Watson v Conolly

[2008] NSWSC 872

CITATION:	WATSON v CONOLLY [2008] NSWSC 872
HEARING DATE(S):	4 August 2008
JUDGMENT DATE :	26 August 2008
JURISDICTION:	Common Law
JUDGMENT OF:	Hall J at 1
DECISION:	Leave to the plaintiff to amend the statement of claim to delete the causes of action pleaded against the defendants in relation to the alleged failure to advise the plaintiff in respect of third party claims by the company in liquidation. Leave to the plaintiff to access and utilise documents in the present proceedings that were produced under subpoena in proceedings brought by him against insurer.
CATCHWORDS:	PROCEDURE – Application for leave to amend statement of claim – sought to delete part of pleadings – amendments in question held separable - Application to rely on subpoenaed documents produced by defendants in different proceedings – documents totalling 350 folders – cost effective to allow access to existing documents
LEGISLATION CITED:	Civil Procedure Act 2005 Corporations Act 2001 (Cth)
CASES CITED:	BL & GY v Hypec Electronics [2004] NSWSC 1119 Clough v Frog (1974) 4 ALR 615 Horton v Jones (No 2) (1939) 39 SR (NSW) 305
PARTIES:	David Patrick WATSON v Alan Robert CONOLLY & ORS
FILE NUMBER(S):	SC No 20096 of 2007
COUNSEL:	P: D J Fagan SC D: S D Robb QC
SOLICITORS:	P: Etheringtons D: Middletons

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HALL J

TUESDAY 26 AUGUST 2008

No 2007/20096

DAVID PATRICK WATSON v ALAN ROBERT CONOLLY & ORS

JUDGMENT

1 HIS HONOUR: The plaintiff, by notice of motion filed on 28 May 2008, seeks leave to file and serve an amended statement of claim in the form annexed to the notice of motion. The proposed amendments involve the deletion of paragraphs that formulate specific claims of negligence.

2 In addition, the plaintiff seeks an order for leave to rely in the present proceedings upon documents produced to the Court by the defendants in answer to a subpoena issued at the request of Allianz Australia Insurance Limited in proceedings in this Court, No 50143 of 2005.

3 The first of the two orders is the primary matter in dispute. It will be necessary to refer to the background circumstances leading to the present proceedings and to the causes of action pleaded in the statement of claim.

Background circumstances

4 The plaintiff’s application was supported by the affidavit of Victor Michael Dominello of Etheringtons, solicitors for the plaintiff, sworn 6 June 2008. Mr Dominello set out in summary form the background to the proceedings.

5 The plaintiff is a chartered accountant and has held registration as an Official Liquidator, Registered Company Auditor and Trustee in Bankruptcy. He has practised as a chartered accountant for approximately 20 years and has acted in relation to a number of liquidations since that time.

6 On 7 May 2001, the plaintiff was appointed Official Liquidator of Hypec Electronics Pty Limited (in Liquidation) (“Hypec”).

7 At all material times, there were two directors and shareholders of Hypec, namely, Colin Mead and his former wife, Lucy Mead. Mr Colin Mead was the holder of 50% of the issued shares in Hypec. Lucy Mead was also the owner of 50% of the issued shares in Hypec.

8 From approximately 12 June 2001 to about 16 December 2004, the defendants were retained and acted for and advised the plaintiff in relation to the liquidation of Hypec.

9 The first, second and third defendants carried on practice as solicitors in the period from prior to 12 June 2001 until 3 November 2002. From 4 November 2002 until 3 December 2004 and continuing, it was carried on by the first, fourth and fifth defendants.

10 In the present proceedings, the plaintiff pleads causes of action in relation to the alleged negligent advice and conduct by the defendants in relation to and arising out of the winding up of Hypec.

11 At the commencement of the winding up of Hypec, a default judgment stood against the company for approximately $7.69 million. The judgment had been entered on 4 December 1997 in favour of BL & GY International Co Limited (“BL & GY”). Lucy Mead was a substantial shareholder in BL & GY.

