Visvalingam Pty Ltd v Vitarag Pty Ltd (No 2)
[2022] NSWDC 294
•26 July 2022
District Court
New South Wales
Medium Neutral Citation: Visvalingam Pty Ltd v Vitarag Pty Ltd (No 2) [2022] NSWDC 294 Hearing dates: 10, 11 March; 26 (written submissions), 29 April (written submissions); 2 June 2022 Date of orders: 26 July 2022 Decision date: 26 July 2022 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: Anand Gokani, solicitor for the first defendant, pay the plaintiff’s costs of the proceedings on an indemnity basis, including the costs of the motion, incurred on and from the date of the filing of the defence on 16 April 2018.
Catchwords: COSTS — Party/Party — Orders against non-parties — Personal costs orders against lawyers – Costs incurred “without reasonable cause” – Legal services provided “without reasonable prospects of success” – “claim for damages”
Legislation Cited: Civil Procedure Act 2005, s 99
Legal Profession Uniform Law Application Act 2014, s 62, Sch 2
Cases Cited: Degiorgio v Dunn (No 2) (2005) 62 NSWLR 284; [2005] NSWSC 3
Fowler v Toro Constructions Pty Ltd [2008] NSWCA 178
Keddie v Stacks/Goudkamp Pty Ltd (2012) 293 ALR 764; [2012] NSWCA 254
Lemoto v Able Technical Pty Ltd & 2 Ors (2005) 63 NSWLR 300; [2005] NSWCA 153
Mark Gerard Ireland as Executor of the Estate of the late Charles Stuart Gordon v Sandra Jane Retallack & Ors (No 2) [2011] NSWSC 1096
New South Wales v Robinson (2019) 266 CLR 619; (2019) 374 ALR 687; [2019] HCA 46
Newell; Muriniti v De Costi [2018] NSWCA 49
S v Boulton (2006) 232 ALR 92
Visvalingam Pty Ltd v Vitarag Pty Ltd [2021] NSWDC 364
Yang v Finder Earth Pty Ltd [2019] VSCA 22
Texts Cited: James Edelman, McGregor on damages (21st ed, 2021, Thomson Reuters)
Ritchie’s Uniform Civil Procedure NSW
Category: Costs Parties: Visvalingam Pty Ltd (plaintiff/applicant)
Anand Kantilal Gokani (respondent)
Vitarag Pty Ltd (first defendant)
Ashish Nanubhai Patel (second defendant)Representation: Counsel:
Solicitors:
Mr D S Weinberger (plaintiff/applicant)
Mr P Silver (10 and 11 March 2022) (respondent)
Chedid Storey Legal (plaintiff/applicant)
YPOL Lawyers (respondent)
File Number(s): 2018/47055 Publication restriction: None
Judgment
Introduction
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Visvalingam Pty Ltd sued Vitarag Pty Ltd for repayment of $94,000 in funds lent in about September 2008, and obtained judgment for the sum of $175,546.91 including interest plus costs. [1] In accordance with leave granted on 5 July 2021, Visvalingam applies for an order that Anand Gokani, the solicitor for Vitarag, pay Visvalingam’s costs of the proceedings pursuant to s 99 of the Civil Procedure Act 2005 or alternatively, s 62 and cl 5 of Sch 2 of the Legal Profession Uniform Law Application Act 2014 (hereafter “LPULAA”).
1. Visvalingam Pty Ltd v Vitarag Pty Ltd [2021] NSWDC 364 at [36].
Issues
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Section 99 of the Civil Procedure Act 2005 provides that the Court may “by order, direct [a] legal practitioner to indemnify any party … against costs payable by that party”. Section 99 applies if “it appears to the court that costs have been incurred—
(a) by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or
(b) improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible.”
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Visvalingam relies only on the final listed event, that the costs have been incurred “without reasonable cause”.
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Section 62 of LPULAA provides:
“62 Costs in civil claims—no reasonable prospects of success
Schedule 2 contains provisions relating to costs in civil claims where there are no reasonable prospects of success.”
