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Firstmac Ltd v Hunt & Hunt (a firm)

 

[2018] QSC 258

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Firstmac Ltd & Ors v Hunt & Hunt (a firm) [2018] QSC 258

PARTIES:

FIRSTMAC LTD (formerly known as Tonto Home Loans Pty Limited)

ACN 094 145 963

(first plaintiff)

TONTO HOME LOANS AUSTRALIA PTY LTD

ACN 104 268 297

(second plaintiff)

QUEENSLAND STATE HOME LOANS PTY LTD

ACN 072 252 030

(third plaintiff)

v

HUNT & HUNT (A FIRM) (now known as Cooper Grace Ward)

(defendant)

FILE NO/S:

SC No 2466 of 2015

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

9 November 2018

DELIVERED AT:

Brisbane 

HEARING DATE:

15 March 2018

JUDGE:

Bond J

ORDER:

The Court directs as follows:

  1. The plaintiffs must notify the defendant and the Associate to Bond J by 4:00pm on 16 November 2018 whether they wish an opportunity to be heard on what these reasons have identified as apparent deficiencies in their pleading;
  2. If the plaintiffs do wish to be heard on that question, the proceeding will be listed before Bond J on a date to be fixed between 26 and 29 November 2018 to permit that to occur; and
  3. If the plaintiffs do not wish to be heard on that question, then the parties are directed to bring in minutes of order consistent with these reasons by 4:00pm on 23 November 2018, and any dispute between them as to the appropriate form of such orders will be listed before Bond J on a date to be fixed between 26 and 29 November 2018 for resolution.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – GENERALLY – where, after the close of pleadings, the plaintiffs foreshadowed an amended statement of claim – where the Court ordered that the plaintiffs file and serve an amended statement of claim by a particular date (which was subsequently extended) – where the plaintiffs indicated they did not require leave for any of their amendments – where directions were made to permit the question of leave to be resolved by requiring the defendant to bring an application to strike out or disallow the amendments once the amended statement of claim was delivered in its amended form – where the plaintiffs delivered their amended statement of claim – where the defendant applied to strike out certain amendments made on the grounds that they raised new time-barred causes of actions for which leave of the Court was required, with no such leave having been sought or obtained – where the plaintiffs opposed the application on the basis that the amendments did not give rise to new causes of action from those pleaded in the original pleading, or alternatively, the plaintiffs sought leave to make the amendments – whether the plaintiffs’ amendments made in their amended statement of claim should be struck out – whether the plaintiffs should be granted leave to make the amendments sought

Civil Proceedings Act 2011 (Qld) s 16

Uniform Civil Procedure Rules 1999 (Qld) r 375, r 376(1), r 376(4), r 379, r 387

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, cited

Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, cited

Draney v Barry [2002] 1 Qd R 145, cited

Hawkins v Clayton (1988) 164 CLR 539, cited

Paul v Westpac Banking Corporation [2017] 2 Qd R 96, cited

Lee v Abedian [2017] 1 Qd R 549, cited

Menegazzo v Pricewaterhousecoopers (a Firm) [2016] QSC 94, cited

McQueen v Mount Isa Mines [2017] QCA 259, cited

Mokrzecki v Popham [2013] QSC 123, cited

Permanent Trustee Company Limited v O’Donnell [2009] NSWSC 902, related

Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389, related

Westpac Banking Corporation v Hughes [2012] 1 Qd R 581, cited

Wolfe v State of Queensland [2009] 1 Qd R 97, cited

COUNSEL:

K Barlow QC, with B Kable, for the plaintiffs

T Sullivan QC for the defendant

SOLICITORS:

Russells for the plaintiffs

Hall & Wilcox for the defendant

Introduction

  1. [1]
    The plaintiffs filed their claim and statement of claim (the original pleading) in this proceeding on 10 March 2015. 
  2. [2]
    The plaintiffs were companies involved in the business of making and managing loans on mortgage security for the acquisition of residential or investment property.  They claimed damages from the defendant solicitors’ firm for negligence and/or breach of contract in respect of 3 separate retainers – referred to respectively as the O’Donnell, Di Benedetto and Tavares & Rowe Loan Retainers – which must have been entered into in early 2003.  The thrust of the case was that but for the defendant’s wrongful conduct in discharging the retainers on behalf of the lender, three particular lending transactions entered into in early 2003 would not have proceeded, and the plaintiffs would have avoided the significant loss which they suffered as a result of that having occurred. 
  3. [3]
    The plaintiffs also claimed pecuniary and other remedies consequent upon the defendant’s alleged breach of fiduciary duties owed in relation to three separate litigation retainers – referred to respectively as the O’Donnell, Di Benedetto and the Tavares & Rowe Possession Proceedings Retainers – in which the defendant had been retained to institute enforcement proceedings against the respective defaulting borrowers in each of the three impugned lending transactions.  Those retainers were entered into in mid-2005.  Judgment adverse to the plaintiffs was delivered in the Supreme Court of New South Wales on 4 September 2009.  Appeals were prosecuted with very limited success, judgment being delivered on 21 December 2011.  This part of the plaintiffs’ case suggested that but for the breaches of fiduciary duty the loss suffered consequent upon the unsatisfactory outcome of the litigation would have been avoided or reduced.
  4. [4]
    Six years prior to the date the proceeding in this Court commenced was 10 March 2009.  Any cause of action which accrued prior to 10 March 2009, and which had a six year limitation period, would be statute-barred. 
  5. [5]
    The defendant filed a defence on 6 October 2015 and included a plea of a six year limitation defence against the causes of action contained in the original pleading.  Pursuant to the defendant’s application the proceeding was placed on the commercial list on 22 June 2016.  The plaintiffs filed a reply on 5 July 2016 which, amongst other things, contested the operation of the limitations defence in various ways. 
  6. [6]
    For some considerable period after the close of pleadings the plaintiffs foreshadowed an amended statement of claim.
  7. [7]
    On 10 October 2016, the Court ordered that the plaintiffs file and serve an amended statement of claim by 7 November 2016.  In effect, multiple orders were then made by the Court extending out that date.  Those various dates were not met.
  8. [8]
    At a directions hearing on 1 December 2017, the plaintiffs had indicated that they did not require leave for any of their amendments.  Directions were made to permit that question to be resolved by requiring the defendant to bring an application to strike out part or all of the statement of claim or to disallow all or part of any amendment to the statement of claim, once it was delivered in its amended form.  The plaintiffs delivered an amended statement of claim (the amended pleading) on 21 December 2017.  The due date for the defendant’s application was later extended by order on 22 December 2017. 
  9. [9]
    By application filed 29 January 2018, the defendant applied to strike out (or to have disallowed) certain amendments made in the amended pleading, on the grounds that they raised new time-barred causes of action for which leave of the Court was required, and no such leave had been sought or obtained.  The application was not advanced on the basis that the plaintiffs had no arguable answer to the limitation defence, even if they were permitted to amend.
  10. [10]
    The plaintiffs opposed the defendant’s application essentially on the grounds that they disputed the proposition that the amendments raise new causes of action from those pleaded in the original pleading.  However, in the alternative, by application filed on 7 March 2018, the plaintiffs cross-applied for leave under r 376(4) of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) and s 16 of the Civil Proceedings Act 2011 (Qld) to make the amendments impugned by the defendant.
  11. [11]
    The defendant opposed the plaintiffs’ cross-application.
  12. [12]
    I turn first to identify the principles which inform the resolution of the competing applications.  I will then make some preliminary observations about the original pleading.  Finally, it will be convenient to examine the issues in contention under headings proposed by the defendant.

Relevant legal principles

  1. [13]
    Section 16 of the Civil Proceedings Act provides:

16  Amendment for new cause of action or party

  1. (1)
    This section applies to an amendment of a claim, anything written on a claim, pleadings, an application or another document in a proceeding.
  1. (2)
    The court may order an amendment to be made, or grant leave to a party to make an amendment, even though—
  1. (a)
    the amendment will include or substitute a cause of action or add a new party; or
  1. (b)
    the cause of action included or substituted arose after the proceeding was started; or
  1. (c)
    a relevant period of limitation, current when the proceeding was started, has ended.
  1. (3)
    Despite subsection (2), the rules of court may limit the circumstances in which amendments may be made.
  1. (3)
    This section—
  1. (a)
    applies despite the Limitation of Actions Act 1974; and
  1. (b)
    does not limit section 103H.
  1. [14]
    The relevant provisions of the UCPR are as follows:

375  Power to amend

  1. (1)
    At any stage of a proceeding, the court may allow or direct a party to amend a claim, anything written on a claim, a pleading, an application or any other document in a proceeding in the way and on the conditions the court considers appropriate.

  1. (3)
    If there is misnomer of a party, the court must allow or direct the amendments necessary to correct the misnomer.
  1. (4)
    This rule is subject to rule 376.

376  Amendment after limitation period

  1. (1)
    This rule applies in relation to an application, in a proceeding, for leave to make an amendment mentioned in this rule if a relevant period of limitation, current at the date the proceeding was started, has ended.

  1. (4)
    The court may give leave to make an amendment to include a new cause of action only if—
  1. (a)
    the court considers it appropriate; and
  1. (b)
    the new cause of action arises out of the same facts or substantially the same facts as a cause of action for which relief has already been claimed in the proceeding by the party applying for leave to make the amendment.

379  Disallowance of amendment

  1. (1)
    If a party makes an amendment without leave before the filing of the request for trial date, another party may, within 8 days after service on the party of the amendment, apply to the court to disallow all or part of the amendment.
  1. (2)
    On the application, the court may make an order it considers appropriate.

387  When amendment takes effect

  1. (1)
    If a document is being amended under this part, the amendment takes effect on and from the date of the document being amended.
  1. (2)
    However, an amendment including or substituting a cause of action arising after the proceeding started takes effect on and from the date of the order giving leave.
  1. (3)
    Despite subrule (2), if an amendment mentioned in subrule (2) is made, then, for a limitation period, the proceeding as amended is taken to have started when the original proceeding started, unless the court orders otherwise.
  1. [15]
    Pleadings may be amended, including by amendments which introduce new causes of action.  But where an amendment is proposed in a context where a relevant period of limitation, current at the date the proceeding was started, has ended, it is necessary first to work out whether the amendment introduces a new cause of action.  If it does, then the Court may give leave only if the two considerations mentioned in UCPR r 376(4) are established.
  2. [16]
    When does an amendment introduce a new cause of action?  And if a cause of action is new, when will it be regarded as arising out of the same facts or substantially the same facts?
  3. [17]
    The following propositions may be distilled from the cases.[1]
  4. [18]
    First, a cause of action is the combination of the facts which are material to be established for the plaintiff to succeed.
  5. [19]
    Second, not every amendment which seeks to add to or alter that combination of facts should be regarded as an amendment which raises a new cause of action. 
  6. [20]
    Third, if an amendment merely adds detail or particularity which it is reasonable to give to the defendant, then the amendment does not introduce a new cause of action.  Similarly, if it was reasonably apparent from a party’s pleading that the party sought to raise a particular cause of action, an amendment which sought to remedy the fact that not all of the material facts which should have been pleaded for the plaintiff to succeed had already been pleaded, would not be regarded as a pleading which raised a “new” cause of action in this context.  So, for example, an additional head of damage or a change to some aspect of damages might not be a new cause of action, but an alteration which completely changed the damages case such that it involved a different assessment of damages might be.
  7. [21]
    Fourth, locating the dividing line between (1) an amendment which introduces a new cause of action; and (2) an amendment which does not, may involve questions of degree and fine judgment which may not be straightforward and can turn on the level of abstraction at which a plaintiff’s case is described. 
  8. [22]
    Fifth, in locating the dividing line, the pleading should not be analysed too critically, nor read pedantically, but broadly, resolving ambiguities or doubtful expressions in favour of the pleader, and allowing inferences to be drawn from incomplete facts.  Nevertheless, the required analysis should be informed by an appreciation that the policies underlying the limitations statute may be inappropriately undermined by conducting the analysis at too high a level of generality.
  9. [23]
    Sixth, but an amendment to introduce a new (but statute-barred) cause of action may be permitted in the circumstances provided for in UCPR r 376(4) of which it has been authoritatively stated (footnote omitted):[2]

Rule 376 provides a structure within which courts may regulate such procedural applications with due regard to the interests of all parties.  Sub-rule (4), which is directly relevant in the present context, allows a fairly wide discretion in that the court will not allow such an amendment unless it considers it “appropriate” to do so and also considers that the new cause of action arises at least substantially out of the same facts as the existing cause of action.  I do not think that “substantially the same facts” should be read as tantamount to the same facts, and consider that the need to prove some additional facts is not necessarily fatal to a favourable exercise of discretion under r. 376(4).  If the necessary additional facts to support the new cause of action arise out of substantially the same story as that which would have to be told to support the original cause of action, the fact that there is a changed focus with elicitation of additional details should not of itself prevent a finding that the new cause of action arises out of substantially the same facts.  In short, this particular requirement should not be seen as a straitjacket.