12 In and after June 2001, solicitors for Colin Mead informed the plaintiff and the first defendant that they had evidence that would, inter alia, support an application to set aside BL & GY’s default judgment, that the claim by that entity was fraudulent and that the evidence would, accordingly, establish that Hypec was never insolvent and that its winding up should be terminated.

13 Colin Mead made an application within the winding up proceedings against the plaintiff and against BL & GY seeking an order under s.237 of the Corporations Act 2001 (Cth) that he be granted leave to intervene in BL & GY’s common law proceedings.

14 In those proceedings, the first defendant is alleged to have acted as solicitor for the plaintiff and for Hypec in relation to that application. It is further alleged that the first defendant advised the plaintiff to oppose Mr Mead’s application and that he failed to advise the plaintiff that he should disclose to the Court and to Mr Mead that he had received $25,000 in funding from BL & GY and that that entity had made an undertaking to provide further funding in the amount of $25,000.

15 The plaintiff maintains that he relied upon the advice given and instructed counsel to appear and oppose Mr Mead’s application, which was duly done.

16 On 27 August 2001, the Court (Einstein J) made orders to the effect that Mr Mead should have leave to act in the name of Hypec to apply to set aside the default judgment.

17 The plaintiff alleges that, on advice from the defendants, he took steps, in particular by sending a letter in September 2001, which placed himself in the position of acting against the interests of Hypec by encouraging and offering assistance to BL & GY to defend its default judgment and to resist Mr Mead’s application in the name of Hypec to set it aside.

18 The plaintiff also alleges that the first defendant drafted and engrossed an affidavit for swearing by the plaintiff to be filed and used in BL & GY’s common law proceedings. Attached to that affidavit was a report which was said to contest the viability of the cross-claim which Mr Mead had sought leave to file and prosecute in the name of Hypec against BL & GY.

19 On 25 September 2001, the Court (Sully J) ordered that BL & GY’s default judgment against Hypec be set aside and that Hypec have leave to file a defence and cross-claim.

20 The statement of claim formulates a number of other matters that are relied upon as constituting alleged breaches of duty to the plaintiff. These relate, inter alia, to proceedings heard and determined by Mathews AJ in which judgment was given in BL & GY’s common law proceedings dismissing that company’s claim against Hypec.

21 In consequence of BL & GY’s default judgment having been set aside and its claim having been dismissed, Hypec was relieved of the liability of $7.69 million plus interest. It is alleged that this was the only significant debt purportedly owed by Hypec at the date the winding up order was made.

22 Following the proceedings before Mathews AJ, further litigation involving the plaintiff and Colin Mead ensured.

23 After some successes by Mr Mead in obtaining various orders sought, he applied to have the plaintiff removed as liquidator of Hypec. Those proceedings came before Gzell J, with Gzell J ordering the removal of the plaintiff as liquidator.

24 Ultimately, as a result of this sequence of litigation, the plaintiff suffered cost orders against him on a personal basis. According to the affidavit of Mr Dominello, Mr Mead’s costs (including interest) as awarded against the plaintiff by the orders alleged in the statement of claim, exceed $1.3 million.

25 In approximately May 2006, Mr Mead made a demand on the plaintiff for payment of his costs. The plaintiff sought to have Mr Mead’s claim met by his professional indemnity insurer, Allianz Insurance Australia Limited. The plaintiff brought proceedings against Allianz which were, in due course, settled. Orders were made, inter alia, requiring Allianz to indemnify the plaintiff to an amount of $1 million in relation to his costs liabilities towards Mr Mead. An order was also made requiring Allianz to indemnify the plaintiff in relation to any damages ascertained in the Inquiry ordered by Gzell J on 16 December 2004. On that date, Gzell J not only ordered that a new liquidator be appointed, but that there be an Inquiry as to any damages caused to Hypec by the plaintiff’s failure to take adequate steps to investigate and enforce a claim against Hypec Information Technology Services (“HITS”) and other claims identified in paragraphs 136 to 149 of the statement of claim.