-
Clause 2 in Sch 2 of LPULAA relevantly provides that:
“(1) A law practice must not provide legal services on a claim or defence of a claim for damages unless a legal practitioner associate responsible for the provision of the services concerned reasonably believes on the basis of provable facts and a reasonably arguable view of the law that … the defence … has reasonable prospects of success.
…
(5) Provision of legal services in contravention of this clause constitutes for the purposes of this Schedule the provision of legal services without reasonable prospects of success.”
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Clause 5 in Schedule 2 of LPULAA provides that:
“5 Costs order against law practice acting without reasonable prospects of success
(1) If it appears to a court in which proceedings are taken on a claim for damages that a law practice has provided legal services to a party without reasonable prospects of success, the court may of its own motion or on the application of any party to the proceedings make …
(b) an order directing the practice or associate to indemnify any party other than the party to whom the services were provided against the whole or any part of the costs payable by the party indemnified.”
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Visvalingam asserts that Mr Gokani provided legal services without reasonable prospects of success, and that by so doing, Mr Gokani caused costs to be incurred “without reasonable cause” under s 99, “in circumstances for which a legal practitioner is responsible”. This last proposition was not disputed; that is, Mr Gokani did not dispute that if he acted without reasonable prospects of success then costs had been incurred without reasonable cause (whether or not cl 5 applied, it seems) and this Court was empowered to order him to indemnify Visvalingam for its costs, by an order for payment as sought in the motion. In any event, costs arising from a solicitor acting without reasonable prospects would be recoverable under s 62 and cl 5 of Sch 2 of LPULAA (if cl 5 applied), the alternative claim in Visvalingam’s motion.
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Accordingly, the dispositive issue appeared to be whether Mr Gokani acted without reasonable prospects of success, that is, whether he lacked a reasonable belief, on the basis of provable facts and a reasonably arguable view of the law, that the defence of Vitarag had reasonable prospects of success.
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The phrase “reasonable prospects of success” is not a high or inflexible bar as Barrett J (as his Honour then was) explained in Degiorgio v Dunn (No 2):
“... ‘without reasonable prospects of success’ ... equates its meaning with ‘so lacking in merit or substance as to be not fairly arguable’. The concept is one that falls appreciably short of ‘likely to succeed’.”[2]
2. (2005) 62 NSWLR 284; [2005] NSWSC 3 at [28].
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His Honour's reasons were approved by the Court of Appeal in Lemoto v Able Technical Pty Ltd & 2 Ors. [3]
3. (2005) 63 NSWLR 300; [2005] NSWCA 153 at [131]-[132]. See Newell; Muriniti v De Costi [2018] NSWCA 49 at [57]-[58], also Fowler v Toro Constructions Pty Ltd [2008] NSWCA 178, Keddie v Stacks/Goudkamp Pty Ltd (2012) 293 ALR 764; [2012] NSWCA 254 at [58].
Background
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The circumstances of the loan by Visvalingam to Vitarag are found in the earlier judgment of the Court. [4] Relevantly, and ignoring any immaterial change of trustees, both Vitarag and Visvalingam were trustees, the former of the Kailash Trust, and the latter of the Savi3 Superannuation Fund. As a result of an arrangement between Ashish Patel, the director of Vitarag, and Selva Nithan Thirunavukarasu, the director of Visvalingam, loan funds were transferred from Visvalingam to Vitarag on about 12 September 2008. The registered office of Vitarag was at “Gokani & Associates”, [5] an accountancy firm of which Mr Gokani is a partner, [6] located at the same address as Mr Gokani’s law practice. [7]
4. Visvalingam at [8]-[12], [24]-[25].
5. Court Book (CB) p 297.
6. Tcpt, 17 June 2021, p 112(40).
7. CB p 17.
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Without intending any disrespect and as the parties have done, for clarity and convenience I will refer to Mr Ashish Patel as “Ashish”, Mr Selva Nithan Thirunavukarasu as “Nithan” and Mr Nanubhai Patel as “Nanu”. Nanu is the father of Ashish.
