Tachnat Pty Ltd v Orsini

1. [1]

   HER HONOUR: This hearing involves five notices of motion. Three have been filed by the plaintiffs, one has been filed by first defendant and one by the second defendant. In summary, the plaintiffs seek summary judgment against both defendants, default judgment against both defendants, an order for maximum costs and an order for joinder of case number 2021/25515. While both defendants seek security for costs against the first defendant, and the second defendant seeks that the claims brought by the second and third plaintiffs as against her are dismissed, or stayed, or for the statement of claim filed on 9 June 2021 be struck out, and for the statement of claim filed on 9 June 2021 insofar as it relates to the first plaintiff’s claims against her to be struck out in part.

2. [2]

   The first plaintiff is Tachnat Pty Ltd (“Tachnat”), the second plaintiff is Mr Gash, the third plaintiff is Ms Rajan. Mr Gash, a director of Tachnat, seeks leave to act for the plaintiff. Ms Rajan, also a director of Tachnat, consented to this course of action (T2.5-15). The defendants did not oppose leave being granted to Mr Gash to appear on behalf of Tachnat. I allowed him to do so before me in these current applications on the basis of his undertaking to comply with r 7.2 Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) in providing a supporting affidavit within seven days. Mr Gash has provided the requisite affidavit. The first defendant is Julie A Orsini (a solicitor), and the second defendant is Vera Culkoff (a barrister).

3. [3]

   The plaintiffs rely upon the affidavits of Mr Gash dated 18 June 2021, 27 July 2021, 5 August 2021, 9 August 2021, 22 August 2021, 29 August 2021 and 2 September 2021. The first defendant relies upon the affidavits of Ms Orsini dated 29 July 2021, Peter Moran, solicitor, dated 2 August 2021 and Christopher Harrison, solicitor, dated 5 August 2021. The second defendant relies on affidavits of James Derek Berg, sworn 27 July 2021 and Ms Culkoff, sworn 27 July 2021 and 6 September 2021.

Background

1. [4]

   In 2013, the second plaintiff had a trademark registered for a menswear business and also a trademark registered for a company that designed menswear. He planned to have garments manufactured in Australia and exported to India (T9.37-50).

2. [5]

   The underlying proceedings to which this matter relates involved a dispute between Tachnat and Pick Packers Pty Limited (“Pick Packers”). It was a commercial dispute between two corporate entities. In 2018, Tachnat had an agreement to store goods in Pick Packers’ warehouse. On about 22 February 2015 the stored goods were water damaged (T10.20-30).

3. [6]

   After some preliminary email exchanges between the second defendant and the second and third plaintiffs, the first defendant was retained as the solicitor for Tachnat on 22 September 2015. Curiously the first defendant retained the second defendant, a barrister, to advise and appear for Tachnat in its dispute with Pick Packers on 30 June 2015, before she herself was retained. It should also be noted that the second defendant had some contact with the plaintiffs prior to 22 September 2015 (CB Vol 2, 813).

4. [7]

   Proceedings between Tachnat as plaintiff and Pick Packers as defendant were commenced in the District Court. The statement of claim in the District Court sought damages of $443,278.69. The District Court proceedings settled at mediation for the sum of $100,000 (“the settlement”). That sum was the maximum recoverable under Pick Packers’ insurance policy.

5. [8]

   Tachnat filed an application for assessment of the first defendant’s costs in 2018/24202 Tachnat Pty Ltd v Julie Orsini. The first defendant sought costs and disbursements of $293,093.75. On 6 December 2018, Costs Assessor Richard Hamwood (“the Costs Assessor”), provided reasons for his decision and issued a certificate. He assessed that a fair and reasonable sum for the first defendant’s costs was $242,018.85 (CB Vol 1, 174).

6. [9]

   Tachnat appealed to the costs review panel. On 18 May 2019, a Review Panel comprised of Stephen Lanken and Michael Robinson (“the Review Panel”) substituted the sum of $192,702.75 in lieu of the Costs Assessor’s decision (CB Vol 1, 202).

The pleading in the Amended statement of claim (“ASC”)

1. [10]

   On 9 June 2021, the plaintiffs filed a statement of claim in this Court. On 11 August 2021, the plaintiffs filed an amended statement of claim (“ASC”). The alleged conduct of the defendants is said to have resulted in a number of losses to the plaintiffs including loss of income, loss of profits, loss of business opportunities, loss of the opportunity to have children, and to have caused the second and third plaintiffs mental harm.

2. [11]

   It should be noted that the defendants acknowledge the amendments made in the ASC are not material to the motions before the Court save for the fact that the pleadings in the ASC should be substituted for the original statement of claim, where referenced, in the second defendant’s Notice of Motion.

3. [12]

   The plaintiffs seek the following:

   1. (1)

      a judgment or declaration on the financial disadvantage caused to the plaintiff(s) pursuant to s 192E of the Crimes Act 1900 (NSW);

   2. (2)

      a judgment or declaration on misleading and deceptive conduct pursuant to s18 of the Competition and Consumer Act 2010 (Cth);

   3. (3)

      a judgment or declaration on breach of duty of care pursuant to Division 2 of the Civil Liability Act 2002 (NSW);

   4. (4)

      a judgment for damages under s 82 of the Trade Practices Act 1974 (Cth);

   5. (5)

      a judgment or declaration for breach of contract for negligent, misleading, dishonest and deceptive conduct;

   6. (6)

      an order or judgment that the defendant pays damages/compensation.

4. [13]

   More specifically, the plaintiffs plead the following in the ASC:

   1. (1)

      the “defendant” withheld notices, and settlement offers issued by Pick Packers or its lawyers;

   2. (2)

      the defendants were intentionally negligent and knowingly brought false detinue and conversion claims against Pick Packers;

   3. (3)

      the defendants knowingly initiated proceedings with no reasonable prospects of success for their own financial advantage and contrary to the plaintiffs’ instructions; and

   4. (4)

      the defendants intentionally misled the plaintiffs, thereby breaching contract, their duty of care, and their fiduciary duties.

5. [14]

   At [82] of the ASC, the plaintiffs seek punitive and exemplary damages in addition to a number of heads of other damages, including for mental harm to the second and third plaintiffs.

6. [15]

   As can be appreciated, these are serious allegations made against the first and second defendants, both of whom are legal practitioners.

The notices of motion

1. [16]

   The best way, in my opinion, to organise the orders sought in each these 5 notices of motion is to group each subject matter raised in the various motions. I shall firstly deal with the plaintiffs’ application for summary judgment and second defendant’s application for summary dismissal or to strike out pleadings. Secondly, I shall address the second defendant’s application for a permanent stay of proceedings against the second and third plaintiffs. Thirdly, I will deal with the plaintiffs’ Notices of Motion seeking default judgment and that damages be assessed as against both defendants. Finally, I will address the first and second defendants’ applications seeking security for costs from Tachnat.

The second plaintiff’s summary judgment and the second defendant’s summary dismissal or strike out motions

1. [17]

   The second plaintiff’s first Notice of Motion filed on 19 June 2021 (“Summary Judgment Motion”) relevantly seeks:

   1. (1)

      summary judgment pursuant to UCPR 13.1.

   2. (2)

      an order for maximum costs pursuant to UCPR 43.4.

   3. (3)

      an order for joinder of case number 2021/25515 pursuant to UCPR Division 5.

2. [18]

   So far as the Summary Judgment Motion is concerned, in relation to paragraph [2], costs of the proceedings are normally determined after trial. Maximum costs are not determined at the hearing of these notices of motion, it is only the costs of the motions can be dealt with in this judgment. Hence I dismiss paragraph [2] of the Summary Judgment Motion.

3. [19]

   In relation to paragraph [3], at the hearing I made an order that the plaintiff serve the defendants in this proceeding with the Summary Judgment Motion and supporting affidavit in 2021/25515. I directed that this file be made available to the Registrar on 25 October 2021 when it is listed for a directions hearing. That leaves only paragraph [1], the plaintiff’s application for summary judgment under UCPR 13.1 to be determined.

