White Cleland Pty v Burgess Properties Pty Ltd
[2012] VCC 266
•31 August 2012
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-10-02340
| WHITE CLELAND PTY (ACN 054 690 827) | Plaintiff |
| v | |
| BURGESS PROPERTIES PTY LTD (ACN 007 029 469) | Defendant |
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JUDGE: | HIS HONOUR JUDGE SHELTON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1-3 August, 6-8 August 2012 | |
DATE OF JUDGMENT: | 31 August 2012 | |
CASE MAY BE CITED AS: | White Cleland Pty v Burgess Properties Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 266 | |
REASONS FOR JUDGMENT
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SUBJECT – PROFESSIONAL NEGLIGENCE
CATCHWORDS – Negligence of solicitors in allowing claim to become statute barred – when cause of action accrues in respect of services provided – use of statutory demand procedure as debt collecting mechanism
LEGISLATION CITED – Wrongs Act 1958, s43, s44, s58 – Limitation of Actions Act 1958, s5(1) – Fair Trading Act 1999, s107(1) – Civil Procedure Act 2010, s7, s9(1)
CASES CITED – Shtrambrandt v Hanscombe [2012] VSC 102; Brakoulias v Karunaharan [2012] VSC 272; Coburn v Colledge [1897] 1 QB 702; Johnson & Ors v Perez (1988) 166 CLR 351; Kitchen v Royal Air Force Association [1958] 1 WLR 563; Todorovic v Waller (1981) 150 CLR; Port of Melbourne Authority v Anshun (1981) 147 CLR 589; Henderson v Henderson (1843) 3 Hare 100; 67 ER 313
JUDGMENT – Judgment for the defendant in the sum of $31,500.00.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S E Marantelli | Wisewould Mahony Lawyers |
| For the Defendant | Mr I Percy | Dunemann Sutherland Pty |
HIS HONOUR:
Introduction
1 The plaintiff is a firm of lawyers. The defendant, a former client of the plaintiff, carried on a business described as “architectural and planning consultants”. Dene Meredith Burgess (“Burgess”) was at all material times a director of the defendant and for some years had been its sole director.
2 The plaintiff issued proceedings in the Magistrates’ Court against the defendant on 26 October 2009 seeking the sum of $13,733.02 for outstanding fees. The defendant counterclaimed against the plaintiff, alleging negligence on its part. The proceedings were transferred to this Court. On 18 February 2001, the plaintiff discontinued its claim for outstanding fees which, by this stage, had been reduced to $1,385.20. Thus before me, the matter proceeded on the hearing of the counterclaim only. This counterclaim related to five separate matters.
The Law
3 Section 58 of the Wrongs Act (“the Act”) 1958 provides:
“Standard of care to be expected of persons holding out as possessing a particular skill
In a case involving an allegation of negligence against a person (the defendant) who holds himself or herself out as possessing a particular skill, the standard to be applied by a court in determining whether the defendant acted with due care is, subject to this Division, to be determined by reference to—
(a)what could reasonably be expected of a person possessing that skill; and
(b)the relevant circumstances as at the date of the alleged negligence and not a later date.”
4 Section 43 of the Act defines “negligence” as follows:
“negligence means failure to exercise reasonable care.”
5 Section 58 of the Act is contained in Part X of the Act.
6 Section 44 of the Act, which is contained in Part X of the Act, states:
“Application of Part
This Part applies to any claim for damages resulting from negligence, regardless of whether the claim is brought in tort, in contract, under statute or otherwise.”
7 In Shtrambrandt v Hanscombe [2012] VSC 102, Ferguson J stated, at paragraph [110]:
“Mr Shtrambrandt claims damages for negligence (in both tort and contract). At common law, a lawyer has a duty to exercise reasonable skill and care when acting for a client. The standard of care is that which could be reasonably expected of persons practising in the lawyer’s area of expertise at the date of the alleged negligence. The duty is the same whether it is based on contract or tort.”
8 In a footnote, her Honour noted the application of s58 of the Act.
The Claims
(1) Bridgewave Investments Pty Ltd (“Bridgewave”)
9 This was the main claim and that most focussed upon during the trial.
Relevant facts
10 The defendant alleges that the plaintiff was negligent in failing to issue a proceeding which became statute barred. It claims the sum of $161,241.30, together with costs paid which were rendered valueless.
11 The defendant had been providing services to Bridgewave in relation to the proposed construction of a sixty-bed aged care facility at High Street, Ashburton. By letter of 8 November 1999, it terminated its relationship with Bridgewave.
12 In January 2001, over fourteen months later, Burgess sent four accounts to Bridgewave as follows:
Date Services Amount Length 10 January 2001 Planning $77,235.00 34 pages 16 January 2001 Tender and pricing $9,092.75 8 pages 22 January 2001 Construction supervision and contract administration $66,460.70 19 pages 24 January 2001 Construction documentation $9,689.35 3 pages
13 Burgess first consulted the plaintiff in April and June of 2004 in respect of summonses that he had received from two previous solicitors who had acted for the defendant and were suing for their fees.
14 Then Collins House Legal, formerly Tuckers Lawyers, which also had previously acted for the defendant (apart from the two firms of lawyers mentioned above), served a creditor’s Statutory Demand dated 14 July 2004 upon the defendant. It alleged a debt of $37,046.94 in respect of outstanding fees, including fees with respect to acting against Bridgewave. Burgess stated that this Statutory Demand was served on 28 July 2004 and he consulted John Fijalski, a solicitor employed by the plaintiff, shortly thereafter. This consultation was in late July or early August 2004, since Mr Fijalski wrote to Collins House Legal on 4 August 2004.