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Subsequently, in the period 2012 to 2014, “Vitarag Pty Ltd ATF Kailash Trust” executed and provided to Visvalingam four letters dated respectively 12 September 2008, 30 June 2012, 30 June 2013, and 30 June 2014. Each was signed by Ashish as director, each headed “Letter of Confirmation”, and each confirmed the details of the loan as follows:
“This letter is to confirm that Vitarag Pty Ltd ATF Kailash Trust has received the below sum from the Savi3 Superannuation Fund on the terms and conditions set out below:
Received amount
AUD 94,000
Date Received
12/09/2008
Purpose of Investment
Investment Loan
Duration of Loan
5 years
Interest on Loan
6% p.a simple interest
Security Provided
Security against Kailash Trust holdings in Riverside Mining
Penalties for Early Repayment
Nil
[signature]
Ashish Patel
Director
Vitarag Pty Ltd ATF Kailash Trust
Date: 12/09/2008”. [8]
8. Visvalingam at [9].
-
At trial, there was no issue that a loan was provided by Visvalingam. The sole and dispositive issue was whether Vitarag was the borrower. [9]
9. Visvalingam at [4].
The filing of a defence
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The Letters of Confirmation were alleged and particularised in the original statement of claim. [10] The Defence relevantly consisted of separate denials of each fact alleged, including the reference to the Letters of Confirmation, but alleged no alternative facts. It did contain the certification required by cl 4(2) of Sch 2 of LPULAA, apparently by Mr Gokani, although that certification alone was not pressed by Mr Gokani as evidence of his belief, or of the reasonableness of any belief.
10. See Statement of Claim at [8].
-
The only evidence on the application, in addition to the Trial Court Book, transcript and judgment, was an affidavit of Sanjay Selvakumaran, a solicitor of YPOL Lawyers who acts for Mr Gokani. Thus, neither Mr Gokani nor Vitarag’s counsel at trial, Mr Mark Newton, gave evidence. Mr Selvakumaran gave no evidence relating to Mr Gokani’s belief of reasonable prospects. His affidavit reiterated that Mr Newton was briefed by Mr Gokani to act for Vitarag as the barrister at trial and gave some evidence of Mr Gokani’s and Mr Newton’s experience. His affidavit annexed a letter sent by email only to Mr Murray, the director of Vitarag. The emailed letter listed an address of Mr Murray in Byron Bay and requested a decision on whether Vitarag would waive privilege over the file of Mr Gokani. There was no response to the letter, in writing or otherwise, and no confirmation that it was received. It follows that there was no waiver of privilege.
-
In these circumstances, there was no evidence, either at trial or on this application, from Ashish or Nanu to support the assertion that one was or both of them were the borrower. Nor was there any evidence from Mr Gokani that he believed, or had reason to believe, that Ashish or Nanu was the borrower at the time of filing the defence or that he could in any other way resist the evidence, including the four Letters of Confirmation, that Vitarag was the borrower. He identified no conversation and no document that gave or could have given him a belief of reasonable prospects.
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In particular, Mr Gokani gave no evidence of his belief at the time of filing the defence, and why he so believed (if he so believed) that Vitarag was not the borrower or could not be shown to be the borrower, even if details of the reason for why he held such a belief could not be revealed because of legal professional privilege. That he chose not to give that evidence or refrained from doing so without any explanation, enlivens the discretion in the Court to draw a Jones v Dunkel inference against him. [11] Even without such an inference, I would not draw in his favour an inference of a belief of reasonable prospects, as he was the witness that could have given evidence of that matter but failed to do so. In any event, a Jones v Dunkel inference is available, and I would draw that inference, to the effect that the Court can draw inferences from the limited evidence more readily in favour of Visvalingam and can infer that Mr Gokani’s evidence would not have assisted him.
11. Newell; Muriniti at [78]-[80].
-
For these reasons, I find that Mr Gokani did not have a reasonable belief at the time of filing the defence that Vitarag had reasonable prospects of defeating the claim,[12] or, which is the same thing, reasonable prospects of resisting a finding that Vitarag was the borrower. I make this finding not because of any prior finding in accordance with cl 6 of Sch 2 of LPULAA, but because I find the documentary evidence compelling and there being no evidence to the contrary.