4. [20]

   As there is an application by the second defendant to summarily dismiss the plaintiff’s statement of claim, I will take the plaintiff’s case at its highest. Therefore, I will deal with all the applications on the basis of the pleading in the ASC.

5. [21]

   The second defendant does not seek to strike out the majority of the claims made by Tachnat, having accepted that they are matters that are to be determined at trial. Rather, the second defendant focuses on the summary dismissal and strike out of the second and third plaintiff’s claims against her.

6. [22]

   The second defendant’s Notice of Motion filed 27 July 2021 (“Second Defendant’s Motion”) is lengthy and involves all three plaintiffs. The relief sought against the second and third plaintiff is almost identical. I have excised paragraph [16] concerning security for costs and reproduced it later in this judgment where I deal with that topic. The second defendant’s Motion relevantly reads:

7. [23]

   Paragraphs [6], [13] and [17] relate to particulars. I note that paragraph [6] is not pressed at this stage (T51.47-52.22). By arrangement paragraphs [13] and [17] have not been dealt with by me at this hearing, they are to be referred to the Registrar for directions, if appropriate.

8. [24]

   In summary, the main issues in the second defendant’s Notice of Motion to be addressed in the summary judgment / strike out application are whether:

   1. (1)

      certain relief sought by the plaintiff should be struck out/dismissed;

   2. (2)

      claims for summary dismissal against the second and third plaintiffs should be granted;

   3. (3)

      proceedings against the second and third plaintiffs should be stayed; and

   4. (4)

      security for costs as against Tachnat should be granted.

9. [25]

   UCPR 13.1, 13.4 and 14.28 provide:

10. [26]

    The power to enter summary judgment should be exercised with great care, and an order under the rule should only be made where it is clear that there is no real question to be tried: see Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99; Webster v Lampard (1993) 177 CLR 598 at [5]; Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28; Dennis v Joukhador [2021] NSWSC 870 at [17]. If there is a real question, either of fact or law, and the rights of the parties depend on it, it is not open for the court to intervene summarily: see Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91. It must be clear that there are no facts in issue.

11. [27]

    The test applied in considering an application for summary judgment is similar to that applying to an application for summary dismissal as per General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 (“General Steel”) at [8], eg "so obviously untenable that it cannot possibly succeed", "manifestly groundless", "so manifestly faulty that it does not admit of argument".

12. [28]

    UCPR 14.28 enunciates grounds, upon which a defective pleading may be struck out. Whereas UCPR 13.4 focuses on the weakness of a party’s case rather than defects of pleading: see Brimson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937.

13. [29]

    The plaintiffs, in their submissions seeking summary judgment, rely upon s 174 of the Legal Profession Uniform Law 2014 (NSW) (“LPUL”) which reads:

14. [30]

    The plaintiffs’ application for summary judgment centres upon the two costs agreements; the first being between Tachnat and the first defendant (“Tachnat/Orsini Costs Agreement”) and the second between the first and second defendants (“Orsini/Culkoff Costs Agreement”).

15. [31]

    The Tachnat/Orsini Costs Agreement reads (CB Vol 1, 96):

16. [32]

    With regards to the Orsini/Culkoff Costs Agreement, the first defendant deposes in her affidavit dated 29 July 2021 (“Orsini Aff 29 July 2021”) at [4] that on 25 June 2015, she had an oral conversation with the second defendant. Shortly after that discussion, she commenced acting for Tachnat, and retained the second defendant as Counsel in relation to Tachnat’s dispute with Pick Packers.

17. [33]

    The Orsini/Culkoff Costs Agreement reads as follows (CB Vol 3, 1974):

18. [34]

    Tachnat, through the second plaintiff, submitted that it gave instructions to the defendants to request and provide the information to Pick Packers’ lawyers that would settle the dispute. It submitted this was an appropriate instruction for the plaintiffs given circumstances at that point in time and relied on the comments of Fitzgerald JA (with whom Sheller and Handley JJA agreed) in Studer v Boettcher [2000] NSWCA 263 at [74]:

19. [35]

    Tachnat also referred to Across Australia Finance v Bassenger [2008] NSWSC 799 in which it was stated at [78]:

20. [36]

    Tachnat noted that the public interest is served by practitioners encouraging an early settlement of their client's dispute, and that practitioners are under a duty to seek such a settlement citing UCPR 5.7. I interpose at this point, that UCPR 5.7 deals with privileged documents. However, solicitors do have a fundamental ethical duty to act in the best interests of their clients and to deliver legal services competently, diligently and as promptly as reasonably possible: rr 4.1.1, 4.1.3 of the Australian Solicitors Conduct Rules 2015 (NSW) (“ASCR”).

21. [37]

    Tachnat further noted that certain relationships are recognised as being fiduciary in character, and that the traditional categories of fiduciary relationship include solicitors and clients: see Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 (“Hospital Products”).

22. [38]

    Tachnat then submitted that the first and second defendants pursued the litigation purely for their financial benefit from the accruing of legal bills. Tachnat stated that the defendants did not provide any information as to the prospects of the litigation’s success pursuant to Schedule 2 of the LPUL.

23. [39]

    Tachnat noted the following:

    1. (1)

       on 22 September 2015, at 12:11:30 pm, the first defendant sent the Tachnat/Orsini Costs Agreement to the plaintiffs by email. It gave an estimate of a successful recovery for $100,000 and $40,000 for counsel;

    2. (2)

       on 6 September 2017, at 4:16 pm, after mediation the second defendant wrote to the second plaintiff "very unusual for such a large business [Pick Packers] to have such a limited cap on insurance cover [of $100,000]";

    3. (3)

       on the same date, at 4:59 pm, the second defendant wrote to the second plaintiff "Legal practitioners would be out of business very quickly if they guaranteed success and no legal costs".

24. [40]

    Tachnat submitted that the first defendant acted for all the plaintiffs, for the first as a company, and the second and third plaintiffs as directors and natural persons, and that the defendants’ conduct caused personal injury and harm to the second and third plaintiffs as pleaded in the ASC.

25. [41]

    In support of this contention Tachnat noted the following:

    1. (1)

       on 22 September 2015, the first defendant's covering email for the costs disclosure stated "You will see from the Disclosure document that as Tachnat is a company, the persons who are responsible for the payment of my fees and any disbursements are Tachnat itself, and also each of you personally (i.e. both being directors and instrumental in providing instructions)”;

    2. (2)

       the first defendant's costs disclosure agreement is addressed to “HULIO GASH, REJANI RAJAN, and TACHNAT PTY LIMITED ACN XXX (TACHNAT).”

    3. (3)

       The clause in the costs agreement under the heading "Persons responsible for your matter and costs" states: "The persons responsible for the provision of instructions and for payment of costs is Hulio Gash. Persons further responsible for the provision of instructions and for the payment of costs are Rejani Rajan and Tachnat. All terms of this disclosure and the Cost Agreement apply to those parties jointly and severally".

    4. (4)

       on 15 March 2018, The plaintiffs rely on the first defendant's submission to the supreme court costs assessor that states: “I note that the cost applicant is Tachnat. Neither Mr. Gash nor Ms. Rajan are named as applicants, notwithstanding they are jointly and severally liable to pay the fees".

26. [42]

    Tachnat submitted it is not an error or mistake that the first defendant included the second and third plaintiffs personally in the costs agreement. A solicitor is learned, and the first defendant had reasons as to why second and third plaintiffs were included as natural persons. Tachnat referred to the following passage in Griffiths v Evans [1953] 1 WLR 1424 (“Griffiths”) where Denning LJ stated:

27. [43]

    I interpose at this point, it should be noted that Griffiths applies to a situation where there is an oral agreement between the client and his or her solicitors. The circumstances as between the first defendant and Tachnat is that there is a written costs agreement and as such Griffiths is not instructive here.

28. [44]

    In relation to the second defendant, Tachnat submitted that from 24 June 2015 to 22 September 2021, the second defendant provided professional services in return for monies pursuant to the Civil Liability Act 2002 (NSW), and hence she owed a duty of care towards the plaintiffs. Tachnat noted the second defendant charged professional fees for professional services, in addition to fees charged by the first defendant, and that the monies were paid directly into the second defendants' bank account by the plaintiffs.