15 Burgess states that at that meeting, he gave to Fijalski the four detailed accounts referred to above, together with a letter dated 24 January 2001 forwarded to Bridgewave and an associated company, Farncliff Pty Ltd (“Farncliff”), which, under the heading “Statement of Accounts Outstanding” stated, inter alia:
“1 ASHBURTON PROJECT:
* Planning Account – 16/1/2001: $76,048.50
* Tender & Pricing Account – 16/1/2001: $9,092.75
* Tender Outgoings & Disbursements – 9/6/1999: $1,945.75
* Tender Outgoings & Disbursements – 5/7/1999: $3,646.25
* Construction Documentation – 23/1/2001: $9,689.35
* Construction Supervision & Contract Administration – 22/1/2001: $66,460.70
TOTAL OUTSTANDING – ASHBURTON – $166,883.30”
16 It will be noted that this summary covers the four accounts referred to above, together with two accounts for “Tender, Outgoings & Disbursements”, one dated 9 June 1999 for $1,945.75 and one dated 5 July 1999 for $3,646.25. The Planning Account is for a slightly reduced amount.
17 Fijalski states that he only received this summary statement of accounts and not the detailed accounts at this meeting.
18 Following the letter to Collins House Legal from Fijalski on 4 August 2004 indicating technical defects in the Statutory Demand, on that same day, Collins House Legal withdrew its Statutory Demand dated 14 July 2004.
19 On 7 September 2004, the plaintiff wrote to a letter to Collins House Legal which stated, inter alia:
“As stated at our meeting Mr Burgess is prepared to pay into trust an amount to be determined by a reconciliation. Prior to doing so he needs to be satisfied as to the status of certain matters. This request is not related to the points of dispute to be prepared by the parties at a later date. If, say a failure to issue has caused our client’s action to be statute barred our client needs to know that now. Why should our client tie up funds in a trust account if the situation be that he has paid a considerable sum without a result and when there will not be a result? If that be the case not only would reimbursement be sought but also compensation for loss.
The relevant matters are Bridgewave, Farncliff and Bolton Robinson files. … .”
(my emphasis)
20 On 22 September 2004, Collins House Legal, in a letter to the plaintiff, stated, inter alia:
“On or around May 2003, we wrote to your client suggesting that he give urgent consideration as to whether or not proceedings should be issued against Bridgewave. Indeed, we advised that if your client did not issue proceedings, then he could face the same difficulties he had faced in another matter (the Strauss matter), where part of his claim related to work which was carried out more than sixty years prior to the proceedings being instituted.
We suggested to your client that he issue proceedings by 31 May 2003 to avoid the risk that part of his claim could be statute-barred.
In our subsequent discussions, your client advised that he wished to hold off on issuing proceedings against Bridgewave. He has since failed to provide us with any further instructions in this matter.”
21 The letter of May 2003 from Collins House Legal to the defendant was not produced in evidence. However, a letter of 30 March 2004 from Collins House Legal to Burgess appears to have been in similar vein. It stated, inter alia:
“Bridgewater Investments Pty Ltd
We refer to our letter dated 20 May 2003 regarding the above matter.
At the time we suggested to you that you should give urgent consideration as to whether you wished to issue proceedings against Bridgewave, to avoid the difficulty which you experienced in the Strauss matter, where part of your claim related to work which was carried out more than six years prior to proceedings being instituted.
We suggested that you issue proceedings by 31 May 2003 to avoid the risk that part of your claim could be statute-barred.
In our subsequent discussions you advised that you wished to hold off on issuing proceedings against Bridgewave and to date we have not received your further instructions.
We repeat our concern that part of your claim may be considered to be statute-barred and are concerned that if action is taken against Bridgewave, the defendant might raise a similar argument to that raised in the Strauss matter.
We note that your claim against Bridgewave is approximately $166,000. The relevant jurisdiction in which to issue proceedings is therefore the County Court.
You will appreciate that litigation in the County Court can be very costly and our professional charges will vary according to a number of contingencies, including unexpected problems, the co-operation of other persons, the seniority of counsel who is briefed in the matter, and administrative and other delays beyond our control. We estimate that the costs of the action will range from $20,000 to $50,000.
If you wish to proceed with this matter, please advise us by 30 April 2004. We will require you by that date to deposit $7,000 into our trust account to be held on account of the costs of preparing and filing a Statement of Claim and reviewing the Defence and, if necessary, Counterclaim.
We will thereafter require you to deposit further amounts into our trust account to be held on account of our further attendances. We will advise you of those costs as and when required. You should note that we will only act in this matter provided you continue to deposit sufficient funds into our trust account.
Alternatively, if we do not receive your further instructions in relation to this matter by 30 April 2004, we will assume that you do not wish to pursue the claim and will close our file.
… .”
22 Burgess stated in evidence that when he received a copy of the letter of 22 September 2004, he queried Fijalski as to when a claim became statute barred, and he was told “six years from the date that the work is accounted for”.[1]
[1]Transcript 71
23 On 30 November 2004, Burgess wrote to Fijalski as follows:
“Seeming. What may. Good news.
We enclose copy of statement to the Di Felice companies. Which owe a total of $191,000.
Note dates of issue of accounts. The longest outstanding has 6 months before it is stale.
…
I would like you to take over these matters.
… .”
24 As to the first paragraph, Burgess stated that it was “my précised scribble for memos”. The “good news” was that he had previously thought that, on the basis of the correspondence from Collins House Legal, such as the letters of 30 March 2004 and 22 September 2004, a claim against Bridgewave was statute barred on 31 May 2003.