26 The settlement of the proceedings against Allianz had the effect that there was still a shortfall of $300,000 in relation to the plaintiff’s liability to Mr Mead pursuant to the costs orders referred to above.

27 According to Mr Dominello, the plaintiff had advised that he did not have the capacity to pay the costs of the liability shortfall to Mr Mead. Mr Mead had identified other claims against the plaintiff arising from his conduct whilst liquidator of Hypec. By reason of the plaintiff’s limited financial capacity to pay Mr Mead, he entered into a Deed with Mr Mead whereby he agreed to commence the present proceedings against the defendants.

28 Pursuant to orders made by Gzell J, Mr K Whittingham was appointed as the new liquidator of Hypec to conduct an Inquiry into the issue of any damage suffered by Hypec as a result of the plaintiff’s conduct.

29 Since 16 December 2004, the Inquiry has been listed for directions on a number of occasions but, according to the evidence, no substantive steps have been taken in those proceedings to date. According to the evidence, Mr Whittingham will not be in a position to conduct the Inquiry proceedings until related complex proceedings in the Family Court of Australia have been resolved. According to Mr Dominello, there have already been 67 hearing days in those proceedings.

30 On the assumption that judgment in the Family Court proceedings will be delivered in October or November 2008, it was estimated that it will take approximately nine to 12 months until any substantive steps will be taken in the Inquiry proceedings.

31 Once such substantive steps are taken, according to Mr Dominello, the Inquiry proceedings could thereafter take a further two to three years to be determined. On that basis, the Inquiry proceedings may not be determined until about 2012.

32 Mr Dominello stated that the plaintiff, who as at September 2008, will be 61 years of age, strongly desires to pursue as quickly as possible his claim against the defendants for damages in respect of those liabilities which he has incurred to Mr Mead and for which he does not have and will not obtain complete indemnity from Allianz.

Correspondence on the issue of amending the statement of claim

33 On 23 April 2008, Etheringtons wrote to the defendant’s solicitors advising that the plaintiff “wished to amend the statement of claim by removing those aspects relating to the Inquiry. This was stated to be on the basis that no Anshun estoppel will arise (in relation to any future claim that Mr Watson may have against A R Conolly & Co) in the event that the Inquiry proceeds and damages are ultimately found against Mr Watson …”.

34 A copy of an amended statement of claim was sent to Middletons on 23 April 2008.

35 Draft short minutes of orders were also sent seeking consent orders, inter alia, for leave to amend the statement of claim. Paragraph 3 of the draft short minutes or order recorded:-

“3. The Court notes that the defendants do not contend that the amended statement of claim by deleting reference to certain claims in any way gives rise to an estoppel that would prevent the plaintiff from making the claims or any of them in accordance with the principles in: Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 …”

36 On 1 May 2008, Middletons sought clarification as to “… why your client says that leave should be given”.

37 On 22 May 2008, Middletons wrote to Etheringtons stating, inter alia:-

“… by letter dated 23 April 2008, you enclose draft consent orders to permit the plaintiff to amend the Statement of Claim …
2. It is therefore the plaintiff’s position that he wants to retain the right to have a separate proceeding in relation to certain aspects of his current claim against the defendants.
3. The defendants are entitled, especially in this case, to have a final determination on all the issues the plaintiff has pleaded against the defendants in the current litigation.
4. Of course, the plaintiff is entitled to elect to abandon portions of his claim, but it is the defendants’ position that the plaintiff cannot in so doing in this case be allowed to institute that portion of the claim being abandoned now, at a later time.
5. Accordingly, it is the defendants’ position that they will not consent to the proposed amendment and further, the defendants also state that the Court in the exercise of its discretion should not allow the proposed amendment except with conditions and they should include an order barring (by judgment or otherwise) the plaintiff from taking any further proceedings in relation to the matters abandoned in this statement of claim at some later time …”

38 On 28 May 2008, Etheringtons advised that the plaintiff would not consent to the conditions sought by the defendants in relation to the proposed amended statement of claim.

