Hermitage v Fargun Bewdy Pty Ltd & Ors [2023] NSWSC 275

Supreme Court New South Wales

Medium Neutral Citation: Hermitage v Fargun Bewdy Pty Ltd & Ors [2023] NSWSC 275 Hearing dates: 22 March 2023 Date of orders: 22 March 2023 Decision date: 22 March 2023 Jurisdiction: Common Law Before: Lonergan J Decision: See orders at par [30] Catchwords: CIVIL PROCEDURE – amendment – inadequate pleading of unconscionability in statement of claim – costs Legislation Cited: Australian Consumer Law (NSW) Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 239 CLR 175 Fiduciary Ltd v Morning Star Research Pty Ltd [2002] NSWSC 432 Category: Procedural rulings Parties: John Hermitage (Plaintiff) Fargun Bewdy Pty Ltd (First Defendant) Peter Politis (Second Defendant) Charles Parisi (Third Defendant) Representation: Counsel: H Weller Solicitor (Plaintiff) A W Smith (First & Second Defendants) B O'Connor (Third Defendant)

Solicitors: Herbert Weller Solicitor (Plaintiff) Hunt Lawyers (First & Second Defendant) Gilchrist Connell (Third Defendant) File Number(s): 2022/00093985 Publication restriction: Nil

REVISED EX TEMPORE JUDGMENT 1. Listed before me today for hearing is a notice of motion filed on 11 October 2022 on behalf of the plaintiff, John Hermitage. That notice of motion at the time it was filed, sought orders in the form of judgment for the plaintiff against the first and second defendants, that the proceedings be listed for assessment of damages against those defendants, and that leave be granted to file an amended statement of claim pleading various causes of action against the third defendant, a solicitor, in the form annexed to an affidavit of the plaintiff's solicitor affirmed on 11 October 2022. 2. Shortly after its filing, the motion was given today as its hearing date. As part of my preparation for hearing the motion, various correspondence was sent to the parties seeking some clarification as to circumstances and incomplete affidavits and matters of that nature. This seemed to have prompted, or perhaps this was already in the pipeline, an amended notice of motion, seeking leave to file a comprehensively re-pleaded statement of claim, which was annexed to an affidavit of Mr Hermitage of 17 March 2023. 3. Orders in respect of judgment against the first and second defendants were to be abandoned by way of the amended notice of motion, which is what has proceeded for hearing before me today. 4. With admirable cogency and practicality, the legal representatives appearing today were prepared to and did proceed on the basis of the amended notice of motion despite its late service and the late service of the material in support of it. I was assisted by succinct oral and written submissions addressing the issues between the parties. 5. The background to the proceedings, briefly stated, is that in August 2021 a settlement was reached in proceedings before the Possessions List Judge, Davies J, and it is now asserted by Mr Hermitage that there were machinations associated with the settlement recorded in that matter that had their origins in unconscionability. I should note that initially the proceedings were commenced by a summons in April 2022 seeking that a number of the aspects of the settlement, the subject of consent orders in August 2021, be set aside and an order restraining the first defendant, (who was the plaintiff in those other proceedings), from enforcing the judgment entered in those proceedings on 10 August 2021. 6. The first iteration of the statement of claim filed in May 2022 had fairly wide scale pleadings of fraud, breaches of s 18 of the Australian Consumer Law, conspiracy, and against the third defendant solicitor, a kind of negligence case, although, to be frank, the pleading left a lot to be desired in terms of absence of clarity as to relationship and retainer and therefore duty of care asserted in relation to the third defendant. 7. With the 17 March 2023 iteration of the amended statement of claim, the pleadings have been simplified to be reduced to, in effect, a case of unconscionability. Even so, there are still deficiencies in the pleading particularly in respect of the third defendant. Counsel for the third defendant, Mr O'Connor, articulated these succinctly for the assistance of the Court. 8. In terms of principle, it is well known that the power to grant leave to amend is discretionary and s 64 of the Civil Procedure Act 2005 (NSW) provides for that. the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 14.17 cover the provisions for a party to raise new matters in pleadings, even after commencement of proceedings, and r 19.1 provides the rules around amending a statement of claim. In particular, leave to amend should be granted if the application is made in a timely manner and for a proper purpose, see Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 239 CLR 175, but any proposed amendment must be proper as to both substance and form and not liable to be struck out. That latter principle applies particularly with the current pleading. 