have been employed as rhetorical devices. There is certainly no statutory or other cause of action pleaded which would make these expressions relevant to any question I have to decide. I appreciate I am presently considering whether the "dictates of justice" require permitting the plaintiff an opportunity to replead.
In this context I am conscious also of the power conferred by s.65 of the Civil Procedure Act 2005, and in particular s.65(2)(c). However, in my judgment it could not be said that any new cause of action making those expressions apt would arise from the same (or substantially the same) facts as those giving rise to the existing, pleaded causes of action relying upon retainer and breach of duty. Moreover, given the long effluxion of time since the occurrence of the events relied upon by the plaintiff, it would be unduly prejudicial to the defendant's position, in a forensic sense, to permit the plaintiff's rhetorical language to found a completely unformed and different pleading raising entirely fresh matters. I will not permit this.
The logically anterior question, of course, is whether the relationship between the manager of a law firm, appointed by statute, owes a duty of care to the clients of the law firm recognised by the law of negligence. The defendant's argument seemed to proceed on the assumption that if it could be shown that the defendant did not act as solicitor for the plaintiff's assignor, then no duty could arise. I am not persuaded that this is so.
The performance of statutory function not uncommonly gives rise to a duty of care: Crimmins v. Stevedoring Industry Finance Committee (1999) 200 CLR 1; Pyrenees Shire Council v. Day (1998) 192 CLR 330; Caledonian Collieries Limited v. Speirs (1957) 97 CLR 202; at least where the statutory regime is not inimicable to the imputation of such a duty: Graham Barclay Oysters Pty Ltd v. Ryan (2002) 211 CLR 540; Sullivan v. Moody (2001) 207 CLR 562; Stuart v. Kirkland-Veenstra (2009) 237 CLR 215; State ofNew South Wales v. Paige (2002) 60 NSWLR 371. Here no consideration of legal coherence is inimicable to the idea of the imputation of a duty of care: Indeed s.114F seems to contemplate, by its reference to damages and costs recovered against the manager, that legal possibility.
I have found no authority deciding that the manager of a law practice appointed pursuant to statute owes a duty of care to the clients of the practice in circumstances where the manager does not act as a solicitor for the client.
It is notable that the power of the Law Society Council to appoint a manager (s.114B) turns upon the considerations which enliven s.92(2) - (3). Section 92 deals with the power of this Court, on the application of the Law Society, to appoint a receiver. Section 109 is in the same terms as s.114F, mutatis mutandis. An important difference is that reimbursement of a receiver is by way of payment from the Fidelity Fund. No such provision is made in respect of reimbursement of a manager.
It may be, nonetheless, that there is an analogy between a manager who does not act as a solicitor, even allowing for the manager holding an unrestricted practising certificate as a solicitor, like the defendant, and a receiver appointed by the Court. Furthermore there is a body of case law discussing the question of whether a receiver owes a duty of reasonable care to, for example, the company in receivership. However, it should be borne in mind that there are important differences, recognised in Equity, between the duties of Court appointed receiver and a receiver appointed out of Court; State Bank of New South Wales v Chia (2000) 50 NSWLR 587 at 625 [866] - [868].
In so far as the analogy with a receiver in this context has any validity, the relevant analogue must be with a receiver appointed out of Court. The better view in Australia is that, statute aside (e.g. s.420A Corporations Act 2001 (Cth)) [t]here is ... no warrant in the authorities for holding [a] receiver to be liable for loss caused by negligence: Expo International Pty Ltd (in liq) v. Chant [1979] 2 NSW LR 820 at 834 per Needham J. This view remains the predominant approach of Australian Courts: Florgale Uniforms Pty Ltd v. Orders (2004) 11 VR 54 at 66 [341] per Dodds-Streeton J; notwithstanding the view of McLelland J in Pollnow v. Garden Mews - St. Leonards Pty Ltd (1984) 9 ACLR 82 at 87 that the question of a receiver's liability for negligence remains arguable, certainly in an appellate court. His Honour in that latter case declined to summarily dismiss a claim against the receivers and managers appointed out of Court. However this may be, Dodds-Streeton J pointed out the predominant view also had been the view of the Australian Law Reform Commission in Report 45, General Insolvency Inquiry, 1988.