39 On 4 June 2008, Etheringtons again wrote to Middletons stating that the conditions proposed in relation to the consent sought to amend the statement of claim were “unreasonable”, observing:-

“… A R Conolly & Co are essentially seeking an Anshun declaration/prohibition in relation to Mr Watson’s claim concerning his damages flowing from the Inquiry. In these circumstances:-
(a) The Inquiry proceedings is in its embryonic stage.
(b) The plaintiff in the Inquiry proceedings is the current liquidator of Hypec … Mr Watson has no control over its pace towards finality.
(c) The potential liability of Mr Watson pursuant to the Inquiry is a complete discrete and separate cause of action to the remainder of the causes of action pleaded in the Professional Negligence proceedings against A R Conolly & Co.
(d) Until the Inquiry proceedings have significantly progressed, it will not be known whether Allianz (exercising its rights of subrogation through Mr Watson) will have a substantial claim against A R Conolly & Co arising there from.
(e) It would be premature and indeed extremely prejudicial at this stage to impose terms preventing Mr Watson (Allianz) from taking any further proceedings in relation to the claim relating to the Inquiry, which is proposed to be removed from the present statement of claim.
(f) As you would also be aware, Mr Watson is approximately 61 years of age. If the proposed amendment to the statement of claim were not allowed, that would likely have the effect of delaying the proceedings for a significant period of time …”

40 In the last-mentioned letter consent was sought to the plaintiff’s notice of motion.

41 According to the affidavit of Mr Dominello, Allianz has retained Wotton & Kearney, lawyers, to represent its subrogated interests in the Inquiry proceedings.

Leave to amend

42 On the hearing of the notice of motion, Mr D J Fagan SC appeared on behalf of the plaintiff and Mr S D Robb QC appeared on behalf of the defendants.

43 The amendments sought proposed the deletion of paragraph 136 to 149 and paragraphs 172 and 173 of the statement of claim.

44 In paragraphs 136 to 143, under the heading “Failure to advise on investigation of claim against HITS”, it is alleged that Mr Mead and his solicitors provided the plaintiff with documentary evidence tending to suggest that the company, HITS, had, in about late 1997, taken over the business which, until that date had been conducted by Hypec, without paying to Hypec any consideration.

45 In paragraph 144 entitled “Failure to advise in the investigation of other claims”, it is alleged that from at least 27 July 2001 the first defendant was aware of certain loans recorded in the books of Hypec as particularised in the paragraph.

46 In paragraphs 145 to 149 it is alleged that the first defendant ought to have advised the plaintiff to investigate the potential claim against HITS and/or Lamron and/or Quoin Island Resort Development Pty Limited (“QIRD”) and to commence proceedings against what are referred to as the “Yang Companies”. It is alleged that the first defendant was in breach of his duty to warn and advise the plaintiff of the matters set out in paragraph 141 of the statement of claim.

47 Paragraph 172 recites the order made on 16 December 2004 by Gzell J that there be an Inquiry as to damages caused to Hypec by the plaintiff’s failure to take adequate steps to investigate and enforce a claim against HITS and other claims identified in the statement of claim.

48 In paragraph 173 it is alleged that, as a result of the order made by Gzell J, the plaintiff has suffered loss and damage due to the negligence of the defendants.

49 Mr Fagan emphasised that the loss alleged in paragraph 172 of the statement of claim is, at present, quite unquantifiable and it is dependent upon the liquidator pursuing the Inquiry and the making of findings that Hypec suffered measurable damage as a result of the claims against HITS and third parties not being pursued. Accordingly, the loss depends upon any such findings resulting in a judgment for the amount found on inquiry against Mr Watson.

50 Mr Fagan observed (transcript, 4 August 2008, p.4):-

“… if all that comes home then Mr Watson will have another quantified, at that stage, liability which he would say has arisen out of Mr Conolly’s failure to advise in relation to that matter. All of that on our contention is entirely discrete and can be removed from the pleading and the rest of the case go forward.”