25 The reference to “the Di Felice companies” is to Bridgewave and Farncliff, companies of which Antonio Di Felice was a director.
26 As to the sum of $191,000 referred to in the letter, the statement dated 24 January 2001 claims a balance of $191,658.22 owing from Bridgewave and Farncliff.
27 On 17 June 2005, a Magistrates’ Court Summons was issued for the sum of $5,592.00, being the sum of the accounts dated 9 June 1999 and 5 July 1999 referred to in the Statement of 24 January 2001. The Summons was not served until almost twelve months later, in June 2006. Fijalski stated that Burgess instructed him to delay service. Burgess denied this.
28 Section 5(1) of the Limitation of Actions Act 1958 (“LAA”) provides that an action such as that brought by the defendant against Bridgewave must be commenced within six years from when “the cause of action accrued”.
29 The Defence to the Magistrates’ Court Summons did not plead s5(1) of the LAA with respect to the account dated 9 June 1999 which, prima facie, appeared statute barred. This proceeding was resolved by payment of $3,500.00 from Bridgewave to the defendant.
30 On 19 October 2006, the plaintiff wrote to the defendant as follows:
“Your further claims against Bridgewave Investments Pty Ltd totalling $161,291.30 do not appear statute barred as yet and proceedings could be issued in either the County Court or VCAT. You are aware of the considerable delays in the County Court which make VCAT an attractive alternative. The accounts are dated January 2001 however it is not clear when the work was carried out.”
31 The letter recommended the issuing of a claim in the Victorian Civil & Administrative Tribunal (“VCAT”) seeking the sum of $161,291.30 “without delay”.
32 Meanwhile, on 21 December 2006, Fijalski had issued proceedings on behalf of the defendant against Bridgewave in VCAT for the sum of $161,291.30. In the application, the claim is particularised simply as being in respect of the four remaining accounts referred to in the Statement of 24 January 2001. Fijalski stated in evidence that the proceeding was issued in VCAT rather than the County Court, since to plead the claim in the County Court he would require more detailed instructions, whereas VCAT procedures were more casual so far as pleadings were concerned.
33 In Points of Defence filed in the VCAT proceeding on 9 March 2007, Bridgewave pleaded that the claim by the defendant arose not later than 8 November 1999 (the date when Burgess terminated its relationship with Bridgewave) and that therefore the claim was statute barred by virtue of s5(1) of the LAA.
34 The parties agreed to have VCAT determine, as a preliminary question, whether the proceeding was statute barred.
35 In an affidavit in respect of the preliminary question sworn 24 May 2007, Burgess stated, in paragraph 25:
“A period of 6 years had not elapsed between submission of the four accounts and when this application was commenced on 21 December 2006.”
36 Both parties were represented by Counsel at the preliminary hearing before Member P Eggleston at VCAT on 6 September 2007. He determined that the proceeding was statute barred. I agree. Counsel for Burgess, in what Mr Eggleston referred to as “a novel approach”, submitted that s107(1) of the Fair Trading Act 1999 gave rise to a separate statutory right of action which only arose after the failure by Bridgewave to respond to the defendant’s accounts when received. Mr Eggleston did not accept this submission. On 21 November 2007, he made a costs order against the defendant, such costs to be taxed on County Court Scale “D”, with some of the costs payable on a solicitor-client basis.
The Liability Issue
37 In Coburn v Colledge [1897] 1 QB 702, Lord Esher M.R., at 705, said:
“In the case of a person who is not a Solicitor, and who does work for another person at his request on the terms that he is to be paid for it, unless there is some special term to the contrary, his right to payment arises as soon as the work is done; and thereupon he can at once bring his action. … .”
(my emphasis)
38 Both Counsel conceded that this statement of the law was still applicable and that the defendant’s claims against Bridgewave were statute barred at the expiration of six years after the defendant provided its services to Bridgewave. In fact, Mr Percy, who appeared for the defendant, conceded that at 14 July 2004 (when the statutory demand was signed by Collins House Legal), $58,705.00 of the claim was statute barred, that on 30 November 2004 (the date of Burgess’s letter to Fijalski), the sum of $64,666.25 was statute barred and that at 17 June 2005 (the date of issue of the Magistrates’ Court Summons), the sum of $79,211.95 was statute barred and that at 20 September 2005, the sum of $122,136.35 was statute barred.
39 Mr Percy relied upon the letter of 7 September 2004 from the plaintiff to Collins House Legal as indicating that the plaintiff was aware of the possibility of a limitations point arising. He further relied upon the letter from Collins House Legal to the plaintiff dated 22 September 2004 which referred to the issue of proceedings by 31 May 2003 to ensure that part of the claim would not be statute barred. Further, he relied upon the letter from Burgess to the plaintiff dated 30 November 2004 which indicates, in my view, that Burgess was under the misapprehension that the six-year limitation period ran from the date of the account rather than from the date when services were provided. It would appear that Burgess was still under this misapprehension as to when a cause of action accrued when he swore his affidavit of 24 May 2007.
40 In my view, in particular, the letter of 22 September 2004, in referring to the date of 31 May 2003, should have “rung alarm bells” for Fijalski. He “could reasonably be expected” then to have advised the defendant of potential limitation problems and sought urgent instructions with respect to the issue of proceedings or, alternatively, suggested the possibility of issuing a generally endorsed writ. The need for such advice was heightened when Burgess’s letter of 30 November 2004 was received, which indicated that Burgess was under a misapprehension as to when a cause of action arose.
41 Fijalski, however, did not write a letter of advice seeking instructions from Burgess at the time, nor is there any evidence of a diary note indicating that he gave such advice to Burgess.
