Court of Appeal
Supreme Court
New South Wales

Medium Neutral Citation:

Maxwell-Smith v Hall [2012] NSWCA 284

Hearing dates:

31 August 2012

Decision date:

31 August 2012

Before:

Basten JA at [1];
Tobias JA at [1]

Decision:

(1) With respect to the application for leave to appeal from orders made in the District Court on 20 April 2012:

(i) dismiss the application with respect to grounds 1-3 of the second amended draft notice of appeal, based on claims of apprehended bias or procedural unfairness;

(ii) with respect to the second respondent:

(a) grant leave to the applicants to appeal in respect of orders 1-4;

(b) by consent, allow the appeal and set aside orders 1-4;

(iii) dismiss the application with respect to the first respondent;

(iv) with respect to the third respondent, stand over the application to allow instructions to be obtained and direct that such instructions be conveyed to the Registrar within seven days and to the applicants as soon as reasonably practicable.

(2) With respect to the application for leave to appeal from order 4(a) made by the District Court on 27 January 2012, striking out paragraph 16(vi) of the amended statement of claim, dismiss the application.

(3) There be no order as to the costs of the applicants and the first and second respondents in this Court.

(4) Make no order as to the costs of the proceedings in the District Court on 20 April 2012.

(5) Reserve consideration of any order in respect of the costs of the third respondent in this Court.

(6) Direct that any further hearing of the application with respect to the third respondent be fixed by arrangement with the Registrar.

[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:

JUDGES - apprehended bias - judge disclosed friendship with partner of defendant solicitor's firm - plaintiff did not object - whether a litigant in person should be taken to have waived right to object - whether plaintiff expressly declined to object - whether facts reveal reasonable apprehension of bias

PROCEDURE - pleadings - application to strike out - allegation that solicitor had misused confidential information - whether confidential information should be pleaded with particularity

PROCEDURE - pleadings - application to strike out - amended pleading filed between hearings - whether judge appreciated significant change in particulars of amended pleading

Cases Cited:

Smits v Roach [2006] HCA 36; 227 CLR 423

Category:

Procedural and other rulings

Parties:

Inge Maxwell-Smith (First Applicant)
Eugene Maxwell-Smith (Second Applicant)
Steve Hall (First Respondent)
S & E Hall Pty Ltd (Second Respondent)
Hugo White (Third Respondent)

Representation:

Counsel:

First Applicant self-represented
Mr D H Hooke SC/Ms T Stevens (First and Second Respondents)
Mr N J Beaumont (Third Respondent)
Solicitors:

Applicants self-represented
Ellison Tillyard Callanan (First and Second Respondents)
Middletons (Third Respondent)

File Number(s):

CA 2012/154529

Decision under appeal

Jurisdiction:

9101

Date of Decision:

2012-04-20 00:00:00

Before:

Colefax DCJ

File Number(s):

DC 2012/292575

Judgment

1THE COURT: In 1995 Inge and Eugene Maxwell-Smith owned land at Tura Beach near Merimbula on the South Coast of New South Wales. They are named as the applicants in this Court although the proceeding has been conducted by Mrs Maxwell-Smith in person.

2On a previous occasion Campbell JA directed that an affidavit be filed by Mr Maxwell-Smith indicating that he was aware of the proceedings and that they were being conducted on his behalf. That has now been done and it is not necessary for present purposes to say anything further about the roles played by the individual applicants.

3In 1995 a contract was entered into with S & E Hall Pty Ltd (the second respondent) for the construction of a dwelling on the applicants' land. The contract was in the name of Mr Maxwell-Smith. The principal of the company was Mr Steve Hall (the first respondent). The construction of the house led to a dispute which was resolved by the Consumer Claims Tribunal on 25 February 1998. The applicants were ordered to pay the second respondent an amount of a little over $6,700. Challenges by the applicants to the orders of the Tribunal were dismissed by a single judge of the Supreme Court, on appeal by this Court and an application for special leave to appeal was refused by the High Court. Although Mrs Maxwell-Smith continues to refer in her submissions to the decision of the Tribunal as "a fundamentally flawed" decision, it stands as the legal determination of the dispute.

4The third respondent in the present application is Mr Hugo White, who acted as solicitor for the applicants on the purchase of their property. He has since acted for the first respondent (Mr Steve Hall) and the second respondent (Mr Hall's company) in respect of the building dispute.

5On 2 September 2010 a statement of claim was filed in the District Court, apparently on behalf of both applicants, with the respondents named as the three defendants. The matter presently before this Court is an application for leave to appeal from interlocutory orders made in the District Court proceedings on 20 April 2012 by Colefax DCJ. The orders relevant to the present application were as follows:

"2. Order paragraphs 18 to 34 inclusive of the amended Statement of Claim be struck out.