  1. [24]
    Seventh, the observations made at [21] and [22] above, may also be made about locating the dividing line between (1) an amendment which introduces a new cause of action which arises out of the same facts or substantially the same facts as an existing cause of action, and (2) one which does not. 
  2. [25]
    Eighth, the adequacy of the original pleading will always be relevant, because a plaintiff cannot be permitted to avoid the operation of the rules by pleading a hopelessly general original pleading so as to make it easier subsequently to contend that proposed amendments are either not new or arise out of substantially the same (hopelessly general) facts.  In Draney v Barry, Pincus JA (with whom McMurdo P and Thomas JA agreed generally) made the following observations:[3]

… one cannot evade the plain intention of O. 32 r. 1(5), or its counterpart r. 376(4), by inserting in a pleading a vague allegation raising no identifiable cause of action.  Such an allegation would be liable to be struck out as not setting out the material facts… But the fact that para. 12(j) was not struck out does not oblige the Court to ignore its vacuous character, when considering whether an amendment will if allowed add or substitute a “new cause of action”.  That view appears, in my opinion, the proper one to take under both the new and the old Rules, but especially under the former, which require that the rules be applied so as to avoid undue technicality and to facilitate their purpose: r. 5(2).  The spirit of the UCP Rules would not be respected if the question whether what are in substance new causes of action should be allowed to be added out of time is made to depend upon the presence or absence in the existing pleading of an allegation of misconduct which is so vague as to be devoid of any ascertainable meaning.

  1. [26]
    Finally, applications in these contexts usually involve the exercise of a discretion and factors of delay and prejudice will be relevant, consistent with the principles in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.  The discretion could arise because –
    1. (a)
      leave was not required because the cause of action was not new, but (as in this case) an application might be made to disallow the amendments pursuant to UCPR r 379; or
    2. (b)
      the amendment did involve addition of a new cause of action which arose out of substantially the same facts, in which case the question arises whether the Court should regard it as “appropriate” to grant leave.
  2. [27]
    I should also make some additional observations about the practical operation of the provisions concerning the grant of leave to amend in circumstances of potential application of limitation of actions statutes.
  3. [28]
    If a new cause of action is presently statute-barred, but would not have been statute-barred at the date the proceeding was started, the effect of the Court being persuaded to make an order permitting the introduction of the cause of action by order pursuant to UCPR r 376(4) is to defeat the possible reliance on the barring statute, because the proceeding as amended is taken to have started when the original proceeding started: UCPR r 387.  It follows that if an amendment seeks to introduce a new (but statute-barred) cause of action and the Court is not persuaded to make an order under UCPR r 376(4), then, because (ex hypothesi) it is clear that the cause of action is statute-barred, leave to amend should be refused. 
  4. [29]
    The Court’s power to make an order under UCPR r 376(4) is limited to the circumstances specified in UCPR r 376(1), namely cases involving an application for leave to make an amendment if a relevant period of limitation, current at the date the proceeding was started, has ended.  But it may be unclear whether the limitation period was current at the date the proceeding was started.  It may also be unclear whether the limitation period had ended.  How should the rule be applied in cases where the question whether the new cause of action is out of time is uncertain of answer?
  5. [30]
    In Mokrzecki v Popham [2013] QSC 123 McMurdo J asked and answered that question in this way (at [20] to [22]):

[20] How then is r 376 to be applied where, as matters can be presently assessed, no more can be said that the cause of action is possibly out of time?  To permit the amendment, but on condition that it be treated as taking effect only from a certain date, to the end of preserving a limitation defence, might unfairly defeat the operation of r 376, which could be beneficial to the plaintiff by relating the amendment back to the date of the original proceeding.

[21]  Where the new cause of action does arise out of the same facts or substantially the same facts as a cause of action already claimed, then allowing the amendment without any condition that it take effect from a certain date would allow the plaintiff the apparently beneficial operation of r 376.  If, in truth, the rule does not apply (according to sub-rule (1)), then there is no relevant detriment to a defendant.  In that event, the period of limitation either would not have ended (in which case no limitation defence would be available) or it would have ended prior to the commencement of the proceeding (in which case the limitation defence would still be available).

[22] In cases which are outside r 376(4) where there may or may not be a new cause of action which is then out of time, the amendment may be permitted but on terms that it take effect from the order giving leave or from some other time, so as not to prejudice a possible limitation defence.  The power to impose this condition is well established.

The case advanced in the original pleading

  1. [31]
    The references in round brackets are to the relevant paragraphs of the original pleading.

Breach of duty as panel lawyer under the Origin Program

  1. [32]
    The background to the proceeding involved a lending business conducted by Australia and New Zealand Banking Group Limited trading as Origin Mortgage Management Services (Origin): (5). 
  2. [33]
    The lending business was referred to as the Origin Program and contemplated transactions involving three active parties: a lender/mortgagor (which would be Origin’s trustee); a mortgage manager; and the various borrower/mortgagors: (5).
  3. [34]
    The business was conducted by reference to three principal documents, namely:
    1. (a)
      a pro forma Mortgage Origination and Management Deed which was entered into with various mortgage managers;
    2. (b)
      the Origin Delegated Lending Authority Guidelines Residential Mortgage Origination Program dated 1 December 2001 (the Origin DLA Guidelines); and
    3. (c)
      the Origin Consumer Credit Code Documents and Procedures Manual for Housing Loans dated 1 May 2001 (the Origin Documents and Procedures Manual).
  4. [35]
    Under the Origin Program so far as is alleged to be relevant to this proceeding:
    1. (a)
      Origin’s trustee was the lender: (5);
    2. (b)
      the third plaintiff (QSHL) was engaged by Origin as the mortgage manager: (7); and
    3. (c)
      by a Third Party Management Deed, the first plaintiff, Firstmac, was appointed as QSHL’s sub-manager to carry out certain of its functions as the mortgage manager under the Origin Program: (8).
  5. [36]
    The terms of the participation in the Origin Program by QSHL and Firstmac were located in two instruments known as the 1998 MOMD[4] and the 2008 MOMD (which replaced the 1998 MOMD): (7), (9) to (14).  Other documents which had significance were the Origin DLA Guidelines and the Origin Documents and Procedures Manual: (6).
  6. [37]
    The original pleading pleaded specific terms of the 1998 MOMD, the 2008 MOMD, the Origin DLA Guidelines, and the Origin Documents and Procedures Manual: (9) to (16).  Amongst other things:
    1. (a)
      the two MOMD documents included terms requiring QSHL to indemnify the lender for its losses arising directly or indirectly from its, or its agent’s, failures;
    2. (b)
      the Origin DLA Guidelines identified “unacceptable purposes” and “acceptable purposes” in respect of how funds were to be used in respect of proposed loans;
    3. (c)
      the Origin Documents and Procedures Manual contemplated that –
      1. the lender/mortgagee would be Origin’s trustee;
      2. panel lawyers would be instructed by the mortgage manager, but would be acting on behalf of Origin and would be expected to protect Origin’s interests and to refer to Origin any matters of concern, whether arising from the mortgage manager’s instructions or otherwise;
      3. Origin would expect a high standard of care from “its panel lawyers” and looked to them to ensure that transactions were properly structured, correct security was taken and properly documented, and any problems with transactions or the misconduct of mortgage managers were promptly reported to Origin;
      4. it was important that panel lawyers recognised that in preparing and accepting loans they were acting for Origin and Origin’s trustee, that panel lawyers must not act on uncorroborated instructions from the mortgage manager, and that panel lawyers should report areas of concern to Origin;
      5. a panel lawyer would be appointed by the lender, amongst other things, so as to prepare transaction documents in accordance with the manual and to check that the specified purpose for the loan was being followed;
    4. (d)
      the Origin Documents and Procedures Manual required the mortgage manager to prepare a document recording relevant instructions for the preparation of the contemplated loan agreement, referred to as the “Schedule 4”, and, after obtaining the lender’s approval for the proposed loan, the mortgage manager was to forward the Schedule 4 to a panel lawyer.
  7. [38]
    I observe that the contemplation of those parts of the Origin Documents and Procedures Manual which I have highlighted in [37](c) above might be thought to pose some difficulties for the notion that the retainer of a panel lawyer could result in professional duties being owed by the panel lawyer to anyone other than Origin or its trustee.  The solution to that conundrum is not apparent from the original pleading.
  8. [39]
    There were a number of other unexplained aspects of the terms so pleaded:
    1. (a)
      Apart from QSHL, the parties to the 1998 MOMD were not identified. 
    2. (b)
      The terms of the 1998 MOMD mentioned an entity referred to as “PIBA”, which seemed to occupy the role which one would have expected to be occupied by Origin.  What PIBA was and what its relationship was with Origin was not pleaded.  For the 1998 MOMD, that meant that the party being indemnified was PIBA, not Origin.
    3. (c)
      Under the 1998 MOMD, there was a pleaded reference to a term by which a guarantor guaranteed QSHL’s performance of its obligations.  The guarantor was identified as persons who were not party to this proceeding.  How that had relevance was not made clear.   
  9. [40]
    The defendant agreed to act as a panel lawyer under the Origin Program, and that it would receive instructions from mortgage managers to prepare and secure the execution of all necessary loan and security documents and to settle the advances of the loans in accordance with the Origin Program: (17).  Panel lawyers, including the defendant, under the Origin Program were “bound” to act in accordance with the Origin DLA Guidelines and the Origin Documents and Procedures Manual: (18).  The original pleading identified that the proposition that the defendant was so bound was to be inferred from certain specified facts: (19).  However there are a number of inadequacies in relation to the manner of pleading of the alleged agreement and the obligations to which the panel lawyers became bound.  I observe:
    1. (a)
      The original pleading of the agreement to act as panel lawyer lacks appropriate detail.  There is no sufficiently precise identification of –
      1. who were the other parties to the defendant’s agreement to act as panel lawyer (and, in particular, who was the client);
      2. if the defendant promised to act as panel lawyer, what was the consideration which flowed from the promisee(s) in exchange for that promise;
      3. whether the agreement was entirely or partly written, oral, or to be inferred (whether from conduct or anything else);
      4. insofar as the agreement was written, what were the documents or parts of documents of which the agreement was comprised and how did they come to form part of it;
      5. insofar as the retainer was oral, what were the conversation(s) concerned, who were the relevant participants, and what was the substance and effect of what was said;
      6. insofar as the retainer was to be inferred, what were the facts from which the inference is to be drawn.
    2. (b)
      The original pleading failed to identify what was the juridical basis of the alleged obligation and to whom was it owed, namely whether it was contract or tort or some other basis.
    3. (c)
      The fact asserted at (17) was to be contrasted with the subsequent assertions of two specific retainers, again apparently without any adequate plea of a contract of retainer in any detail.  That is significant because the claims for relief were not claims for damages for negligence and/or breach of contract in respect of the agreement to act as panel lawyer but were specifically made as claims for damages for negligence and/or breach of contract in respect of the two specific loan retainer agreements subsequently pleaded.
  10. [41]
    In acting as a panel lawyer under the Origin Program, the defendant was pleaded (at (25)) to have owed the following duties to QSHL and Firstmac:
  1. (a)
    A duty to exercise reasonable care, skill and diligence as solicitors in preparing and securing the execution of loan and security documents and in settling the advances of Loans under the Origin Program;
  1. (b)
    A duty to act in accordance with the Origin DLA Guidelines;
  1. (c)
    A duty to act in accordance with the Origin Documents and Procedures Manual;
  1. (d)
    A duty to warn them of any breach of or non-compliance with the Origin DLA Guidelines;
  1. (e)
    A duty to warn them of any breach of or non-compliance with the Origin Documents and Procedures Manual in transactions on which they were acting as panel lawyers, including a duty to ensure that Certificates given to them were true and correct.
  1. [42]
    Presumably these duties were duties said to have been owed in tort.  The duties were pleaded to have arisen in certain “premises”, namely:
    1. (a)
      the defendant had copies of both the 1998 MOMD and the 2008 MOMD: (20) and (21);
    2. (b)
      under those and other identified documents Firstmac was –
      1. authorised by Origin to retain and instruct the defendant in loan transactions under the Origin Program;
      2. liable as guarantor for any default of QSHL under the Origin Program (although how that could possibly be under the 1998 MOMD was left unspecified);
      3. also subject to the liabilities and duties as a sub-manager under the Origin Program; and
      4. entitled to receive a solicitor’s certificate prior to completion of each transaction, in the terms required by the Origin Documents and Procedures Manual: (22);
    3. (c)
      under those and other identified documents, QSHL was –
      1. authorised by Origin to retain and instruct the defendant in loan transactions under the Origin Program; and
      2. subject to the liabilities and duties as a manager under the Origin Program: (23);
    4. (d)
      the defendant knew or ought to have known of the matters in (b) and (c): (24).
  2. [43]
    Firstmac’s and QSHL’s claims were then made in respect of two particular loan transactions: the O’Donnell Loan and the Di Benedetto Loan.  In each case, the allegation was that the defendant prepared the necessary loan documentation and provided its solicitor’s certificate to QSHL and Firstmac, but in doing so breached its duties.
  3. [44]
    As to the O’Donnell Loan ((37) to (47)):
    1. (a)
      in early 2003, Firstmac forwarded a Schedule 4 document to the defendant in respect of a proposed loan between Origin’s trustee and the O’Donnells which identified the loan purposes were to refinance an existing $6,000 loan and to establish a facility to purchase an investment property and special conditions for the loan;
    2. (b)
      the defendant accepted the instructions and proceeded to prepare the necessary documents in respect of the O’Donnell Loan;
    3. (c)
      in so acting as panel lawyers in respect of the O’Donnell Loan (referred to in the pleading as “the O’Donnell Loan Retainer”) the defendant was subject to the duties referred to at [41] above (presumably in a contractual sense);
    4. (d)
      the defendant prepared loan transaction documents in late December 2002 or early January 2003 and provided a solicitor’s certificate on about 5 February 2003 which certified “in accordance with the terms of the precedent certificate forming document D1 of the Origin Documents and Procedures Manual”;
    5. (e)
      settlement occurred on 7 February 2003 and details concerning the loan made by Origin’s trustee to the O’Donnells in reliance on the certificate were set out in the pleading;
    6. (f)
      in truth the purpose of the O’Donnell Loan did not accord with the instructions and was not for the purpose stated in the Schedule 4, but was to obtain money to be paid to or for the benefit of another entity (Streetwise Property) for a purpose which did not involve purchasing an investment property or any other purpose permitted by the Origin DLA Guidelines;
    7. (g)
      in breach of its duties, the defendant failed to make the requisite inquiries and the defendant –
      1. did not document the “cash out component” of $489,651.82 (which was in excess of $100,000);
      2. did not refer the “cash out component” to Origin, Origin’s trustee or the mortgage insurer;
      3. whereas the purpose and intention of Streetwise Property was not for the permitted purposes:
        1. A failed to make any inquiries or otherwise attempt to determine that the purpose of the loan was to acquire a residential or investment property;
        2. B failed to make any inquiries to determine that the loan proceeds were to be used for the purpose stated in the Schedule 4;
      4. failed to require production of a contract for the purchase by the O’Donnells of a residential or investment property;
      5. failed to appreciate or ascertain that the O’Donnells had not entered into a contract for the purchase of a residential or investment property.
  4. [45]
    As will appear, it eventually transpired in the course of enforcement litigation in New South Wales[5] taken when the borrower defaulted, that the involvement of Streetwise was as a purported joint venturer with the O’Donnells for investment and property development purposes.  I say “purported” because Streetwise turned out to be a fraudster.  In the Supreme Court of New South Wales, Price J summarised the overall circumstances of the O’Donnell Loan as follows:[6]