42 It is particularly surprising that Fijalski did not advise Burgess in writing, given that Burgess was in dispute with three previous solicitors over their costs.
43 Mr Percy sensibly conceded that he would accept the end of 2004, one month after the letter of 30 November 2004, as the date by which the suggested advice should have been given. The period of one month after 30 November 2004 was to enable Fijalski to react promptly to the letter from Burgess of that date. By then, he conceded that the maximum amount which could have been claimed by the defendant from Bridgewave, after allowing for parts of the claim being statute barred, was $97,812.00.
44 Mr Marantelli, who appeared on behalf of the plaintiff, submitted that the defendant did not retain the plaintiff to act on its behalf on the Bridgewave matter in the sixteen months between July 2004 and November 2005. He considered three possible dates when the defendant retained the plaintiff: 14 July 2004, 30 November 2004 and 16 June 2005. He relied upon various documents and evidence given in support of his stance.
45 Further, I allowed an application by Mr Marantelli in the course of final submissions to amend the plaintiff’s Defence to Amended Counterclaim to allege contributory negligence.
46 I note the provisions of s62 of the Act, which state:
“Standard of care for contributory negligence
(1)The principles that are applicable in determining whether a person has been negligent also apply in determining whether the person who suffered harm has been contributorily negligent in failing to take precautions against the risk of that harm.
(2) For that purpose—
(a)the standard of care required of the person who suffered harm is that of a reasonable person in the position of that person; and
(b)the matter is to be determined on the basis of what that person knew or ought to have known at the time.”
47 In support of the allegation of contributory negligence, Mr Marantelli relied upon letters of 11 May 2001 and 29 October 2001 from Tuckers to Burgess seeking instructions in response to a letter received from Bridgewave’s solicitors to a letter of demand of 11 April 2001. He also relied upon the letter of 23 May 2003 from Tuckers to Burgess, which is referred to in the letter of 22 September 2004 quoted above from Collins House Legal to the plaintiff. He further relied upon the letter of 30 March 2004 from Collins House Legal to Burgess in similar vein.
48 The answer to all of these matters is that they do not take account of Burgess’s continuing misapprehension that a cause of action only accrued when an account was rendered rather than when the services to which it related were provided.
49 I thus conclude that there was negligence on the part of the plaintiff in allowing the Bridgewave claim to become statute barred.
Assessment of Damages
50 How then do I assess damages with respect to the potential claim for $97,812.00 which has become statute barred?
51 In Johnson & Ors v Perez (1988) 166 CLR 351, the plurality of Wilson, Toohey and Gaudron JJ were considering a proceeding against a solicitor where a claim had been dismissed for want of prosecution due to the solicitor’s negligence. They stated, at page 366:
“When an action has been dismissed for want of prosecution due to the negligent conduct of a solicitor, the client has lost the opportunity to bring that claim to trial and recover damages in respect thereof. As already indicated, in some cases it may be appropriate to describe the loss as the loss of a chance for there may be various contingencies bearing on the likelihood that the plaintiff would have recovered judgment against the defendant and further that any such judgment would have been met. When those contingencies have been foreclosed by agreement or by the decision of the primary judge in the trial of the claim against the solicitor, the way is open for the judge to proceed to the assessment of damages for the loss flowing to the plaintiff by reason of the negligence of the solicitor. The first component in that assessment is the amount of damages likely to have been awarded by the court before whom the action against the employer (as in this case) would have come. That loss crystallises when the action is dismissed for want of prosecution and is then capable of assessment. The process of assessment may well require a broad brush approach in determining when, in the absence of negligence, the action would have come to trial and the evidence bearing on the quantum of damages that would or should have been available for tender to the court.”
(my emphasis)
52 It was not in issue that the same principles applied where a claim is statute barred.
53 At page 363 of Johnson, the plurality quoted with approval the statement of Lord Evershed M.R. in Kitchen v Royal Air Force Association [1958] 1 WLR 563 at 575:
“In my judgment, what the court has to do (assuming that the plaintiff has established negligence) in such a case as the present, is to determine what the plaintiff has by that negligence lost. The question is, has the plaintiff lost some right of value, some chose in action of reality and substance? In such a case, it may be that its value is not easy to determine, but it is the duty of the court to determine that value as best it can.”
54 In Kitchen, as here, the claim became statute barred on account of a solicitor’s negligence. The plurality also quoted with approval, at page 364, the following statement of Lord Evershed at pages 574-575:
“If, in this kind of action, it is plain that an action could have been brought, and if it had been brought that it must have succeeded, of course the answer is easy. The damaged plaintiff then would recover the full amount of the damages lost by the failure to bring the action originally. On the other hand, if it be made clear that the plaintiff never had a cause of action, that there was no case which the plaintiff could reasonably ever have formulated, then it is equally plain that the answer is that she can get nothing save nominal damages for the solicitors’ negligence.”
55 Clearly, in the matter before me, the claim falls between the two extremes posited by Lord Evershed.
56 Following Todorovic v Waller (1981) 150 CLR 402, the plurality stated, at page 367:
“The starting point is that ‘a plaintiff who has been injured by the negligence of the defendant should be awarded such a sum of money as will, as nearly as possible, put him in the same position as if he had not sustained the injuries. . .”
57 As to the date of assessment of damages, the plurality stated, at page 367:
“As a general rule, ‘damages for tort or for breach of contract are assessed as at the date of the breach’ … .”
