Smith v McCusker QC
[2002] WASC 267
SMITH & ANOR -v- McCUSKER QC [2002] WASC 267
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASC 267 | |
| Case No: | CIV:1230/1995 | 3 OCTOBER 2002 | |
| Coram: | MASTER SANDERSON | 15/11/02 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Leave refused Plaintiff permitted to bring in fresh minute | ||
| B | |||
| PDF Version |
| Parties: | JAMES GARNETT SMITH ELIZABETH ANNE SMITH MALCOLM JAMES McCUSKER QC |
Catchwords: | Practice and procedure Application for leave to amend statement of claim Turns on own facts |
Legislation: | Nil |
Case References: | Pegrum v Fatharly (1996) 14 WAR 92 Smith v McCusker QC [2000] WASCA 320 Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- ELIZABETH ANNE SMITH
Plaintiffs
AND
MALCOLM JAMES McCUSKER QC
Defendant
Catchwords:
Practice and procedure - Application for leave to amend statement of claim - Turns on own facts
Legislation:
Nil
Result:
Leave refused
Plaintiff permitted to bring in fresh minute
(Page 2)
Category: B
Representation:
Counsel:
Plaintiffs : In person (Mrs E A Smith)
Defendant : Mr M J Buss QC & Mr S S Sandhu
Solicitors:
Plaintiffs : In person
Defendant : Pullinger Readhead Stewart
Case(s) referred to in judgment(s):
Pegrum v Fatharly (1996) 14 WAR 92
Smith v McCusker QC [2000] WASCA 320
Case(s) also cited:
Nil
(Page 3)
1 MASTER SANDERSON: This matter has something of a history. The writ was issued on 13 March 1995 but was not served until 30 January 1996. The original statement of claim was filed and served on 22 February 1996. That pleading was struck out by Acting Master Chapman, who gave the plaintiffs leave to serve a substituted statement of claim.
2 After some delay and a number of further interlocutory applications, a minute of proposed statement of claim was filed on 31 January 1997. On 15 April 1997 the plaintiffs filed a notice of motion for leave to file a proposed amended writ and proposed substituted statement of claim. On 5 September 1997 I refused leave to amend in terms of the minute, struck out the plaintiffs' claim and entered judgment for the defendants (at that stage there were two defendants). From this decision the plaintiffs appealed. On 30 October 2000 the Full Court delivered reasons allowing the appeal in part: see Smith v McCusker QC [2000] WASCA 320. I will return to this decision below but will first recount the further history of the matter.
3 Subsequent to the publication of the Full Court's reasons, a matter arose which required further consideration by the Court. I need say nothing about this matter as it is not relevant to the present application. The Full Court's further reasons were published on 6 April 2001. As at that date there was no statement of claim properly on foot, it being up to the plaintiffs to produce a minute of their proposed statement of claim.
4 On 30 July 2001 Master Bredmeyer considered an application by the plaintiffs for leave to substitute a statement of claim in the form of a minute of proposed substituted statement of claim dated 15 June 2001. On 17 August 2001 the learned Master published reasons refusing leave to amend in terms of the minute but granting to the plaintiffs leave to bring in a further minute of proposed amended statement of claim. There followed much toing and froing between the plaintiffs' and the defendants' solicitors. This culminated in a minute of proposed amended statement of claim dated 1 March 2002. The defendant objected to the form of this minute and the matter was listed for a special appointment. Prior to the hearing of the matter the plaintiffs filed a further minute of proposed amended statement of claim dated 5 May 2002. As at the date of this hearing this document had not made its way to the court file. At the hearing I was provided with a copy of the document by counsel for the defendant. The matter proceeded as an application by the plaintiffs for leave to file a substituted statement of claim in the form of a minute dated 5 May 2002. The plaintiffs undertook to file a copy of this minute
(Page 4)
- subsequent to the hearing. In fact a copy was not filed until 7 November 2002.