3. Order the Plaintiffs to pay the 1st and 2nd Defendants' costs.

4. Note proceedings continue only as against the 3rd Def."

6Directions were then given with respect to particulars in relation to the claim against the third defendant (Mr White).

7In his judgment of 20 April 2012 the primary judge referred to an earlier judgment he had delivered on 27 January 2012. He noted that he had, on that date, "granted leave to Mrs Maxwell-Smith and her husband to file an amended statement of claim", generally in the form of a document which he identified. The primary judge then noted that an amended statement of claim had been filed on 20 February 2012, although without pleading material facts as to the allegations of abuse of process in respect of the issue of two bankruptcy notices.

8When the white folder was prepared for the purposes of this application it contained no document reflecting any of the descriptions of the amended statements of claim, nor did it contain the original statement of claim. Subsequently the applicant filed a copy of a document which contained a verifying affidavit of 1 September 2011 and which appears to have been the document which was before the primary judge on 27 January 2012 and which was the subject of the grant of leave to file.

9At the hearing of the application Mr Hooke SC, who appeared for the first and second respondents, handed up a copy of a filed amended statement of claim which bore the District Court stamp of 20 February 2012 and which was apparently the statement of claim as amended pursuant to the orders made on 27 January 2012.

10Broadly speaking, after identifying the parties, the statement of claim asserted causes of action in paragraphs 4 to 17 involving breach of the contract of retainer between the applicants and Mr White and breach of fiduciary duties owed by Mr White as the plaintiffs' solicitor. The reference in the orders to the provision of particulars in respect of those claims was particularly directed to an allegation that Mr White had used confidential information obtained during the course of the retainer other than in the interests of and for the purpose of the applicants, a claim set out in paragraph 16(vi). That paragraph was ordered to be struck out on 27 January and the amended statement of claim dated 20 February 2012 did not contain it.

11Paragraphs 18 to 34 of the amended statement of claim alleged causes of action against Mr Hall and his company (the first and second respondents) with respect to the issue of three bankruptcy notices in April 2001, on 4 December 2002 and on 26 April 2006 which were referred to respectively as the first, second and third bankruptcy notices.

12The first bankruptcy notice was withdrawn and nothing appears to turn on it. The second notice resulted in a sequestration order, but the bankruptcy was annulled by Moore J in the Federal Court on 2 July 2004. The third bankruptcy notice was set aside by Jacobson J: Maxwell-Smith v S& E Hall Pty Ltd; in the matter of Maxwell-Smith [2006] FCA 825. The pleadings allege that the issue of the second and third bankruptcy notices were in each case an abuse of process. Those allegations appeared in paragraphs 26 and 27 of the amended statement of claim that was before the judge on 27 January 2012. There were claims that the applicants had suffered loss and damage amounting to approximately $300,000 as a result of the issue of the second and third bankruptcy notices. These claims, set out in paragraphs 18 to 34 of the amended statement of claim, were struck out by the principal order of the primary judge now sought to be challenged.

13On 15 May 2012 the applicants filed a summons seeking leave to appeal from the judgment and orders of the primary judge of 20 April 2012. The document was signed by Mrs Maxwell-Smith on her own behalf and it may be accepted for present purposes, on behalf of her husband. An amended summons was filed on 31 May 2012, the purpose of which appears to have been to join the second respondent, S & E Hall Pty Ltd. It was not actually signed.

14The proceedings have also witnessed a series of draft notices of appeal. The second amended draft notice of appeal was apparently lodged with the Court on or shortly after 22 August 2012, being the date on which it was signed (although that course was not necessary or appropriate). It is convenient to deal with the grounds of appeal as set out in that document although it post-dates the written submissions, particularly of the third respondent.

15The orders sought in the appeal are said to be "a verdict and judgment" in favour of the applicants or, in the alternative, an order that the matter be remitted to the District Court and the case proceed on the proposed pleadings: draft orders 2 and 3. Draft order 4 sought the setting aside of "the order in the Judgement made on 20 April 2012" which, it may be accepted, was intended to apply to all the orders made on 20 April, or at least the operative orders referred to above. As there has been no notice of motion dealt with in the District Court seeking a summary judgment for the applicants, relief of that nature would not be available on any proposed appeal.

16The grounds of appeal may conveniently be set out in full.

"1. The hearing of the case was put before Colefax SC DCJ. His Honour admitted in Court that he was a personal friend of John Sautelle, the partner of the third defendant Hugo Patrick White in the firm Sautelle White Lawyers in Merimbula.

2. This law firm represented the second Respondent S & E Hall Pty Ltd in proceedings against the Appellants Inge and Eugene Maxwell-Smith.

3. His Honour erred in removing the second Respondent S & E Hall Pty Ltd in the proceedings, and it is considered a denial of Procedural Fairness. To continue the proceedings against the third Respondent Hugo White before Colefax SC DCJ can also be influenced by his Honour's alleged conflict of interest through his personal friendship with John Sautelle.