29. [45]

    Tachnat noted that the second defendant started providing professional advice from 24 June 2015, and that between 24 June 2015 and 22 September 2015 there was no costs agreement or a retainer between the plaintiffs and the second defendant.

30. [46]

    Tachnat noted the following:

    1. (1)

       on 22 September 2015, at 11:08am, the second defendant emailed the second plaintiff that "Julie suggested I send the invoice directly to you as it includes work before Julie became involved";

    2. (2)

       on the same date, at 12:10pm: the first defendant emailed the Tachnat/Orsini Costs Agreement to the plaintiffs. There is a clause in the cost agreement under the heading "Engagement of another Law practice/ Barrister" which reads:

31. [47]

    Tachnat finally submitted that at no point in time did the second defendant notify the plaintiffs that she does not accept direct instructions from litigants noting the following:

    1. (1)

       on 24 June 2015, at 3:24pm, the second plaintiff wrote to the second defendant stating: "Once we have you on board for this issue can you request for the insurance copy and take the necessary steps?”.

    2. (2)

       on the same day, at 3:42 pm, the second defendant wrote back "I will talk with David tomorrow and we can take it from there". This suggests that the second defendant agreed to assist the plaintiffs, invoiced the plaintiffs, and received payments directly into her account. Hence it should be concluded that the second defendant failed to have a retainer with the plaintiffs in compliance with the LPUL and the first defendant’s costs agreement.

32. [48]

    The first defendant noted that on 30 July 2021, she filed Orsini Aff 29 July 2021, and therein denied the allegations of negligence and disputed the other matters raised in the ASC. She deposed that she:

    1. (1)

       contends that the District Court statement of claim in the Pick Packers matter was prepared in accordance with Tachnat’s instructions at [11];

    2. (2)

       denies that there were unconditional settlement offers sent by Pick Packers;

    3. (3)

       denies that any offers made by Pick Packers were not passed to the plaintiffs at [15];

    4. (4)

       denies that the terms of collection of all stock were acceptable to Tachnat at [18];

    5. (5)

       states that the settlement of the matter was made on the instructions of the plaintiffs at [28];

    6. (6)

       denies that the dispute was a minor dispute limited to $40,000 at [29]; and

    7. (7)

       refers to sworn affidavit evidence from the second plaintiff from 2016 and 2017 which confirms the much wider scope of the losses said to have been incurred by Tachnat, which were not limited to water damaged stock but extended to Pick Packers’ responsibility for delays in the first defendant's business proceeding.

33. [49]

    The first defendant submitted that on 6 September 2021, she filed and served a defence in these proceedings, following delays in the fullsome provision of particulars by the plaintiffs. The defence denies the allegations of negligence made by the plaintiffs and either denies or does not admit large numbers of the factual assertions made by the plaintiffs.

34. [50]

    The first defendant noted that at [5] of the 18 June 2021 Hulio Gash Affidavit it is stated “the particulars make the following submission in support of the summary judgment because the defendants have no defence as they do not have a copy of the plaintiff’s file contrary to ASCR 14.2 and further there are no issues that needs or must be tried” (CB Vol 3, 2144).

35. [51]

    The first defendant submitted that:

    1. (1)

       the status of her file is incorrectly stated by the second plaintiff. The first defendant has explained how she has been able to retain the vast majority of her file in Orsini Aff 29 July 2021 at [8]-[9];

    2. (2)

       the submission is incorrect legally. ASCR 14.2 simply states that "A solicitor or law practice may destroy client documents after a period of 7 years has elapsed since the completion or termination of the engagement"; and

    3. (3)

       even if there was no file retained, it would not be a proper basis for a summary judgment application.

36. [52]

    The first defendant finally submitted that as illustrated by her defence and Orsini Aff 29 July 2021, there are serious concerns surrounding the plaintiffs' claims and if being pressed, the matter should proceed to hearing in the usual course.

37. [53]

    The second defendant submitted that the plaintiffs' application for summary judgment is doomed to fail and does not pass the General Steel test, as there are serious issues to be tried.

38. [54]

    The second defendant noted that Mr James Berg, a partner of the solicitors acting for the second defendant, in his affidavit dated 27 July 2021 (“Berg Aff 27 July 2021”) relevantly deposes:

39. [55]

    The second defendant noted that the retainer is the starting point for consideration of the legal relationship between the parties, and submitted that Any work undertaken by the second defendant from 30 June 2015 was:

    1. (1)

       undertaken pursuant to the Orsini/Culkoff Costs Agreement;

    2. (2)

       undertaken in the context of Tachnat's dispute with Pick Packers; and

    3. (3)

       invoiced to Ms Orsini.

40. [56]

    The second defendant submitted that the nature and scope of the duty of care allegedly owed by the second defendant to the second and third plaintiffs is not articulated in the ASC, and in any event, the second defendant was retained by first defendant to advise and appear for Tachnat. The second defendant was not retained by Tachnat however, in line with conventional authority, the first defendant does not deny she owed Tachnat a duty of care in the provision of her services pursuant to the retainer, subject to the terms and conditions of the retainer.

41. [57]

    It is clear, however, in the second defendants’ submission that she:

    1. (1)

       was not retained/engaged by the second defendant and/or the third defendant in respect of the impugned conduct which is the subject of the claims; and

    2. (2)

       did not owe the second or third plaintiffs a duty of care.

42. [58]

    The second defendant further submitted that while it is true that the second defendant charged some fees for work undertaken prior to the Orsini/Culkoff Costs Agreement, none of the work undertaken in respect of those fees relates to conduct which the plaintiffs seek to impugn in these proceedings, nor could it. Even if, for the sake of argument, there was an engagement of the second defendant by one or more of the plaintiffs prior to 30 June 2015, that engagement did not extend beyond 30 June 2015 and all work done by the second defendant after that date was pursuant to the Orsini/Culkoff Costs Agreement.

43. [59]

    The second defendant noted that neither the second nor third defendants were parties to the dispute between Tachnat and Pick Packers. The second defendant noted that the first defendant did not act for either of them at any stage and they were, for all relevant purposes, strangers to the litigation. The fact that they were directors of Tachnat, in the second defendant’s submission, cannot operate to impose any duty on her.

44. [60]

    The second defendant submitted that Tachnat has a cause of action against the second defendant in negligence. That is a matter which Tachnat can pursue and not one which vests in the second and third defendants as individuals.

45. [61]

    The second defendant further submitted that in short, there was no contractual arrangement between herself and any of the plaintiffs and the law does not recognise the existence of a duty of care between the second defendant and second plaintiff, or the second defendant and third plaintiff, in the circumstances of the second defendant’s engagement by the first defendant pursuant to the Orsini/Culkoff Costs Agreement.

46. [62]

    On that premise, the claims in contract and tort, by the second and third plaintiff, in the second defendant’s submission, have no prospects of success. Likewise, in the second defendant’s submission there being no relationship between the second and third plaintiffs and second defendant there is no scope for argument that the second defendant owed either a fiduciary duty.

47. [63]

    The second defendant noted that from [64] of the ASC which follows a heading of "Intentional negligence, incorrect and false detinue and conversion claims", it is alleged claims of this nature should never have been made in the underlying proceedings. The second defendant submitted that whether that be true or not, such claims could only ever vest in Tachnat as they relate to goods owned by Tachnat which were the subject of the alleged detinue and conversion.

48. [64]

    The second defendant noted that the plaintiffs included, as part of the 'Relief Claimed', a judgment or declaration on the financial disadvantage caused to the plaintiff (singular) pursuant to section 192E of the Crimes Act 1900 (NSW). In the second defendant’s submission, this is not a justiciable claim, nor does it reflect a form of relief available to any of the plaintiffs, and therefore it ought to be dismissed.

