Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: May v Cutler Hughes & Harris; May v Brahmbhatt [2012] NSWCA 119
• Hearing dates: 20 April 2012
• Decision date: 20 April 2012
• Before: Sackville AJA at [1]; Tobias AJA at [14]

Decision

1. Dismiss the application for leave to appeal.

2. The applicant pay the First Respondents' costs of the application for leave to appeal.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: PRACTICE AND PROCEDURE - application for leave to appeal against interlocutory decision - strike out of applicant's cross claim by primary Judge - cross-claim not properly pleaded - no barrier to filing fresh cross claim - application dismissed
• Legislation Cited: Uniform Civil Procedure Rules, r 14.28
• Category: Principal judgment
• Parties: Stephen James May (Applicant); Thomas Damien Boyce, Patere Revelin Grinter, Philip Noel de Haan, Raymond Smith and Lunchinder Judith Smoth t/a Cutler Hughes & Harris (First Respondents); Rajesh Brahmbhatt (Second Respondent)
• Representation: Counsel: Applicant in person; R M Hamwood (Solicitor) (First Respondents); Solicitors: N/A (Applicant); Thomsons Lawyers (First Respondents)
• File Number(s): 2010/131109

Decision under appeal

• Citation: Brahmbhatt v May (District Court 2010/131109, 16 September 2011, unreported)
• Date of Decision: 2011-09-16 00:00:00
• Before: Truss DCJ
• File Number(s): 2010/131109

Judgment

1 SACKVILLE AJA: This is an application for leave to appeal against a judgment of the District Court striking out the applicant's cross-claim: Brahmbhatt v May (16 September 2011, 2010/131109).

2 The present applicant, Mr May, was the defendant in District Court proceedings brought against him by the lessors ("the Plaintiffs") of certain land located at Kellyville. The lessors' claim against the applicant was founded on a guarantee executed by the applicant, whereby he guaranteed to the lessors the performance by the lessee, Belltree Constructions Pty Ltd ("Belltree"), of its obligations under the lease.

3 The cross-claim filed by the applicant in the District Court identified the cross-defendants as a firm of solicitors, Cutler Hughes and Harris ("CHH"). The cross-claim filed in the District Court does not name the partners of the firm. CHH are the first respondents to the application for leave to appeal. The second respondent has played no part in the application for leave to appeal.

4 The cross-claim is not easy to follow. However, the applicant apparently wishes to allege that a member of CHH, Mr Smith, acted on behalf of both the applicant and a company known as Homeworld IV Pty Ltd ("Homeworld"). Homeworld is not named as a party to the lease and its role in the transaction does not appear from the cross-claim (but the Court was informed that Homeworld had a role in developing display villages). The applicant's central allegation seems to be that Mr Smith, in his capacity as solicitor for Homeworld, insisted that the applicant execute the guarantee, notwithstanding that Mr Smith was also acting for the applicant and thus owed him fiduciary obligations.

5 The parties' submissions to this Court do not set out the sequence of events. The following brief chronology is based on the judgment of the primary Judge:

(1) At all material times, CHH, or a predecessor firm, acted for Homeworld.

(2) On 24 November 2006, a number of transactions were entered into:

(a) a contract for the sale of the subject land by Landcom to Mr and Mrs Mikel (as trustees of the Belltree Homes Superannuation Fund) and Bella Ink Pty Ltd ("Bella"), as tenants in common;

(b) a contract for the on-sale of the land by the trustees and Bella to the Plaintiffs;

(c) a lease between the Plaintiffs, as lessors, and Belltree, as lessee, on terms which are not set out in the primary judgment; and

(d) a guarantee executed by the applicant, whereby he guaranteed performance of Belltrees' obligations under the lease.

(3) Prior to these transactions being entered into, CHH (or its predecessor firm) forwarded an offer to enter a costs agreement addressed to "Mr S May, Mr F Mikel". The firm offered to act for Belltree and Bella in connection with the sale by them of the land. The addressees were asked to sign the acknowledgement in the letter of offer. The terms of the offer, if accepted, required Mr May and Mr Mikel to pay the firm's costs and disbursements. An annexure to the offer is also addressed to the two individuals and does not mention either Belltree or Bella.

(4) The contracts of sale and on-sale of the land entered into on 24 November 2006 were settled on 19 December 2006.

(5) The Plaintiffs commenced proceedings against the applicant in the District Court in May 2010. The applicant filed his cross-claim against CHH on 3 April 2011.

(6) On 10 August 2011, CHH filed a motion seeking to dismiss or strike out the applicant's cross-claim.

(7) On 16 September 2011, Truss DCJ delivered a judgment striking out (but not dismissing) the cross-claim. Her Honour concluded (at [31]) that the cross-claim disclosed no reasonable cause of action in that:

". The [applicant] has filed to identify any retainer, express or implied, between him personally and Mr Smith.