58 Mr Percy submitted that, from a consideration of Johnson and other relevant cases, the following principles could be distilled:
“(a) loss occurs when the right of action is barred;
(b) the loss is to be assessed by reference to prospects of success had the right not been lost;
(c) the assessment is to be made as at the date the right was lost – not at the date of this trial;
(d) in assessing the prospects of success, all known factors have to be taken into account including the strength of the claim, the strength of any likely counterclaim, the chances of a successful recovery, the likely interest component … and costs.”
59 Mr Marantelli did not disagree with this submission.
60 In applying these principles and adopting a broad-brush approach, in my opinion, relevant factors in considering the defendant’s loss of opportunity to pursue its claim for $97,812.00 are:
(i) The defendant’s Statements of Account are exceedingly lengthy (66 pages) and complex. Mr Marantelli described them as “convoluted”. They were not considered in any detail before me. They took Burgess over fourteen months to compile.
(ii) In Particulars of its claim provided in the VCAT application, the defendant stated:
“The commission covered the development of the site from the demolition of existing houses after obtaining permits, the application to amend the site zoning to permit aged care, production of construction drawings, obtaining required planning permits, trade quotations, construction supervision and contract administration and attendance on all matters to developing the site as an aged care building, including A.A.T. appeals.”
The precise role of the defendant, particularly with respect to “construction, supervision and contract administration”, may well cause difficulties for the defendant.
(iii) Throughout, Bridgewave asserted that it had a strong set-off and counterclaim to the defendant’s claim. In a letter of 30 April 2001, Russell Kennedy, Bridgewave’s solicitors, wrote to Tuckers Lawyers in response to a letter of demand, claiming the sum of $166,883.30. On behalf of their client, they denied any liability to the defendant. They alleged delays in the provision of documentation and in the obtaining of planning and building permits. They also alleged errors in the construction documentation. They further claimed consequential losses in rental payments and outgoings. A total loss of $231,669.59 was claimed.
In an affidavit sworn on 6 December 1999 in support of an application to set aside a statutory demand under the Corporations Law issued by the defendant, Antonio Di Felice attests to some of these matters, although it appears that the net sum claimed is for a lesser amount.
In Bridgewave’s Points of Defence lodged in the VCAT proceeding dated 9 March 2007, Bridgewave repeats its allegations against the defendant and further alleges misrepresentation on the part of Burgess that he was a registered architect.
Again, there was no evidence before me to enable me to evaluate the strength of Bridgewave’s set-off and counterclaim. Suffice to say that my experience of construction disputes over forty-six years in practice and as a Judge is that such disputes are notoriously time consuming, expensive and uncertain of outcome. The present matter has all the hallmarks of such a dispute.
(iv) Burgess stated that Di Felice was a difficult person to deal with.
(v) Burgess was prepared, sensibly, to make substantial reductions to settle matters. There was evidence before me of several occasions when this occurred.
(vi) It is appropriate that I take the question of interest into account. In Johnson, Dawson J stated, at page 390:
“In valuing the respondent's lost chances, the likelihood of his recovering interest against his employers for the period between the causes of action arising and a notional date of judgment against them ought to be taken into account and, of course, there is provision for interest for the remaining period up to the date of judgment in the present actions. Interest at the market rate has an inbuilt factor for inflation.”
Mr Percy provided me with a helpful spreadsheet indicating possible scenarios for the award of interest.
(vii) Had the matter proceeded to judgment and the defendant was successful in recovering some amount and was awarded costs, there would be a shortfall between the party-party costs which would normally be awarded and the actual costs payable by the defendant to its solicitors. Of course, this difference would not be so great were the matter compromised at an earlier stage. I take judicial notice of the fact that most construction disputes are compromised prior to trial.
(viii) Mr Percy conceded that it was appropriate for me to take into account the chances of recovery against Bridgewave, were a judgment obtained against it. Burgess stated in evidence that Bridgewave, in the past, was the owner of a considerable parcel of commercial freehold land. There was no evidence before me that this was still the case.
(ix) There was ample evidence before me that generally Burgess was slow in pursuing claims. This is not the normal approach of a party who thinks he has a strong claim.
(x) Di Felice, it seems, when pressed, was prepared to make an offer of settlement. This occurred when statutory demands were served upon Bridgewave and Farncliff on 12 November 1999. The demand against Bridgewave was for the sum of $44,998.85. There was no evidence before me of the amount claimed to be owing from Farncliff. Matters were resolved by payment of the sum of $10,000 on 21 December 1999. Then there was the Magistrates’ Court proceeding against Bridgewave which settled for the sum of $3,500.00.
61 Taking into account all these imponderables and adopting a broad-brush approach, in my view, an appropriate sum to award the defendant for its lost opportunity with respect to its claim for $97,812.00 is $25,000.00.
62 In addition to this sum, the plaintiff claims the following amounts:
· Plaintiff’s costs for VCAT proceedings $10,001.75
· Costs paid to Tuckers and Collins House Legal in
respect of subject matter of VCAT proceedings $5,849.87
_________
$15,851.62
=========
63 In the Magistrates’ Court proceeding against Bridgewave, a limitations defence was not taken, although it would appear to have been open with respect to part of the claim. There was thus a possibility that a limitations defence might not have been taken in the VCAT proceeding. However, when the limitations defence was raised in the Points of Defence in the VCAT proceedings on 9 March 2007, it was quite futile to proceed further. I am therefore of the view that the defendant is entitled to a reimbursement of its costs paid to the plaintiff for work performed after 9 March 2007. Included in the sum of $10,001.75 for the plaintiff’s costs for the VCAT proceedings is the sum of $4,000.00 counsel fees. Adopting a broad-brush approach as I must, I assess these wasted costs at $6,500.00.
(2) Farncliff
64 On 21 August 2001, Tuckers Lawyers, the defendant’s previous solicitors, issued a Magistrates’ Court Summons for the defendant against Farncliff, claiming the sum of $24,774.92.
65 Burgess states that at the meeting with Fijalski in late July or early August 2004, he provided Fijalski with details of the Farncliff claim and requested him to pursue the matter. Melbourne Magistrates’ Court records indicate that at that point in time there had been no action in the proceeding since 20 September 2002 when Further and Better Particulars were provided by the defendant. Burgess alleges that Fijalski failed to pursue the matter and that the defendant has now lost the opportunity to proceed against Farncliff. In addition to the sum of $24,774.92, the defendant seeks reimbursement of the sum of $8,217.34 paid to its former solicitors in respect of the matter, which payment it claims was rendered valueless.
66 Fijalski states that he did not receive instructions to prosecute the Farncliff matter in 2004 but that he only received instructions in March 2007. He stated that from early 2005, Burgess had been mentioning the Farncliff matter and that he kept asking what was happening with it and what did he want him to do. In the letter of 19 October 2006 from the plaintiff to the defendant, it is stated:
“We note that an action issued against Farncliff Nominees Pty. Ltd. by Collins Legal, your previous solicitors, on behalf of Burgess Properties Pty. Ltd. claiming some $24,774.92 remains in limbo in the Magistrates’ Court and is capable of being brought on, no final order having been made. Their claim also relates to work performed in 1999 and would otherwise be statute barred.”
67 On 9 March 2007, Fijalski filed a Notice of Change of Solicitor, and on the same date, wrote to Farncliff’s solicitors, Russell Kennedy, indicating that he had received instructions to proceed in the matter.
68 There was no evidence before me of Burgess querying the progress of the matter between August 2004 and March 2007 as might have been expected had he given instructions to Fijalski in the matter in 2004. It is, in my view, reasonable to infer that Fijalski only received instructions to act in the matter in March 2007.
69 In the letter of 9 March 2007 to Russell Kennedy, Fijalski indicated that his instructions were to relist the matter. There is no evidence of a response to this letter. Fijalski wrote to the Magistrates’ Court on 15 August 2007 seeking that the matter be relisted. A response from the Magistrates’ Court of 7 September 2007 indicated that on account of the age of the proceeding, that written consent from Farncliff was required before the matter could be relisted.
70 Given the inactivity in the proceeding between 20 September 2002 and 9 March 2007, it is highly likely that any application to have the matter relisted would have been strongly opposed and met with a cross-application for dismissal for want of prosecution.
71 Fijalski stated that Burgess told him not to pursue the Farncliff matter since he did not want to “rock the boat” – there was an outstanding order for costs against the defendant in the Bridgewave VCAT proceeding and, as mentioned, Di Felice was a director of both companies.
72 After the termination of the plaintiff’s retainer, Burgess did not prosecute the proceeding.
73 Significantly, on 3 November 2008, Burgess made a notation: “On hold – agreed” with respect to this proceeding. I agree with Mr Marantelli’s submission that this is consistent with Fijalski’s evidence that Burgess told him not to “rock the boat”.
74 In summary, I conclude that Fijalski did not receive instructions in late July or early August 2004 to pursue this proceeding and that at no stage thereafter did he fail to prosecute the claim.
75 This claim against the plaintiff fails.
(3) Bolton and Robinson
76 This claim is very similar to the Farncliff claim. A Summons was issued on behalf of the defendant against Bolton and Robinson on 10 December 2001, claiming the sum of $75,726.07 and interest, a total sum claimed of $80,662.76. The last step taken in the proceeding was on 16 April 2003, according to Melbourne Magistrates’ Court records, when an Amended Statement of Claim was filed by the defendant.
77 Again, Burgess claims that he provided Fijalski with relevant documentation and instructions to pursue the matter in late July or early August 2004. Fijalski denies that he received such documents or instructions.
78 On 31 March 2008, Burgess wrote to Fijalski with respect to the matter, stating, inter alia:
“Could this matter be activated ASAP in I believe the County Court.
Could, once activated, the matter be then transferred to VCAT due to resolution, time and costs.
Could the second defendant, David Robinson, be dropped and the claim relating to him for $4,936.69 be dropped and just deal with Bolton alone. Robinson is just too much trouble and will muddy waters.”
79 This letter makes no complaint of delay since 2004. Nor is there any evidence before me of any complaint by Burgess as to lack of progress over this period.
80 Then, on 13 June 2008, Burgess wrote to Fijalski as follows:
“Bolton
Enclosed are copies of all legal and other relevant documents from our files as arranged. I believe you have copies of accounts from prior forwarding.
We are eager to get on with this due to its current status (writs issued etc by Tucker) and we perceive Bolton is a likely candidate for negotiated settlement.”
81 Fijalski filed a Notice of Change of Solicitor on 7 August 2008.
82 On 22 December 2008, Fijalski forwarded to Burgess an affidavit for him to swear in support of an application in the Magistrates’ Court for directions in the matter. The affidavit was sworn on 23 December 2008.
83 A diary note of 20 April 2009 from Fijalski to a solicitor at the plaintiff, states:
“I don’t know if Dene is going to want to reactivate the matter but if he does the application I think is still correct.”
84 A further Notice of Change of Solicitor dated 7 August 2008 was forwarded to Bolton’s solicitors. This followed a failed attempt by Burgess to settle the matter directly with Bolton – he forwarded to him a somewhat complex twelve-page letter dated 8 May 2009 indicating a willingness to accept $60,000 in full settlement of a potential claim of $250,000. The matter was not resolved.