9. As articulated by Mr O'Connor, the cause of action advanced against the third defendant claims unconscionability at general law but does not plead any special disadvantage. The authorities that deal with this type of allegation make it crystal clear that special disadvantage must be pleaded if unconscionability at law is to be pursued. 10. There are more basic problems with the way the case has been pleaded against the third defendant in the 17 March 2023 iteration. First of all, the third defendant, other than being mentioned as being a solicitor, is first introduced into the pleading at par [26] with no explanation as to who he is or his relationship to the parties. This problem is compounded when in par [31], representations are asserted to have been made by him, but context of those representations has not been made clear and there is nothing pleaded that explains whether the relationship in which those assertions were made was in the nature of some kind of retainer, or something else, and this lack of clarity makes it impossible to plead to the allegations. 11. Paragraphs [32] and [33] are also problematic. Agency in respect of the first defendant is pleaded but there is no pleading as to the relationship between the third defendant and the first defendant that would give rise to such principles of agency being applied and so it is impossible to respond because it is not known whether it is asserted that it is an actual agency, ostensible agency or implied agency. 12. Mr O'Connor submitted, correctly, that these are matters that all need to be in the pleading as opposed to being a matter for later requested particulars. 13. Paragraph [33] is also problematic because particulars of knowledge for the underlying claims of unconscionability ought to be pleaded because in the context of unconscionability involving an element of moral turpitude, what is asserted to have been that knowledge, and thus the degree or presence of moral turpitude, is a matter that ought to be pleaded. I accept that submission is correct. 14. Paragraph [34] suffers from the problem that no special disadvantage has been pleaded. Paragraph [40] asserts that various representations made by the first and second defendants, as set out in pars [16] and [25], were misleading or deceptive or both, but nowhere is there an assertion of that type regarding representations attributed to the third defendant. Accordingly, there is no clarity at all about what is alleged to be the third defendant's unconscionability and what was said by him that meets that description. There is no pleading anywhere that anything said by the third defendant was untrue or false and so there is an incoherence between the pleaded unconscionable conduct and the representations attributed to the third defendant, given the falsity or untrue nature of them has not been identified at all in the pleadings. 15. Mr O'Connor, in accordance with the pragmatic requirements of the overriding purpose rule and in proper and professional furtherance of narrowing down the issues between the parties, has received instructions from his client to accept that the plaintiff should be allowed another opportunity to re-plead to fix these difficulties. This is a position that Mr Weller, who appears on behalf of the plaintiff, has accepted. Accordingly, I will make some orders to facilitate that position, namely that the plaintiff ought to, within a certain period, which I will specify at the end of this judgment, prepare and provide to the other parties a further amended statement of claim for the parties to review and indicate their position in response. Before I do that, however, I will deal with the question of costs. 16. Mr Smith, who appears for the first and second defendants, seeks costs of the notice of motion filed on 11 October 2022, which has been effectively abandoned today, the costs of the amended notice of motion dated 17 March 2023 and the costs thrown away by any of the amendments to the statement of claim. 17. The effect of Mr Weller's submissions on costs was that he would not wish to be heard against orders in that form in respect of the first, second or third defendant. 