New South Wales Supreme Court CITATION : Premier Travel Pty Limited & 3 Ors v Yandell & 2 Ors [2007] NSWSC 985 HEARING DATE(S) : 3 and 17 August 2007 JURISDICTION : Common Law JUDGMENT OF : Adams J at 1 EX TEMPORE JUDGMENT DATE : 17 August 2007 DECISION : 1. Leave given to the cross defendants to the second cross claim to file a third cross claim against the plaintiffs substantially in the form of paragraphs 1 and 2, 4 to 8, 10 to 31, and 47(a) to (e) and (g) to (i) of Annexure A to the amended notice of motion filed in Court on 17 August 2007; 2. The cross defendants to the second cross claim file and serve the third cross claim on or before Friday 31 August 2007; 3. The cross defendants to the second cross claim to pay the costrs of the respondents to the notice of motion filed on 13 July 2007 and the amended notice of motion filed on 17 August 2007. CATCHWORDS : Leave to file cross-claim - whether causes of action must fail - whether notice to solicitor of facts is notice to client - whether silence may be misrepresentation - whether silence of solicitors for opposing party is misrepresentation - leave granted in part. LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act 1946 Premier Travel Pty Limited (First plaintiff0 Noviga Pty Ltd (Second plaintiff) Betaco Pty Ltd (Third plaintiff) PARTIES : Robcox Investments Pty Ltd (Fourth plaintiff) Robert Walter Yandell (First defendant) Robert Rex Wright (Second defendant) Dean Robert Stell (Third defendant) FILE NUMBER(S) : SC 20226/05 COUNSEL : Mr D F Villa (Plaintiff/respondent) Mr T D Tzovaras (sol) (Defendant/applicant) SOLICITORS : Cutler Hughes & Harris (Plaintiff/respondent) Tzovaras Legal (Defendant/applicant) THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADAMS J FRIDAY 17 AUGUST 2007 20226/05 - PREMIER TRAVEL PTY LIMITED & 3 ORS v ROBERT WALTER YANDELL & 2 ORS JUDGMENT 1 HIS HONOUR: This is an application by Michael Vincent Bourke for leave to commence a cross-claim called the "third cross-claim" against a number of cross-defendants. 2 The cross-defendants fall into two categories. The first is a number of associated persons and companies who were involved in proceedings commenced in 2003 as plaintiffs against the applicant and various others which were settled on 25 June 2005. The other class of cross-defendants are partners in the firm, Cutler Hughes & Harris (Cutlers), who acted for the plaintiffs in the 2003 action and were their solicitors during the settlement negotiations and on settlement. 3 For convenience, the plaintiffs in the 2003 proceedings have been called the "Cox" entities and the defendants in those proceedings, who are the present applicants, the "Bourke" entities. The firm is called Yandells. 4 Leave to file the third cross-claim is opposed, in substance for the reason that, it is contended, the proposed causes of action cannot succeed. 5 The 2003 litigation between the Cox and the Bourke entities arose when a joint venture between them foundered. Yandells were solicitors who had been retained in respect of a joint venture. The Cox entities claimed substantial damages for specified losses against the Bourke entities. The settlement deed provided for the payment of a substantial sum in return for an unqualified release of any liabilities owed by the Bourke entities to the Cox entities arising out of the joint venture arrangements. Yandells were not involved in or a party to that deed of settlement. 6 Certain documents had been produced by Yandells in answer to subpoenas in the course of the 2003 litigation. In August 2004 the Cox entities, by notice of motion, sought access to those documents which were identified in the notice of motion. In substance they were to be used for the purpose of undertaking proceedings against Yandells. The affidavit in support of the notice of motion sworn by Mr Hamwood, then a solicitor employed by Cutlers and now a consultant with them, discloses, amongst other things, that his inspection of the documents produced by Yandells disclosed significant facts concerning the nature and extent of the involvement of Yandells, as solicitors in some of the transactions, and as having various retainers from the Cox entities, or some of them, in relation to some of those transactions. Those transactions formed an integral part of the joint venture and the events that led to its failure. 7 It is evident from the affidavit of Mr Hamwood that it was intended by the Cox entities to pursue a claim against Yandells for what were alleged to be breaches of fiduciary and tortious duties by them relating to their conduct and knowledge of the transactions which were the subject of the 2003 proceedings, namely arising out of the joint venture to which I have referred. 8 The Bourke entities were named as defendants to the notice of motion and as such were served with the notice of motion and the supporting affidavit. As is usual, those documents were served on their solicitor, Mr Tzovaras. 9 The schedule to the proposed subpoena specified a number of documents which in various ways involved the Bourke entities. It seems obvious enough that this was the reason that they were named in the notice of motion, since they plainly had an interest in the subject matter of the proceedings and may have wished to oppose either production of or access to some or all of those documents. In the result there was no objection and they did not appear. The notice of motion was ultimately the subject of orders by consent made at the instance of the applicants on the one hand and Yandells on the other. 10 The notice given to the Bourke entities' solicitor, Mr Tzovaras, of the intention to commence the proceedings against Yandells was notice to the Bourke entities that the Cox entities intended to sue Yandells in respect of the losses they suffered arising from the transactions which were the subject of the 2003 proceedings and the deed of settlement. Was it notice for the purpose of considering whether they were aware at the time of the negotiations for and execution of the settlement of the 2003 proceedings? If so, this presents a significant, perhaps decisive answer to the cross-claims now sought to be advanced. 11 It was submitted to me by Mr Tzovaras that such notice should not be imputed since the Bourke entities had no "interest" in the notice of motion, pointing to the fact that they did not appear at the hearing of the motion and orders were not made against them. For the purpose of considering whether communication of information to a solicitor is to be imputed to the client, the fact that a solicitor is retained by the client in respect of the particular matter in which the communication is made must mean (unless the circumstances are very exceptional) that knowledge of material facts communicated to the solicitor is imputed to the client, even if the client is indifferent to the outcome of the proceedings in which the communication has been made, provided of course the client is a party to or has otherwise a relevant connection with the proceedings in respect of which the communication is made to the solicitor. 12 In early July 2005, the Cox entities commenced proceedings against Yandells as had earlier been foreshadowed in the notice of motion. Yandells have, amongst other things, cross-claimed against the Bourke entities for a contribution under the Law Reform (Miscellaneous Provisions) Act 1946 towards any verdict which might be found against them in favour of the Cox entities. 13 As I have mentioned, the deed of settlement of the 2003 proceedings was entered into on 25 June 2005, approximately two weeks before the commencement of the action against Yandells. By the end of the preceding May, the statement of claim in the 2005 proceedings was in final form and had been verified by affidavit in accordance with the Rules. I think it is reasonable to infer that at the time of settlement the Cox entities in all probability had determined that they would commence proceedings against Yandells for the very losses which had been the subject of the 2003 proceedings. I think it is also reasonable to infer that Cutlers were aware of this intention. 14 The Bourke entities now seek leave to commence proceedings against the Cox entities and Cutlers, in substance, for allowing the settlement to proceed upon the mistaken assumption by the Bourke entities that it would end all litigation arising out of the matters agitated in the 2003 proceedings. That case is put in various ways which I do not need to set out in detail. It is sufficient for present purposes to say that it is alleged that the deed of settlement, in effect, indemnified the Bourke entities from any further payment of damages in respect of the transactions which were the subject of the 2003 proceedings, including any that might be indirectly payable to a third party by way of contribution. 15 There is a collateral argument that, at all events, the effect of the deed of settlement is to prevent (by virtue of the doctrine of satisfaction) the Cox entities from suing Yandells, who are, it is said, joint tortfeasors with the Bourke entities whose allegedly wrongful conduct gave rise to the losses first claimed in the 2003 litigation and now claimed in the 2005 litigation. 16 Nice analysis of the deed of settlement is not necessary. In my view, the contentions as to the effect of the deed and the extent of the settlement of the Bourke entities is fairly arguable, though whether the essential character of this case really depends upon the implication of a term in the deed of settlement or is a collateral term or operates by virtue of the law relating to satisfaction can reasonably be the subject of some debate. For present purposes, I think such a debate would be arid. The proposed cross-claim seeks also to sue upon an allegation, in essence, that the Cox entities were guilty of misleading conduct by not informing the Bourke entities of the proposal to commence proceedings against Yandells. However, as I have already pointed out, the Bourke entities were informed of that intention, though that information was conveyed some eight months before settlement was entered into. 17 I think it is arguable that it was reasonable for the Cox entities to have assumed (if they did) that the Bourke entities were aware of their intention to sue and, it never having been communicated that that intention had ended, thought that the Bourke entities entered into the agreement upon the understanding that such an action might still take place and that it was for the Bourke entities, if they wished, to ensure that the matter was specifically covered in the deed of settlement to safeguard their interests. However, as I have said, eight months had passed since the information had been conveyed, at that time the 2003 proceedings were still on foot, and it may have been reasonable in the circumstances, considering the unqualified nature of the negotiations as they are presently disclosed and of the terms of the deed of settlement, that the Bourke entities were under an apprehension that the matter would be entirely at an end so far as any possible liability to which they might be subject was concerned when the 2003 proceedings were settled, despite the earlier notice of the Cox entities' intention to sue Yandells. 18 It is not easy for a plaintiff to establish misleading conduct by silence, and it may fairly be said that the way in which this second category of case is pleaded is so unspecific as not adequately to express the precise factual context giving rise to the implicit misleading representations which are the subject of this category of claim. Nevertheless, it seems to me that the circumstances are sufficiently clear for me to consider whether or not leave should be granted or refused to permit such a case to go forward. 19 In my view the allegations in the proposed third cross-claim, together with the affidavit material, demonstrate a sufficiently arguable case to permit leave to be granted. 20 The third category of claim concerns alleged misleading representations by the solicitors in remaining silent about the proposed litigation. I have already referred to the assumption that might reasonably have been made by virtue of the giving of notice of the intention to sue eight months previously. The reasonable inference that probably should have been drawn by the Bourke entities arising out of silence on this matter was that such was still the intention, even though there had been a significant lapse of time and the context had changed substantially in that it was now one of settling the 2003 proceedings. Be that as it may, as the cross-claim is presently pleaded I do not see a basis upon which it is fairly arguable against Cutlers that their silence implied a misrepresentation. There is nothing in the affidavits which gives additional material capable of being used to support the allegations. Accordingly, I would not give leave in respect of the cross-claims against Cutlers. 21 It is scarcely necessary for me to point out that this judgment is interlocutory and it may be that repleading this claim, of course upon a proper factual basis, could lead to a different outcome. 22 It has been submitted in opposing the application that I should take into account the disruption to the course of the associated proceedings which would result from the necessity for Cutlers to cease acting for the Cox entities. In the result, it has not been necessary for me to consider this aspect of the matter. ********** 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.