51 Mr Fagan observed that the only matter raised in correspondence by the solicitors acting the defendants in opposition to the proposal to amend the statement of claim was an assertion that, if amended, Mr Watson would be subject to an Anshun estoppel against proceedings at a later stage in respect of a cause of action relating to negligent advice concerning claims against third parties and damage resulting from any breach of duty. Mr Fagan contended that the question of an estoppel does not arise at this point. In this respect, he observed that the principle of Anshun estoppel raises the question as to whether a particular claim would be regarded by a court as one that ought to have been brought in previous proceedings so that there would be a bar to bringing it in separate and later proceedings.

52 In that respect, there was a question of reasonableness in terms of the existence of sound reason for not bringing the claim being litigated. In the present case, a number of factors were relied upon which, so far as Mr Watson is concerned, it is said would make it reasonable for him not to bring the claim relating to third parties but to bring it at a later point in time. Firstly, the claim sought to be deleted was separable in that it relates or depends upon legal advice (or the failure to provide such advice) by the defendants in relation to a discrete subject matter. If Mr Watson were successful in later establishing it, it would result in an entirely separate head of damage. The causes of action and particulars of negligence in the remaining cause(s) of action in negligence relate to damages measured in terms of the amount of costs orders made in favour of Mr Mead.

53 Any cause or causes of action in relation to the failure or failures to pursue third parties is/are said to relate to damage sustained by Hypec as a result of the claims not having been investigated and pursued. Those, it was contended, would constitute separate and discrete matters not capable of presently being progressed in the proceedings without causing significant delay.

54 In relation to the Family Court proceedings to which I have earlier referred, Mr Fagan advised that his instructions were that the evidence in those proceedings was now closed and that lengthy submissions are in the process of being exchanged. Mr Fagan accepted that Mr Dominello’s estimates of time as to the completion of the inquiry were “extremely rubbery”. Nevertheless, considerable uncertainty it was said must remain as to the time required for the Inquiry process to reach completion. On any view, it was submitted, there was a high degree of uncertainty about that matter.

55 Finally, Mr Fagan observed that it was relevant to take into account that, in the ordinary course where a professional indemnity insurer has indemnified an insured (as in the case of Mr Watson), the usual situation is that the insurer would exercise its rights of subrogation to carry on proceedings to recover against another party. So far as the present proceedings are concerned, Allianz was not carrying on the proceedings as it had not given complete indemnity in respect of the costs amounting to $1.3 million. The present proceedings, in those circumstances, were brought by Mr Watson to recover the part of the loss allegedly caused by the defendant’s negligence for which he does not have the benefit of indemnity from Allianz.

56 Mr Robb, in his submissions on behalf of the defendant, referred to the fact that the matters relied upon by Gzell J in his judgment, BL & GY v Hypec Electronics [2004] NSWSC 1119, included the matters the subject of the paragraphs which the plaintiff wishes to delete from the statement of claim.

57 The proceedings before Gzell J concerned an application by Mr Mead to remove the plaintiff as liquidator of Hypec. Mr Mead claimed that the plaintiff had actively opposed his claim that BL & GY’s default judgment against Hypec had been fraudulently based and that the plaintiff had unfairly and oppressively exercised his powers against him.

58 Gzell J set out the history of proceedings before Einstein J, Sully J, Mathews AJ and proceedings before Campbell J (as his Honour then was). Campbell J had heard an application commenced by the plaintiff as liquidator in which Mr Watson sought orders for the transfer of properties into the name of Hypec. Gzell J also recorded proceedings in the Family Court (Cohen J) and proceedings in the Court of Appeal involving an appeal by the plaintiff as liquidator against the decision of Campbell J.

59 In his judgment under the heading “other matters”, Gzell J referred to information that had been provided to the plaintiff as liquidator suggesting that HITS, with the assistance of Lucy Mead, may have taken over the business of Hypec without consideration (at [102]). His Honour expressed the view that there was sufficient information to have warranted an investigation as to whether the goodwill of Hypec had been taken over by HITS (at [107]).