49. [65]

    Further the plaintiff noted that in the ASC, under the heading 'Relief Claimed', the plaintiffs assert an entitlement to damages under s 82 of the Trade Practices Act 1974 (Cth)(“TPA”), and there is also reference to misleading and deceptive conduct. For the purposes of these motions, the second defendant makes no complaint about references to the TPA instead of the Australian Consumer Law. However, on review of the ASC, in the second defendant’s submission it is difficult to discern any pleading of misleading and deceptive conduct, and no cause of action under the Australian Consumer Law is actually pleaded.

50. [66]

    The second defendant submitted that aside from questions of form, the substance of the position is:

    1. (1)

       there can be no claim for misleading and deceptive conduct by the second or third plaintiffs against the second defendant given all services provided by the second defendant were in the context of advising Tachnat; and

    2. (2)

       there is no basis for a claim to the effect that the second or third plaintiffs, in their respective personal capacities relied upon, and/or were induced into error by, any representations made by the second defendant.

51. [67]

    The second defendant submitted that as such the ASC fails to disclose a cause of action for misleading and deceptive conduct.

52. [68]

    The second defendant noted that part of the relief pleaded by the second or third plaintiffs is for damages in relation to mental harm, and submitted that the law does not recognise, as compensable, the type of harm pleaded. To this extent, the second defendant submitted:

    1. (1)

       the mental harm is not consequent on personal injury of another kind; and

    2. (2)

       the mental harm does not arise wholly or partly from mental or nervous shock in connection with another person being killed, injured or put in peril by the alleged acts or omissions of the second defendant.

53. [69]

    In the second defendant’s submission, the claim for damages in respect of alleged mental harm has no reasonable prospects of success.

54. [70]

    The second defendant acknowledged that, in accordance with the principles established in General Steel, the bar is high for her to succeed on this application. However, the claims by the second or third plaintiffs against the second defendant fail to disclose a reasonable cause of action and are so clearly without legal substance that it would be inappropriate to allow them to continue.

55. [71]

    For these reasons, the second defendant submitted that the claims by the second and third plaintiffs against the second defendant should be dismissed.

56. [72]

    Before resolving the issue of summary judgment or dismissal something should be said about advocates’ immunity. Advocates are afforded protection from suit in respect of participation in the judicial process, and this extends to work undertaken outside of court which affects the conduct of a case: see Giannarelli and Others v Wraith and Others (1988) 165 CLR 543 at 560; D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12 (“D’Orta”). However advocates immunity does not extend to advice which leads to settlement (D’Orta at [155]; Attwells v Jackson Lalic Lawyers Ptd Ltd (2016) 259 CLR 1; [2016] HCA 16 (“Attwells”) at [38]) or negligent advice to bring proceedings which are doomed to fail (Attwells at [50]). This matter is therefore one where advocates immunity does not apply.

57. [73]

    The starting point for the relationship between Tachnat and the first defendant, its solicitor, is the Tachnat/Orsini Costs Agreement. I note:

58. [74]

    While the Tachnat/Orsini Costs Agreement states that the plaintiffs may be asked to enter a costs agreement with a barrister, none of the plaintiffs were ever asked to enter into a separate agreement with the second defendant.

59. [75]

    Furthermore, despite the agreement specifing ‘Hulio Gash, Rejani Rajan and Tachnat’ as the ‘Persons responsible for the provision of instructions and payment of costs’, Tachnat, not being a natural person, requires a director to give instructions on its behalf. Payment of costs by the second or third plaintiff on behalf of Tachnat does not give rise to the first defendant owing a duty of care to the second and third plaintiffs. Nor does the clause in the Tachnat/Orsini Costs Agreement that all terms of disclosure and the costs agreement apply to the parties “jointly and severally” make the first defendant liable to all three plaintiffs.

60. [76]

    It is arguable that the Tachnat/Orsini Costs Agreement complies with s 174 of the LPUL. The other matters raised by the plaintiffs give rise to disputed facts and circumstances. These can only be resolved at trial.

61. [77]

    Despite the retainer being the starting point for the relationship between the parties, it should be noted that in her defence filed on 6 September 2021 the first defendant ostensibly admits undertaking work prior to 22 September 2015. For example: she admits having been referred to the plaintiffs by the second defendant on 24 June 2015 and afterwards scheduling an inspection of the stock held at the Pick Packers warehouse (at [8]); that she communicated with Pick Packers on 29 June 2015 (at [10]) and on 9 July 2015 (at [12]); and that she corresponded with the second plaintiff on 14 August 2015, 31 August 2015, and 15 September 2015 (at [13]-[16]). What claims may be brought in relation to the period between the first defendant’s first involvement in the matter before the existence of the Tachnat/Orsini Costs Agreement is a matter for trial.

62. [78]

    Although the first defendant has not sought to dismiss or strike out any claims by the second or third plaintiffs as against her, it should be said that there are circumstances in which a solicitor may be found to owe a duty of care to the directors of their corporate clients due to special features in their relationship: See About life v Maddocks [2021] NSWSC 1370 at [701]. The existence of such special features in this case is matter for resolution at trial.

63. [79]

    One further matter should be noted. The plaintiffs seek summary judgment on the basis that the first defendant has not retained her complete file. The loss of the first defendant’s file is disputed by the first defendant in Orsini Aff 29 July 2021 at [8]-[9], and in any event, the destruction of a legal practitioner’s complete file does not give rise to an order for summary judgment.

64. [80]

    Again the starting point for the relationship between the parties is the retainer. The second defendant was retained by the first defendant to advise and appear for Tachnat in the Orsini/Culkoff Costs Agreement. It is dated some 3 months before the Tachnat/Orsini Costs Agreement.

65. [81]

    It is unusual for a solicitor to engage a barrister to act without first contracting with their client, as the usual course is that barristers do not deal directly with clients but instead receive instructions and fees through the intermediary of their instructing solicitor.

66. [82]

    There is also evidence that the second defendant dealt directly with Tachnat and the second plaintiff directly, before the date of the Orsini/Culkoff Costs Agreement and (logically) before the date of the Tachnat/Orsini Costs Agreement. In Orsini Aff 29 July 2015 the first defendant deposes that she had an oral conversation with the second defendant on 25 July 2015 and thereafter commenced acting for Tachnat. Further there is email correspondence between the second defendant and the second plaintiff predating both costs agreements. On 22 September 2015, the second defendant emailed the second plaintiff an invoice saying “[the first defendant] suggested I send the invoice directly to you as it includes work before [the first defendant] became involved”, and on 24 September 2015 there is further correspondence wherein the second plaintiff asks that the second defendant request the plaintiffs’ insurance copy once on board, to which the second plaintiff responds she will talk with David the following day.

67. [83]

    Given the unusual circumstances of this matter the correct chronology of events is at best uncertain. On this basis, in my opinion it makes sense to split the plaintiffs’ claims into two periods, the claims which relate to conduct before the first defendant entered into an agreement with Tachnat on 22 September 2015, and those which relate to conduct after that date.

68. [84]

    However before addressing the plaintiffs’ claims by reference to those two periods, some claims may be briefly dealt with.

69. [85]

    Under the heading ‘Intentional negligence, incorrect and false detinue and conversion claims’ the plaintiffs allege that the defendants drafted pleadings that had no reasonable prospects of success. I agree with the second defendant that such claims could only ever vest in Tachnat as they relate to goods owned by Tachnat, however perhaps more pointedly, this claim is at odds with the fact that Tachnat recovered the sum of $100,000 from Pick packer’s insurer after the District Court statement of claim had been filed and served. A claim cannot be characterised as having ‘no reasonable prospects of success’ if there is evidence that it was in fact successful. There is therefore no discernable claim pleaded by any of the plaintiffs against the second defendant, and as it stands this claim fails to disclose a reasonable cause of action and should be summarily dismissed.

70. [86]

    The second and third plaintiffs claim for relief in the form of a judgment or declaration for the financial disadvantage caused to a “plaintiff” (singular) pursuant to s192E of the Crimes Act. This provision reads:

71. [87]

    It is not pleaded as to how this could be a justiciable claim by the plaintiffs against the second defendant. As it stands this claim fails to disclose a reasonable cause of action and should be summarily dismissed.