5 At the conclusion of the hearing Mrs Smith, on behalf of the plaintiffs, asked for leave to file further written submissions. Counsel for the defendant had no objection to this course of action, provided that they in turn were given the opportunity to reply to these written submissions. Consequently the plaintiffs filed further written submissions on 21 October 2002 and the defendants replied on 25 October 2002. In dealing with this application I have taken into account all of the oral submissions and the written submissions, both those filed before the hearing of the application and those filed subsequently.
6 The starting point in dealing with the plaintiffs' application is the decision of the Full Court. The Court dealt with the appeal in a somewhat unusual and creative way. At a directions hearing the issues were defined by posing a series of 16 questions. These questions were directed at whether particular causes of action were open to the plaintiffs. The final question was whether, in light of the previous answers, the appeal ought be allowed. The Court determined the answer to this question was yes and accordingly allowed the appeal. However, for present purposes, it is the answer to earlier questions which are of importance. In particular, the answers to questions 2, 3 and 4. These questions were in the following terms:
"2. Do the facts and matters set out in paragraph 9 and in the particulars running from paragraph 9.3.1.1 to 9.3.20.4 disclose a cause of action in negligence against the first respondent?
3. Do the facts and matters set out in paragraph 10 disclose that the allegedly negligent opinion provided by the first respondent cause the appellants to suffer loss by causing the Legal Aid Commission to terminate the grant of legal aid in reliance on the opinion so that the appellants lost the opportunity of having a trial of their action against the R & I Bank.
4. Do the facts and matters set out in paragraph 11 disclose:
(1) That the first respondent delayed in unreasonably delivering his opinion; and
(2) If so, that the appellants thereby suffered loss."
(Page 5)
7 In each case the answer to these questions was yes. In other words, the Court was satisfied that the pleading disclosed a cause of action in negligence. (Questions 5 and 6 were also answered in the affirmative. However, question 6 should have been answered in the negative - that was made plain by the Full Court's decision delivered 6 April 2001. That still meant that the Court was satisfied the plaintiffs were entitled to prosecute a cause of action against the first defendant based on a conflict of interest. However, such a claim does not appear in the latest version of the statement of claim and can be put to one side.)
8 In dealing with the issues raised by question 2, Templeman J, with whom all other members of the Court agreed, referred to the then par 6.1 of the statement of claim. This paragraph pleaded that as a consequence of the defendant accepting his retainer, he had:
"A duty to exercise all due professional care, skill and diligence as a solicitor in relation to (the Smiths) said business affairs."
9 His Honour goes on to say (at par 51) that on the basis that the "said business and affairs is limited to the Smiths' action against the bank, that is, I think, a fair statement of Mr McCusker's duty".
10 His Honour then goes on to discuss other duties implicit in a solicitor's retainer and concludes (at par 54):
"For the purposes of a pleading summons such as this, I would accept that, at least, Mr McCusker's retainer would have required him to carry him out the following tasks:
• Familiarise himself fully with the Smiths' claim against the bank.
• Consider the merits of that case
• Review the pleadings in the action against the bank.
• Advise whether any amendments were necessary or desirable to those pleadings.
• Provide a full opinion as to the merits.
• Provide a full opinion on the quantum of damages the Smiths might recover if successful in the action.
• Advise generally.
(Page 6)
11 His Honour then went on to consider in some detail the allegations of material fact and the particulars to be found in the statement of claim. His Honour concluded under the heading "Summary of this Part" as follows (at par 160):
"I have come to the conclusion, assuming the facts pleaded in the statement of claim to be true, it alleges that Mr McCusker was negligent in the following respects:
(1) he failed to read or take into account that part of his brief which disclosed that the Smiths did not rely on the 1977 cash flow budget, but on the bank to provide proper advice as to the implementation of the Smiths' proposal for the expansion of their farming activities;
(2) he therefore placed undue emphasis in his opinion of the difficulties which the Smiths would face in seeking to prove that they had relied on the budget;
(3) he failed to read or take into account that part of his brief in which Mr Smith explained that she and Mr Smith had provided only approximate figures to Mr Danks for inclusion in the cashflow budget, on the basis that they would not be held to those figures;
(4) he therefore failed to point out the allegation in the bank's defence, that the figures had been provided by the Smiths, while true up to a point, was largely irrelevant to their case;
(5) he failed to recognise an inconsistency in the Smiths' statement of claim against the bank, which would have been cured by omitting references to reliance on the budget and pleading reliance on the bank to provide a proper budget;
(6) he failed to familiarise himself with that part of his brief in which it was explained how the actual costs for 1977 had exceeded the budget;
(7) he failed to familiarise himself with that part of his brief in which Mrs Smith described how the application to the rural adjustment authority came to be made, thus explaining why, as he put it in his opinion (par 18) 'there
(Page 7)
- is not a hint … of any suggestion that the R & I Bank was responsible for (the Smiths') difficulties …'."