60 His Honour concluded that the plaintiff’s persistent opposition to Mr Mead’s proceedings in relation to the default judgment stood out as favouring the interests of Lucy Mead at the expense of Mr Mead (at [121]).

61 Gzell J also observed that the plaintiff’s favouring of the Lucy Mead interests was further exacerbated by his failure to investigate the charge that the goodwill of Hypec had been taken over by HITS without consideration (at [130]).

62 Mr Robb argued that the question as to advice given, instructions received and issues of reliance and consequences in relation to the third party claims would remain a live issue in the present proceedings even if the amendments were permitted.

63 Mr Robb submitted in this respect (transcript, 4 August 2008, at pp.9 to 10):-

“… what the defendants submit is that the factual circumstances of the parts of the statement of claim which the plaintiff wishes to delete are an integral part of a compound finding by Justice Gzell that the plaintiff ought to be removed with the various unfortunate consequences to the plaintiff that followed from that order. In the defendants’ submission it is not true to say that those subject matters are separate so that if they were deleted and not pursued here they could, if circumstances warranted it, be re-enlivened at some other stage without any unfair or inappropriate consequences. From the defendants’ perspective, even if the matters were deleted, they would still have to be litigated in these proceedings because, at the end of the day, Justice Gzell gave one judgment based upon an accumulation of circumstances out of which these were two out of, I am guessing, 10, and the issue of who was responsible in this case will be the subject of this litigation.”

64 Later in his submissions, Mr Robb emphasised that it was not merely the failure by the plaintiff to investigate HITS that was the subject of attention by Gzell J, but that it was one of several components or matters that supported the proposition that the plaintiff had favoured one side as against the other. In that respect, rather than HITS being a complete stranger, the issue in question was not merely the failure to investigate and pursue third party claims but that this formed part of a course of conduct which was characterised by Gzell J in his judgment as stated above.

65 Similarly, in the statement of claim (paragraph 141), the failure to investigate or commence proceedings was relied upon as evidence of conduct that was against the interests of Hypec and which favoured the interests of Lucy Mead.

Consideration

66 The Court has power pursuant to s.64 of the Civil Procedure Act 2005, at any stage of proceedings, to make an order that leave be granted to a party to amend any document in the proceedings: s.64(1)(b).

67 Applications to amend are often made for the addition or the substitution of a cause of action. However, the power extends to permitting a party to amend a pleading to delete a cause of action or particulars of a cause of action. The power is a discretionary one and is to be exercised judicially having regard to the nature of the amendment proposed and the consequences of the amendment if granted on the position of the other party or parties. The power is also to be exercised having regard to the statutory obligation to allow all amendments necessary to determine the real questions in dispute and to the scope of any qualification on that obligation imposed by the operation of s.57 and s.58 of the Civil Procedure Act which is concerned, inter alia, with the timely disposal of proceedings and with the obligation to act in accordance with the dictates of justice.

68 The exercise of the power to amend in a particular case will, of course, be very much dependent upon the circumstances and facts in the proceedings in question. The Court is also to have regard to the overriding purpose of the Civil Procedure Act which is directed to the “just, quick and cheap resolution of the real issues”: s.56(1), Civil Procedure Act.

69 As a general rule, leave should be granted if the application for leave to amend is made in a timely manner and, inter alia, for the purpose of modifying an existing claim: Clough v Frog (1974) 4 ALR 615 at 618; Horton v Jones (No 2) (1939) 39 SR (NSW) 305 at 309.

70 In the latter case, Jordan CJ also observed that the question whether an amendment would cause substantial injustice must, of course, depend upon the circumstances of the particular case (at 310).