Mr and Mrs O’Donnell, however, had been dishonestly mislead by Streetwise about their investment.  Furthermore, Streetwise had fraudulently completed the loan application form and income declaration as Streetwise knew that truthful disclosure of the O’Donnells’ assets and income would not meet the lending guidelines either under the Origin Program or the FirstMac securitised lending program.  But for the fraud of Streetwise, the loan would not have been approved.  Mr and Mrs O’Donnell were unaware that the loan had been approved upon the fraudulent material inserted by Streetwise.  If they had known that the lender did not take into account the promise by Streetwise to contribute to the loan repayments when considering the application and that their financial position truthfully stated did not meet the lending guidelines, I am satisfied on the balance of probabilities that the O’Donnells would not have proceeded with the loan application.

  1. [46]
    I observe that the pleading of the O’Donnell Loan Retainer was inadequate.  Given that the claim was for damages for negligence and/or breach of contract in respect of that retainer, that is embarrassing.  There is no sufficiently precise identification of –
    1. (a)
      who were the other parties to the contract of retainer and, in particular, who was the client;
    2. (b)
      if the defendant promised to act as panel lawyer in respect of the loan, what was the consideration flowing from the promisee(s) in exchange for that promise;
    3. (c)
      whether the retainer was entirely or partly written, oral, or to be inferred (whether from conduct or anything else);
    4. (d)
      insofar as the retainer was written, what were the documents or parts of documents of which the retainer was comprised and how did they become part of it;
    5. (e)
      insofar as the retainer was oral, the conversation(s) concerned, who were the relevant participants, and what was the substance and effect of what was said;
    6. (f)
      insofar as the retainer was to be inferred, the facts from which the inference is to be drawn.
  2. [47]
    Moreover, the confusion between the allegation of the initial agreement to act as panel lawyer and the allegation of the existence of the O’Donnell Loan Retainer, adds to difficulties of analysis as to how it was that that the tortious duties referred to at [41] above became transmuted into contractual obligations owed pursuant to the specific retainer.  How it was that any of the plaintiffs became party to any contract of retainer with the defendant is also unclear.
  3. [48]
    In my view these weaknesses in the pleading might assume real significance because it is unclear how contractual and tortious duties became owed to the plaintiffs, as opposed to Origin and its trustee.  As I have already noted, it appeared from the Origin Documents and Procedures Manual that the contemplation of the Origin Program was that a panel lawyer’s client would be Origin and/or its trustee and specifically not the mortgage manager, not least because part of the panel lawyer’s duty was to protect Origin and/or its trustee from any misconduct by the mortgage manager.  How then did contractual and/or tortious duties become owed to the mortgage manager in that context?  I touched upon this problem in a different context in Lee v Abedian [2017] 1 Qd R 549 at [48] to [50], where I observed (footnotes in original):

[48]  The alleged retainer was that the solicitors would prepare for their client a report about potential legal proceedings by the client against a third party, so that the client could use that report in what the client conceived were its own interests. 

[49]  The alleged duty of care was effectively a duty to take reasonable care in one of the key tasks to be undertaken in the performance of that retainer, namely in the manner of expression of the report.  Undoubtedly the solicitors owed their client a duty of care in both contract and tort.  But in this case it is suggested that the solicitors also owed a duty to the third party who was the client’s potential adversary in the legal proceedings which would be the subject of the contemplated report.

[50]  In my view, the suggested duty runs up against the stumbling block of the following statement by Brennan CJ in Hill v Van Erp (1997) 188 CLR 159 at 167[7]:

Generally speaking, however, a solicitor’s duty is owed solely to the client subject to the rules and standards of the profession. That is because the solicitor's duty is to exercise professional knowledge and skill in the lawful protection and advancement of the client's interests in the transaction in which the solicitor is retained and that duty cannot be tempered by the existence of a duty to any third person whose interests in the transaction are not coincident with the interests of the client.

[51]  It may be acknowledged that there are exceptions to the general rule to which his Honour referred. Thus:

  1. (a)
    There are cases where although there is no formal solicitor/client relationship, a solicitor’s conduct demonstrates an assumption of responsibility, with known reliance by the plaintiff, such that a duty of care may arise by reason of an implied professional retainer agreement: see the cases cited in Carey v Freehills (2013) 303 ALR 445 at 525; [2013] FCA 954 at [311] per Kenny J.
  1. (b)
    There are cases in which a duty of care owed by a professional to someone other than their client has been held to exist on the basis of normal principles relating to negligent misstatement, which include the requirements of assumption of responsibility and reasonable reliance: see Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 and Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241.
  1. (c)
    There are also cases in which a duty of care has also been recognised as being owed by a solicitor to someone other than their client (e.g. beneficiaries in a will or the client’s trustee in bankruptcy), but in those cases there is a coincidence of interest between the client and third party: see Hill v Van Erp and Blackwell v Barroile Pty Ltd (1994) 51 FCR 347.

[52] However, this case does not fit into any of those exceptions.  The plaintiff concedes that he cannot point to any case which directly supports the existence of a duty of care in analogous circumstances.

[53] In assessing whether a duty of care arises in a novel circumstance or category, authority suggests I should undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by reference to the salient features or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury: see Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649 at 675 to 676; [2009] NSWCA 258 at [100] to [102] per Allsop P, recently cited with approval in Grills v Leighton Contractors Pty Ltd [2015] NSWCA 72 at [98] to [100] per Beazley P (with whom Barrett and Gleeson JJA agreed) and Kinsella v Gold Coast City Council (No 3) [2016] QSC 14 at [31] to [32] per Burns J.

  1. [49]
    I presently express no view as to whether the “stumbling block” to which I adverted in Lee v Abedian would prove similarly problematic for the plaintiffs in this proceeding.  It may be that there are facts or documentation which demonstrate that the apparent problem does not exist.  I mention the problem at this stage to highlight the significance of having a proper articulation of each relevant retainer in a pleading of this nature.  I will return to this issue when I address the defendant’s complaints that the pleading of the retainer had a “vacuous character”.
  2. [50]
    As to the Di Benedetto Loan ((48) to (58)):
    1. (a)
      in early 2003 Firstmac forwarded a Schedule 4 document to the defendant in respect of a proposed loan between Origin’s trustee and the Di Benedettos which identified the loan purpose was to free up equity for investment purposes;
    2. (b)
      the defendant accepted the instructions and proceeded to prepare the necessary documents in respect of the Di Benedetto Loan;
    3. (c)
      in so acting as panel lawyers in respect of the Di Benedetto Loan (referred to in the pleading as “the Di Benedetto Loan Retainer”) the defendant was subject to the duties pleaded referred to at [41] above;
    4. (d)
      the defendant prepared loan transaction documents in late January 2003 or early February 2003 and provided a solicitor’s certificate on about 24 February 2003 which certified “in accordance with the terms of the precedent certificate forming document D1 of the Origin Documents and Procedures Manual”;
    5. (e)
      settlement occurred on 26 February 2003 and details concerning the loan made by Origin’s trustee to the Di Benedettos in reliance on the certificate were set out;
    6. (f)
      in truth the purpose of the Di Benedetto Loan was similar to that of the O’Donnell Loan;
    7. (g)
      the defendant breached its duties in the same way as it had in relation to the O’Donnell Loan (save for the alleged breaches in relation to documenting a cash out component). 
  3. [51]
    I observe that the pleading of the Di Benedetto Loan Retainer suffered from similar inadequacies to the pleading of the O’Donnell Loan Retainer, as identified at [46] and [47] above. 