12 In the concluding paragraph of his judgment (par 217) his Honour says:
"I would permit the Smiths to file the statement of claim limited to par 9.3.15.3, par 9.3.16.1-4 and par 9.3.17.1-3 and such other paragraphs as were necessary to give them context."
13 These paragraphs relate back to the matters which his Honour dealt with in answering question 2. In my view, this last paragraph of the judgment is the key to resolving the impasse over the statement of claim. I will return to it below. However, I should also deal with matters raised by questions 3 and 4.
14 In dealing with question 3, his Honour concluded (at par 167):
"In all the circumstances, and particularly as it seems the Legal Aid Commission regarded the case as being somewhat borderline, it seems to me to be arguable that if there had not been negligence as alleged, and the opinion had been more favourable, legal aid would not have been terminated. The Smiths therefore arguably lost the opportunity of having their case tried. Consequently, they lost the chance of recovering damages against the R & I Bank. Whether, and to what extent, the loss of that chance meant that they actually suffered financial loss and damage it is not possible to say. Subject to those qualifications, the answer to question 3 is 'yes'."
15 In dealing with question 4(2), his Honour dealt with the question of whether or not the alleged delay in the defendant provided his opinion gave rise to loss. His Honour said (at par 170):
"Assuming there was a breach of duty, it would not be actionable unless it caused loss. However, the statement of claim alleges facts which, if proved, would arguably establish that the Smiths did suffer loss. In summary, it is said that the Town & Country would probably not have exercised its power of sale as a mortgagee of the Smiths' property if it could have been satisfied the action against the R & I Bank was proceeding and might result in the discharge of the Smiths' debt. Upon the assumption that this allegation is true, the answer to question 4(1) is 'yes' and the answer to question 4(2) is 'yes'."
(Page 8)
16 Against the background of the Full Court decision there are, I think, two points to be made. First, this is not a case which should proceed without pleadings. Given the difficulty occasioned by the statement of claim and the now limited nature of the plaintiffs' cause of action, it might be thought that the most expeditious way to deal with this case is simply to order the filing of witness statements and allow the matter to proceed. Templeman J, in his reasons for decision, did mention that dispensing with pleadings in an appropriate case is possible: see par 212. But his Honour did not suggest that this was such a case. So the statement of claim must be put in some form of order before the action can proceed.
17 The second point has to do with the consequences of refusing leave to amend in the form of the present minute. Counsel for the defendant urged that should I refuse leave to amend, I should also strike out the plaintiffs' claim. His submission, in essence, was that the plaintiff has had long enough to formulate their claims and the stage has now been reached where no further indulgence should be granted. In my view, to strike out the action on that basis would be at odds with the view taken by the Full Court: see in particular par 214 to 216. It must also be borne in mind that since the decision of the Full Court the plaintiffs have been attempting bona fide to produce an acceptable statement of claim. They have been given no quarter by the defendants' solicitors - nor are they entitled to any. But if this matter is to progress the defendant has to accept that the plaintiffs will never produce a statement of claim that might be expected of a legal practitioner. He will just have to make do with the best the plaintiffs can produce consistent with the Full Court's decision. Once that point is reached it is in everyone's interests to simply progress the matter as quickly as possible.