. He has also failed to indicate any circumstances capable of giving rise to a duty of care in tort owed by [CHH] to him".

(8) On 9 December 2011, Olsson DCJ resolved the Plaintiffs' claim against the applicant. His Honour entered a verdict for the Plaintiffs against the applicant in the sum of $98,546.30, plus interest.

6 The primary Judge reformulated the applicant's cross-claim and summarised CHH's response as follows ([16]-[20]):

"16. What lies at the heart of the cross-claim is the [applicant's] allegation that Mr Smith accepted a retainer and agreed to act on his behalf personally and that by reason of that retainer he owed to the [applicant] duties which included:

(a) A fiduciary duty to act in good faith in the interests of the [applicant], and not to prefer their interest or the interest of any other person over his;

(b) A duty of care to conduct the legal business of the [applicant] with a care and skill due from a professional solicitor's firm to its clients; and

(c) A duty to act in accordance with the [applicant's] instructions".

17. In his written submissions the [applicant] submits that in breach of each of these duties [CHH] inserted into the lease a clause purporting to be a personal guarantee by him of the obligations of the lessee and that Mr Smith refused to allow changes requested by the [applicant].

18. In my view, the [applicant's] cross-claim ought to be characterised as a claim for damages equivalent to the amount claimed by the [Plaintiffs] under the guarantee.

19. The [applicant] also alleges that:

(a) Despite the fact that he was not a director of the lessee, Mr Smith insisted that he give a personal guarantee before he would allow settlement to occur; and

(b) At settlement, he requested Mr Smith to amend the guarantee, which had already been signed, so as to limit his exposure to the [Plaintiffs] but he refused to do so....

20. [CHH's] position in short is that:

(a) There is no evidence of any contract or retainer with the [applicant], express nor implied, nor any evidence to suggest that CHH owed a duty of care to the defendant.

(b) Alternatively, if it could be said that there was a retainer or [CHH] otherwise owed him a duty of care there was no breach.

(c) Further, if there were a breach, the [applicant] did not sustain any damages as the guarantee had already been signed before the settlement and all parties including the [applicant] wanted the settlement to occur."

7 The primary Judge referred to the letter of offer from the solicitors to enter into a costs agreement (see [5(3)] above). Her Honour accepted, for the purposes of the application, that in about September or October 2006 a conversation occurred between the applicant and Mr Smith. In that conversation, the applicant asked Mr Smith to "handle the settlement". However, her Honour pointed out that the applicant did not claim that he had asked Mr Smith to act for him personally regarding any part of the transaction.

8 The primary Judge concluded (at [25]) that it was "unlikely" that the solicitors' letter of offer could be construed as establishing a retainer, express or implied, between Mr Smith and the applicant personally. Her Honour also found that a letter of 17 November 2006 from CHH forwarding to the applicant documents for execution suggested that CHH was not in fact acting on behalf of the applicant.

9 This reasoning indicates that the primary Judge did not strike out the cross-claim simply because of deficiencies in the pleading itself. She appears to have found, on the evidence, that the applicant had no reasonable prospects of success in establishing his cross-claim.

10 It is not necessary, in my view, to consider whether the applicant has an arguable case that the primary Judge should not have concluded, on the evidence, that he has no reasonable prospects of making out a cause of action against CHH. The first step is for the applicant to plead a case in substantial conformity with the Uniform Civil Procedure Rules ("UCPR"). This requires him to plead the material facts establishing (if this is what is alleged) that CHH or its predecessor firm accepted a retainer to act on his behalf or that CHH otherwise came under a duty to act on the applicant's behalf or to protect his interests in connection with the execution of the guarantee. The pleading would also need to identify the relief sought by the applicant and, if he claims damages or compensation, the basis upon which he does so.

11 It is common ground between the parties to this application that the orders made by the primary Judge do not prevent the applicant from filing a fresh cross-claim in the District Court. It remains open to him to do so, provided the cross-claim complies with the requirements of the UCPR, and provided also that he acts reasonably promptly in filing such a cross-claim.

12 Regardless of the state of the evidence, the primary Judge was correct to strike out the cross-claim because, in its present form, it discloses no reasonable cause of action and has a tendency to cause embarrassment or delay in the proceedings: UCPR, rr 14.28 (1)(a) and (b). Since the applicant is free to replead his case, there is no injustice in refusing his application for leave to appeal.

13 The orders I propose are:

1. Dismiss the application for leave to appeal.

2. The applicant pay the First Respondents' costs of the application for leave to appeal.

14 TOBIAS AJA: I agree with Sackville AJA.

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Decision last updated: 01 May 2012