In Re Custom Card (NSW) Pty Ltd & The Companies Act [1979] 1 NSWLR 241 at 248, it was pointed out that a receiver is appointed to receive rents and profits and pay necessary outgoings, but may also be given authority to act as manager where the continued operation of the business is desirable, in which case the same person is usually appointed as a receiver and manager, and the manager's task therefore, may extend beyond that of the receiver's. Presumably, when the manager embarks upon work, a duty arises for the reasons discussed by Windeyer J in Voli. However, I have already held that a Voli type duty does not arise in this case because the defendant did not undertake any work.
A great deal of water has passed under the bridge since McLelland J held in Pollnow that the question of a receiver's duty remained arguable. Indeed, in a subsequent case his Honour, by necessary implication, moved from this position. As Chief Judge in Equity in Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd [1995] NSW ConvR 55-731 at 55,650, his Honour said by reference to Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 at 700 (per Isaacs J) that a mortgagee, a hence receiver, is not answerable for mere negligence or carelessness in carrying out the sale. If this is the analogy, there is no duty of care per se.
The factors, or salient features, which may give rise to a duty of care in modern negligence law in a novel situation were thoroughly reviewed by Allsop P in Caltex Refineries (Qld) Pty Ltd v. Stavar (2009) 75 NSWLR 649 at 647 [93] - 676 [104]. Reviewing the examples of salient features set out at [103], in the context of the present case, makes it difficult to conceive of a duty of care being imputed in the present circumstances (see also Basten JA at 687 [160] - 691 [178]). As in Wickstead at 17G, it can be said, given the established principles of equity, there is no room for a common law duty of care; s.5 Law Reform (Law and Equity) Act 1972 (NSW).
Accordingly, as a matter of law, in my judgment no amendment should be allowed.
If one assumes duty, and postulates breach as consisting of the defendant continuing to hold himself out as acting as manager, failing to positively advise about the need to change the address for service on the caveat (there was no evidence he knew of the caveat), and a failure to re-direct the mail (so that he could draw the lapsing notice to the attention of the client when it was received by re-direct), it is nonetheless difficult to conceive of the plaintiff establishing causation in accordance with the requirement of s.5D Civil Liability Act 2002 (NSW). But are his prospects hopeless? And for this question, need they be?
As I have found, by 26 April 2005 the plaintiff and his assignor knew of the existence of the caveat, and had obtained a copy of it with the relevant notation requiring notification, inter alia, of change in the address for service. They had made a demand for repayment on the Whitton's and subsequently took steps to recover the debt with interest.
By that time, although they did not know that the third mortgagee was contemplating action, the plaintiff and his assignor knew all they had to know to take the necessary action to continue the protection afforded by the caveat lodged by Mr. Goldberg, i.e. give notice to the Registrar General of the change of address for service. They could easily have taken that one simple step in good time to avoid the caveat lapsing without their knowledge. In my judgment the failure of the defendant to put in place a mail redirection in these circumstances could not be a necessary condition of the plaintiff's assignor suffering economic loss when the Whitton's home unit was sold.
As I have pointed out in my previous analysis, the plaintiff's assignor did not in any way rely upon the defendant to do anything to look after his, or their, interests. On the contrary they had engaged the plaintiff himself as their representative, and were relying upon him, and not the defendant, to devise and implement a strategy for recovery of the debt from the Whitton's. Their contemporaneous correspondence with the defendant related to obtaining from him such information as he possessed about their affairs generally, which he provided, and taking up with him what he regarded as discrepancies in the accounts, which he sought to explain. As I have said the Whitton matter was not raised with him directly until the horse had bolted.
The absence of any material before me from which I may infer that at a trial there will be evidence, which, if accepted, would support an inference that by either continuing to hold himself out as manager after his appointment was terminated, or failing to "advise about the caveat", or failing to put in place a mail redirect, the defendant's conduct was a necessary condition of the occurrence of the particular harm (i.e. economic loss) allegedly incurred by the plaintiff's assignor, is a most significant consideration. So too is the absence of any material from which it may be inferred that a redirection of the mail from Mr. Goldberg's office was necessary because, on a de facto basis, the defendant's management had not concluded. There is no evidence that after the termination of the defendant's appointment he did anything other than answer inquiries specifically directed to him.
Nor can it be said that there is material from which I may infer that there will be evidence at the trial, which if accepted, would support an inference that it is appropriate for the scope of any liability on the part of the defendant to extend to economic loss in this case, on the assumption that factual causation could be established. Given, most importantly, the consideration that the plaintiff's assignor appeared to have entrusted the management of his affairs in regard to the debt to the plaintiff, it is extremely difficult to see, leaving aside the question whether or not, why responsibility for the harm should be imposed upon the defendant, assuming negligence. Certainly, no material was introduced, nor any argument advanced, to demonstrate an arguable case in regard to these matters.
Leaving aside the legal question I have decided against the plaintiff, where as here, at the factual level, the question is not should the proceedings be dismissed, but rather whether the plaintiff should be permitted to amend to raise a different case from that pleaded, in my judgment it is not for the defendant to negative the case that has never been made on the pleadings against him. Rather, the plaintiff must persuade the Court that there is point to, as it were, staying its hand on a summary dismissal application to enable an alternative case to be brought forward which has demonstrable prospects of success.
In this regard, whilst a Court will refuse to summarily dismiss a case which is merely very weak, that consideration does not inform the approach that should be taken to the question of whether amendment to save a hopeless case should be permitted. The amendment must disclose a case that has at least some prospect of success. In my judgment, the weakness of the plaintiff's alternative case at the factual level is such that he has not persuaded me, at the relatively low level necessary, that an amendment should be permitted. Accordingly, I will make an order dismissing the proceedings.
The Defendant's Other Points
The defendant has some complaints about the form of the assignment. Interestingly, each of the four affidavits read before me attached as its last annexure, or at least page of its last annexure, a document headed "Assignment". Each document appears to be signed by Tony Samek and each is dated the 3rd of February 2010. But, as I said at the outset, there are two different versions. The first is annexed to PS-P 1 and ADC, and the second to PS-P 2 and PS-P 3. The versions are almost identical except in the first, Valerian Samek is rendered without the middle initial "A" shown in the second, and the defendant is described as Anthony Brown, but in the second, as Andrew Stuart Brown. Mr. Grisci points to the misnomer of the defendant and also says that the statutory office occupied by the defendant is in no way properly described as successor in title to Mr. Goldberg. It seems to me that both these literal difficulties with the document could be overcome by a purposive approach to the question of construction. Although, it must be said that why there are two versions of the assignment was never explained. I would not have summarily dismissed the proceedings on those grounds.
There may be other issues with the assignment. For instance, it is not clear that notice was ever given to Mr. Goldberg, and certainly not before 14 April 2011 was notice ever given to Mr. Brown: ADC-06; s.12 Conveyancing Act 1919 (NSW). Accordingly, it may be said that the plaintiff's assignment could only be effective in Equity: as Gummow and Bell JJ pointed out in Equuscorp Pty Ltd v. Haxton [2012] HCA 7 at [78]:
An action by an equitable assignee without joining the assignor is not a nullity; the action may be liable to be stayed pending joinder, but no such application for a stay has been made in the present litigation
That observation applies equally here.
Mr. Gritsci also argued that there was no proper pleading of loss, and that the material did not support an inference that loss could be established by evidence available to be led at the trial. It may be that the particulars that should have been provided with paragraph 60 of the Statement of Claim are lacking. However, the material I have referred to already indicates that on the sale of the Whitton's home the third defendant recovered an amount of around $100,000. This is sufficient to show that the plaintiff's claim in this respect is not hopeless. Nor is the allegation of loss offset by the recovery of the judgment in the 2005 proceedings against the Whitton's. I infer that this judgment has gone largely unsatisfied apart from Mrs. Whitton's $60,000. The 2005 judgment gives some idea of the full extent of the loss suffered by the plaintiff's assignor. The amount that could have been recovered out of the proceeds of sale falls well short of this. This is sufficient to enable me to say that I would not have dismissed the proceedings had this been the defendant's only available argument.
The Plaintiff's Motion
My conclusions so far make it otiose to decide the plaintiff's motion. But lest I be wrong, it is appropriate that I set out my thinking in relation to it.
Had I not been persuaded to dismiss the proceedings, I would nonetheless have refused the plaintiff the relief sought. In my judgment, there is just no justification for joining Mr. Goldberg as an additional defendant to the proceedings against Mr. Brown. Mr. Goldberg has already been sued in 2010/32737 and an order for substituted service has been made and complied with. I agree with Mr. Griscti's submission that it be wrong in principle to permit the initiation of a second set of proceedings against Mr. Goldberg based upon the same facts and formulated by reference to the same causes of action, on which the existing proceedings are founded.
Nor would joinder of Mr. Goldberg to these proceedings render the unmaintainable, maintainable. Necessarily, Mr. Goldberg's part in the events which underpin the proceedings was over before Mr. Brown's part commenced.