Breach of duty as panel lawyer under the Firstmac Program

  1. [52]
    Under the second program (the Firstmac Program):
    1. (a)
      the second plaintiff (Tonto) was one of a number of lenders: (26(a)); and
    2. (b)
      Firstmac was the mortgage manager: (26(b)).
  2. [53]
    Firstmac, Tonto (and other lenders) and the defendant entered into an agreement, pursuant to which the defendant agreed to act as a panel lawyer to the Firstmac Program.  Under that program, the defendant would receive instructions from Firstmac and Tonto to prepare and secure the execution of all necessary loan and security documents and to settle the advances of loans in accordance with the Firstmac Program: (28).  The agreement was contained in the “Firstmac Documents and Procedures Manual” and to be inferred from the defendant’s conduct in accepting instructions to act as panel lawyer in thousands of retainers, including in respect of the particular retainer referred to as the Tavares & Rowe Retainer: (27) and (29).
  3. [54]
    The original pleading failed to plead the alleged agreement to act as a panel lawyer in appropriate detail.  How, for example, did the Firstmac Documents and Procedures Manual come to express a solicitors’ retainer?  If this an arguable proposition, there must be other detail, not yet pleaded, to permit that conclusion to be reached.  Moreover, the facts asserted at (27) to (29) of the original pleading are to be contrasted with the subsequent assertion of a specific retainer for the Tavares & Rowe Loan, again without any adequate plea of a contract of retainer.  Critically, it is the Tavares & Rowe Loan Retainer, not the panel lawyer agreement which is the retainer which is sued upon.
  4. [55]
    The original pleading pleaded specific terms of the Firstmac Documents and Procedures Manual: (30).  Amongst other things, panel solicitors were required to make reasonable inquiries to determine that the loan proceeds are used for the “loan purpose” and to review a purchase contract to ensure that the purchase price tallies with the purpose section of the instructions. But there were indications that the client was intended to be the lender/mortgagee and another company (without any indication that Firstmac was intended to be the client).
  5. [56]
    In acting as a panel lawyer under the Firstmac Program, the defendant was pleaded (at (34)) to have owed the following duties to Tonto and Firstmac:
  1. (a)
    A duty to exercise reasonable care, skill and diligence as solicitors in preparing and securing the execution of loan and security documents and in settling the advances of Loans [under] the Firstmac Program; and
  1. (b)
    A duty to warn them of any breach of or non-compliance with the Firstmac Documents and Procedures Manual in transactions on which they were acting as panel lawyers, including a duty to ensure that Certificates given to them were true and correct.
  1. [57]
    Presumably these duties were duties said to have been owed in tort.  The duties were pleaded to have arisen in certain “premises”, namely:
    1. (a)
      by reason of the Firstmac Documents and Procedures Manual, Tonto was –
      1. one of the lenders under the Firstmac Program;
      2. the client of the defendant in its retainers as panel lawyers under the Firstmac Program including in particular the Tavares & Rowe Loan Retainer; and
      3. entitled to receive a solicitor’s certificate prior to completion of each transaction, in the terms required by the Firstmac Documents and Procedures Manual: (31);
    2. (b)
      by reason of the Firstmac Documents and Procedures Manual, Firstmac was –
      1. the client of the defendant in its retainers as panel lawyers under the Firstmac Program including in particular the Tavares & Rowe Loan Retainer; and
      2. entitled to receive a solicitor’s certificate prior to completion of each transaction, in the terms required by the Firstmac Documents and Procedures Manual: (32);
    3. (c)
      the defendant knew or ought to have known of the matters in [57](a) and [57](b): (33).
  2. [58]
    Further, or alternatively, to the tort case, the defendant was alleged to be the subject of contractual obligations to Firstmac and Tonto as follows:
    1. (a)
      (by the terms of the Firstmac Documents and Procedures Manual) the defendant was expressly obliged:
      1. to act in accordance with the Firstmac Documents and Procedures Manual; and
      2. to warn them of any breach of, or non-compliance with, the Firstmac Documents and Procedures Manual in transactions on which they were acting as panel lawyers, and to ensure that certificates given to them were true and correct: (35)
    2. (b)
      (by a term implied into the contract by law) the defendant was obliged to exercise reasonable care, skill and diligence as solicitors in preparing and securing the execution of loan and security documents and in settling the advances of loans under the Firstmac Program: (36).
  3. [59]
    Again, it is notable that the contract sued upon was not the agreement to act as a panel lawyer, but was the separate and specific Tavares & Rowe Loan Retainer.
  4. [60]
    As to the Tavares & Rowe Loan Retainer ((59) to (70)):
    1. (a)
      in April or early May 2003, Firstmac forwarded a Schedule 4 document to the defendant in respect of a proposed loan between Tonto’s trustee and Tavares & Rowe which identified the loan purpose was to refinance a $40,000 ANZ Bank Loan and surplus funds for investment purposes;
    2. (b)
      the defendant accepted the instructions and proceeded to prepare the necessary documents for the Tavares & Rowe Loan;
    3. (c)
      in acting as panel lawyers in respect of the Tavares & Rowe Loan (referred to in the pleading as “the Tavares & Rowe Retainer”), the defendant was subject to the duties pleaded referred to at [56] and [58] above;
    4. (d)
      the defendant prepared loan transaction documents in April or early May 2003 and provided a solicitor’s certificate on about 28 May 2003;
    5. (e)
      settlement occurred on 30 May 2003 and details concerning the loan made in reliance on the certificate were set out;
    6. (f)
      in truth the purpose of the Tavares & Rowe Loan, was similar to that of the O’Donnell and Di Benedetto Loans;
    7. (g)
      the defendant breached its duties in the same way as it had with the Di Benedetto Loan. 
  5. [61]
    I observe that the pleading of the Tavares & Rowe Loan Retainer suffered from similar inadequacies as the pleading of the O’Donnell Loan Retainer and the Di Benedetto Loan Retainer, as identified at [46] above, although the solicitor’s certificate was in a form which gave a warranty to people other than the lender, which may affect the question of whether duties were owed to any other party.  Still, the confusion between the allegation of the initial agreement to act as panel lawyer and the allegation asserting the existence of the Tavares & Rowe Loan Retainer, adds to difficulties of analysis as to how it was that the tortious and contractual duties referred to at [56] and [58] above became transmuted into contractual obligations owed pursuant to the specific retainer.

Breach of duty in acting during Possession Proceedings

  1. [62]
    The plaintiffs assert that the borrowers in respect of each of the three lending transactions defaulted: the O’Donnells on 7 August 2005 ((73)); the Di Benedettos in late August or early September 2005 ((80)) and Tavares & Rowe on 15 August 2005 ((87)).
  2. [63]
    Within a few weeks of each default, the defendant was retained to institute proceedings in the name of the lender (Origin’s trustee in the first two cases and Tonto in the last) against the borrower including, if necessary, proceedings for possession of the mortgaged property: (74), (81), (88).  These retainers were respectively pleaded as:
    1. (a)
      the O’Donnell Possession Proceedings Retainer;
    2. (b)
      the Di Benedetto Possession Proceedings Retainer; and
    3. (c)
      the Tavares & Rowe Possession Proceedings Retainer.
  3. [64]
    I observe the same inadequacies existed here as existed in relation to the earlier specific “loan” retainers alleged to have been entered into with the three borrowers.  Firstmac was pleaded as having retained the defendant in the first two retainers, but to commence proceedings on behalf of Origin’s trustee, presumably because Origin’s trustee was the lender.  But which of them was the client?  There is no sufficiently precise identification of –
    1. (a)
      who were the other parties to the contract of retainer (including, specifically who was the client);
    2. (b)
      if the defendant promised to act as solicitor in respect of litigation, what was the consideration flowing from the promisee(s) in exchange for that promise;
    3. (c)
      whether the retainer was entirely or partly written, oral, or to be inferred (whether from conduct or anything else);
    4. (d)
      insofar as the retainer was written, what were the documents or parts of documents of which the retainer was comprised and how did they become part of it;
    5. (e)
      insofar as the retainer was oral, the conversation(s) concerned, who were the relevant participants, and what was the substance and effect of what was said;
    6. (f)
      insofar as the retainer was to be inferred, the facts from which the inference is to be drawn.
  4. [65]
    In the Tavares & Rowe Possession Proceedings Retainer, the defendant was pleaded as having been retained by Firstmac and Tonto to institute proceedings in the name of Tonto, and a similar issue arises.
  5. [66]
    Although that fact is not pleaded, it seems that a proceeding or proceedings must have been commenced pursuant to each of those retainers, because it is then pleaded that each of the borrowers filed a defence and cross-claim which complained of the involvement of Streetwise Properties; asserted that the loan was actually used to the benefit of that company or a company associated with it; and complained of the failure by the lender to comply with its own guidelines and of the failure by the lender to ensure that the loan was actually paid to the benefit of the borrower: (92) to (93).
  6. [67]
    In or about July 2008, Origin required QSHL, Firstmac, and others to enter into a certain deed of indemnity with Origin, as a condition of Origin not taking over from Firstmac the conduct of the three Possession Proceedings.  Under that deed, Firstmac and Tonto were obliged to indemnify Origin and its trustee from any claims which might be brought against them in relation to the subject matter of the Possession Proceedings and against any loss they might suffer as a result of the success of the borrower’s defence in the proceedings: (108) to (113).
  7. [68]
    During the Possession Proceedings, affidavit evidence was received which made particular assertions about the conduct of the defendant in the Firstmac and Origin Programs: (98).  A witness statement, and later an affidavit, of one of the partners of the defendant, Donald Thorne, was prepared in response: (99) to (103).  The plaintiffs plead various steps taken and not taken by the defendant in discharging each of the Possession Proceedings Retainers: (104) to (107), and how consequent upon objection being taken by Origin, the defendant declined to act for QSHL, Firstmac and others: (110) to (112).
  8. [69]
    The plaintiffs plead that the defendant owed the plaintiffs various fiduciary duties in acting for the plaintiffs in the Possession Proceedings ((124)), namely:
  1. (a)
    To act in their best interests;
  1. (b)
    Not to act where a member or employee was likely to be required to give evidence material to the determination of contested issues;
  1. (c)
    To act with reasonable care and skill and, in particular, to seek out evidence relevant to the issues raised by the Defences and Cross-claims and to advise the Plaintiffs herein of the effect of such evidence on their prospects in the Possession Proceedings;
  1. (d)
    To avoid any conflict between any such duties and their interests; and
  1. (e)
    To avoid any conflict between any such duties and their duties to any other persons (including Origin and [Origin’s trustee]).
  1. [70]
    The defendant breached those duties (see (128) and (129)) because:
    1. (a)
      the defendant ought not to have acted in the Possession Proceedings but did act;
    2. (b)
      the defendant ought to have disclosed the existence of the conflicts referred to in (126), and the fact that those conflicts meant the defendant could not act, but did not do so;
    3. (c)
      the defendant ought to have advised the plaintiffs that they ought to take independent legal advice, as a consequence of such conflicts, but did not do so;
    4. (d)
      the defendant ought not to have charged and could not retain the fees and disbursements which were paid to them in respect of the Possession Proceedings;
    5. (e)
      the defendant did not advise the plaintiffs in the Possession Proceedings, or to the plaintiffs herein of the existence of the particular witnesses or of the evidence they could give.
  2. [71]
    The trial of the Possession Proceedings took place in March and April 2009.  Judgment was delivered in the Supreme Court of New South Wales on 4 September 2009 which dismissed the plaintiffs’ claims, set aside each of the loans, and awarded judgment in favour of the borrowers relieving them of their obligations to the plaintiffs: (120) and (122).  The loans were found to be unjust pursuant to the Contracts Review Act 1980 (NSW).[8]  Price J held this was so for the following reasons:[9]
    1. (a)
      the contracts arose from the unfair pressure, deception and fraudulent conduct of Streetwise, acting on behalf of Tonto and Origin’s trustee;
    2. (b)
      the way in which Tonto conducted its business with Streetwise exposed the borrowers to a serious risk of fraud;
    3. (c)
      the relevant lending guidelines of Origin and Firstmac were not followed; and
    4. (d)
      Tonto and Origin’s trustee had knowledge of the borrowers’ true financial position (that knowledge imputed as a result of Streetwise’s agency relationship with Tonto and Origin’s trustee).
  3. [72]
    The plaintiffs paid the defendant about $769,449.29 for costs and disbursements in the Possession Proceedings: (130).
  4. [73]
    Appeals were prosecuted with very limited success,[10] leaving the plaintiffs with costs liability which was ultimately settled for $1,200,000: (131) to (136).