12. Legal Profession Uniform Law Application Act 2014, Sch 2, cl 2(4).
-
As Mr Gokani acted without reasonable prospects, an order that he indemnify Visvalingam for its costs can be made against him pursuant to s 99 of the Civil Procedure Act, and cl 5 of Sch 2 of LPULAA. An order that Mr Gokani pay the plaintiff’s costs on an indemnity basis is to the same effect. Such an order would allow the ordinary costs assessment processes to determine the monetary extent of the liability.
At trial
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At trial, Vitarag asserted that Visvalingam had not established that Vitarag was the borrower. As indicated, Ashish gave no evidence, and no relevant documentary evidence was tendered. Vitarag led no evidence to indicate an alternative borrower, but did submit that the evidence “tends to show” [13] that Ashish or Nanu or both were the borrowers, an obligation claimed by neither Ashish, who did not give evidence at trial, nor Nanu, who did. [14] Vitarag relied on the accounts of conversations given by Nithan, in his affidavit read by Visvalingam, and the contents of emails annexed to that affidavit, and the cross-examination of Nithan on these matters, to argue that the identity of the borrower was not proved to be Vitarag.
13. Tcpt, 16 June 2021, pp 13(50)-14(7).
14. Cf Visvalingam at [5].
-
None of these matters in Nithan’s affidavit were known to Mr Gokani before Nithan’s affidavit was served, or at least there was no evidence of it. Submissions were made by Vitarag about favourable inferences that should be drawn from the involvement of Mr Gokani and Mr Newton. But the absence of evidence from either of them, when they were the only persons who could evidence their respective beliefs about the reasonable prospects of the defence, created a judicial reluctance in drawing inferences in their favour.
-
Mr Gokani submitted that his inability to contact Ashish militates against an adverse Jones v Dunkel inference. Insofar as I understood this submission, I do not think it assists Mr Gokani. The inference the Court draws in this application is because of the failure of Mr Gokani to give evidence, not because of the absence of Ashish. That Ashish was aware of the proceedings and verified the defence, shows that Mr Gokani was aware of the significance of the absence of Ashish at trial. It could only operate to weaken his belief in the prospects of the defence at trial if his primary witness gave no affidavit to counter the compelling documentary evidence.
-
In the result, up until the service of Nithan’s affidavit, I can find no basis to conclude that there was any belief, let alone a reasonable belief based on provable facts, of an alternative borrower to Vitarag. That is, that there was no available material providing a proper basis for alleging the borrower was not Vitarag. [15]
15. See cl 2(2) of Sch 2 of the Legal Profession Uniform Law Application Act.
-
It follows that from the date of service of the defence until the service of Nithan’s affidavit, I conclude that the requirement of cl 2(2) in Sch 2 was lacking and therefore, costs were incurred in that period “without reasonable cause, in circumstances for which a legal practitioner is responsible”. [16]
16. Section 99(1)(b) of Civil Procedure Act.
-
Mr Gokani identified Nithan’s affidavit as constituting material available to him before the trial which provided a proper basis for asserting that Vitarag was not the borrower. Did it give rise to a belief of reasonable prospects even if Mr Gokani gave no evidence that it did?
-
Nithan’s affidavit dated 26 November 2019 gave evidence of conversations where Ashish spoke of seeking funds for an American quarry mine, [17] that “My dad and I will borrow the money”. [18] The significance of the reference to “dad and I” is weakened by Nithan’s recollection of Mr Gokani saying:
“The way Ash’s trust works, is that he has the Kailash Trust and that he has a company acting as trustee called Vitarag Pty Ltd. It holds Ash’s family’s investments. I can do the same for your family’s investments.” [19]
That statement was denied by Mr Gokani in a responsive affidavit at trial, although Vitarag being the trustee of the Kailash Trust was never in issue.
17. At [12], [16], CB pp 47-48.
18. At [15], CB p 48.
19. At [26], CB p 50.
-
However, the value of these conversations is limited, because a colloquial reference to the borrower being Ashish, his father, or both, could not reasonably supplant the formal “Letter[s] of Confirmation”, because of the substantial lapse of time since the conversation, and because Ashish was out of contact, giving no instructions or evidence for Vitarag. His father, Nanu, who put on an affidavit, did not accept any responsibility for the loan.
-
There were also emails annexed to the affidavit. There was a reference to the “94k that was lent to your dad”. [20] The subject line of the email and other emails sent on the same day expressly refer to the “Kailash Trust”, [21] thereby connecting them with Vitarag.
20. CB p 239.
21. CB p 239.
-
Mr Gokani also referred to various passages of the transcript. To the extent that those passages are submissions, [22] they do not advance the matter. There was evidence that indicated a different and higher interest rate initially, [23] that Nithan received the bank account details of Nanu as well as those of the Trust, [24] and that the money may ultimately have been received by Nanu. [25]
22. Tcpt, 16 June 2021, pp 13(49), 17(16), 18(20), 36(16), 50, 42(35), 2(35), 30(40).
23. Tcpt, 16 June 2021, pp 58(42)-59(2), 59(45).
24. Tcpt, 16-17 June 2021, pp 75-76, 144.
25. Tcpt, 17 June 2021, pp 102(45)-103(10).
-
But the circumstance that Nithan was provided with Nanu’s bank account details several days before the transfer of the funds says little about the terms of the loan, and nothing at all if, as occurred, those details were not used in the transfer of the funds.
-
The judgment reveals that the defence was weak, relying on a colloquial expression in an email about money being “lent to your dad” and decades-old conversations about a loan to Nanu or that the money was to be used overseas. This evidence does not go to the issue of the identity of the borrower and could not displace the weighty formal documentary record. [26] In my view, these matters would cause a reasonable solicitor to conclude that the defence was “plainly untenable” or not “fairly arguable”, at least without further explanation, and none was given.
26. Visvalingam at [30].
-
In my view, the repeated signed Letters of Confirmation were of force equivalent to a signed loan agreement. They could not reasonably be thought capable of being displaced by an old conversation referring to the individual behind the named borrower, or by an email indicating information about another bank account.
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If contrary to my finding, the conversations and the email containing Nanu’s bank account details constitute material providing a proper basis for alleging that Vitarag was not the borrower, I am not satisfied that this deprives Visvalingam of an order for costs. Had Mr Gokani not acted in the filing of the defence, there would have been no filing of affidavits. In a real and common-sense way, the costs of the proceedings arose from Mr Gokani acting in the filing of the defence and thereafter. In the result, costs were incurred by that conduct of Mr Gokani, including the whole costs of the proceedings. There is no basis to conclude that the proceedings would have continued without Mr Gokani acting, nor did Mr Gokani submit that they would.
A “claim for damages”
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In the course of preparing the judgment, the significance of the phrase “claim for damages” in cl 2 of Sch 2 of LPULAA became apparent, especially as it was not obvious that the proceedings, which principally concerned repayment of a loan, involved a claim for damages. The parties had made no submissions on this point. They were invited to make further submissions addressing whether Visvalingam’s claim was a claim for damages or not, whether initially or otherwise, and the significance of that characterisation.
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In the result, the plaintiff submitted that a claim in debt and a claim pursuant to a loan agreement is a claim in damages, and any difference is relevant only to onus of proof and was not a question of substance.
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Mr Gokani submitted that a claim in debt is not for recovery of damages, the latter requiring an award of money for a civil wrong, whereas a claim in debt is based not on a wrong, but on the promise to pay. The submission rested on the proposition that the Amended Statement of Claim did not claim damages or plead a breach of contract, and cl 5 of Sch 2 should not be read as including a claim in debt, even if a claim in debt might also be pleaded as a breach of contract.
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Thus, the questions to be determined are first, whether a claim in debt is a claim in damages, and secondly, whether the present claim is one for damages.
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In McGregor on Damages, it is plain that “[d]amages are an award in money for a civil wrong”, [27] and may exclude “actions for money payable by the terms of a contract, actions for restitution based on unjust enrichment, and actions under statutes where the right to recover is independent of any wrong”. [28] Actions for money payable under a contract are “done but on a promise made. They are in a sense a form of specific performance, ensuring that a contractual obligation is carried out”. [29] Examples include actions for the price of goods sold and delivered, actions for salary or wages for services, actions for rent, and actions to recover monies payable under insurance policies. As stated, “In traditional terminology the contrast is between actions of debt and actions for damages” and “[a]ctions of debt are to be distinguished from actions for damages”. [30]
27. James Edelman, McGregor on damages (21st ed, 2021, Thomson Reuters) at [1-001].
28. McGregor on Damages at [1-004].
29. McGregor on Damages at [1-005].
30. McGregor on Damages at [1-005].
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Accordingly, an action in debt is not within the ordinary meaning of an action in damages.
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It might be wondered why cl 2 is limited to “a claim for damages”. One can readily imagine that defences to a proper claim for unpaid rent, or wages, or on a loan could be at least as unmeritorious as a defence on a claim for damages, in particular because the former action requires no proof of a wrong. The policy reason that would allow a law practice to appear for an unmeritorious party in those actions but not in a damages claim, is not easy to discern. However, the expression “claim for damages” has a particular meaning, and I am not persuaded it should be given a wider meaning, especially since cl 2 generally operates to remove a common law right to retain legal representation to maintain or defend proceedings. That removal should not be enlarged contrary to the clear words of the provision. [31]
31. See S v Boulton (2006) 232 ALR 92 at p 111 [120]-[121] and the references therein. Cf New South Wales v Robinson (2019) 266 CLR 619; (2019) 374 ALR 687; [2019] HCA 46.
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The second matter is whether the present case is one in damages. In Degiorgio v Dunn (No 2), Barrett J stated:
“[13] A threshold question arises as to the meaning, in this part of the Legal Profession Act, of the expression ‘proceedings … taken on a claim for damages’. A ‘claim for damages’ may have one of many foundations. Damages may be claimed for tort, for breach of contract, for infringement of copyright, for breach of statutory duty, under statutory provisions such as s.82 of the Trade Practices Act 1974 (Cth) or under an undertaking as to damages given to the court. This list is by no means exhaustive. Section 68 of the Supreme Court Act 1970, dealing with a case where the court may grant an injunction to restrain a breach of contract or ‘any wrongful act’ or make an order for specific performance, empowers the court to ‘award damages to the party injured either in addition to or in substitution for the injunction or specific performance’. In addition, equitable compensation is sometimes referred to as a species of ‘damages’. In Nagle v Lavender [2002] NSWSC 611, Campbell J referred to equitable ‘damages’ as follows:
‘While it is correct that equity awards monetary compensation for breach of different obligations to those for which the common law awards damages, and assesses that compensation using different principles to those which the common law uses to assess damages, it is still a common enough, although loose, use of language to talk about damages being awarded in equity when one is talking about equitable compensation being granted.’
[14] His Honour mentioned observations in Re Leeds and Hanley Theatre of Varieties Ltd [1902] 2 Ch 809 and Seager v Copydex (No 2) [1969] 1 WLR 809 ‘to show that, in a loose sense, the notion of damages being awarded for breach of an obligation arising in equity’s exclusive jurisdiction is not unheard of’. The former case involved breach of fiduciary duty and the latter breach of an equitable obligation of confidence.
[15] It is thus not an entirely simple matter to decide, from the terms of the enactment itself, what the legislature had in contemplation when it chose to refer, in s.198M, to ‘proceedings … taken on a claim for damages’. In the end, however, I do not think that there is any real alternative but to treat as within that specification every case in which an originating process claims what are there designated ‘damages’, whether or not the nature of the damages is specified. Whether the provision also has regard to claims for compensation or reimbursement which are not labelled ‘damages’ but may be within one of the ‘loose sense’ concepts of damages to which I have referred is not a question that need be addressed here. One thing may, however, be said with confidence. Although the relevant provisions were introduced into the Legal Profession Act by the Civil Liability Act 2002 which is concerned overwhelmingly with claims in negligence for personal injuries, the Parliamentary materials make it clear that the Legal Profession Act aspects are not so confined.” (Emphasis added).[32]
32. Degiorgio v Dunn (No 2) (2005) 62 NSWLR 284; [2005] NSWSC 3 at [13]-[15].
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Accordingly, Barrett J determined that within “proceedings … taken on a claim for damages” cl 2 of Sch 2 of LPULAA falls “every case in which an originating process claims what are there designated ‘damages’”.[33]
33. At [15].
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The converse situation, in a context unrelated to the Legal Profession Act, occurred in Yang v Finder Earth Pty Ltd,[34] where the Victorian Court of Appeal stated:
“[29] As is apparent from the extracts set out above, the pleading does allege events of default under the loan agreements, although ― as counsel for Yang also pointed out ― there is no allegation that any notice of default was given, that being necessary to constitute an ‘event of default’ as defined by the agreements. But the critical point is that the allegations are all expressed in the language of ‘loss and damage suffered by reason of the defendants’ conduct’. Far from Luo alleging that Yang is indebted to her under the terms of the guarantee and indemnity, she claims to recover from him loss and damage which she has suffered ‘by reason of the conduct’, being the misapplication of the loan funds.
[30] As we have said, the position would have been quite different if the claim had been pleaded as one for a debt owing under the guarantee by reason of the non-payment by the borrowers of amounts due and payable by them. That was nowhere pleaded in this case.” [35]
34. [2019] VSCA 22.
35. At [29]-[30].
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Accordingly, it appears from both those decisions that whether proceedings are “on a claim for damages” depends on the pleading rather than the circumstances giving rise to the claim.
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The originating process in the present case involved a Statement of Claim. The Statement of Claim [36] pleaded a breach of contract [37] and claimed “loss and damage” comprising the principal plus interest. The defence denied the transaction, the breach and the loss. The Amended Statement of Claim removed from the claim the allegation of breach and damage, pleading the claim in debt. Thus, the claim based on the loan agreement was originally pleaded as a claim for damages, then subsequently pleaded in debt. As indicated, the characterisation under the Legal Profession Act is not to be based on the circumstances giving rise to the claim but the cause of action that is pleaded.
36. Primary Trial Court Book at p 4.
37. At [10]-[12].
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So although the claim at trial was not one in damages, the proceedings were commenced as a claim in damages. The contravention of cl 2 occurred by the filing of a defence without reasonable prospects. That contravention resulted in the costs in the proceedings as discussed earlier. I am persuaded Visvalingam remains entitled to the costs from Mr Gokani.
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Mr Gokani did not raise the question of the claim not being one for damages until it was raised by the Court after final submissions, when judgment was reserved. As indicated, Mr Gokani accepted that if he had acted without reasonable prospects, he was liable under s 99. When the matter returned to court on the “claim for damages” point, an issue arose about whether Mr Gokani had acted “without reasonable cause” under s 99, not because of a contravention of cl 2 in Sch 2 of LPULAA, but because that part of s 99 is offended by acting to defend a debt claim without any proper basis. Mr Gokani did not oppose this issue being raised, and as indicated earlier, appeared to accept in argument that Visvalingam was entitled to the order if I was persuaded that the proceedings would not have been defended without the involvement of Mr Gokani. That such an inference was open was not disputed, and I am persuaded that it should be drawn for the reasons already indicated in the judgment.
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Accordingly, the injunction against incurring costs without reasonable cause is not limited to acting without reasonable prospects on a claim for damages. [38] Maintaining an unmeritorious defence to a claim in debt may activate this component of s 99, as it does in the present case.
38. See Mark Gerard Ireland as Executor of the Estate of the late Charles Stuart Gordon v Sandra Jane Retallack & Ors (No 2) [2011] NSWSC 1096 at [46]-[54], Ritchie’s Uniform Civil Procedure NSW at [s 99.15].
Order
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The order of the Court is that Anand Gokani, solicitor for the first defendant, pay the plaintiff’s costs of the proceedings on an indemnity basis, including the costs of the motion, incurred on and from the date of the filing of the defence on 16 April 2018.
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Endnotes
Decision last updated: 26 July 2022
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