District Court New South Wales Medium Neutral Citation: Australian Continuing Legal Education Centre Pty Ltd v Philip Bates [2024] NSWDC 442 Hearing dates: 27 June 2024 Date of orders: 27 June 2024 Decision date: 27 June 2024 Jurisdiction: Civil Before: Russell SC DCJ Decision: Ex tempore reasons given in court (1) Dismiss the defendant's Notice of Motion filed on 21 December 2023. (2) Order that costs of the motion be costs in the cause. (3) Grant leave to the plaintiff to file an Amended Statement of Claim by 25 July 2024 pleading the additional causes of action set out in the proposed Amended Statement of Claim annexed to the Amended Notice of Motion filed on 27 June 2024. (4) Balance of the plaintiff's Amended Notice of Motion is dismissed. (5) Costs of the Amended Notice of Motion to be costs in the cause. Catchwords: CIVIL PROCEDURE – notice of motion to strike out statement of claim – whether there is no reasonable cause of action – tests for lack of cause of action – pleaded cause available at law – must take plaintiff's case at its highest CIVIL PROCEDURE – notice of motion to file an amended statement of claim – proposed amendment pleads new cause of action – fails to plead the breach and a dollar figure for damages – particulars need to be much improved –– credit to defendant for loans does not have to be pleaded COSTS – costs in the cause – protects party ultimately proved correct about the key factual issue in the case Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), rr 13.4, 14.28 Cases Cited: Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 Agius v New South Wales [2001] NSWCA 371 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 Category: Procedural rulings Parties: Australian Continuing Legal Education Centre Pty Ltd (Plaintiff) Philip Bates (Defendant) Representation: Counsel: M Zammit (Plaintiff) P Bates (Defendant) Solicitors: CMC Lawyers Pty Ltd (Plaintiff) City Lawyers and Consultants (Defendant) File Number(s): 2023/00156489 REVISED EX TEMPORE Judgment 1. I will give judgment on the defendant's Notice of Motion filed on 21 December 2023 and the plaintiff's Amended Notice of Motion filed in court today, 27 June 2024. These proceedings are between a plaintiff company which operates a set of barristers' chambers, known as Sir Anthony Mason Chambers, and the defendant, who is a barrister who once occupied a room in those chambers. 2. The Statement of Claim filed on 16 May 2023 pleads one cause of action, which is that there was a constitution of the plaintiff company adopted by resolution in 2013 and that that constitution forms a contract between the company and its members. The Statement of Claim pleads that that constitution obliged members to pay what are known as floor fees or monthly fees and alleges that there is a right to recover unpaid floor fees pursuant to nominated paragraphs of the constitution. 3. A Defence to that action was filed on 20 November 2023. Inter alia, the defendant raised an allegation that the 2013 constitution was not validly or formally adopted, and the defendant pointed to correspondence which he had received from the directors of the plaintiff company which referred more than once to that 2013 document as a draft constitution. 4. There is clearly, then, an issue to be decided which will involve the credibility of the two directors who have signed that 2013 constitution as being adopted and who will put that document forward as a binding contract between the company and its members. 5. The defendant filed a Notice of Motion on 21 December 2023 seeking orders to strike out or dismiss the Statement of Claim. That application has been modified and clarified today by Mr Bates, who has indicated that he relies upon two rules of the Uniform Civil Procedure Rules 2005 (NSW). The first is r 14.28, which says: "(1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading – (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court." 1. I accept the bona fides of the defendant in putting forward the defence in relation to whether or not that constitution of the company was validly adopted. He relies upon correspondence that came from the company and its directors themselves. However, looking at the pleading itself, there is a pleaded cause of action, which is an action available at law. There are disputed facts concerning the allegations, but there is nothing wrong with the pleading as a pleading per se. 2. I therefore decline to make an order under r 14.28 striking out the Statement of Claim for reasons set out in r 14.28. 3. Mr Bates has indicated today that the second rule upon which he moves is r 13.4, which provides: "(1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings – (a) the proceedings are frivolous or vexatious, or (b) no reasonable cause of action is disclosed, or (c) the proceedings are an abuse of the process of the court, the court may order that the proceedings be dismissed generally or in relation to that claim." 