72. [88]

    Finally the second and third plaintiffs seek damages in relation to mental harm which is said to be consequent on the actions of the defendants. The mental harm has not been pleaded as being consequent on personal injury of another kind, nor as arising from mental or nervous shock in the connection with another person being killed, injured or put in peril by the acts or omissions of the second defendant. The law does not recognise the type of harm pleaded. This claim also fails to disclose a reasonable cause of action and should be summarily dismissed.

73. [89]

    The General Steel test imposes a high bar for summary dismissal, however it is clear these three claims are without substance such that they cannot be repleaded to assert a variable claim. It is clear that there is no question to be tried. It would therefore be inappropriate for them to continue to trial.

74. [90]

    As before stated there is evidence that the second defendant carried out legal work on Tachnat’s instruction before both the Tachnat/Orsini Costs Agreement and the Orsini/Culkoff Costs Agreement. There is also evidence that the second defendant dealt directly with the second plaintiff during this period. While the second defendant says there was no contractual relationship between herself and any of the plaintiffs, in my opinion the factual matrix is such that it would be inappropriate to accept the second defendant’s contention without the matter proceeding to trial. The existence of such a relationship before 22 September 2015 is a matter for trial, as is the effect of the Orsini/Culkoff Costs Agreement on that relationship.

75. [91]

    The plaintiffs submitted that the second defendant breached her fiduciary duty to them citing Hospital Products as authority for the existence of a fiduciary relationship between the second defendant and each of the plaintiffs. The solicitor/client relationship is accepted as a category of fiduciary duty: see Hospital Products at [53]. Notwithstanding the existence of clear examples, there is no single test to identify whether a relationship is fiduciary in character, and it is not every case in which there is a relationship of trust that fiduciary obligations will be imposed: see Hospital Products at [54]. The plaintiffs have asserted the existence of a fiduciary relationship without having properly pleaded their claim. Further, as there may have been a contractual relationship between Tachnat and the second defendant during this period, there is ostensibly scope to bring a claim for misleading and deceptive conduct under the Australian Consumer Law by Tachnat as against the second defendant. Again, no such claim has been properly pleaded. These two claims fail to disclose a reasonable cause of action and should be struck out.

76. [92]

    As to the claim of breach of contract, if a contract between the second defendant and any of the plaintiffs is found to have been in existence during this period it is conceivable that the second defendant breached its terms and that breach caused damage to the plaintiff(s). The existence of such a contract, its breach and the damage which flowed from that breach are all in issue and are all for resolution at trial.

77. [93]

    To the allegation of negligence, it is uncontroversial that in circumstances where the second defendant may have been acting directly for one or more of the plaintiffs that she would have owed them a duty of care. Further, in accordance with About life v Maddocks there may have existed special features in the relationship between the second defendant and second and third plaintiffs such that the second defendant could be said to owe them a duty of care directly. I note that About Life v Maddocks refers only to a solicitor owing a duty to the directors of a corporate client, however this is an unusual situation in which a barrister may have dealt directly with the directors of a corporate client. Whether the principle in About life v Maddocks extends to such a scenario is not a matter to be resolved here, however in my opinion the claim should not be struck out as it is not clear that there is no real question to be tried and is a matter which again should be left for trial.

78. [94]

    Therefore, in relation to the period before 22 September 2015, I propose to strike out all remaining claims except those for breach of contract and in negligence.

79. [95]

    None of the parties have sought to question the existence of the Tachnat/Orsini Costs Agreement. The first defendant does not deny she owed Tachnat a duty of care in the provision of her services subject to the terms and conditions of the retainer. The nature and scope of the duty of care allegedly owed by the second defendant to the second and third plaintiffs has not been articulated in the ASC.

80. [96]

    As from 22 September 2015, there was no contractual arrangement directly between the second defendant and any of the plaintiffs. It follows that a claim for breach of contract cannot succeed and should be struck out for failing to disclose a reasonable cause of action. Further, the law does not recognise the existence of a duty of care between the second defendant and second plaintiff, or the second defendant and third plaintiff, in the circumstances where the second defendant’s engagement by Tachnat is pursuant to Tachnat/Orsini Costs Agreement as it was after 22 September 2015. These claims should also be struck out as they disclose no reasonable cause of action. However, as is not disputed by the second defendant, she nevertheless owed Tachnat a duty of care. Therefore, the claim in negligence by Tachnat as against the second defendant should be left for trial. Similarly, there being no relationship between the second and third plaintiffs and the second defendant, there is no scope for argument that the second defendant owed them fiduciary duties. These claims should also be struck out for failure to disclose a reasonable cause of action.

81. [97]

    Further, while it is theoretically possible for Tachnat to bring a justiciable claim for misleading and deceptive conduct as against the second defendant, there is no such discernable claim pleaded by any of the plaintiffs. As it currently stands the claim for damages due to misleading and deceptive conduct fails to disclose a reasonable cause of action and should be struck out.

82. [98]

    The result is that I strike out all remaining claims during this period as against the second defendant save the claim for negligence by Tachnat which is to be left for trial.

Stay of proceedings generally

1. [99]

   The second defendant seeks a permanent stay of proceedings against the second and third plaintiffs: see [2] and [8] of the Second Defendant’s Motion.

2. [100]

   Section 67 of the Civil Procedure Act 2005 (NSW) reads:

3. [101]

   The applicable principles to a grant of permanent stay are well known. They were summarised by Campbell J in GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore [2021] NSWSC 1204 (“GLJ”) at [37] referring to Bell P in Moubarak bht Coorey v Holt (2019) 100 NSWLR 218 (“Moubarak”) as:

4. [102]

   The prejudice that a delay in bringing proceedings occasions to the ability to have a fair hearing has been subject to examination in many cases: see, Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 (“Taylor”); Longman v The Queen (1989) 168 CLR 79; Connellan v Murphy [2017] VSCA 116 (“Connellan”) at [44]-[47]; Newcastle City Council v Batistatos [2006] HCA 27 (“Batistatos”).

5. [103]

   The factors that have been identified as giving rise to prejudice include:

   1. (1)

      the death of witnesses;

   2. (2)

      the destruction or inability to locate documents;

   3. (3)

      “unknown unknowns” i.e. prejudice that is caused by the disappearance of evidence that no one was aware existed: See Taylor at [551]:

   4. (4)

      the general diminution of the body of evidence available; and

   5. (5)

      the unreliability of evidence that either fades or is subject to reconstruction by being recalled over a number of times particularly where the events provoke an emotional reaction: See The Nominal Defendant v Cordin [2019] NSWCA 85.

6. [104]

   Neither party made submissions on this issue. The second defendant did not provide any evidence as to prejudice as set out in Batistatos, nor as to there being exceptional circumstances. The second defendant’s prayers for a permanent stay of proceedings against the second and third plaintiffs fail. I dismiss paragraphs [2] and [8] of the Second Defendant’s Motion seeking a permanent stay of proceedings against the second and third plaintiffs respectively. It may be that the second defendant is seeking a stay of proceedings in the event that Tachnat does not lodge security for costs. I have dealt with this issue under the heading ‘Security for costs’.

The plaintiff’s notices of motion seeking default judgment and that damages be assessed

1. [105]

   The plaintiffs filed two notices of motion purportedly seeking default judgment and for damages to be assessed, the first on 27 July 2021 and the second on 5 August 2021 (“Default Judgment Motions”). The plaintiff seeks default judgment pursuant to UCPR 14.3, 16.2, 16.3 and 16.7 on the basis of the defendants' failure to file defences and that damages be assessed. It is convenient that I deal with both of these notices of motion together.

2. [106]

   By way of email dated 2 August 2021, the second defendant’s solicitor asked the second plaintiff why two motions seeking, in essence, the same thing were required. The second plaintiff responded by advising the plaintiffs seek default judgment because the defendants had not filed their defences to the Statement of Claim within 28 days.

3. [107]

   Relevantly UCPR 14.3, 16.7 and 30.1 read:

4. [108]

   It is convenient that I now outline a short chronology of events (as best I can) to ascertain whether Tachnat is entitled to default judgment and/or that damages be assessed.

The short chronology

1. [109]

   On 1 June 2021, the plaintiff served a statement of claim on both defendants (curiously this appears to be prior to the statement of claim actually being filed in this court).

2. [110]

   On 9 June 2021, the first, second and third plaintiffs filed a statement of claim against the first and second defendants.

3. [111]

   On 19 June 2021, (10 days after the statement of claim was filed), the plaintiffs filed and served the Summary Judgment Motion. The defendants had at least until 30 June 2021 (28 days after the statement of claim was filed at the earliest) to file their defences.

4. [112]

   On 29 June 2021, the second defendant requested particulars. In that request, at [45] the second defendants’ solicitor wrote “In the meantime, we assume that the time for filing of our client’s defence will not commence to run until the particulars requested above have been provided. Please let me know if this assumption is incorrect.” Tachnat did not advise that the assumption was incorrect.

5. [113]

   On 30 June 2021, the first defendant filed a defence.

6. [114]

   On 6 July 2021, a directions hearing took place before the Registrar. The Registrar made the following orders:

7. [115]

   On 12 July 2021, a request for particulars was made by the first defendant to the plaintiffs.

8. [116]

   On 23 July 2021, Tachnat “answered” the second defendants request for particulars. The answer comprised of five emails from the second plaintiff attaching his responses to the request for particulars as well as over 385 pages of documents in support of his claim against the second defendant. On review, the second defendant’s solicitors decided that this response was inadequate.

9. [117]

   On 5 August 2021, at 12.58pm the first defendant caused a letter to be sent to the plaintiffs. In that letter the first defendant pressed for a proper response to a number of the requests for further and better particulars contained in the letter of 12 July 2021, and indicated a defence would be filed after the further particulars were received and considered.

10. [118]

    On the same day, at 1.28pm, the first defendant received an email from the second plaintiff, in response to the first defendants' letter of 5 August 2021. The first defendant says that the second plaintiff failed to provide a substantive response to the letter of 5 August 2021.

11. [119]

    On the same day, the plaintiffs filed a Notice of Motion seeking default judgment against both defendants. Both defendants hold the opinion that the plaintiffs have not adequately replied to their requests for particulars

12. [120]

    On 10 August 2021, the Registrar made the following directions:

13. [121]

    On 11 August 2021, the plaintiffs filed the ASC.

14. [122]

    On 6 September 2021, the first defendant filed a defence to the ASC.

15. [123]

    The second defendant is yet to file a defence to the ASC.

16. [124]

    The plaintiffs submitted that they seek default judgment pursuant to UCPR 14.3 as against both defendants on the basis that they did not file a defence within 28 days.

17. [125]

    The plaintiffs submitted that there is no principle or provision under the UCPR that a defendant need not give a defence until further and better particulars are provided.

18. [126]

    The plaintiffs noted that the defendants did not make an application to the court seek an extension to file a defence, nor has the court granted leave to file defence after 28 days pursuant to UCPR 14.3.

19. [127]

    The plaintiffs also noted that the defendants did not seek an undertaking from the plaintiffs to not take steps to enter default judgement after the service of the statement of claim.

20. [128]

    The plaintiffs therefore submitted that entering default judgment in their favour is appropriate in the circumstances.

21. [129]

    The first defendant noted that plaintiffs' final Notice of Motion seeking default judgment was filed on 5 August 2021 on the basis that the first defendant had not filed a defence within 28 days. The first defendant submitted that the reason a defence was not filed in time was because the plaintiffs’ response to her request for particulars was inadequate. In that regard the first defendant relied on the affidavit of Christopher Harrison, solicitor for the first defendant, dated 5 August 2021.

22. [130]

    The first defendant noted that the plaintiffs filed the Summary Judgment Motion only 10 days after filing the Statement of Claim in circumstances where the first defendant had a proper basis not to file a defence within 28 days.

23. [131]

    The first defendant submitted that she has now filed a defence which puts in issue all the allegations of negligence, so there is no basis for default judgment.

24. [132]

    The second defendant noted that the plaintiffs seek default judgment on the basis of the failure by the second defendant to file a defence. The second defendant submitted that she makes similar submissions as the first defendant.

25. [133]

    The second defendant noted that the Summary Judgment Motion which was: 10 days after filing of the Statement of Claim; after second defendant had filed and served an appearance; and before the filing and service of the ASC.

26. [134]

    The second defendant noted that the plaintiffs' first motion seeking default judgment filed on 27 July 2021, was filed in circumstances where:

    1. (1)

       (purported) answers to particulars, with over 380 pages of enclosures, had been provided to the second defendant’s solicitors approximately two working days earlier;

    2. (2)

       the plaintiffs knew second defendant had filed, or was filing, a Notice of Motion seeking interlocutory orders; and

    3. (3)

       the ASC had not yet been filed.

27. [135]

    The second defendant noted that the plaintiff’s second motion seeking default judgment filed on 5 August 2021, was filed in circumstances where:

    1. (1)

       the plaintiffs knew the second defendant had filed and served the Second Defendant’s Motion seeking parts of the plaintiffs' case be dismissed,

    2. (2)

       the Court had established a timetable for determination of the existing notices of motion; and

    3. (3)

       the ASC had not yet been filed.

28. [136]

    The second defendant submitted that at all times she has demonstrated an intention to defend the plaintiffs' claims, has complied with the Court's case management timetable and has communicated an intention to move the Court for interlocutory relief. In the second defendant’s submission, there is therefore no basis for the orders sought by the plaintiffs.

29. [137]

    The Default Judgment Motions were filed at the time when the plaintiff had not provided proper answers to requests for particulars by both defendants. That meant neither defendant was in a position to file meaningful defences. On 6 July 2021 and 10 August 2021, the Registrar made directions that the plaintiffs answer the requests for particulars in order for the defendants to file their defences. The plaintiff filed its ASC on 11 August 2021. On 6 September 2021, the first defendant filed her defence to the ASC.

30. [138]

    These two notices of motion were filed at a time when there was no basis to seek those orders. The plaintiff’s two notices of motion are dismissed.

Security for costs

1. [139]

   Both the second and first defendants have sought an order for security for costs from Tachnat.

2. [140]

   The first defendant filed a motion on 30 July 2021. The first defendant’s motion relevantly seeks the following orders:

3. [141]

   In the Second Defendant’s Motion at [16] the second defendant seeks:

4. [142]

   Section 1335 of the Corporations Act 2001 (Cth) reads:

5. [143]

   UCPR 42.21 reads:

6. [144]

   The only relevant factor pursuant to either s 1335 of the Corporations Act or UCPR 42.21(1)(d) is whether there is reason to believe that the plaintiff, being a corporation, will be unable to pay the defendants’ costs if ordered to do so.

7. [145]

   In Treloar Constructions Pty Limited v McMillan [2016] NSWCA 302, Beazley ACJ said at [11] that the test to be applied in determining whether an applicant has satisfied the jurisdictional requirements of s 1335 of the Corporations Act has been described as "undemanding".

8. [146]

   The approach to ordering security for costs has been discussed in many cases, particularly KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 (“Meltglow”) at 196-198, Jazabas Pty Ltd v Haddad [2007] NSWCA 291 at [74] (“Jazabas”), and Kounnas v Citywide Civil Engineering Pty Ltd [2012] NSWCA 287 at [4].

9. [147]

   Peter Moran, the solicitor acting for the first defendant, in his affidavit filed on 2 August 2021 (“Moran Aff 2 August 2021”) sets out the plaintiff’s financial position and the first defendant’s anticipated costs. James Berg, solicitor for the second defendant, in Berg Aff 27 July 2021 does the same. The defendants are concerned that Tachnat will be unable to pay their costs if unsuccessful in the proceedings.

10. [148]

    A company search of Tachnat, undertaken on 30 June 2021, reveals that Tachnat was registered on 25 June 2012; Mr Gash has been a director of Tachnat at all times; Ms Rajan has been a director of Tachnat at all times; and Tachnat has a paid up share capital of $100, with Mr Gash owning all of those shares. It is common ground that Mr Gash and Ms Rajan are husband and wife. The search was undertaken to ascertain if Tachnat owned any property in New South Wales and the result came back negative.