The mechanism by which loss was allegedly suffered

  1. [74]
    The mechanism by which the alleged breaches of duty in respect of the three impugned loan transactions was said to have caused loss to the plaintiffs overlaps to some extent with the separate case for breach of fiduciary duty in relation to the three separate retainers to act during the Possession Proceedings. 
  2. [75]
    So far as the conduct alleged to have been in breach of duties concerning the O’Donnell Loan Retainer and the Di Benedetto Loan Retainer, the case (see (137) and (138)) was:
    1. (a)
      Had the defendant not breached its duties and provided its solicitor’s certificate in each case, Firstmac would not have lent the principal sum to either the O’Donnells or the Di Benedettos.  (I observe that this allegation is inconsistent with the earlier allegation that the loans were by Origin’s trustee not by Firstmac.)
    2. (b)
      Because Firstmac lent the principal sum, it became liable to indemnify Origin under the terms of the 1998 MOMD, the 2008 MOMD and another instrument referred to as the Origin Litigation Indemnity Deed for “all of the liability to the O’Donnells [and Di Benedettos]” under the Possession Proceedings, only recovering a small part of the loan which had been made to the O’Donnells.  (I observe that exactly what this liability was, was unclear.  Moreover, I have earlier referred to the problem caused by terms which referred to an entity named “PIBA”.)
  3. [76]
    How QSHL or Tonto were entitled to advance any claim for relief for breach of duties in respect of those two retainers (as they have done in the claims for relief) was entirely unclear.
  4. [77]
    So far as the conduct alleged to have been in breach of duties concerning the Tavares & Rowe Loan Retainer, the case (see (139)) was that if the defendant had not breached its duties and provided its solicitor’s certificate, Firstmac would not have lent the principal sum and would not have lost the whole of the principal sum lent.  How QSHL or Tonto were entitled to advance any claim for relief for breach of duties in respect that retainer (as they have done in the claims for relief) was entirely unclear.
  5. [78]
    All the plaintiffs were alleged to have suffered loss by reason of the defendant’s breach of fiduciary duty during the Posession Proceedings as follows:
    1. (a)
      they were deprived of the benefit of independent legal advice in the conduct of the Possession Proceedings;
    2. (b)
      they lost the opportunity to settle the Possession Proceedings on terms more advantageous than the outcome of the appeals;
    3. (c)
      Firstmac lost the opportunity to avoid or reduce its liability to Origin under the 1998 MOMD and the 2008 MOMD, recorded in the Origin Litigation Indemnity Deed;
    4. (d)
      they paid the sum of $1,481,704.64 to Origin, under the Origin Litigation Indemnity Deed for the principal and interest under the O’Donnell Loan and the Di Benedetto Loan (for which they were liable under the 1998 MOMD and the 2008 MOMD);
    5. (e)
      they paid the sum of $1,008,215.22 to Origin, under the Origin Litigation Indemnity Deed to reimburse it for legal costs paid by it in respect of the Possession Proceedings (for which they were liable under the 1998 MOMD and the 2008 MOMD);
    6. (f)
      they paid the sum of approximately $769,449.29 to the defendant for fees and disbursements in the conduct of the Possession Proceedings;
    7. (g)
      they paid to Gadens Lawyers the sum of $604,749.90 in respect of the appeals;
    8. (h)
      they paid to Allens Arthur Robinson the sum of $178,686.22 in respect of the costs due to the O’Donnells, the Di Benedettos and Tavares & Rowe;
    9. (i)
      they became liable to pay, and did pay to the O’Donnells, the Di Benedettos and Tavares & Rowe the sum of approximately $1,200,000 in respect of the costs of the Possession Proceedings and the appeals.
  6. [79]
    I observe that the pleading is deficient in terms of the pleading of the relevant material which would establish the requisite causal link between the alleged breaches of fiduciary duty and the loss individually suffered by the individual plaintiffs.  In particular is that so in relation to the counterfactual position which would have arisen if the impugned conduct had not occurred. 

The defendant’s objections to the amended pleading

  1. [80]
    The references in round brackets are to the relevant paragraphs of the amended pleading.

New pleading of “The Origin Pitt Street Manual”: Document D1 of the Origin Pitt Street Manual [Paragraphs 6(d), 16A, 18(c), 18A, 18B(g) and 21A]

  1. [81]
    The amended pleading at (6(d)) added a plea that a new document formed part of the Origin Program and operated to inform the duty which the defendant needed to perform as panel lawyer.  The new document was called the “Origin Pitt Street Manual” dated 16 April 2002. I agree with the defendant’s submission that this is an embarrassing plea as the amended pleading at (5B) states that the Origin Program operated from 1 October 1998, four years prior to the pleaded date of the Origin Pitt Street Manual.  The plaintiffs must address this deficiency.
  2. [82]
    The amended pleading at a new (16A) then pleads out the relevant terms of this new document being an introductory paragraph followed by eight provisions.  I agree with the defendant that because the document newly included at (6(d)) is pleaded to be part of the Origin Program as defined, it is necessarily the case that it is then picked up in subsequent paragraphs where the defined term “Origin Program” is used.
  3. [83]
    The Origin Pitt Street Manual is then expressly included by amendment again in new (18(c)). Paragraph (18(c)) (as amended) is a plea, inter alia, that when a panel lawyer was retained, that panel lawyer “was bound and had a duty to act in accordance with” “Document D1 of the Origin Pitt Street Manual”. 
  4. [84]
    New (18A) then pleads an implied term of the retainer being to use reasonable care, skill and diligence in the preparation and execution of loan security documents and in settling the advances of loans in the Origin Program.  I agree with the defendant that this is another example of the implicit incorporation of the new document by use of the “Origin Program” definition.
  5. [85]
    The new (18B(g)) pleads for each of the O’Donnell Loan and the Di Benedetto Loan that the defendant “was obliged and under a duty” as part of its retainer, inter alia, only to provide a solicitor’s certificate in certain circumstances.  This plea relies in part on the new pleading of the Origin Pitt Street Manual.
  6. [86]
    The new (21A) contains a new pleading of reliance on the defendant, inter alia, complying with its obligations under the Origin Pitt Street Manual.
  7. [87]
    I accept the defendant’s submissions that the new (6(d)), (16A), (18(c)), (18B(g)) and (21A) each plead and rely upon the new allegation of the Origin Pitt Street Manual forming part of the Origin Program, the relevant content of the provisions of that Manual, to then give rise to contractual and tortious obligations that apply by reference to that document specifically.
  8. [88]
    However, I do not accept that the allegations should in this context be regarded as necessarily giving rise to new causes of action because, as the plaintiffs contend, the new Document D1 already formed part of the plaintiffs’ breach case because the solicitor’s certificate, the inadequacy of the work leading up to which forms the basis of the claim, was pleaded as a certificate which certified in accordance with Document D1: see (43) and (54).  The new plea of the terms and content of Document D1 seems to me to be filling in details and the defendant’s complaint is too pedantic and narrow an approach.
  9. [89]
    Moreover and in any event, there is no doubt that the plea arises out of substantially the same fact as the existing pleading.
  10. [90]
    The principal reservation I have in relation to permitting the amended pleading to proceed concerns the inadequacy of the pleas of the contractual retainers.  That is an issue to which I will return.

Pleading of new provisions of existing documents [Paragraphs 16(b) and 16(c)]

  1. [91]
    As I have mentioned, the original pleading had pleaded that a document called the “Origin Documents and Procedures Manual” had formed part of the Origin Program and had pleaded material terms of that document at (16). The amended pleading now pleads additional parts of the document paragraphs (16(b)) and (16(c)).  
  2. [92]
    The amendments:
    1. (a)
      plead terms which clarify that the panel solicitor was obliged to provide a solicitor’s certificate, which in terms link up with the existing case concerning the adequacy of the solicitors’ conduct in relation to certification;
    2. (b)
      plead terms which clarify that the solicitor’s duty was to check the purpose of the loan;
    3. (c)
      otherwise provide further detail capable of being relevant to the assessment of the content of the solicitors’ duty in contract or tort, and, possibly the person(s) to whom the duty was owed.
  3. [93]
    The new allegations should not be regarded as advancing new causes of action in this context. 
  4. [94]
    Moreover and in any event, there is no doubt that the plea arises out of substantially the same fact as the existing pleading.
  5. [95]
    Again, the principal reservation I have in relation to permitting the amended pleading to proceed concerns the inadequacy of the pleas of the contractual retainers.  That is an issue to which I now turn.

Retainer plea in relation to the Origin Program [Paragraphs 18A, 18B, 25 and 25A]

  1. [96]
    The defendant complained that the retainer plea in relation to the Origin Program was a plea of a “vacuous character”, using the language of Draney v Barry, quoted at [25] above.  I think this is an overstatement, but that there is nevertheless a problem with the pleading which must be addressed.
  2. [97]
    I have earlier expressed my adverse view of the adequacy of the manner of pleading of the various agreements and retainers apparently relevant to the plaintiffs’ causes of action and why that inadequacy assumes significance.  The various retainers which, in one way or another, reflect these inadequacies were:
    1. (a)
      the alleged agreement to act as panel lawyer for the Origin Program;
    2. (b)
      the alleged separate loan retainers in respect of the O’Donnells and the Di Benedettos;
    3. (c)
      the alleged agreement to act as panel lawyer for the Firstmac Program;
    4. (d)
      the alleged separate loan retainer in respect of Tavares & Rowe;
    5. (e)
      the alleged separate Possession Proceedings retainers in respect of the O’Donnells, the Di Benedettos and Tavares & Rowe.
  3. [98]
    It is relevant in this section of these reasons to confine my remarks to the adequacy of the amended pleading of the alleged agreement to act as panel lawyer for the Origin Program and the related pleading of the specific retainers to act in respect of a proposed loans under that program to the O’Donnells and the Di Benedettos. 
  4. [99]
    The pleading of the alleged agreement to act as panel lawyer has been changed only by reference to there being an approval by Origin: see amended pleading at (17).  Otherwise the inadequacies I previously identified at [40] above still exist.
  5. [100]
    New paragraphs (17A) and (17B) pleaded what are apparently intended to be the specific pleas of the “O’Donnell Loan Retainer” and the “Di Benedetto Loan Retainer”.  Embarrassingly, there are no longer any specific retainers so defined, even though those terms still exist elsewhere in the amended pleading, including in the claims for relief.  Presumably that is just sloppy pleading which may be fixed.  I will still refer to the specific retainers as though they had continued to be defined by reference to the previous terms. Although the plea now identifies that the defendant was retained by Firstmac and that the consideration was in each case an agreement to pay fees, the other inadequacies identified at [46], [47] and [51] above still exist.
  6. [101]
    The new (18A) pleads an implied term to act with reasonable care, skill and diligence, not previously pleaded. 
  7. [102]
    Paragraph (18B) is a new pleading which asserts that the effect of paragraphs (5), (6) and (15) to (18A) meant that the defendant, pursuant to its retainer, was obliged and under a duty to do the eight things specifically set out therein.  The content of the duty alleged pursuant to each of the separate retainers was newly expressed in these terms (formatting altered to separate the formulation of the duty from the identification of the documents apparently said to provide the foundation for the duty):

… pursuant to its retainer with Firstmac for each of the O’Donnell Loan and the Di Benedetto Loan, the Defendant was obliged and under a duty:

  1. (a)
    to “determine” and “check” that the purpose of the loan as set out in the relevant Schedule 4 document was in fact the purpose for which the funds were to be used

(paragraph 15 entitled “Settlement and post settlement” in Part 2 - Documentation of loans of the Origin Documents and Procedures Manual as referred to in paragraph 16(b) above);

  1. (b)
    where the borrowed funds were to be credited to a person other than the borrower, to have the person who was to receive the funds certify that they were to be used for the purpose identified in the relevant Schedule 4

(paragraph 3 of “Commonly asked questions” in the Origin Documents and Procedures Manual referred to in paragraph 16(c) above);

  1. (c)
    to make enquiries sufficient to satisfy itself that the funds were to be used for an acceptable purpose within the meaning of the Origin Documents and Procedures Manual

(paragraphs l and 3 of “Commonly asked questions” in the Origin Documents and Procedures Manual referred to in paragraph 16(c) above; the “Searches and Enquiries” section of the Origin Documents and Procedures Manual referred to in paragraph 16(e) above; clause 6.3 of the Origin DLA Guidelines referred to in paragraph 15 above);

  1. (d)
    to serve transaction documents upon the borrowers at their home addresses, or in exceptional cases, the borrowers’ lawyers, but on no other party

(paragraph 9(a) of “Service of documentation by panel lawyer” in the Origin Documents and Procedures Manual referred to at paragraph 16(b) above);

  1. (e)
    to ensure that the loan transaction documents complied with their instructions, as contained in the Schedule 4, and not to act on uncorroborated instructions from mortgage managers

(“Panel Lawyers” section in the Origin Documents and Procedures Manual referred to at paragraph 16(d) above; paragraph 4 of “Commonly asked questions” in the Origin Documents and Procedures Manual referred to at paragraph 16(c) above; paragraph 7 of “Loan procedures” in the Origin Documents and Procedures Manual referred to at paragraph 16(b) above);

  1. (f)
    where the purpose of the loan is to purchase real estate, to check the full contract for sale, including to ensure that it has been stamped with the appropriate duty, and that there are no other transactions (side deals) affecting the price

(paragraph 1 of “Commonly asked questions” in the Origin Documents and Procedures Manual referred to at paragraph 16(c) above); and

  1. (g)
    to provide a Solicitor’s Certificate if and only if the requirements pleaded in subparagraphs (a) to (f) above had been satisfied

(paragraph 14 of “PreSettlement” in the Origin Documents and Procedures Manual referred to at paragraph 16(b) above; Certificate D1 of the Origin Pitt Street Manual as referred to in paragraph 16A above).