18 In his submissions counsel for the defendant subjected virtually every paragraph of the minute of amended statement of claim (which I will refer to as "the minute") to detailed and largely justified criticism. This is not a statement of claim which could stand whether the draftsman was legally qualified or not. But that, to my mind, is not the issue. I think what is necessary is to identify those paragraphs in the present minute which are unobjectionable, refer again to what was said by the Full Court, and in particular to those paragraphs which can stand, then to identify the loss which allegedly flows from the pleaded breach of duty, thus allowing the defendant to understand the case he has to meet. In undertaking this exercise I am not attempting to draft a statement of claim on behalf of the plaintiffs. The Full Court in its supplementary reasons specifically warned against such a cause of action: see par 12. But with that warning in mind, some steps must be taken to bring this pleading issue to an end.
(Page 9)
19 Turning then to the minute, I would allow par 1 through to par 19 to stand. Although these paragraphs were subject to some criticism by counsel for the defendants, they really do no more than provide a narrative background to the events leading to the defendants' engagement by the plaintiffs. Paragraph 16 is of some importance. It is a plea that in June 1989 Town & Country sold the plaintiffs' farm under the terms of the mortgage. Counsel for the defendant pointed out that there is nothing to suggest that Town & Country were not entitled to sell the farm as they did. This, he said, had consequences for the plea of loss to be found later in the pleading. So it does, but that does not impact upon the material fact pleaded in par 16. It is a matter to which I will return later in these reasons.
20 Paragraph 20 of the minute pleads, in effect, the defendants' retainer. The material fact is pleaded in the first sentence of par 20. There then follows 27 paragraphs which are said to be particulars and particulars of particulars. In my view the first sentence of par 20 is all that is required. In Pegrum v Fatharly (1996) 14 WAR 92, Ipp J, when dealing with a solicitor's retainer, said (at 95):
"A contractual relationship of solicitor and client will therefore be presumed if it is proved that the relationship of solicitor and client existed defacto between a solicitor and another person. Upon proof of that kind it would not be necessary to prove when, where, by whom or in what particular words the agreement of retainer was made."
21 In this case there can be no serious dispute about the retainer. As the Full Court decision makes clear, the defendant provided an opinion to the plaintiffs. There is every chance that a defence would admit the retainer. For present purposes a simple plea of the material fact is sufficient.
22 Paragraph 21 of the minute deals with the duties that were said to arise consequent upon the defendants' retainer. This paragraph is largely in accord with par 6.1 of the version of the statement of claim dealt with by the Full Court. It might have been better, and certainly in line with what Templeman J said in his reasons, if instead of using the words "the business and affairs of the plaintiffs" the phrase was "business and affairs in relation to the plaintiffs' action against the bank". Nonetheless I am satisfied that par 21 in its present form can stand.
23 There then follows in the minute 17 paragraphs of particulars. It is open to question whether these particulars should be pleaded as material
(Page 10)
- facts. It is also open to question whether some of the particulars are properly to be regarded as aspects of a duty of care consequent upon the solicitor/client relationship. In his decision, Templeman J set out seven aspects of the defendants' duty. These are all covered at least once in the particulars provided by the plaintiffs. His Honour did say in his reasons that the seven aspects of the duty he referred to were "at least" aspects of the duty owed by the defendant to the plaintiff. On that basis I am prepared to allow par 21 in its present form to stand.
24 The allegation of breach of the defendants' duties to the plaintiff is to be found in par 22. Paragraph 22 itself alleges the breach and there then follows 36 paragraphs of particulars and particulars of particulars. With great respect to the plaintiffs, I think they have unnecessarily complicated the pleading. At par 160 of his reasons, Templeman J sets out seven areas where he says he is satisfied that on the assumption the facts pleaded in the statement of claim are true, an allegation of negligence can stand. In my view it would be satisfactory if the plaintiffs simply included these seven areas by lifting what is to be found in his Honour's judgment and placing it in the pleading. These matters are, of course, pleadings of material fact and should not be referred to as particulars. It would be satisfactory then, in my view, if par 22 were left in its present form, the particulars were omitted entirely and seven subparagraphs were added, reflecting Templeman J's decision. That then would amount to a plea of breach of duty of care in line with what was said by the Full Court.
25 Paragraph 24 of the present minute should then be included to assist the narrative. That is simply a plea that the defendants' opinion was to provide it to the Legal Aid Commission on or about 23 March 1989.
26 There then arises the question of loss. For the plaintiffs to establish their claim they must satisfy the Court that as a consequence of the defendants' breach of his duty of care, they have suffered loss and damage. The Full Court was satisfied that there were two areas where the plaintiffs could have suffered loss and damage. In dealing with question 3, Templeman J was satisfied that the allegedly negligent opinion provided by the defendants could have caused the plaintiffs to suffer loss by causing the Legal Aid Commission to terminate the grant of legal aid in reliance upon the opinion so that the appellants lost the opportunity of having a trial of their action against the R & I Bank. What the plaintiffs must now plead is a causal connection between the allegedly negligent opinion and the decision of the Legal Aid Commission to terminate the grant of aid. It must be said that this plea is not without its difficulties. Paragraphs 26 through to 28 of the statement of claim detail the steps
(Page 11)
- taken by the Legal Aid Commission subsequent to receiving the defendants' opinion. By par 29 it is pleaded that the grant of aid was terminated on 9 April 1994. By that stage, at least two other Queen's Counsel and one junior counsel had dealt with the file and none apparently differed in their views from the defendant. Furthermore, the plaintiffs acknowledge in their pleading that "the diminishing availability of Legal Aid money" played a part in the termination of the grant of aid. Having said all of that, it seems to me that par 26 through to par 29 state the plaintiffs' case with as much clarity as is ever likely to be achieved. I am therefore prepared to allow those paragraphs to stand.
27 In answering question 4, Templeman J concluded that the then pleaded facts were sufficient to establish that if there had been unreasonable delay on the part of the defendant in delivering his opinion, the appellants had suffered loss. His Honour said (at 170):
"However, the statement of claim alleges facts which, if proved, would arguably establish that the Smiths did suffer loss. In summary, it is said that the Town & Country would probably not have exercised its power of sale as a mortgagee of the Smiths' property if it could have been satisfied that the action against the R & I was proceeding and might result in the discharge of the Smiths' debt".
28 This damages claim is hinted at but not directly picked up in par 33 and par 34 of the minute of proposed statement of claim. However, I think par 34 of the minute read with the answer to question 4 of the Full Court's reasons, is sufficient to allow the defendant to know the case that he has to meet.
29 In summary then, I think the minute in its present form is unsatisfactory but it really only needs some tidying up and it will be in a form which, while a long way short of perfect, will be acceptable. I will allow the plaintiffs the opportunity to bring in a further minute.
30 Before leaving this matter, I should make the point that the time has come for the plaintiffs to carefully consider whether they wish to pursue their action. Even assuming they were able to establish negligence on the part of the defendant, they run up against the difficulty of establishing loss. They are limited then to two areas in which they say loss occurred. The first is the withdrawal of legal aid and the consequent loss of the chance to proceed against the bank. I have already mentioned the fact that it was more than five years after the defendant signed his opinion that
(Page 12)
- legal aid was terminated. Given the number of other solicitors who handled the matter, can it be said that the chain of causation remained unbroken? Furthermore, it would seem that the plaintiffs' action against the bank is still on foot. Counsel for the defendants pointed this out during his submissions and as a matter of fact, it appears to be correct. Have the plaintiffs then lost their chance? Perhaps they have lost the chance to be represented by senior counsel at trial but one wonders how a value is put on that loss of a chance. The plaintiffs may care to consider what evidence they will require on this issue to make good their claim.
31 The other aspect of the damages claim is the allegation that Town & Country would not have sold the plaintiffs' farm if the defendant had not delayed in delivering his opinion. The plaintiffs would need to obtain evidence from Town & Country on this issue. There is no allegation in the statement of claim that Town & Country were not entitled to sell the plaintiffs' farm or that they were acting other than within the terms of their security. The plaintiffs' farm was sold by Town & Country in 1989. If evidence has not yet been obtained on this issue, it might now be difficult to obtain such evidence. This is a matter to which the plaintiffs need to turn their mind.
32 I will hear the parties as to the precise form of orders and as to costs.
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