18. However, counsel for the third defendant seeks particular costs orders and posed specific arguments as to why that should be the orders I make today. In his written submissions Mr O'Connor stated that the abandonment of the previous amended statement of claim, that is the October 2022 iteration, has given rise to wasted costs and inefficiencies. The extremely serious allegations of fraud and conspiracy against an officer of this Court made in a completely unparticularised way should never have been made. They did not enjoy enough prospects of succeeding. Accordingly, costs of the third defendant in dealing with that motion should be paid forthwith on an indemnity basis, in accordance with the principles in Fiduciary Ltd v Morning Star Research Pty Ltd [2002] NSWSC 432 at pars [11] to ]13]. 19. Turning to that judgment, Barrett JA identified three factors relevant to the determination as to whether an order that costs be payable forthwith, (not necessarily indemnity costs), ought to be made. The first two are relevant here: "[1] That the interlocutory decision represents the determination of a separately identifiable matter and may be viewed at the completion of a discrete aspect of the case; and [2] That some conduct of the unsuccessful party may be seen as being unreasonable." 1. Mr O'Connor submitted that both those elements were present here, particularly given the abandonment of the fraud and conspiracy allegations that were included in the October 2022 iteration of the statement of claim, which are not only abandoned, but are discrete and severable causes of action. 2. I interpolate here that perhaps the same could be said for the professional negligence claim that was brought and not very persuasively pleaded in that October 2022 iteration, but Mr O'Connor's submission focuses on the unreasonableness and seriousness of the fraud and conspiracy assertions against a solicitor of the Court. 3. Added to that submission, Mr O'Connor raised the requirements of UCPR r 15.3 to plead with particulars any fraud, misrepresentation, breach of trust, wilful default or undue influence on which a party relies and that in circumstances where those particulars were not provided, this feeds into a potential finding of unreasonable conduct against the plaintiff in pleading in the way it did inadequately, serious allegations of fraud and conspiracy. 4. In response, Mr Weller, whilst acknowledging certain standard costs orders ought to be made, submitted that this Court should not make an order for indemnity costs payable forthwith as it would tend to stymie the proceedings because Mr Hermitage is a pensioner and does not have the means to pay. Such an order may tend to stymie the proceedings, because of a risk that the third defendant could ask for a stay of proceedings if costs ordered to be paid forthwith were not paid. 5. Mr O'Connor responded by noting on the record that he had received instructions to not seek a stay of proceedings if costs payable forthwith were ordered, but not paid. 6. Section 98 of the Civil Procedure Act provides that subject to the rules of the Court, costs are in the discretion of the Court and the Court has full power to determine by whom, to whom and to what extent costs are to be paid and the Court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. 7. The proceedings commenced by summons on behalf of Mr Hermitage have some factual and legal complexity. It is understandable that alternative legal frameworks to choose as the basis for pleading a cause of action in these circumstances create some difficulties for solicitors and barristers as to the most appropriate form of cause of action to pursue. In cases involving allegations of moral turpitude and, to use a non-legal and perhaps more neutral term, "cheating" or "fooling others", a number of different legal frameworks can fit the same factual scenario. The fact that one of the persons asserted in this cause of action to be involved in that is a solicitor should not entitle that solicitor to some different level of costs protection. 8. I appreciate that the submission Mr O'Connor made on behalf of his client was not necessarily directed that way but it seems to me for me to make a finding that conduct by legal representatives, doing their best by their client to appropriately identify and plead causes of action was unreasonable, is a conclusion I should reach only in very clear and fairly egregious circumstances. 9. I appreciate that in a sense the allegations in the October 2022 iteration of the statement of claim of fraud and conspiracy are severable in the legal sense, but in terms of the facts that underpin them, I am not entirely confident that severability is as clear as submitted by Mr O'Connor. 10. It seems to me in all the circumstances the appropriate order is that ultimately the plaintiff pay all of the costs thrown away by the amendments to the statement of claim and the notice of motion that was not pursued and today's notice of motion, which was in effect unsuccessful, requiring as it does further re-pleading of the causes of action against the third defendant that are currently inadequately pleaded.