  1. [103]
    The defendant contends that (18A) pleads an implied term that was not previously pleaded and constitutes the adding of a new cause of action.  But it had previously been pleaded that the contractual duty included duties the same as the pleaded duty of care in tort, so I do not regard the change as introducing a new cause of action.  And although the new (18B) is differently worded, it reflects the pleader taking a more careful and precise approach to the articulation of what was already the contractual case.  Again, I do not think it adds new causes of action.  But in any event, there is no doubt that the amended pleads arise out of substantially the same facts as the original pleading. 
  2. [104]
    The defendant objects to the amended pleading adding to the plea of the tortious duty at (25), reference to exercising reasonable care, skill and diligence as solicitors “including [in] the production of the solicitor’s certificate”.  I do not think that this can be characterized as a new cause of action in this context.  It merely adds greater detail to a case which was already reasonably obvious.
  3. [105]
    The defendant objects to the new (25A), which pleads that the duty owed was to take the steps which were pleaded in (18B).  I agree with the plaintiffs that it is clear that the purpose of (25A) is to articulate what the content of the duty pleaded in (25) was in all the circumstances, and, in that way to accept that the proposition could only succeed if the exercise of the alleged duty to exercise reasonable care, skill and diligence required those steps.
  4. [106]
    Viewed in isolation, and if the agreements and retainers had been adequately pleaded in the first place, I would reject the defendant’s complaints.  But, even if I was wrong in that regard, I would conclude that all of the amended pleas arise out of substantially the same facts as the original pleading.
  5. [107]
    Whilst I think that the defendant has overstated the problem by contending that the pleading of the retainers was of such a vacuous character that the amendments must be regarded as new causes of action, and could not be regarded as arising out of substantially the same facts as the original pleading, my analysis of the pleading (in order to respond to that contention) has revealed that there is, nevertheless a problem which must be addressed.
  6. [108]
    The amendments proposed do not adequately address the inadequacies I have identified in the pleading of the solicitors’ retainers.  In my view, the foundation for the ability of the defendant fairly to meet either a case in contract or a case in tort in relation to the alleged retainers depends upon a proper and precise pleading containing the orthodox level of detail of:
    1. (a)
      the alleged agreement to act as panel lawyer for the Origin Program; and
    2. (b)
      the alleged separate loan retainers in respect of the O’Donnells and the Di Benedettos.
  7. [109]
    Where documents are said to have become contractual documents, the defendant is entitled to a pleading which makes it apparent how there is an arguable case that the contract concerned was formed in a way as to incorporate the documents.
  8. [110]
    The defendant has not advanced its complaint about the pleading quite in the way in which I have found it to be defective.  However, I have a discretion to exercise.  Because my present view is that the foundation of the case is not pleaded adequately, my present view is also that the case should not be permitted to proceed further until the issues I have identified have been rectified.  If the plaintiffs wish to be heard to the contrary, I would be minded to give them that opportunity.  Otherwise, I would disallow the paragraphs which presently assert each of those agreements and I would order the plaintiffs to bring an application for leave to amend further the amended pleading to remedy the concerns which I have identified.  I will hear the parties as to the form of orders which should be made to give the plaintiffs an opportunity to be heard, if that is necessary, and otherwise to ensure that the plaintiffs take the step of bringing the contemplated application promptly.

Firstmac Program including a new document pleaded and s 55 of the Property Law Act [Paragraphs 30B, 30A, 30D, 34A and 36]

  1. [111]
    The original contractual retainer plea was to be found in the old (28) which pleaded an agreement said to be made between Firstmac, Tonto (and others not presently relevant) and the defendant whereby the defendant was appointed by Firstmac, and (from April 2003) Tonto, and agreed to act as a panel lawyer to the Firstmac Program under which the defendant would receive instructions from Firstmac and Tonto to prepare and secure the execution of the necessary loan and security documents to settle the advances of loans in accordance with the Firstmac Program.
  2. [112]
    The old but now deleted (29) pleaded that the agreement was contained in the Firstmac Documents and Procedures Manual and was inferred from the defendant’s appointment as panel lawyers and acceptance of instructions from Firstmac in thousands of retainers including the Tavares & Rowe Retainer.
  3. [113]
    I have criticized the adequacy of these pleas.
  4. [114]
    The amended paragraph (28) now pleads that the defendant was appointed by Firstmac and Tonto and agreed to act as panel lawyer for the Firstmac Program.  The old plea of the terms of the Firstmac Documents and Procedures Manual is still there at (30), but with the deletion of the old (29), that document is no longer pleaded as a contractual document for the agreement to act as panel lawyer.  There is a new (30A) which asserts the pleas of a “Document A9” which, like the earlier document D1, asserts more detail in relation to the solicitor’s certificate.  Again that document is not pleaded to be a contractual document and without a proper plea that it is to be so regarded, it is an embarrassing plea.  The defendant complains that reliance on it must establish a new cause of action, but I would reject that complaint for the same reasons I did in relation to the earlier document D1.
  5. [115]
    The result is that the inadequacies I previously identified about the adequacy of the manner of pleading the agreement to act as panel lawyer still exist and are in some respects worse because documents are not pleaded as being contractual documents.
  6. [116]
    There follows an entirely new (30B) which pleads that on or about 9 May 2003 Firstmac and Tonto or, alternatively Firstmac, retained the defendant to act in accordance with the Firstmac Program in respect of the loan transaction between Tonto and Tavares & Rowe.  In the context of the amended pleading, this paragraph now seems intended to be the specific plea of the “Tavares & Rowe Loan Retainer”.  Embarrassingly, there is no longer any specific retainer so defined, even though that term still exists elsewhere in the amended pleading, including in the claims for relief.  Presumably that is just sloppy pleading which may be fixed.  I will still refer to the specific retainer as though it had continued to be defined by reference to the previous term.  The amendments do not remedy the inadequacies identified previously.  The defendant complains that the alternative case that Firstmac was a party to the specific retainer (without Tonto) must be regarded as new, but I reject that because it was clear from the original pleading that Firstmac sought to be able to assert a contractual remedy under that retainer.
  7. [117]
    There follows a wholly new (30C) which pleads “further or in the alternative” to (30B), that if Tonto was not a party to the retainer agreement for Tavares & Rowe, then by reason of the material facts then pleaded out in (30C), Tonto is entitled to remedies and relief pursuant to s 55(3)(a) of the Property Law Act 1974 (Qld).  I agree with the defendant that the alleged cause of action pursuant to s 55 must be regarded as a new cause of action.  I would, however, regard it as a cause of action which arises substantially out of the same facts as had been pleaded in the original pleading, because it is part of the story by which Tonto is said to be able to enforce contractual remedies against the defendant.
  8. [118]
    A new (30D) operates in the same way in relation to the Tavares & Rowe Loan Retainer as did (18B) in relation to the other two loan retainers.  As was the case in relation to those retainers, the new plea is embarrassing because it relies on documents which must be said to have been contractual documents without a proper plea of a retainer which makes it plain how the documents arguably became contractual documents.  The content of the duty alleged pursuant to the Tavares & Rowe Loan Retainer was newly expressed in these terms (formatting altered to separate the formulation of the duty from the identification of the documents apparently said to provide the foundation for the duty):
  1. (a)
    to make “reasonable enquiries” to determine that the purpose of the loan as set out in the relevant Schedule 4 document was in fact the purpose for which the funds were to be used

(paragraph 5 and 6 of “Settlement and post settlement”, “General Requirements for lawyers” and “Searches and Enquires” in the Firstmac Documents and Procedures Manual as referred to in paragraph 30(g) above; paragraphs 5 and 11 of Document A9 as referred to in paragraph 30A above);

  1. (b)
    where the funds were to be credited to a person other than the borrower, to make “reasonable enquiries” to determine that that person would employ the funds for the purpose for which the funds were to be used

(paragraph 5 and 6 of “Settlement and post settlement”, “General Requirements for lawyers” and “Searches and Enquires” in the Firstmac Documents and Procedures Manual as referred to in paragraph 30(g) above; paragraphs 5 and 11 of Document A9 as referred to in paragraph 30A above);

  1. (c)
    where the identified purpose in the First Mortgage Schedule Four was “investment purposes”, to make enquiries sufficient to satisfy itself that the funds were to be used for investment purposes under the Firstmac Program

(paragraph 5 and 6 of “Settlement and post settlement” in the Firstmac Documents and Procedures Manual);

  1. (d)
    to ensure that the loan transaction documents complied with the requirements of their instructions, as contained in the First Mortgage Schedule Four

(“General Requirements for lawyers” in the Firstmac Documents and Procedures Manual as referred to in paragraph 30(g) above);

  1. (e)
    where a property is being purchased, to review the purchase contract, including to ensure the purchase price tallies with the ‘purpose’ section of the instructions and that there are no ‘side deals’ or obvious relationship between the vendor and the purchaser

(“Searches and Enquiries” in the Firstmac Documents and Procedures Manual as referred to in paragraph 30(g) above); and

  1. (f)
    to send loan documents either to the borrower’s home or business address, or to the borrower’s lawyer and not to use GPO Boxes save in exceptional circumstances (and not to a licensed conveyancer)
  1. (g)
    to provide a Solicitor’s Certificate if and only if the requirements pleaded in (a) to (f) above had been satisfied

(“General Requirements for lawyers” in the Firstmac Documents and Procedures Manual as referred to in paragraph 30(g) above).

  1. [119]
    The defendant’s objection to the new (30D) may be dealt with in the same way as I dealt with the objection to (18B). 
  2. [120]
    The defendant objects to the amended pleading adding to the plea of the tortious duty at (34A), which pleads that the duty owed was to take the steps which were pleaded in (30D).  I agree with the plaintiffs that it was clear that the purpose of (34A) is to articulate what the content of the duty pleaded in (34) was in all the circumstances, and, in that way to accept that the proposition could only succeed if the exercise of the alleged duty to exercise reasonable care, skill and diligence required those steps.
  3. [121]
    Viewed in isolation, and if the agreement to act as a panel lawyer under the Firstmac Program and of the separate Tavares & Rowe Loan Retainer had been adequately pleaded in the first place, I would reject the defendant’s complaints.  And, even if I was wrong in that regard, I would conclude that the amended pleas arise out of substantially the same facts as the original pleading.
  4. [122]
    The defendant criticizes the case of breach of contractual and tortious duty here on the basis that the proposition that the defendant was obliged to act in accordance with the Firstmac Documents and Procedures Manual was an allegation of a vacuous character.  I disagree, because it was reasonably obvious that the allegation derived from the proposition that there was an alleged retainer in which that document formed part.  The pleading is not of a vacuous character, rather it is a pleading which needs to be clarified by the pleading and particularizing of the alleged contracts in an orthodox manner.
  5. [123]
    I take the same approach here as I did under the previous heading.
  6. [124]
    The amendments proposed do not adequately address the difficulties I have identified.  In my view the foundation for the ability of the defendant fairly to meet either a case in contract or a case in tort in relation to the alleged Tavares & Rowe Loan Retainer, depends upon a proper and precise pleading containing the orthodox level of detail of:
    1. (a)
      the alleged agreement to act as panel lawyer for the Firstmac Program; and
    2. (b)
      the alleged separate loan retainer in respect of Tavares & Rowe.
  7. [125]
    Where documents are said to have become contractual documents, the defendant is entitled to a pleading which makes it apparent how there is an arguable case that the contract concerned was formed in a way as to incorporate the documents.
  8. [126]
    The defendant has not advanced its complaint about the pleading quite in the way in which I have found it to be defective.  However, I have a discretion to exercise, and, as presently advised, would exercise as identified at [110] above.  I will hear the parties as to the form of orders which should be made to give the plaintiffs an opportunity to be heard, if that is necessary, and otherwise to ensure that the plaintiffs take the step of bring the contemplated application promptly.

Breach of the O’Donnell Loan Retainer [Paragraphs 47(a), 47(aA), 47(c), 47(cA), 47(f) and 47A]

  1. [127]
    The defendant complains that new breaches are pleaded which constitute new causes of action.
  2. [128]
    As to (47(a)) and (47(aA)), I agree with the plaintiffs that the essence of these allegations is that the defendant failed to follow its instructions, as contained in the O’Donnell Schedule 4, as pleaded in (40), and that viewing the pleading in the way I am required to, I cannot regard the allegations as advancing anything which is to be regarded as a new cause of action.  But if I am wrong, the allegations arise out of substantially the same facts.
  3. [129]
    As to (47(c)) and (47(cA)), these allegations now include an alternative allegation that, if the defendant made enquiries, they were insufficient, concerning the involvement of Streetwise,  and a further alternative allegation of failure to make any or sufficient inquiries.  Viewing the pleading in the way I am required to, I cannot regard the allegations as advancing anything which is substantially new.  But if I am wrong, the allegations arise out of substantially the same facts.
  4. [130]
    Paragraph (47(f)) is a plea of a breach of duty in producing and providing to Origin, Origin’s trustee and Firstmac, the solicitor’s certificate referred to in paragraph (42). The defendant complains that this is again a fresh plea of a new and separate breach and adds a new cause of action.  I disagree.  Although (47(f)) is new, the case only makes sense by reference to what is pleaded as the content of the certificate in (43) and as what was done wrong as pleaded in (47).  In this way (47(f)) is an embarrassing plea which adds nothing.  But if it does add something then it would be a new plea.  It would however be a plea which obviously arose out of substantially the same facts as were set out in the existing plea and for which leave would be given.
  5. [131]
    Paragraph (47A) is a new plea of causation.  But in substance the new causation plea adds the appropriate pleas of material fact to flesh out the “no transaction” causation hypothesis which had been pleaded at (137), by pleading the counterfactuals which would have arisen if the defendant had performed its duty in the way it is alleged it should have.  It is not to be regarded as relevantly advancing a new cause of action, because the same damages follow, assessed in the same way.  And even if it was, it would arise out of the substantially the same facts as the original pleading.

Breach of the Di Benedotto Loan Retainer [Paragraphs 57(aA), 58(a), 58(aA) 58(d), 58(e) and 58A]

  1. [132]
    The defendant contends that (57(aA)) contained an amendment which makes the plea for the first time that as a fact the purpose of the Di Benedetto Loan was not to “free up equity for investment purpose” and that this was a different allegation to the allegation which had appeared in the old deleted (57(a)), namely that the Di Benedettos had not entered into a contract to purchase an investment property.  I agree with the plaintiffs’ response that the new plea adds particularity to the existing allegations concerning the true purpose of the loan, which the defendant is alleged not to have found out.
  2. [133]
    The defendant contends that (58(a)) was objectionable for the same reason as advanced for (47(c)), and I resolve its complaint in the same way as I did for the previous complaint.
  3. [134]
    Paragraph (58(d)) pleaded a new breach, namely forwarding transaction documents not to the Di Benedettos.  This is a new allegation of breach of contract and should be regarded as giving rise to a new cause of action.  But on any view, it would arise out of the substantially the same facts as the original pleading.
  4. [135]
    Paragraphs (58(e)) and (58A) were said to be objectionable for the same reasons as paragraph (47(f)) and (47A) and my ruling is the same.

Breach of the Tavares & Rowe Loan Retainer [Paragraphs 69(a), 69(d), 69(e) and 69(A)]

  1. [136]
    The defendant’s complaints in relation to these paragraphs do not need to be separately summarized and ruled upon.  They raise the same issues as were raised in relation to the breach of the previous retainers and should be responded to in the same way.

Pleaded knowledge of the defendant relating to the second duties claim [Paragraphs 104(aD)(a) and 104(aD)(b)]

  1. [137]
    The amended pleading at (104(aD)(a)) and (104(aD)(b)) advances amended pleadings that at particular dates the defendant knew or ought to have known that the propriety of the conduct of the defendant in the loan transactions, pleaded by reference to specifically identified paragraphs of the amended pleading (which in part include the specific pleas of the first set of breaches of the tortious duties and contracts), had the potential to be called in question in the relevant proceedings which were being brought by the three borrowers, and that this conduct exposed the defendant to potential liability for breach of duties pleaded in the identified paragraph.
  2. [138]
    The defendant objects on the grounds that to the extent that those subparagraphs identified cross-reference matters which have been previously objected to, and those objections upheld, the plea of knowledge to that extent is objectionable.  As the objections have not been upheld, this objection does not need to be considered further.
  3. [139]
    The defendant then suggests that the pleading of specific knowledge (advanced to underpin the fiduciary duty pleaded case) should be regarded as an amendment to the vacuous character of the prior plea at (104(a)) which merely asserted that the conduct of the defendant as the solicitors in the loan transactions were substantial issues in the Possession Proceedings.  I reject the proposition that the previous pleading made an assertion which should be so characterized.  A reasonable person would have appreciated the nature of the cause of action which was being advanced by reference to what was said in the original pleading
  4. [140]
    There is no merit in the complaints regarding the amended pleading at (104(aD)(a)) and (104(aD)(b)).

Pleadings concerning breaches in respect of the conduct of the Possession Proceedings and the plea of fiduciary duty [Paragraphs 124, 129B and 129C]

  1. [141]
    I have explained above that the case previously advanced had these elements:
    1. (a)
      the defendant was retained to institute enforcement proceedings (referred to as the Possession Proceedings) in the name of the lender against the borrower, those retainers being respectively referred to as the O’Donnell Possession Proceedings Retainer; the Di Benedetto Possession Proceedings Retainer; and  the Tavares & Rowe Possession Proceedings Retainer;
    2. (b)
      the defendant owed the plaintiffs various fiduciary duties in acting for the plaintiffs in the Possession Proceedings;
    3. (c)
      the defendant breached those fiduciary duties, essentially because the existence of conflicts between duty and interest meant that they should have disclosed the conflicts and determined not to act, and instead advised the plaintiffs to get independent advice;
    4. (d)
      the breach of the fiduciary duties caused the plaintiffs to suffer loss in various ways.
  2. [142]
    I observed that the pleading of the case was deficient in that – 
    1. (a)
      the manner of pleading of the retainers was attended by similar inadequacies to each of the earlier pleadings of retainers;
    2. (b)
      the manner of pleading of the causal link between breach and loss claimed by individual plaintiffs was deficient, particularly in relation to the articulation of the counterfactual position which would have arisen if the impugned conduct had not occurred.
  3. [143]
    I make the following observations concerning the amended pleading.
  4. [144]
    First, the amended pleading did not remedy the inadequate pleading of any of the Possession Proceedings Retainers, except, strangely, to delete the reference to the defined terms “the O’Donnell Possession Proceedings Retainer; the Di Benedetto Possession Proceedings Retainer; and the Tavares & Rowe Possession Proceedings Retainer”.
  5. [145]
    Second, the amended pleading deletes the explicit reference to breaches of fiduciary duty in the heading and now refers to “Breaches in respect of the Conduct of the Possession Proceedings”, and in an amended (124) alters the articulation of those duties to the following:

… the Defendant owed duties to the Plaintiffs herein, including:

  1. (a)
    A duty not to obtain any unauthorized benefit from that relationship;
  1. (b)
    A duty not to be in a position where its own interests may conflict with the interests of its client; and
  1. (c)
    A duty to act with reasonable care and skill and diligence in the conduct of the Possession Proceedings.
  1. [146]
    Third, that list of duties may be compared to the list quoted at [69] above.  Although said in different words, there is no difference in substance between the second and third duties and the third, fourth and fifth of the duties previously articulated.  The defendant complains that the first duty pleaded is irrelevant, but I disagree because it is pleaded as being relevant to the breach of the other fiduciary duty.  There is, however, merit in the defendant’s submission that the deletion of the reference to “fiduciary duty” in the hearing seems to introduce an embarrassing ambiguity as to the juridical basis on which the case is being advanced.  The plaintiffs contend that there is no concern here: the first two duties are fiduciary and the third is tortious.  But that only compounds the ambiguity, because there is no claim for damages for breach of a tortious duty.  The only relief claimed consequent upon breach of the duty is an order for an account of the monies received from acting in the Possession Proceedings; an order for the payment of the sum found due on the taking of an account; and damages and/or equitable compensation for breach of fiduciary duty.  The ambiguity is embarrassing and I would not permit the amendments to proceed without that position being clarified. 
  2. [147]
    Fourth, the breach of fiduciary duty case is amended, but not in a way which in my view should be regarded as giving rise to a new cause of action from the previous cause of action founded on breach of fiduciary duty: see new (126), (128), (129).  The breach was constituted by the failure to disclose the conflict or potential for conflict and by continuing to act without having first obtained fully informed consent: (129).  But for the breach, the plaintiffs would have terminated the retainer: (129A). 
  3. [148]
    Fifth, there is a new and more detailed case pleaded for breach of what is now characterized as a tortious duty: see (124(c)), (129B), (129C).  I accept the submissions of the defendant that this case must be regarded as a new cause of action because it advances for the first time a detailed positive case about specific failures of the defendant, including a failure to advise on actual specified risks during the litigation period.  This then leads to the new plea of an alleged failure on the part of the defendant to advise to settle the proceedings as soon as possible.  That is a very different case from that expressed in the original pleading.  It is not simply a case of filling in detail based on an existing cause of action.  The plaintiffs contend that a claim for relief based on such facts arises out of substantially the same facts as previously pleaded, but I would not permit the case to advance (and would not rule on that argument) without some proper connection with a claim for relief consequential upon it.  The problem here is, as I have said, there is no claim for relief for damages for breach of a tortious duty in this section of the case.  The allegations are presently embarrassing and ought not to be permitted to proceed without a proposal which removes the embarrassment.   
  4. [149]
    The result is that I would disallow the amendments which I have said are embarrassing. 
  5. [150]
    Further, although the defendant has not impugned the pleas of the Possession Proceedings Retainers, I would still be minded to exercise my discretion to require the plaintiffs to bring an application for leave to amend further the amended pleading to remedy the concerns which I have identified in relation to the articulation of the relevant retainers.  If the plaintiffs wish to be heard to the contrary, I would be minded to give them that opportunity.  I will hear the parties as to the form of orders which should be made to give the plaintiffs an opportunity to be heard, if that is necessary, and otherwise to ensure that the plaintiffs take the step of bring the contemplated application promptly.

Loss and damage

  1. [151]
    The amendments to the loss and damage case clarified how it was that QHSL could claim damages in respect of the indemnity liability asserted by Firstmac in respect of the O’Donnell and Di Benedetto Loans, namely that it was a contractual liability (pursuant to one or other of the various pleaded instruments) to reimburse Firstmac for an equal share of the liabilities which Firstmac had incurred.  The nature of Firstmac’s losses, for negligence and/or breach of contract in respect of the two loan retainers, was still advanced on a “no transaction” basis was articulated in a new (137A) by reference to its obligation to indemnify Origin and Origin’s trustee in respect of various specified sums, and also by reference to amounts it paid the defendant.
  2. [152]
    How Tonto could advance a claim for relief for breach of duties in respect of those two retainers (as it has done in the claims for relief) is still entirely unclear.
  3. [153]
    That lack of clarity continues in respect of the claims by QHSL in respect of the Tavares & Rowe Retainer.  But the amendments have clarified how both Firstmac and Tonto can claim in respect of the Tavares & Rowe Retainer, because the plea is that Firstmac arranged for and guaranteed the funding of the loan by Tonto.
  4. [154]
    So far as the case for compensation for breach of fiduciary duties is concerned, I observe that the pleading is still deficient in terms of the pleading of the relevant material facts which would establish the requisite causal link between the alleged breaches of fiduciary duty and the loss individually suffered by the individual plaintiffs.  In particular is that so in relation to the counterfactual position which would have arisen if the impugned conduct had not occurred.
  5. [155]
    No point has been taken as to this deficiency by the defendant.  Its only complaint about the pleading of the loss and damages is that which would be consequential upon acceptance of their earlier complaints.  As I have not accepted those complaints, there is no application before me in relation to this part of the pleading.
  6. [156]
    The matter is, however, on the commercial list.  Moreover, for other reasons I have expressed, my inclination is, subject to hearing from the plaintiffs to the contrary, to require that the pleading be amended in relation to certain other paragraphs which were the subject of complaint, albeit on a different basis.  I am inclined to take the same approach in relation to the deficiency I have identified in the pleaded case for loss and damage claimed consequent upon the breach of fiduciary duty.  If the plaintiffs wish to be heard to the contrary, I would be minded to give them that opportunity.  I will hear the parties as to the form of orders which should be made to give the plaintiffs an opportunity to be heard, if that is necessary, and otherwise to ensure that the plaintiffs take the step of bring the contemplated application promptly.

Relief

  1. [157]
    For those amendments where I have determined that leave is not required because the cause of action was not new, the defendant nevertheless invites me to exercise my discretion to disallow the amendments pursuant to UCPR r 379.  And for those amendments which do involve addition of a new cause of action but which I have concluded arise out of substantially the same facts, the defendant invites me not to regard it as “appropriate” to grant leave.
  2. [158]
    A long period has passed between the time the impugned conduct occurred and the time the proceeding was commenced.  A further long period has passed before it was amended.  As to the former, the explanation seems to be that the plaintiffs were expecting to win the Possession Proceedings and only appreciated that they might have a case against the defendant shortly before the present proceedings commenced.  As to the latter, a solicitor’s affidavit refers to the extent of disclosure which has been obtained, and to some professional commitments on other matters.  These provide some explanation but are insufficient to justify the full extent of time which has been taken to prepare the amendments. 
  3. [159]
    There is no evidence from the defendant of any particular difficulty or prejudice that might be suffered from the delay which has been experienced.  The defendant nevertheless contended that they should be regarded as suffering some prejudice because the position will now be that there will be an absence of recollection as to whether there was some non-documentary communication which may have impacted upon the assessment of the case.  The defendant says that now, 15 years after the event, no one will have any relevant recollection of such things.  They refer to and rely on the frequently cited observations by McHugh J in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 551-553: see also Menegazzo v Pricewaterhousecoopers (a Firm) [2016] QSC 94 at [175] per Applegarth J.
  4. [160]
    I agree that that prejudice is likely to exist.  However there is no reason to think that it is any worse at the time amendments were made than it would have been at the time the proceeding was started.  I am not minded to exercise my discretion against permitting the amended case to proceed because of the difficulties which the effluxion of time will cause to the defendant.
  5. [161]
    I have indicated in the reasoning in previous sections of this judgment that in some respects I am minded to exercise my discretion to require what I presently regard to be obvious deficiencies in the amended pleading to be corrected.  But if those issues are addressed (or the plaintiffs seek to be heard and persuade me that the deficiencies do not exist), there presently seems to me to be no reason why the case should not proceed as amended.
  6. [162]
    The defendant invited me to make an order under UCPR r 387(3) to change what would otherwise be the impact of that rule.  In particular, the defendant sought an order that for any new causes of action, the proceeding as amended be taken to have started when the date of the order giving leave was made.  In order to explain my response to that submission, it is necessary to explain with a little more particularity what can presently be made of the impact of the Limitations of Actions Act 1974 (Qld) on the plaintiffs’ case.
  7. [163]
    Prima facie, the alleged breaches of the contracts of retainer, if they had occurred at all, must have occurred before 10 March 2009.  Absent some other consideration, the result would be that those causes of action must have been statute-barred at the time of commencement of the proceeding and no relevant period of limitation in respect of the contractual causes of action would be current as at the date the proceeding was started.
  8. [164]
    As I have mentioned, the defendant filed a defence on 6 October 2015 and included a plea of a six year limitation defence against the causes of action contained in the original pleading.  The plaintiffs filed a reply on 5 July 2016 which, amongst other things, contested the operation of the limitations defence in various ways.  Before me the plaintiffs also foreshadowed an intention to amend the reply to plead facts which advanced reliance on the remarks made by Deane J in Hawkins v Clayton (1988) 164 CLR 539 at 589–591 that it was arguable that the notion of unconscionable reliance on a limitations statute should be extended to cover cases such as these where the wrongful act at the one time inflicts the injury and, while its effect remained, precludes the bringing of an action for damages.
  9. [165]
    I have not been invited to find that all contractual causes of action are statute-barred, or to decide the applications before me on that basis.  The appropriate course is to regard the question of whether causes of action in contract are statute-barred as unclear at present.  I have found the amendments to the contractual causes of action as not advancing new causes of action, but have indicated that if I am wrong, I would regard the amendments as arising out of substantially the same facts as the original pleading.  The defendant would not be prejudiced if the amendments take effect from the date of the pleading being amended, so I would not make any different order under UCPR r 387.
  10. [166]
    For tortious causes of action in relation to the three loan retainers, the plaintiffs contend as follows:
    1. (a)
      In respect of the O’Donnell and Di Benedetto claims, in each case, the losses pleaded as having been suffered are pleaded as an indemnity.  Each of the pleaded indemnities did not generate an immediate non-contingent liability to pay upon execution of the instrument.  Instead, they generated an executory and contingent liability upon Firstmac and QSHL to make a payment if and when Origin suffered loss.
    2. (b)
      Firstmac and QSHL did not suffer loss in respect of the O’Donnell and Di Benedetto claims until the contingency was fulfilled, and they were required to indemnify Origin for its losses.  In the plaintiffs’ submission, this occurred – at the earliest – when the Supreme Court of New South Wales dismissed the plaintiffs’ (and Origin’s trustee’s) claims against the O’Donnells and the Di Benedettos, awarded judgment in favour of the O’Donnells and Di Benedettos on their cross-claims, and ordered costs against the plaintiffs. 
    3. (c)
      On the plaintiffs’ pleaded case, this occurred on 4 September 2009.  The statement of claim was filed on 10 March 2015, within six years of this date, and within time under the Limitation of Actions Act
    4. (d)
      As to the Tavares & Rowe Claims, the claim by Firstmac is again pleaded as an indemnity.  Therefore, the same argument applies.
    5. (e)
      The claim by Tonto arose upon delivery of the judgment.  Before that time, Tonto always had the contractual and legal right to recover the loan and interest against Tavares & Rowe.  It was only upon judgment that this right was extinguished, and its loss was suffered.  The same reasoning may also be applied to the other claims by Firstmac and QSHL, in respect of the O’Donnell, Di Benedetto and Tavares & Rowe Loans.
  11. [167]
    One difficulty with the plaintiffs’ hypothesis is that prima facie, some pecuniary loss consequent upon the alleged tort claims must have been incurred at the date of judgment, not the least because the damages claim includes the recovery of legal fees and disbursements which were paid and some parts of the fees must have been paid before that date and, indeed before 10 March 2009.  Once a tortious cause of action accrues it covers all subsequent loss and damage attributable to the same cause, even if that loss and damage is latent or only manifests by stages: McQueen v Mount Isa Mines Ltd [2017] QCA 259 at [70] per Brown J (Fraser and McMurdo JJA agreeing).
  12. [168]
    Of course, one possible response is the foreshadowed reliance on the remarks of Deane J in Hawkins v Clayton.  And, again, I have not been invited to find that all causes of action in tort are statute-barred, or to decide the applications before me on that basis
  13. [169]
    The appropriate course is to regard the question of whether causes of action in tort are statute-barred as unclear at present.  I have found the amendments to the tortious causes of action as not advancing new causes of action, but have indicated that if I am wrong, I would regard the amendments as arising out of substantially the same facts.  The defendant would not be prejudiced if the amendments take effect from the date of the pleading being amended, so I would not make any different order under UCPR r 387.
  14. [170]
    So far as the claims which are made for relief consequent upon breach of fiduciary duty, the defendant did not identify any applicable provision of the Limitations of Actions Act or suggest that one should apply by way of analogy.  The only basis on which the defendant sought to justify my making an order under UCPR r 387 was that it suggested that it might otherwise be prejudiced in advancing equitable defences such as laches or acquiescence.  I reject that argument.  The plaintiffs submitted and I agree that equity has regard to the substance of the matter, and in dealing with such defences (in the event they are pleaded) the court would not ignore the fact that notwithstanding an amendment has effect from 2015, it was not in fact made until 2018.
  15. [171]
    The result is that I am not persuaded to “order otherwise” pursuant to UCPR r 387.

Conclusion

  1. [172]
    I direct as follows:
    1. (a)
      The plaintiffs must notify the defendant and my Associate by 4:00pm on 16 November 2018 whether they wish an opportunity to be heard on what these reasons have identified as apparent deficiencies in their pleading;
    2. (b)
      If the plaintiffs do wish to be heard on that question, the proceeding will be listed before me on a date to be fixed between 26 and 29 November 2018 to permit that to occur; and
    3. (c)
      If the plaintiffs do not wish to be heard on that question, then the parties are directed to bring in minutes of order consistent with these reasons by 4:00pm on 23 November 2018, and any dispute between them as to the appropriate form of such orders will be listed before me on a date to be fixed between 26 and 29 November 2018 for resolution by me.

Footnotes

[1] Draney v Barry [2002] 1 Qd R 145 per Thomas JA at [57]; Wolfe v State of Queensland [2009] 1 Qd R 97 per Keane JA (with whom Muir JA and Douglas J agreed) at [16]; Westpac Banking Corporation v Hughes [2012] 1 Qd R 581 per Chesterman JA (with whom Martin J agreed and with whom Fraser JA agreed generally) at [27] and [54]; Paul v Westpac Banking Corporation [2017] 2 Qd R 96 per Fraser JA (with whom Gotterson JA and Douglas J agreed) at [15]; McQueen v Mount Isa Mines [2017] QCA 259 per Brown J (with whom Fraser JA and McMurdo JA agreed) at [44]-[46].

[2] Draney v Barry [2002] 1 Qd R 145 per Thomas JA at [57].  

[3] Ibid per Pincus JA at [32].

[4] MOMD was an acronym for Mortgage Origination and Management Deed.

[5] Permanent Trustee Company Limited v O’Donnell [2009] NSWSC 902 and Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389.

[6] Permanent Trustee Company Limited v O’Donnell [2009] NSWSC 902 at [93].  This was not challenged on appeal.

[7] To similar effect, see also Dawson J at 187 and Gaudron J at 196 to 197.  The passage quoted from the judgment of Brennan CJ has been quoted with approval many times: see, for example, The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 5] [2013] WASC 121 at [98] per Le Miere J; Carey v Freehills (2013) 303 ALR 445 at 525; [2013] FCA 954 at [310] per Kenny J; Hardie Finance Corporation Pty Ltd v Ahern [No 3] [2010] WASC 403 at [448] per Pritchard J; David v David [2007] NSWSC 855 at [164] per Patten AJ; Chapman v Luminis Pty Ltd (No 5) (2001) 123 FCR 62 at 148; [2001] FCA 1106 at [284] per von Doussa J. 

[8]Permanent Trustee Company Limited v O’Donnell [2009] NSWSC 902 at [420], [429], [438].

[9] Permanent Trustee Company Limited v O’Donnell [2009] NSWSC 902 at [413], [427], [436].

[10] In respect of the Di Benedettos and Tavares & Rowe, the order of the primary judge relieving them of liability was upheld on appeal.  However, in respect of the O’Donnells’ liability, the order was amended on appeal to provide that the principal of the loan was reduced from $500,000 to $125,000 and the O’Donnells were liable to repay the amended principal.  This was because while the loan agreement was unjust due to Streetwise’s fraud, the O’Donnells chose to go through with the borrowing after deciding not to make use of their available accounting and legal advisers: see Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [279]-[280].

Close

Editorial Notes

  • Published Case Name:

    Firstmac Ltd & Ors v Hunt & Hunt (a firm)

  • Shortened Case Name:

    Firstmac Ltd v Hunt & Hunt (a firm)

  • MNC:

    [2018] QSC 258

  • Court:

    QSC

  • Judge(s):

    Bond J

  • Date:

    09 Nov 2018

  • White Star Case:

    Yes

Litigation History

Event Citation or File Date Notes
Primary Judgment [2018] QSC 258 09 Nov 2018 Defendant's application to strike out paragraphs of amended statement of claim dismissed; and plaintiff's cross-application for leave for amendments to the amended statement of claim dismissed (because other deficiencies in the pleading were noted by the trial Judge that in his judgment required curing and a subsequent application to amend): Bond J.

Appeal Status

No Status