85 The delay in proceeding can perhaps be explained by Burgess’s wish to negotiate directly with Bolton.
86 Predictably, a response from Bolton’s solicitors dated 25 June 2009 indicated a likelihood that any application to reinstate the matter would be resisted.
87 It is, in my view, reasonable to infer that Fijalski did not receive instructions to pursue the proceeding until 31 March 2008. The content of the letter of 31 March 2008 and the apparent failure of Bolton to enquire as to the progress of the matter prior to that support this approach.
88 Burgess took no steps to pursue the matter after determining the plaintiff’s retainer.
89 I note that in addition to the sum of $80,662.76, the defendant also claims the sum of $6,132.07 paid to Tuckers and Collins House Legal, which it claims was rendered valueless.
90 In summary, I conclude that instructions to proceed were not received until 31 March 2008 and that the plaintiff did not breach its retainer to the defendant.
91 This claim also fails.
(4) Hequinta Pty Ltd (“Hequinta”) and Neocape Pty Ltd (“Neocape”)
92 In June 2007, the plaintiff issued two Statutory Demands under the Corporations Act on behalf of the defendant. The Hequinta demand, undated, but it seems issued on 2 July 2007, the date of the supporting affidavit, is in respect of a debt for $70,703.57. The Neocape Statutory Demand is dated 29 June 2007 and is in respect of a debt for $28,445.77.
93 Both debtors took steps to set aside the Statutory Demands and on counsel’s advice, the defendant consented to withdraw the Statutory Demands and to pay the costs of the debtor.
94 In the case of Hequinta, the total costs of the creditor’s solicitors and of the plaintiff in acting on the application were $29,608.79, and in the case of Neocape, the sum of $10,683.43. It was these sums which the defendant claims in this proceeding.
95 The defendant alleged that the plaintiff should not have issued statutory demands without first obtaining a court order for payment of the debts referred to in the Statutory Demands.
96 The defendant’s assertions need to be looked at in the context of advice received from Tuckers Lawyers in a letter dated 14 February 2001, which stated:
“The statutory demand procedure is not appropriate where there is a genuine dispute about the company’s liability. In circumstances where a statutory demand has been previously issued, a notice of motion has been filed by the defendants, as occurred in this situation, setting out its defence, it is extremely unlikely that you would succeed in a winding up motion. It is most likely that a court would strike out the statutory demand and award costs to the defendant.”
97 Further, Burgess had been involved with statutory demands on at least three previous occasions where the demand had been issued but without a judgment having been first obtained. There were the Bridgewave and Farnclff Statutory Demands in November 1999 referred to in paragraph 60(x) above. These resulted in a prompt payment of $10,000. Then there was the Statutory Demand served on the defendant by Collins House Legal dated 14 July 2004. As mentioned, this statutory demand was withdrawn. A summons was then issued by Collins House Legal against the defendant and the matter was resolved on the basis that the defendant would make payment by instalments.
98 Clearly, Burgess was no tiro when it came to statutory demands.
99 The statutory demand procedure was successful in the case of Bridgewave and Farncliff. It was also successful in the matters of Rimstone Pty Ltd (“Rimstone”) and Sandfield Pty Ltd (“Sandfield”). In Rimstone, a Statutory Demand was issued on 2 May 2007 in respect of a debt of $129,085.14 and in the case of Sandfield, a Statutory Demand was issued on the same date in respect of a debt of $243,270.41.
100 Sandfield and Rimstone took proceedings in the Federal Court to set aside the Statutory Demands against them. By Terms of Settlement dated 30 November 2007, matters were resolved by a payment to the defendant of $165,000 on behalf of Sandfield and Rimstone.
101 In examination-in-chief, Burgess conceded that he was advised by Fijalski:
“… The statutory demand, if it was successful, would be a far more economic way of going about debt collection … .”
102 He was asked:
“As I understand it, you were informed it was quicker and cheaper or it could be quicker and cheaper?”
and he answered:
“And more effective and having a – a surprise or startling effect on a defendant company because of the potential – someone’s threatening to wind it up it may choose to settle a matter that it might not otherwise do in a civil court.”[2]
(sic)
[2]Transcript 116
103 So far as the Hequinta Statutory Demand is concerned, in his affidavit accompanying the Statutory Demand sworn 2 July 2007, Burgess stated, in paragraph 5:
“I believe there is no genuine dispute about the existence or amount of the debt.”
104 Hequinta’s solicitor, upon service of the Statutory Demand, contacted Fijalski, enquiring whether the defendant was prepared to withdraw the Statutory Demand and take court proceedings. Burgess instructed Fijalski to proceed with the Statutory Demand and indicated he was prepared to reduce it by the sum of $4,207.60. Hequinta’s solicitors then took proceedings in the Supreme Court to have the Statutory Demand set aside. Burgess did not withdraw then but instead filed an answering affidavit to two affidavits filed in support of the application. This resulted in two further affidavits being filed on behalf of the debtor, subsequent to which the defendant agreed to set aside the Statutory Demand and pay the debtor’s legal costs. Burgess resolved the matter directly with the debtor.
105 So far as Neocape was concerned, by letter of 18 June 2007, Burgess requested Fijalski to issue the Statutory Demand. Again, in an affidavit accompanying the Statutory Demand sworn 29 June 2007, he stated, in paragraph 5:
“I believe there is no genuine dispute about the existence or amount of the debt.”
106 Following service of the Statutory Demand, the debtor’s solicitors provided to Fijalski correspondence of which he was not aware, which they asserted clearly indicated that there was a dispute between the parties as to the alleged debt. Application was made by Neocape to the Supreme Court to set aside the Statutory Demand. Burgess was determined to proceed to oppose the Statutory Demand. On 8 August 2007, he provided thirteen pages of instructions to Fijalski, followed by four pages of further instructions on 30 August 2007.