4. His Honour erred in deleting paragraph 16(vi) of the Pleadings and Particulars and in the Amended Statement of Claim, filed in September 2011, and striking out all paragraphs 18 to 34 in this Statement of Claim."

17It should be noted that the primary judge did not strike out paragraph 16(vi), which is referred to above, on 20 April. That paragraph was in fact struck out in the judgment and orders of 27 January 2012.

18It may be inferred from grounds 1 and 3 that the essential complaint is one of apprehended bias on the part of the primary judge. That was indeed the only complaint relied upon in earlier versions of the notice of appeal and it was the only complaint to which the third respondent directed his summary of argument. The inference was expressly identified in the summary of argument filed for the third respondent on 26 July 2012 and correctly so. That proposition was not contradicted in any subsequent submission filed on behalf of the applicants. Included in the white folder before this Court was a transcript of a hearing on Friday, 6 May 2011 before the primary judge. Mrs Maxwell-Smith appeared on that occasion and sought leave to file an amended statement of claim: Tcpt, p 2(2). After taking a short adjournment at the request of the parties, the primary judge returned and stated on his return:

"HIS HONOUR: . ... I'm sorry ... to have gone off like that or come back on like that, but just whilst I was leaving the courtroom I noticed that the second defendant is Mr Hugo Patrick White, a partner of a firm called Sautelle White Lawyers. I don't know whether he is still a partner of the firm or not, but Mr John Sautelle is a personal friend of mine. I don't know if he is a partner. I have a feeling that he resigned from the partnership. Whether he still has some association by way of consultancy or whatnot I have absolutely no idea, but I thought I should reveal that immediately. I am not volunteering to disqualify myself because I don't know that this involves Mr Sautelle himself. Do you have any reaction to that, Mr Callanan [counsel for the defendants]?

CALLANAN: I understand your Honour has taken an oath of office and I certainly don't take any point in that regard.

HIS HONOUR: Mrs Maxwell-Smith, do you have a problem with me hearing the case if I am a friend of Mr Sautelle's?

PLAINTIFF I MAXWELL-SMITH: No, your Honour, because Mr John Sautelle shortly retired after we were connected with solicitor who provide and we had only dealings with solicitor who provide. I think we met Mr John Sautelle very briefly when we decided to retire to Merimbula, and Mr Hugo White, he had a partnership with Andrew Rowan(?), association, and he specialising in litigation. And this is when I started litigating because when we were declared bankrupt for unjustifiable reason, they sued us for defamation during the lunchbreak in the District Court - in the Federal Court, but they were who initiated the bankruptcy proceedings, but Andrew Rowan was his partner at that particular time and he done all the litigation.

HIS HONOUR: I don't know -

PLAINTIFF I MAXWELL-SMITH: But the partnership fell apart because -

HIS HONOUR: The short point, the limited point is I know Mr Sautelle. That's the only person -

PLAINTIFF I MAXWELL-SMITH: He's a very nice man, I've met him too.

HIS HONOUR: I think so too. Do you have any objection to me hearing this case because I know Mr Sautelle?

PLAINTIFF I MAXWELL-SMITH: No, I don't think so -

HIS HONOUR: Very well.

PLAINTIFF I MAXWELL-SMITH: - because Hugo White, he called - it used to be Sautelle White, slightly different, and like they have Sautelle and White, and there it's called Sautelle White Lawyers, ever since Mr John Sautelle retired.

HIS HONOUR: All right. I think I've made the appropriate disclosures and no-one has made any application. I'll continue to hear the matter. ..."

19The respondents submitted that there was a disclosure by the judge of his friendship with one of the former partners in the firm, the substance of which was understood by the applicant then appearing before him who took no objection to his continuing to sit. This constituted, it was submitted, a waiver of any right to object which was conclusive for present purposes: see Smits v Roach [2006] HCA 36; 227 CLR 423 at [43] (Gleeson CJ, Heydon and Crennan JJ) and [61] (Gummow and Hayne JJ).

20On 2 May 2012, after the judgment the subject of the present application had been delivered, Mrs Maxwell-Smith filed an affidavit in support of a motion for a stay of proceedings. In it she set out key steps in the history of the proceedings in the District Court to that time. She referred to the events of 6 May 2011 and stated in her affidavit at paragraph 8:

"I do know now that I should have objected for his Honour to continue. However, due to his Honour's order to refer the plaintiffs to the Registrar for referral to a Barrister on the pro-bono panel for legal assistance... I felt confident that justice would prevail."

21She further stated that on 26 July 2011 she had raised her concern in respect of the primary judge with counsel who had accepted a brief on a pro bono basis: paragraph 10. She further noted that counsel had not requested the primary judge to recuse himself: paragraph 16.