71 In the present proceedings, Mr Robb emphasised that the issues as pleaded and the issues as determined by Gzell J were not separate issues. However, although as matters presently stand it could be said in one sense that there is some association between the matters pleaded in the statement of claim and what Mr Robb described as the “compound finding” made by Gzell J, that does not, in my opinion, constitute a matter or circumstance that is determinative of the present application. Whilst Mr Robb emphasised the connection between the “compound finding” and the allegations made in the statement of claim, I do not consider that any disadvantage would arise to the defendants by permitting the amendment sought, nor do I consider there to be any other reason as to why the plaintiff should not be permitted to amend the statement of claim, as he seeks.

72 I accept, as Mr Fagan contended, that, if the amendments are made as sought in the notice of motion, the position would simply be that the plaintiff would no longer rely as against the defendants on the outcome of the proceedings that were initiated before Gzell J and are subject to the present Inquiry. If the amendments are granted, the plaintiff will only be proceeding against the defendants for relief in respect of the costs orders which resulted from the multiple proceedings associated with the setting aside of the default judgment that was entered against Hypec. In that respect, the plaintiff is alleged to have acted on the advice and conduct of the defendants. If the amendment were granted, the consequence would be that the plaintiff would no longer be relying in the present proceedings upon any alleged breach of duty associated with the defendants’ conduct in relation to a separate and distinct matter, namely, the failure to investigate and pursue third party claims.

73 As Mr Fagan further contended, if the amendments are granted, there would be no evidence reason as to why the defendants in these proceedings would pursue matters deleted from the statement of claim and/or seek to make any issue of credit in relation to them. In the event that leave is granted to amend, the allegations concerning the question of third party claims would no longer remain as issues. Accordingly, it has not, in my opinion, been established on this application that there would be any likelihood in the amended proceedings of an intertwining of factual circumstances (or facts in issue) as contended by Mr Robb in his submissions.

74 I am, in other words, unable to accept that the matters referred to in the submission made on behalf of the defendants as set out in paragraph [63], if the amendments are granted, would remain as issues in the present proceedings. The fact that they were an element in the “compound finding” referred to in the conclusions of Gzell J does not, in my opinion, carry the consequence that the issues will necessarily remain live issues on the proposed amended statement of claim.

75 The allegations by the plaintiff that, by reason of the advice of one or more of the defendants, he was exposed to complaint by Mr Mead that he had misconducted himself in the administration of Hypec and acted with bias or the appearance of bias are capable of determination by reference to the specific matters to which the legal advice or action by the defendants was directed in the cascade of litigation concerning the default judgment that had been entered in favour of BL & GY against Hypec. The allegations made against the defendants with respect to those specific matters will be determined by reference to the facts that are subjacent to, what might be termed, the “BL & GY” issues set out in paragraphs 15 to 112 inclusive of the statement of claim and the Family Court matters referred to in paragraphs 113 to 120 of the statement of claim.

76 Mr Robb contended as a separate matter that there was no evidence demonstrating that the plaintiff had taken steps to expedite the litigation of the issue as to whether or not he is liable to the new liquidator. This criticism relates in part, at least, to the inquiry ordered by Gzell J as to the amount of loss sustained by Hypec as a result of any misconduct by the plaintiff as liquidator.

77 I accept, as Mr Fagan contended, that Mr Robb had not identified any legitimate ground of objection in this respect. As he observed, it would be quite unreasonable to expect Mr Watson to take steps to expedite the Inquiry. I do not consider that there has been any relevant failure by the plaintiff and certainly none that could operate as a ground for refusing the application to amend the statement of claim.

78 I propose to make an order granting leave to the plaintiff to amend the statement of claim in terms of paragraph 1 of the notice of motion.

Access and use of subpoenaed documents

79 As to the plaintiff’s application for leave to rely in the present proceedings upon the documents produced to the Court by the defendants in answer to a subpoena issued at the request of Allianz Australia Insurance Limited in proceedings No 50143 of 2005, I note that the documents in question were described in the schedule to the subpoena addressed to the defendants, a copy of which is Annexure D to the affidavit of Mr Dominello. The schedule is in the following terms:-

“All documents, including but not limited to, any notes, correspondence, letters, facsimile transmissions, file notes, memoranda, electronic mail, print outs of electronic mail and all other documents brought into existence in connection with and/or for the purpose of any legal advice provided to David Patrick Watson as liquidator of Hypec Electronics Pty Limited during the period 1 April 2001 and 28 February 2005.”