107 Burgess instructed Fijalski that he was prepared to reduce the sum claimed in the Statutory Demand to $9,000.
108 Finally, as with Hequinta, on 26 September 2007, the defendant consented to set aside its Statutory Demand and pay the debtor’s legal costs.
109 It is my view that the defendant made the commercial decision to adopt the surprise or shock tactic of a statutory demand with which he had success in the past in the case of Bridgewave and Farncliff, and with which he had success at about the same time in the cases of Sandfield and Rimstone.
110 Burgess was aware that the statutory demand procedure was, although risky, quicker and cheaper, and decided to take this approach.
111 The claim in respect of Hequinta and Neocape fails.
112 In respect of Neocape, a Magistrates’ Court Summons was filed on 28 July 2008, claiming the sum of $28,445.77 and interest. A default judgment was obtained on 10 October 2008. At about that time, a receiver and manager was appointed to Neocape. The defendant was unable to recover against Neocape. It alleges that the plaintiff was negligent on account of its failure to obtain payment on the judgment. In my view, there is no basis for this claim. The plaintiff issued the Magistrates’ Court proceeding after the statutory demand procedure proved unsuccessful. The delay between 26 September 2007 and 27 July 2008 could be explained by the fact that costs of Neocape were only taxed on 27 June 2008 at the sum of $7,549.49 and were still not paid at 9 July 2008. They still remain unpaid. Fijalski stated Burgess did not make any complaint about the delay in issuing the proceeding.
(5) The Plaintiff’s Lien
113 I gave leave to the defendant to include this claim in the course of final addresses.
114 This claim is de minimis.
115 As mentioned, the plaintiff’s claim was originally for the sum of $13,733.02. By its Amended Statement of Claim dated 5 August 2010, the plaintiff reduced its claim to the sum of $1,385.20. This sum is in respect of the preparation of mortgage documents.
116 On 18 February 2011, the plaintiff discontinued its claim against the defendant. It did not formally waive or abandon its claim.
117 Robert White, a principal of the plaintiff, gave evidence that although the plaintiff had discontinued its claim in the sum of $1,385.20, it had not abandoned its claim for this sum. He stated that the plaintiff did not pursue the claim in these proceedings since to do so, its insurer, which was defending the counterclaim on its behalf, required it to contribute towards its costs of running the action. Given the small amount involved, it was uneconomical for it to do so. The plaintiff, notwithstanding the discontinuance of the claim for $13,733.02, still maintains that the sum of $13,733.02 remains payable.
118 The defendant has requested the plaintiff to return various documents it is holding, including documents relating to Farncliff and Bolton and Robinson, as well as mortgage documents in two mortgages obtained over a debtor’s property in 2008.
119 The plaintiff has refused to deliver up the defendant’s documents, claiming a lien over them pending payment of the sum of $13,733.02.
120 The Farncliff and Bolton and Robinson documents would seem to be of no value to the defendant, in that should the defendant wish to proceed in these two matters, they would surely be dismissed for want of prosecution. In any event, these documents might well have been viewed and copies obtained on discovery. Likewise, the mortgage documents, it seems, would be of no value since both properties were heavily encumbered prior to the granting of the mortgages to the defendant, and after these earlier encumbrances were satisfied, it would appear there would be no funds left for the defendant.
121 Mr Percy submitted that the plaintiff could no longer rely upon a lien over the defendant’s documents it is holding. He relied upon Port of Melbourne Authority v Anshun (1981) 147 CLR 589, where the High Court approved the principle spelt out in Henderson v Henderson (1843) 3 Hare 100; 67 ER 313, where Sir James Wigram VC said, at 115;319:
“Where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”
122 It appears to me however that Anshun does not apply, since the plaintiff’s claim for fees has not been adjudicated upon. There would be no possibility of inconsistent judgments in the unlikely event that the claim for fees was litigated.
123 Mr Percy seeks to rely upon the Civil Procedure Act 2010 (“the CPA”) and the overarching obligations spelt out there. Section 7 of the CPA provides:
“The overarching purpose of this Act and the rules of court in relation to civil procedures is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.”
124 Section 9(1) of the CPA provides:
“(1) In making any order or giving any direction in a civil proceeding, a court shall further the overarching purpose by having regard to the following objects—
(a)the just determination of the civil proceeding;
(b)the public interest in the early settlement of disputes by agreement between parties;
(c)the efficient conduct of the business of the court;
(d)the efficient use of judicial and administrative resources;
(e)minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required for any interlocutory steps that are necessary for—
(i)the fair and just determination of the real issues in dispute; and
(ii)the preparation of the case for trial;
(f)the timely determination of the civil proceeding.”
125 He submitted that the litigating of the claim for its fees by the plaintiff would offend the new regime established by the CPA.
126 As its name implies however, the CPA is concerned with procedural matters and does not seek to interfere with substantive rights such as a solicitor’s lien.
127 I therefore conclude that the plaintiff is entitled to its lien over the defendant’s documents and the defendant’s application for an order for the delivery up of its documents in the possession of the plaintiff fails.
Conclusion
128 There will be judgment for the defendant against the plaintiff in the sum of THIRTY ONE THOUSAND FIVE HUNDRED DOLLARS ($31,500.00), being $25,000.00 on account of the negligence of the plaintiff in allowing the defendant’s claim against Bridgewave to be statute barred and $6,500.00, the costs wasted on the VCAT proceeding.
129 I will hear from the parties on the question of interest, costs and any other orders thought appropriate.
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