1. The authorities in relation to r 13.4 are authorities which speak of that rule as being one involving an application for summary dismissal. The authorities say a party should only be denied the opportunity to place her or his case before the court in the ordinary way and after taking advantage of the usual interlocutory processes, where there is a high degree of certainty about the ultimate outcome of the proceeding, if the proceedings were to go to trial in the ordinary way. The authority for that, amongst others, is Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41. 2. The authorities, and in particular General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 (General Steel Industries), say the test to be applied where lack of a cause of action is alleged, has been expressed as: so obviously untenable that it cannot possibly succeed; manifestly groundless; so manifestly faulty that it does not admit of argument; discloses a case which the court is satisfied cannot succeed; under no possibility can there be a good cause of action; it is manifest that to allow the pleadings to stand would involve useless expense. The pleadings in this case do not satisfy the General Steel Industries test. 3. The authorities says that the assessment of whether the pleading discloses no reasonable cause of action is made taking the plaintiff's case at its highest. An applicant for summary dismissal must accept the truth of all allegations in the statement of claim and the ranges of meaning the assertions of fact in the statement of claim are reasonably capable of bearing. The authority for that is Agius v New South Wales [2001] NSWCA 371 at [24]. 4. True it is that there is an obvious dispute between the parties as to whether that constitution was ever validly adopted by the company. However, applying the General Steel Industries test, I am not satisfied that the pleading does not disclose a cause of action. Taking the plaintiff's case at its highest, which is not just the pleading but also the affidavit of Mr Beale, PX1, there is evidence before the Court of the constitution itself signed by two directors and dated, and evidence on oath from Mr Beale that he and the other director held a meeting and adopted that constitution. 5. For those reasons, I propose to dismiss the defendant's motion. 6. I will make an order that costs of that motion be costs in the cause, and I do it for this reason. Normally costs would follow the event, but if it turns out in a final hearing that Mr Bates is right and that constitution was never validly adopted, then I see no reason why the plaintiff should not pay the defendant's costs of this motion, let alone of that issue being determined at the trial. Such an order will protect Mr Bates if it turns out to be the case that the constitution was never validly adopted, he will win on that point and he will get all of his costs, including today. 7. I turn to the plaintiff's Amended Notice of Motion seeking leave to file an Amended Statement of Claim in the form annexed to the Amended Notice of Motion. The proposed pleading in pars 1 to 15 inclusive simply repeats and recites the pleading based upon the constitution of the company being a contract. The pleading then, in pars 16, 17 and 18, pleads a claim in quantum meruit. 8. I regard it as appropriate that I grant leave to allow that quantum meruit claim to be litigated, but I do remark that I find the particulars under par 18 inadequate. It may well be that the reasonable value of the accommodation services provided were the same as the floor fees which the plaintiff alleges Mr Bates agreed to pay, but that is not the test. There would have to be evidence of what the value of those services was. It is therefore necessary, if this matter is re‑pleaded, for the particulars under par 18 to be much improved. 9. Paragraphs 19, 20 and 21 in the proposed pleading refer to a written undertaking given by Mr Bates on 22 December 2022. That written undertaking is in evidence. By it, Mr Bates agreed to reduce his arrears of floor fees by paying the plaintiff $30,000 on or before 28 February 2023. 10. I have some difficulty with the form of the pleading in pars 19, 20 and 21. If there was an agreement, the pleading in its present form does not set out the offer and the acceptance, and in particular does not set out the consideration for that agreement. The document dated 22 December 2022 on its face appears to be no more than a promise by Mr Bates to do what he is already obliged to do, and I am not sure that forms a separate agreement between the parties. Nevertheless, I will grant leave to amend to add that cause of action, but the pleading of it will need to be in substantially different and better terms to the proposed amended pleading. 11. Paragraphs 22 and 23 plead a breach of an undertaking, which was par 1 of the document of 22 December 2022. That was an undertaking by Mr Bates to apply for finance by 9 January 2023 for the purpose of using such finance to reduce arrears of floor fees owed to the plaintiff. Again, it is difficult to see why that undertaking constitutes a separate and enforceable agreement, and further, there are no particulars provided, if it be an agreement, of what the breach was or what the damages were. The defendant will need to be given particulars of those matters for this to be a satisfactory amended pleading. 12. There is then a pleading in pars 24 to 29 inclusive of breach of contract. The offer and the acceptance are pleaded in par 25 of the proposed amended pleading. The breach is pleaded in par 26. Paragraph 27 harks back to the undertaking to pay the $30,000, and it is difficult to see where that failure fits into an allegation that there was a 2014 contract to provide accommodation in chambers in exchange for monthly fees. 13. Paragraph 28 of the pleading refers again to the breach. Paragraph 29 refers to the background to the operation of chambers and the charges which were made. Having been taken through that pleading by Mr Zammit, I am not as critical as I was when I first raised my misgivings about pars 24 to 29, but I think it could be improved from its present state. In particular, there is not a dollar figure put on the damages suffered through that breach of contract. I suspect that it is the $95,000, but the defendant is entitled to be told that. The defendant is entitled to be told by particulars which months are the subject of the claim. 14. I will, therefore, grant leave to the plaintiff to file an Amended Statement of Claim within 28 days, and the Amended Statement of Claim can plead the additional causes of action set out in the proposed amended pleading annexed to the Amended Notice of Motion. But I think it is plain from my remarks thus far that I would expect to see a different and better pleading of those causes of action to the present draft. 15. The plaintiff has come to court seeking an indulgence to amend the Statement of Claim. Again, I think it is appropriate that the order I make for costs of the Amended Notice of Motion be an order that costs of that motion be costs in the cause. At the end of the day, one of these parties is going to be proved completely right, and one is to be proved completely wrong. If it is the plaintiff who is proved completely right, and for whatever cause of action Mr Bates was obliged to pay $95,000 worth of floor fees, I see no reason why the plaintiff should not obtain all of its costs, including the costs of the motion today. 16. Mr Bates has raised a submission that it would be best if I treated this matter as part heard, that the plaintiff produce a draft Amended Statement of Claim within 28 days, and he had a chance to look at that, and then the matter came back before me so that Mr Bates, if he took the view that it was defective, could argue that. I am always reluctant to do that because parties can take their own course about spending their own money in challenging or making interlocutory applications, and if Mr Bates is unhappy with the form of pleading produced, I would have expected that any qualms he has would be raised in correspondence, and if the proposed document did not ultimately meet with his approval, in the sense of acknowledgement that it was an appropriate pleading, that he could put on a motion to strike it out. That would put the plaintiff at risk of paying costs of that application if it was successful. That is an incentive to the plaintiff to get the proposed amended pleading right. 17. I should mention that one of Mr Bates' submissions was that even the proposed amended pleading did not give him credit for loans he had made to the plaintiff company. Mr Bates is entitled to plead those amounts by way of set‑off to the plaintiff's claim, and indeed he is entitled to bring a cross‑claim, as mooted in the original defence, to seek recovery of moneys which he lent to the plaintiff. If the argument of Mr Bates is successful, then he owes the company nothing and he will have a right to recover a substantial amount of money, said to be approximately $80,000, from the plaintiff. I do not think that the lack of acknowledgement of money lent by Mr Bates to the company is a reason to require the plaintiff to plead that. If of course the plaintiff takes the view, on instructions and advice, that yes, there is money owing to Mr Bates, then the plaintiff would be foolish not to give a credit for that in its amended pleading. 18. My orders are these: 1. Dismiss the defendant's Notice of Motion filed on 21 December 2023. 2. Order that costs of the Notice of Motion be costs in the cause. 3. Grant leave to the plaintiff to file an Amended Statement of Claim by 25 July 2024 pleading the additional causes of action set out in the proposed Amended Statement of Claim annexed to the Amended Notice of Motion filed on 27 June 2024. 4. Balance of the plaintiff's Amended Notice of Motion is dismissed. 5. Costs of the Amended Notice of Motion to be costs in the cause. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 September 2024