80 The above description would apply to every document forming part of the file or files that the defendants’ solicitors maintained on behalf of the plaintiff.

81 The documents as described relate to the several proceedings in which the defendants acted for the plaintiff over the years specified.

82 It was argued on this application that in circumstances where it is said that $100,000 was spent on copying the documents falling within the description of the schedule. It was argued that, where a paginated full copy of them exists and such copies are available to be used, the present application is a highly meritorious one as it would avoid duplication and a waste in terms of expense. This is said to be in the context of the present proceedings involving a claim by the plaintiff, the former client of the defendants, who would be entitled to access to the files that his former solicitors, now being sued, maintained on his behalf. It was contended that there was no legitimate basis for resisting the order sought in paragraph 2 of the notice of motion.

83 The practical benefit of the order, it was observed, would obviate the necessity for the preparation of a list of documents and the necessity for providing documents for inspection and copying.

84 Mr Robb raised the question of the plaintiff, or those acting for him, having acted in breach of an implied undertaking not to use any documents produced in the Allianz proceedings and that he had, in fact, acted in contravention of such implied undertaking. He referred to correspondence which was said to provide evidence of breach. I do not need to refer to the detail of that correspondence.

85 Whether or not breach of the implied undertaking could be established does not, in my opinion, bear upon the merits of the present application. Even if it did, it would not, in the particular circumstances, in my opinion, warrant refusal of the order sought. I should note that, if required, Mr Fagan contended Mr Dominello was in a position to provide a very sound answer to the use of the documents referred to in his email of 19 September 2007 (Annexure F to Mr Dominello’s affidavit).

86 Mr Robb submitted that the evidence did not make out a case for the Court to grant leave to the plaintiff to use all of the documents for whatever purpose they may wish in the present proceedings. He contended that mere convenience was insufficient. He acknowledged that the probability was that many of the documents in the 350 folders produced in response to the abovementioned subpoena would now need to be discovered by the defendants in the present proceedings.

87 According to Mr Dominello, he has inspected the 350 folders of subpoenaed material for the purpose of advising the plaintiff in the Allianz proceedings. He stated that on 19 January 2007 he wrote a letter to the defendants’ firm and provided an index in relation to the 350 folders.

88 I do not consider that I should accept the submission made for the defendants that the plaintiff and his solicitor ought to seek from the Court to be released from the consequences of what was referred to as the prior use without consent. Mr Robb fairly conceded that, if the application were made properly, it would be an appropriate case for the order sought. However, he contended it was not appropriate for the plaintiff to simply come and ask the Court for an order in terms of paragraph 2 of the notice of motion as it would have the effect retrospectively of the Court absolving the plaintiff and his solicitor from the consequences of having used the documents when the implied undertaking precluded he or them from doing so.

89 I consider that an order granting leave in terms of paragraph 2 of the notice of motion is an efficient and cost effective means of containing costs that would otherwise be incurred in the litigation. The fact that the files in question were files maintained on the plaintiff’s behalf by the defendants, is a factor which would indicate that it is appropriate in all the circumstances for the order to be made. I do not consider that in so ordering any retrospective consequence would flow in relation to any possible breach of the implied undertaking as contended for by the defendant.

90 In submissions, reference was made to the development of a regime to determine matters for access and use of the documents produced under the abovementioned subpoena. This is a matter the parties are in a position to determine for themselves. I direct the parties to incorporate appropriate directions to that end.

91 I propose to make orders in accordance with paragraphs 1 and 2 and request the parties to lodge short minutes of order to give effect to my reasons.

92 I also request the parties to seek agreement on the costs of the present application. I grant liberty to apply in that respect and generally.

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