As Mr. Griscti points out, it is a misconception on the part of the plaintiff to seek to join Mr. Goldberg pursuant to s.6 Law Reform (MiscellaneousProvisions) Act 1946. No more need be said about that.
There is simply no justification for mounting a second proceeding on the same basis set out in no. 2010/32737.
As I would have refused leave to join Mr. Goldberg as a second defendant to these proceedings, no question arises in relation to the joinder of LawCover Insurance Pty Limited ("LawCover") to these proceedings as Mr. Goldberg's insurer. Additionally, however, Mr. Griscti relies upon Owners - Strata Plan 50530 v. Walter Construction Group Ltd [2007] NSWCA 124 at [4] - [6] and [30] - [33] to argue that s.6 cannot assist as the relevant acts giving rise to potential liability do not occur in the applicable policy period. There is no rule that s.6 does not apply to claims made and notified policies: SP No. 50530 at [5] per Giles JA. At [30] Hodgson JA said:
..... Under s.6(1) the "charge" must arise, if at all, on the happening of the event giving rise to the claim against the insured, and not at some later time. That being so, if there is to be any charge in cases where that event (whatever completes the case of action against the insured) occurs before any contract of insurance is made, it would have to be a charge arising where there is no property or even potential property to which it could apply, and not even any identifiable insurer with whom such property, if and when it came into existence, might be associated.
At [33] his Honour said that the language of s.6(1) itself, constituted a strong indication that s.6(1) is directed to those cases where the "event" happens after entry into the contract.
Mr. Gritsci's point seems to be that on the evidence (PS-P1, Annexures "B" and "C") a policy has only been shown to be in force in 2004. LawCover has not been shown to be on risk either when the economic loss was sustained in 2005, or at the latest 2006, and certainly not when a claim when was notified on 12th August 2009.
The plaintiff referred me to Perpetual Trustees Victoria Ltd. v. Malouf [2008] NSWSC 834. That case also involved Mr. Goldberg. McCallum J refused an application to join LawCover Insurance Pty Ltd pursuant to s.6. As I understand it, the point of the plaintiff's reference to this case is that the insurer, for the purpose of that case accepted, as is common in the case of professional indemnity insurance, that there was a current policy when the claim was made against Mr. Goldberg in that case in the financial year 1st July 2006 to 30th June 2007, by way of run-off cover: Malouf at [22] - [23]. However, treating each financial year as the subject of a separate policy, her Honour decided that the event giving rise to the claim occurred before the inception of the policy relied upon, and accordingly that leave should not be granted: [46].
In Strata Plan 50530 there was no policy in existence when the relevant "event" occurred. The result in Malouf may not have been inevitable given there was a policy when the event occurred, and with the same insurer, just a separate policy from that invoked before McCallum J. The operation of s.54 of the Insurance Contracts Act 1984 (Cth) may be a question relevant to whether, in such circumstances, leave should be granted under s.6: Tzaidas v. Child (2004) 61 NSWLR 18.
Contracts of professional indemnity insurance typically require the insured to notify of circumstances of which the insured becomes aware during the period of cover which may give rise to a claim. The failure of the insured to give notice of circumstances may be an omission within the meaning of s.54(1) and (6), even though the claim for indemnity is made after the expiration of the period of cover: FAI General Insurance Co. v. Australian Hospital Care Pty Ltd (2001) 204 CLR 641. However that may be, LawCover's position seems to be that Mr. Goldberg has never at any time made any claim. Just as the failure to notify circumstances may be an omission, so too might be the failure to lodge a claim.
However, as the plaintiff has not put before me the terms of any of the potentially relevant policies, it is impossible for me to express a view about these matters.
I should point out that at the outset of the hearing, both parties assured me that no application was made in case no. 2010/32737. In particular, no application was made in that case by the plaintiff to join LawCover Insurance Pty Ltd pursuant to s.6. Given the point was argued in relation to the present proceedings, and in relation to cover that may be held by Mr. Goldberg, I have given some consideration to the provisions of r. 36.1 of the Rules. However, as Mr. Gristci, on behalf of LawCover, was not on notice that relief under s.6 was sought in the Goldberg proceedings, it is not appropriate, in my view, that I take that matter any further.
My orders are:
1.Pursuant to r. 13.4 of the Uniform Civil Procedure Rules 2005, the proceedings be dismissed generally.
2.The plaintiff pay the defendant's costs of the proceedings on the ordinary basis
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Decision last updated: 01 June 2012
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