11. [149]

    In Moran Aff 2 August 2021, Mr Moran annexes financial documentation relating to Tachnat. According to the first defendant that documentation indicates that in its company tax return for the year 2019-20, Tachnat had:

    1. (1)

       total income of $247,456;

    2. (2)

       total expenses of $230,609;

    3. (3)

       total profit of $16,847;

    4. (4)

       total liabilities of $346,205; and

    5. (5)

       tax losses carried forward to later years of $229,362.

12. [150]

    Further Tachnats financial statements to 30 June 2020 indicate that:

    1. (1)

       Tachnat's income had dropped by over $110,000 from 2019 to 2020;

    2. (2)

       Tachnat made a loss in 2019 of $47,587;

    3. (3)

       Tachnat’s total assets were $96,087, but its total liabilities were $346,209; and

    4. (4)

       Tachnat’s net assets were negative $250,117.

13. [151]

    Tachnat, through the second plaintiff, made the following oral submissions in this Court (T52.43-53.13):

14. [152]

    Tachnat submitted that it is an actively operating business trading from 2013 and has not ceased operation to date. It submitted that while it does not own real property it is financially solvent with an annual average net income of $290,000 for the past 6 years and a total income of $1,716,549.10 since 2015: Affidavit of Hulio Gash dated 29 August 2021 (“Gash Aff 29 August 2021”) at [72a] (CB Vol 2, 879).

15. [153]

    Tachnats’ claims against the first defendant remain on foot. The first defendant did not apply that the second and third plaintiff’s claims against her be summarily dismissed and so they also remain on foot. The plaintiffs’ claims in negligence and for breach of contract as against the second defendant for the period up until 22 September 2015 remain on foot, as does Tachnat’s claim in negligence for the period after 22 September 2015.

16. [154]

    From the financial information provided above, I am satisfied that while Tachnat earns income, its income dropped by over $110,000 in the period 2019-2020. Its total assets were ­­$96,087 but its total liabilities were $346,209. Thus, it had negative net assets of -$250,117.

17. [155]

    I am satisfied that if the first and second defendants are successful with their defences, there is reason to believe that Tachnat will be unable to pay the first and second defendants costs if ordered to do so. I take into account that Tachnat’s allegations against the first and second defendants are serious issues that will incur costs to defend for both defendants. In the exercise of my discretion, I am satisfied that the defendants have established that security for costs should be provided. Both defendants have passed through the threshold gateway. I now turn to consider the discretionary factors.

18. [156]

    The first and second defendants submitted that this Court should exercise its discretion in each of their favour and order Tachnat give security for their costs in accordance with the orders sought, at an amount considered by the Court to be appropriate in the circumstances. The plaintiffs oppose the making for an order for security for costs.

19. [157]

    The factors to be considered for ordering security for costs were set out in Meltglow where Beazley J said at 196-198:

20. [158]

    The plaintiff agrees with the defendants that the applications seeking security for costs have been brought promptly.

21. [159]

    The plaintiffs are of the opinion that they have provided adequate evidence and submissions so the court can make an determination on the merits of the proceedings.

22. [160]

    The second defendant submitted that the plaintiffs’ prospects of succeeding against the second defendant are poor.

23. [161]

    It is my view that the plaintiffs’ case against the first defendant is poor. Tachnat’s case against the second defendant has been significantly narrowed. The strength of Tachnat’s case against the second defendant is also poor.

24. [162]

    The plaintiff submitted that its impecuniosity was caused by the defendants’ conduct.

25. [163]

    The first defendant submitted that while this is a relevant factor in considering the exercise of the discretion (Jazabas at [74(3)]) there is no evidence of it in the present case. Tachnat's gross revenue in fact appeared to rise by about $100,000 between 2018 and 2019, the proceedings having been settled in late 2017.

26. [164]

    In the second defendant’s submission it could not be said, with any force, that Tachnat's purported impecuniosity is attributable to the second defendant’s conduct. In this respect, the second defendant submitted:

27. [165]

    It is my view that Tachnat’s impecuniosity is due to other than the defendants’ conduct

28. [166]

    The plaintiff submitted that the plaintiffs’ current financial status is consequent on the defendants' intentional tort. The plaintiffs' entire stock was detained at the Pick Packers warehouse and consequently it could not commence trading in its Menswear business until the stock was released after 802 days in the Pick Packers warehouse. This led to catastrophic financial losses to the plaintiffs and caused damage to the stock.

29. [167]

    The plaintiff submitted that any costs orders against it will stultify the proceedings, and deny the plaintiffs their right to pursue legitimate claims for the financial losses, and personal injury caused to the second and third plaintiffs. The plaintiff also submitted that an order for costs will also deny the fundamental right of access to justice to all the plaintiffs and particularly the second and third plaintiffs who are natural persons.

30. [168]

    The first defendant submitted that while stultification is a relevant factor, it is a matter which Tachnat must positively establish and it has not done so.

31. [169]

    The first defendant submitted that its application for costs is not being used merely to deny an impecunious applicant a right to litigate, but rather the first defendant has serious concerns about the costs involved in the claim which will no doubt be high, exemplified by the fact that the second plaintiff has, over the 3 months since the proceedings were commenced, served some 8 affidavits usually of 15 to 30 pages each, with exhibits usually of between 150 and 250 pages each. While there is duplication within the affidavits and exhibits filed, the first defendant is put to the additional cost of examining all the affidavits and exhibits to determine what in fact is duplicated. So far close to 1600 pages of affidavit and exhibit material has been served: see Jazabas at [74(4)]-[74(5)].

32. [170]

    Tachnat submitted that the second and third plaintiffs who are its directors and shareholders are willing to provide an undertaking to meet any adverse costs orders if the court thinks it is appropriate. Tachnat noted that the third plaintiff is a public servant working with the Department of Communities and Justice, and submitted that being a public servant and natural person is an important factor that the court should take into consideration. In this regard, Tachnat relied on the following passage from Cooper J in Gentry Bros v Wilson Brown & Associates [1992] FCA 592 at 415:

33. [171]

    The first defendant submitted that in Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306 (“Intercraft Cabinets”) (to which reference was made in Epping Plaza v Bevendale [2010] VCC 805), Malcolm CJ said at 316:

34. [172]

    The first defendant submitted that while the second and third plaintiffs have offered such an undertaking "if the Court thinks it appropriate" this is no more than a factor to be taken into account in the exercise of the discretion: Intercraft Cabinets at 316; Jazabas at [80].

35. [173]

    Further, the first defendant relied on the following passage from Live Board Holdings Ltd v Cody Live Pty Ltd [2017] NSWCA 302 at [90]: "Candour in a case such as this involves the impecunious claimant which seeks to avoid an order for security for costs presenting evidence of those persons who stand to benefit from the litigation and their own capacity to fund it including by meeting any adverse costs orders." The first defendant submitted that the second and third plaintiffs have provided no such evidence.

36. [174]

    It is a relevant factor that the second plaintiff who is a director and shareholder of Tachnat and third plaintiff who is also a director of Tachnat have offered to provide an undertaking concerning any adverse costs order. However, despite undertaking to pay, they have not provided any details of their financial ability to meet such costs orders nor have they offered to provide security. I take these factors into account.

37. [175]

    Tachnat is in substance the plaintiff. Tachnat initiated proceedings in the District Court. Tachnat instructed the first defendant to act for it. The second defendant was retained by the first defendant to act as a barrister on behalf of Tachnat.

38. [176]

    Tachnat submitted via the second plaintiff that the conduct of the defendants highlights the importance of the honest conduct that is expected from the officer of the court: Gash Aff 29 August 2021 at [79a] (CB Vol 2, 880). The alleged exploitation and trust of their superior position affects people’s lives. The court must take into consideration that where, such as in this instance, an officer of court destroys a client file after an intentional tort, there is no recourse to the clients to fight for their rights.

39. [177]

    It should be noted that the first defendant submitted that the state of her file is misstated by Tachnat and that she has retained the ‘vast majority’ of it.