22There may be circumstances in which a litigant in person who has not taken objection to a judge continuing to hear proceedings should not be taken to have waived any right to object, through failure to take objection at the first available opportunity. However, the limits to such circumstances need not be explored in the present case. The evidence demonstrates that, the fact of an association having been raised in clear terms by the primary judge, Mrs Maxwell-Smith expressly declined to take an objection. It may be inferred that she later obtained advice as to whether such a course had been erroneous, or otherwise. Though conscious of the circumstances, she herself declined to raise the matter again. It was only opportunistically, after receiving what she believed to be an erroneous decision with respect to her pleadings, that she then sought to resile from her earlier position and raise objection.

23In these circumstances there is no basis for an application for leave to appeal grounded on a reasonable apprehension of bias. Indeed, quite apart from the question of waiver, it is unlikely that the facts revealed in the evidence would have formed the basis for such a ground. Leave to appeal on that ground should therefore be refused.

24There remains a question raised by the fourth (and perhaps the first sentence of the third) ground in the second draft amended notice of appeal relating to the supposed error on the part of the trial judge in striking out the various paragraphs to which I have referred.

25With respect to paragraph 16(vi) struck out on 27 January 2012, for reasons already given there is no basis for thinking that there was error. The importance of pleading the confidential information with some particularity is not to be gainsaid. The absence of any such pleading, after an adequate opportunity to rectify the omission if that were possible, rendered the cause of action based upon that ground inappropriate to proceed. His Honour was correct to strike it out.

26In respect of the other paragraphs, being paragraphs 18-34 in the amended statement of claim filed on 20 February 2012, there appeared to the Court to be an issue as to whether or not his Honour might not have been mistaken in thinking that they had not been particularised.

27The numbering had changed in the amended statement of claim filed on 20 February 2012, paragraphs 26 and 27 from the earlier version having been amalgamated into one paragraph dealing with both the second and third bankruptcy notices. However paragraph 26 made statements in respect of those two bankruptcy notices globally, alleging certain aspects in respect of each which might qualify as particulars of an abuse of process. Paragraph 27 then stated that "[i]n the circumstances," referring apparently to what had been said in the previous paragraph, the issuing of the notices was in each case an abuse of process.

28His Honour apparently did not appreciate that there had been a significant change in the particularity in respect of the alleged abuses of process. It therefore appeared to the Court that there might be a difficulty in maintaining his Honour's conclusion in that regard, that being the only basis on which he had struck out paragraphs 18-34, and there might have been grounds for an appeal based on the reasons he gave for taking that course.

29Once those circumstances were identified in the course of the hearing, it was agreed that there should be an adjournment to allow the respondents to consider what position they should take. The result has been that the second respondent agrees that an order can be made by the Court by consent setting aside orders 1-4 made by the primary judge in the District Court on 20 April 2012: that order should be made.

30The same position is not taken in respect of the first respondent and it is accepted by the applicants, as explained in the submission prepared by Mrs Maxwell-Smith in reply at paragraph 22, that the applicants' claim for compensation is in effect against the company and not against Mr Hall personally. Accordingly the application for leave to appeal in respect of those orders with respect to the first respondent should be dismissed.

31That leaves the situation of the third respondent, Mr White. It is apparent from paragraph 27 of the amended statement of claim filed on 20 February 2012 and confirmed by Mrs Maxwell-Smith that paragraphs 18-34 are intended to operate as a basis for a cause or causes of action against Mr White as well as against the second respondent. Counsel appearing for Mr White today has not been in a position to obtain instructions as to what course his client considers appropriate in the light of the indication that the Court gave earlier.

32Counsel has indicated on behalf of Mr White that there might be a number of reasons why the claims against Mr White should be left in the situation in which they presently stand, namely having been struck out by the District Court. The grounds he sought to rely upon however were not matters which had been litigated in the District Court and it is unlikely that the Court would be minded to permit such grounds to be raised by way of a notice of contention in this Court in circumstances where they had not been addressed below and the applicants in this Court are litigants in person.

33The proper course to adopt is to stand over the application for leave to appeal as against the third respondent to a time when it may be possible for the third respondent to consider what has happened today and for counsel to obtain instructions from him and to advise the Court of what position he wishes to take. The Court would direct that the third respondent advise the Registrar in due course as to the course which it is proposed should be taken and the Court will proceed accordingly.

34So far as the costs of the proceedings in this Court are concerned, the applicants have had a degree of success but they are litigants in person and there is no basis for making an order for costs in their favour.

35So far as the first and the second respondents are concerned, they are jointly represented in this Court and the appropriate course is to allow those costs to lie where they fall. There will be no order for costs in respect of them and the question of costs with respect to third respondent can be reserved until consent orders are made or the Court otherwise proceeds further in the matter.

36Accordingly, the Court makes the following orders: