Smith v McCusker QC [No 5]
[2009] WASC 382
•11 DECEMBER 2009
SMITH -v- McCUSKER QC [No 5] [2009] WASC 382
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2009] WASC 382 | |
| Case No: | CIV:1230/1995 | 12 & 26 AUGUST 2009 AND ON THE PAPERS | |
| Coram: | MARTIN CJ | 11/12/09 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Orders pronounced on 12 August 2009 by Chief Justice Martin should remain | ||
| B | |||
| PDF Version |
| Parties: | JAMES GARNETT SMITH ELIZABETH ANNE SMITH MALCOLM JAMES McCUSKER QC BANK OF WESTERN AUSTRALIA LTD |
Catchwords: | Costs Dismissal of third party proceedings Grounds upon which third party proceedings were brought and maintained Turns on own facts |
Legislation: | Rules of the Supreme Court 1971 (WA), O 19 r 1 |
Case References: | Chaplin v Hicks [1911] 2 KB 786 Kitchen v Royal Airforce Association [1958] 1 WLR 563 Redman v Instant Nominees Pty Ltd [1987] WAR 277 Smith v Commissioners of the Rural and Industries Bank of Western Australia [2009] WASC 100 Smith v McCusker [2009] WASC 101 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- ELIZABETH ANNE SMITH
Plaintiffs
AND
MALCOLM JAMES McCUSKER QC
Defendant
BANK OF WESTERN AUSTRALIA LTD
Third Party
Catchwords:
Costs - Dismissal of third party proceedings - Grounds upon which third party proceedings were brought and maintained - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 19 r 1
Result:
Orders pronounced on 12 August 2009 by Chief Justice Martin should remain
(Page 2)
Category: B
Representation:
Counsel:
Plaintiffs : In person (Mrs E A Smith)
Defendant : Mr M N Solomon (12 & 26 August 2009)
Third Party : Ms R J Lee (12 & 26 August 2009)
Solicitors:
Plaintiffs : In person
Defendant : Jackson McDonald
Third Party : Blake Dawson
Case(s) referred to in judgment(s):
Chaplin v Hicks [1911] 2 KB 786
Kitchen v Royal Airforce Association [1958] 1 WLR 563
Redman v Instant Nominees Pty Ltd [1987] WAR 277
Smith v Commissioners of the Rural and Industries Bank of Western Australia [2009] WASC 100
Smith v McCusker [2009] WASC 101
(Page 3)
1 MARTIN CJ: On 22 April 2009 I published my reasons for concluding that the third party proceedings brought by the defendant against the Bank of Western Australia Ltd (the Bank) should be dismissed (Smith v McCusker [2009] WASC 101). That conclusion followed a concession made by the defendant to the effect that it was appropriate to dismiss the third party proceedings if I concluded that proceedings which had been commenced in 1982 by the plaintiffs in these proceedings (the Smiths) against the Bank's predecessor should be dismissed. For reasons which I also published on 22 April 2009 (see Smith v Commissioners of the Rural and Industries Bank of Western Australia [2009] WASC 100), I concluded that those proceedings should be dismissed, from which it followed that the third party proceedings in this case should also be dismissed, on the basis of the defendant's concession.
2 After hearing argument on 12 August 2009, I gave oral reasons for concluding that the defendant should pay the Bank's costs of the application to dismiss the third party proceedings, and the costs of those third party proceedings to be taxed if not agreed, and pronounced orders to that effect. My reasons for those orders have not been published other than in the form of a draft judgment extracted from the transcript of the hearing on that day, nor have the orders I made been extracted. That is because, subsequent to the hearing, the solicitors for the defendant drew my attention to an inadvertent oversight by counsel for the defendant which had resulted in me drawing an erroneous conclusion as to the stance adopted by their client in the course of the third party proceedings. As the orders had not been perfected by extraction, I ordered that they not be extracted until further order and gave liberty to the defendant to apply to vacate the orders that I had earlier pronounced. The defendant has exercised that liberty, and written submissions have been filed and exchanged between the defendant and the Bank. Those parties are content for me to deal with the issues on the papers.
The 1982 proceedings
3 In 1982 the Smiths commenced proceedings in this court claiming damages from the Bank's predecessor for breaches of contract and a duty of care by giving negligent advice, during 1977 and 1978. The causes of action asserted were said to arise from events which occurred in connection with their request for an advance of funds from the Bank to enable them to acquire a tractor and to expand their farming operations on land at Borden.
(Page 4)
4 The history of those proceedings, and the reason I decided they should be dismissed are set out in Smith v Commissioners of the Rural and Industries Bank of Western Australia.
The 1995 proceedings
5 In 1995 the plaintiffs commenced these proceedings against the defendant, Mr Malcolm McCusker QC. The causes of action which they have asserted against Mr McCusker QC have varied from time to time, but essentially assert that as a result of breach of various duties owed to them in his capacity as legal adviser, the defendant caused them to lose the prospect of successfully proceeding against the Bank with the benefit of legal assistance.
The third party proceedings
6 The third party proceedings were commenced by a notice issued by the defendant to the Bank on 4 September 2006. This was more than 10 years after these proceedings were commenced. Nevertheless, leave to commence third party proceedings was given by the Master. The third party notice asserted that in the event that the defendant was found liable to the plaintiffs, the defendant would claim an indemnity, or alternatively a contribution, in respect of any such liability and the costs of the action on the grounds that the Bank was in breach of a contract with the Smiths or breached a duty of care owed to the Smiths.
7 A statement of claim was issued by the defendant against the Bank in the third party proceedings. That statement of claim essentially enunciated in greater detail the reasons why the defendant asserted that in the event he was found liable, he claimed indemnity and/or contribution from the Bank in respect of that liability. That statement of claim was amended by a document filed on 30 May 2007. It also asserted an entitlement to contribution from the Bank on the basis that the plaintiffs' loss and damage was caused or contributed to by the Bank's breaches of duties owed to the Smiths. However, it also asserted, for the first time:
Further, the questions and issues raised in the Plaintiffs' Statement of Claim against the Defendant concerning the conduct of the Bank are substantially the same as [sic] question and issues which arise in CIV 2130 of 1982 as between the Plaintiffs and the Bank (now the Third Party) and those issues should properly be determined as between the Plaintiffs, the defendant and the Third Party.
8 This assertion appears calculated to invoke O 19 r 1(1)(c) of the Rules of the Supreme Court 1971 (WA) which provides that:
(Page 5)
- O.19 1
(1) Where in any action a defendant who has entered an appearance claims against any person not already a party to the action (in this Order called the third party) -
(a) …
(b) …
(c) that any question or issue relating to or connected with the original subject-matter of the action is substantially the same as some question or issue arising between the plaintiff and the defendant and should properly be determined not only as between the plaintiff and the defendant but also as between either or both of them and the third party,
then … the defendant may issue a notice … containing a statement of the nature of the claim made against him and … the question or issue required to be determined.
9 As I observed in my earlier reasons (Smith v Commissioners of Rural and Industries Bank of Western Australia at [39]), the defendant conceded, properly, that his claim for contribution and indemnity against the Bank had no basis, because the damage suffered by the Smiths, as a consequence of any breach of retainer and/or a duty of care by him, is both conceptually and practically different to that suffered by the Smiths as consequence of any breach of contract or duty of care by the Bank. However, when, in consequence of that concession, the Bank moved to dismiss the third party proceedings, the defendant proposed an amendment to the third party notice deleting any claim for contribution and indemnity, and instead relying entirely upon the portion of O 19 r 1 RSC which I have set out above and the assertion that there were issues arising in the 1982 proceedings which were required to be resolved in these proceedings. As I have observed, it followed that once the 1982 proceedings were dismissed there was no longer any basis for the third party proceedings, as the defendant conceded.
The proceedings on 12 August 2009
10 Issues relating to the costs of the third party proceedings were listed for hearing on 12 August 2009. The Bank sought an order that it have the costs of its application to dismiss those proceedings, and of the proceedings. The defendant opposed that order on the basis that until the 1982 proceedings were dismissed, the third party proceedings were
(Page 6)
- properly brought pursuant to the portion of O 19 r 1 RSC which I have set out above.
11 In the course of argument I put to counsel for the defendant that it was not until the defendant had conceded that his claim for contribution and indemnity was defective that he placed reliance upon the alternative basis upon which third party proceedings might be brought under O 19 r 1 RSC. Counsel for the defendant challenged that proposition in general, but was unable, in the course of argument, to point to any document asserting the alternative basis for the third party proceedings prior to the defendant's concession that the claim for contribution and indemnity was fatally flawed. He had obviously overlooked the assertion in the amended statement of claim filed on 30 May 2007 which I have set out above. I was also unaware of that assertion and proceeded to determine the issue of costs on the basis that the only claim advanced in the third party proceedings until October 2008 was the defective claim for contribution and indemnity. That erroneous conclusion was made explicit in the reasons which I gave for the orders which I pronounced on 12 August 2009. As I have indicated, the true position is that while the third party notice was issued in September 2006 exclusively on the basis of a claim for contribution and indemnity, when the amended statement of claim in the third party proceedings was filed in May 2007, the third party proceedings were advanced on two alternative bases - firstly, the claim for contribution and indemnity, and secondly, the claim that there were issues arising in these proceedings which were common to the issues arising in the 1982 proceedings which should be determined as between the Smiths, the defendant and the Bank by way of third party proceedings.
12 It is therefore clear that in arriving at my conclusion that the defendant should pay the Bank's costs of the third party proceedings, and of the application to dismiss those proceedings, I was under a false impression as to the course which the defendant had taken in those proceedings. The question now is whether the true position alters the proper conclusion to be drawn with respect to the exercise of the discretion relating to the costs of the third party proceedings.
13 The false conclusion which I drew as to the basis upon which the third party proceedings had been maintained was essential to the line of reasoning which I adopted. In short, that line of reasoning was to the effect that the third party proceedings were fundamentally flawed at all times until October 2008, when, for the first time, reliance was placed in the alternative assertion under O 19 r 1(1)(c) RSC. However, on that false conclusion, by the time reliance was placed upon that rule, the Bank had
(Page 7)
- already made application to dismiss the 1982 proceedings which were therefore an unstable base upon which to mount the third party proceedings. It was essentially for those reasons that I concluded the Bank should have its costs of those proceedings. That line of reasoning is vitiated if the defendant was justified in bringing third party proceedings against the Bank pursuant to the portion of O 19 r 1 RSC to which I have referred, because there was a substantial period of time over which that claim was made.
14 The relevant portion of O 19 r 1 RSC requires that there be a question or issue which is substantially the same as some question or issue arising between the plaintiff and defendant which should properly be determined not only as between the plaintiff and defendant but also as between either or both of them and the third party. Translating that requirement to the circumstances of these proceedings, the third party proceedings could only be justified under that rule if there was a question or issue which is substantially the same as some question or issue arising between the Smiths and Mr McCusker QC, which should be properly determined not only as between the Smiths and Mr McCusker QC, but also as between either or both of them and the Bank. Put another way, in order to justify pursuing third party proceedings on the basis of this rule, the defendant needs to establish:
(a) an issue which is substantially the same as an issue which arises in the proceedings between the Smiths and him; and
(b) that that issue should properly be determined not only as between the Smiths and him, but also as between either the Smiths and the Bank, or him and the Bank, or both.
15 It seems to me that the defendant is unable to satisfy either of these requirements.
16 Order 19 r 1 requires that a notice issued in reliance upon par 1(c) state 'the question or issue required to be determined'. Neither the original third party notice, nor the amended statement of claim satisfied that requirement, beyond the vague and general assertion that the issues raised by the Smiths in their case against Mr McCusker QC 'concerning the conduct of the Bank' are substantially the same as issues arising in the 1982 proceedings. However, the proposed amended third party notice filed after the Bank had applied to dismiss the third party proceedings asserted that the questions and issues of whether the Bank had breached contractual and common law duties owed to the Smiths, and if so, the loss
(Page 8)
- and damage which those breaches caused, were substantially the same as issues arising in the Smiths' action against Mr McCusker QC, and should properly be determined as between the Smiths, Mr McCusker QC and the Bank.
17 In the 1982 proceedings, while they were on foot, the questions at issue were whether the Bank had breached a contractual duty, or a duty of care owed to the Smiths, and if so, whether they had suffered loss and damage as a consequence, and if so, the extent of that loss and damage. The proceedings brought by the Smiths against Mr McCusker QC are brought on the basis that they have lost the opportunity to pursue a cause of action against the Bank. In those proceedings it is not incumbent upon the Smiths to conduct a trial within a trial so as to establish their cause or causes of action against the Bank. Rather, it is sufficient if they establish that, by reason of breaches of duty by Mr McCusker QC, they have lost a chance of succeeding. If they succeed in their claim against Mr McCusker QC, the task of the court is then to place a value on the chance lost (see Redman v Instant Nominees Pty Ltd [1987] WAR 277, at 290; Chaplin v Hicks [1911] 2 KB 786; Kitchen v Royal Airforce Association [1958] 1 WLR 563, especially at 574 - 575 (Lord Evershed MR)). The question of whether the plaintiffs' prospects of success against the Bank were sufficient that they lost something of value as a consequence of a breach of duty by Mr McCusker QC is not substantially the same question as whether the plaintiffs in fact had a good cause or causes of action against the Bank.
18 Nor does it seem to me that the question of whether the plaintiffs had a good cause of action against the Bank was, while the 1982 proceedings were on foot or thereafter, a question that should properly be determined not only as between the Smiths and Mr McCusker QC, but also as between Mr McCusker QC and the Bank. While the 1982 proceedings were on foot the question of the Bank's liability to the Smiths was appropriately determined within those proceedings. There was no reason for that issue to be determined in the 1995 proceedings. Now that the 1982 proceedings have been dismissed, the relevant issue is whether the cause of action which the Smiths previously had against the Bank was something of value and, if so, what its value was. That issue is alive in the 1995 proceedings. As between Mr McCusker QC and the Bank, as Mr McCusker QC now accepts that he has no claim for contribution or indemnity against the Bank, there is in truth no issue between him and the Bank and therefore no issue which requires resolution by way of third party proceedings in the 1995 action.
(Page 9)
19 For these reasons I have concluded that the third party proceedings commenced by the defendant against the Bank were not justified by either of the grounds upon which those proceedings were eventually maintained - namely, the claim for contribution or indemnity, or on the basis that there was some common question properly determined by way of third party proceedings. It follows that there is no reason why the usual conclusion to the effect that costs should follow the event should not apply to the third party proceedings. The orders which I pronounced on 12 August 2009 should remain, albeit for different reasons to those which I gave on that occasion. For the avoidance of doubt, those orders should be construed as including the costs of this issue.
0