40. [178]

    I take into account that the applications for security for costs were brought promptly, Tachnat is in substance the plaintiff, the allegations against both defendants are serious, and that the second and third plaintiffs are willing to provide an undertaking to meet any adverse costs order but note they have not offered any security, nor have they set out their ability to meet any such costs orders. I am not satisfied that Tachnat’s impecuniosity was caused by either defendants conduct nor that Tachnat has established that an order for security for costs will stultify its claim. Taking these factors into account, it is my view that orders for security for costs in favour of each defendant should be made.

Quantum for security for costs

1. [179]

   The authorities show that the amount of security ordered should be sufficient, but not a complete indemnity: Brundza v Robbie & Co (No 2) (1952) 88 CLR 171; Dennis vJoukhador [2021] NSWSC 870 at [92].

2. [180]

   In Moran Aff 2 August 2021, Mr Moran, who has been in practice for 38 years, outlined similar work as in Mr Berg’s affidavit (reproduced below). The same type of work needs to be undertaken by both the first and second defendant’s solicitors in these proceedings. I do not think it is necessary to reproduce them again here.

3. [181]

   Mr Moran’s assessment of his costs on a reasonable party/party basis is as follows:

4. [182]

   Mr Berg, in Berg Aff 27 July 2021 deposes the following as to quantum:

5. [183]

   The plaintiff submitted that the costs of the proceedings are being exaggerated/blown out by the defendants similarly to when the defendants handled the plaintiffs' dispute with the Pick Packers warehouse. The plaintiffs' reiterated that their claim is on the grounds that the defendants made false/incorrect detinue and conversion claims that resulted in damages, and this is very obvious in the statement of claim that states that the conduct of the Pick Packers warehouse between "29 June 2015 and September 2015" led to detinue and conversion of the plaintiffs stock. The plaintiffs submit that on the available evidence, it is clear that before 29 June 2015 and after September 2015 there was no detinue and conversion of the plaintiffs stock. Hence the defendant drafted false claims which need no further explanation.

6. [184]

   The plaintiffs submitted that the estimate of costs provided by Mr Berg, must be rejected. Although the plaintiffs note that they are not solicitors, the second plaintiff is a migration agent with 8 years of experience in representing clients at Tribunals. The plaintiffs submit that the amount of time and work they have spent on the matter has provided a guide to provide an estimate of the time and money required for the matter. This is estimated as follows:

7. [185]

   The plaintiffs submitted that the estimate of costs provided by the defendant is misleading, a farce, and an insult to the justice system. The plaintiffs further submitted that the defendants are seeking an order for security of costs to protect white-collar fraud, and “this should be discouraged as it is no lesser crime than a fraud itself.”

8. [186]

   I propose to order security for costs up to the close of pleadings and for the close of discovery. The first defendant has already filed her defence to the plaintiff’s ASC, however the second defendant has not. I allow the first defendant security for costs in the sum of $50,000.00 upto the close of pleadings and for discovery. In relation to the application for security for costs by the first defendant I make orders that:

   1. (1)

      Tachnat gives security for costs of the first defendant by payment of funds into Court in the sum of $50,000;

   2. (2)

      The proceedings, insofar as they relate to the plaintiff’s claims against the first defendant, be stayed until the above order has been complied with.

9. [187]

   So far as the second defendant is concerned, the plaintiffs’ claims in negligence and for breach of contract for the period up until 22 September 2015 remain on foot, as does Tachnat’s claim in negligence for the period after 22 September 2015.

10. [188]

    Therefore, I allow the sum of $50,000 for security for costs for the second defendant up to the close of pleading and for discovery.

11. [189]

    In relation to security for costs as against the second defendant. I make orders that:

    1. (1)

       Tachnat give security for the costs of the second defendant by payment of funds into Court in the sum of $50,000;

    2. (2)

       the proceedings, insofar as they relate to Tachnat, against the second defendant be stayed until the above order has been complied with.

12. [190]

    Both notices of motion are to be stood over with liberty to the defendants to restore in order to obtain further security at the appropriate time. Further security for costs will become necessary if Tachnat continues to send voluminous documents to the defendants, rather than confining itself to what is essential.

Result

1. [191]

   In regards to the second defendant’s Notice of Motion filed 27 July 2021: Paragraphs [2] and [9] seeking a permanent stay of proceedings are dismissed. Paragraphs [13] and [17] seeking answers to particulars are stood over to the Registrar at 9.00am on 27 April 2021 for directions. The plaintiffs’ claims in relation to drafting pleadings with no reasonable prospects of success, those pursuant to s 192E of the Crimes Act 1900 (NSW), and those seeking damages for mental harm as against the second defendant are dismissed. Of the plaintiffs’ remaining claims against the second defendant: in relation to the period until 22 September 2015 those in negligence, and those for breach of contract remain, and for the period after 22 September 2015 the claim in negligence by Tachnat remains. All other claims made by the plaintiffs’ as against the second defendant are struck out.

2. [192]

   The second plaintiff’s Notice of Motion dated 19 June 2021 seeking summary judgment, and the plaintiff’s Notices of Motion dated 27 July 2021, and 5 August 2021 seeking default judgment and the assessment of damages against both defendants are dismissed.

Costs

1. [193]

   Costs are discretionary. Costs normally follow the event. The plaintiffs were unsuccessful with their notices of motion seeking default judgment and that damages be assessed.

2. [194]

   The first, second and third plaintiffs are to pay the first defendant’s costs of their notices of motion filed 19 June 2021, 5 August 2021, and 27 July 2021 respectively and the first defendants Notice of Motion dated 30 July 2021 seeking security for costs. As the second defendant was almost entirely successful in her Notice of Motion, the first, second and third plaintiffs are to pay the second defendant’s costs of the Notice of Motion dated 27 July 2021.

   1. (1)

      Tachnat give security for the costs of the first defendant by payment of funds into Court in the sum of $50,000;

   2. (2)

      Tachnat give security for the costs of the second defendant by payment of funds into Court in the sum of $50,000;

   3. (3)

      The proceedings against the first defendant be stayed until order (1) above has been complied with;

   4. (4)

      The proceedings against the second defendant be stayed until order (2) above has been complied with;

   5. (5)

      The first defendant’s Notice of Motion filed 30 July 2021 and paragraph [16] of the second defendant’s Notice of Motion filed 27 July 2021 seeking security for costs, are to be stood over with liberty to the defendants to restore in order to seek further security for costs;

   6. (6)

      In regards to the second defendant’s Notice of Motion filed 27 July 2021: Paragraphs [2] and [9] seeking a permanent stay of proceedings are dismissed. Paragraphs [13] and [17] seeking answers to particulars are stood over to the Registrar at 9.00am on 27 April 2021 for directions. The plaintiffs’ claims in relation to drafting pleadings with no reasonable prospects of success, those pursuant to s 192E of the Crimes Act 1900 (NSW), and those seeking damages for mental harm as against the second defendant are dismissed. Of the plaintiffs’ remaining claims against the second defendant: in relation to the period until 22 September 2015 those in negligence, and those for breach of contract remain, and for the period after 22 September 2015 the claim in negligence by Tachnat remains. All other claims made by the plaintiffs’ as against the second defendant are struck out.

   7. (7)

      So far as the second defendant is concerned the plaintiff’s request for particulars needs to be recast now that the surviving claims against her have been narrowed;

   8. (8)

      The second plaintiff’s Notice of Motion dated 19 June 2021 seeking summary judgment, and the plaintiffs’ Notices of Motion dated 27 July 2021, and 5 August 2021 seeking default judgment and the assessment of damages against both defendants are dismissed;

   9. (9)

      The first, second and third plaintiffs are to pay the first defendant’s costs of their notices of motion filed 19 June 2021, 5 August 2021, and 27 July 2021 respectively and the first defendant’s Notice of Motion dated 30 July 2021 seeking security for costs. As the second defendant was almost entirely successful in her Notice of Motion, the first, second and third plaintiffs are to pay the second defendant’s costs of the second defendant’s Notice of Motion dated 27 July 2021.