Sutherland v GHR Accounting Group Pty Ltd

1. [1]

   HER HONOUR: By notice of motion filed 7 June 2017, the defendant seeks firstly, an order that the plaintiff’s further amended statement of claim (“FASC”) filed 5 May 2017 be dismissed pursuant to r 12.7(1) of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”); and secondly, in the alternative, that the proceedings be dismissed pursuant to UCPR r 13.4(1)(b).

2. [2]

   The plaintiff is Richard Craig Sutherland. The defendant is GHR Accounting Group Pty Ltd. The plaintiff appeared without legal representation. The plaintiff seeks to join Quadratus as second plaintiff. Mr Peadon of counsel appeared for the defendant.

3. [3]

   On 18 December 2015, Hall J dismissed the plaintiff’s claim against the second defendant, Macquarie Bank Limited.

4. [4]

   The plaintiff relied upon his affidavits dated 8 August 2018 and 5 September 2018 and a court book. The first defendant relied upon the affidavits of Marco Chiarella sworn 16 September 2015, Brendan Miller sworn 10 September 2015, Peter Moran sworn 7 June 2017, Emily Brownlee dated 14 August 2018 and a court book.

Background

1. [5]

   The plaintiff’s father died in 1991 when the plaintiff was age 25, and after probate was granted he was left in control of considerable assets. He had no close relatives that he could turn to for advice regarding either personal or professional matters. Throughout the course of his life, he has had to seek out any type of advice that he wanted on a fee for service basis.

2. [6]

   The plaintiff is a long-term academic. His field of academic research is classical political theory. He says that his mathematical skills are limited to the consecutive numbering of the pages of his academic work. From 1993 onwards, for the most part, the plaintiff lived overseas and studied humanities. In late 2002, he returned to Australia where his time was mostly spent writing up his academic research.

3. [7]

   The plaintiff is suing the defendant for alleged breaches of duty of care in contract and tort in relation to financial advice allegedly given in around 2006 through to about June 2008. The advice allegedly related to the acquisition of certain properties by a company, Quadratus Pty Ltd (“Quadratus”), of which the plaintiff was the sole shareholder and director.

Procedural history

1. [8]

   These proceedings have had a protracted history. It is as follows:

2. [9]

   On 18 December 2015, Hall J dismissed the plaintiff’s claim against Macquarie Bank Limited (who had provided funding to Quadratus for the purchase of the properties) pursuant to UCPR 13.4. The plaintiff’s statement of claim was also struck out with leave to replead the claim against the defendant: see Sutherland v GHR Accounting [2015] NSWSC 1946 at [52], [67] and [68] (“Sutherland (No 1)”).

3. [10]

   On 31 May 2016, the defendant filed a notice of motion (“the second notice of motion”) seeking an order dismissing the plaintiff’s amended statement of claim pursuant to UCPR 12.7(1) or, in the alternative, an order dismissing the proceedings pursuant to UCPR 13.4(1)(b).

4. [11]

   On 15 February 2017, the second notice of motion was listed for hearing before Button J, at which time the plaintiff sought an adjournment. Button J observed that the plaintiff’s position was that he had now come to appreciate the legal distinction between Quadratus and himself, and in order to overcome the basal criticism of his claim he was trying to “revive” the company or otherwise somehow have it joined to the proceedings: see Sutherland v GHR Accounting [2017] NSWSC 100 at [11] (“Sutherland (No 2)”).

5. [12]

   The second notice of motion was stood over to 31 March 2017. On 7 April 2017, Button J ordered that the amended statement of claim be struck out with a further order that the plaintiff file and serve any further statement of claim upon which he relies by 5 May 2017: see Sutherland v GHR Accounting (No 3) [2017] NSWSC 373 at [44] (“Sutherland (No 3)”).

6. [13]

   On 5 May 2017, a further amended statement of claim (“FASC”) was filed.

7. [14]

   On 7 June 2017, the defendant filed the present notice of motion seeking an order dismissing the plaintiff’s FASC filed on 5 May 2017 pursuant to UCPR 12.7(1) or, in the alternative, an order dismissing the proceedings pursuant to UCPR 13.4(1)(b) of the UCPR.

8. [15]

   On 27 July 2017, orders were made to reinstate Quadratus pursuant to s 601AH of the Corporations Act 2001 (Cth) and appoint Steve Naidenov and David lannuzzi of Veritas Advisory as joint and several liquidators.

9. [16]

   On 21 August 2017, the plaintiff served a further reiteration of the FASC which added two more plaintiffs: Quadratus Pty Ltd and Steve Naidenov, liquidator of Quadratus.

10. [17]

    On 21 August 2017, an order was made requiring the defendant to advise the plaintiff by 30 October 2017 of its position in relation to the PFASC. On 28 August 2017, the defendant through its solicitors, informed the plaintiff that it objected to the PFASC being filed or otherwise relied upon.

11. [18]

    Since that time, a number of adjournments have been granted so that the plaintiff could receive pro bono assistance to properly plead his case. In summary, these have been as follows:

    1. (1)

       On 8 March 2018, the defendant’s notice of motion filed 7 June 2017 was stood over for hearing on 15 June 2018. The plaintiff was ordered to serve a proposed second further amended statement of claim (“P2FASC”) and any further affidavit evidence he intended to rely upon by 8 June 2018. An order was made that the plaintiff be referred to a Registrar for a further referral to a barrister or solicitor for legal assistance.

    2. (2)

       On 13 June 2018, the defendant’s notice of motion filed 7 June 2017 was stood over for hearing on 13 July 2018. The plaintiff was to serve a P2FASC and any further affidavit evidence he intended to rely upon by 2 July 2018.

    3. (3)

       On 12 July 2018, the defendant’s notice of motion filed 7 June 2017 stood over for hearing on 15 August 2018. The plaintiff was to serve a PFASC and any further affidavit evidence he intended to rely upon by 6 August 2018.

    4. (4)

       On 15 August 2018, the defendant’s notice of motion over for hearing on 7 September 2018. The P2FASC and further affidavit evidence was to be served on the defendant by 5 September 2018. An order was made that save exceptional circumstances, the plaintiff’s failure to serve a copy of the P2FASC and any further affidavits would result in the plaintiff’s proceedings being dismissed.

12. [19]

    Delays have also been incurred because Mr Sutherland has been assessed by a psychiatrist as having a significant mental health disorder, and from early 2015 to August 2018 he has technically been an outpatient of Manly hospital.

13. [20]

    The plaintiff has now served a P2FASC and has had the benefit of pro bono legal advice. The defendant opposes the filing of the P2FASC. Pursuant to UCPR r 19.2, the plaintiff has added Quadratus as second plaintiff to his P2FASC. As the deed of company arrangement means that Quadratus has been reinstated to the ASIC’s company register, the defendant does not object to the joining of Quadratus as second plaintiff (T3.15).

The pleading in the P2FASC

1. [21]

   It is necessary that I briefly set out the pleading framework in the plaintiff’s P2FASC here.

2. [22]

   The plaintiff’s P2FASC relevantly states:

3. [23]

   In relation to the First GHR Accounting Advice, the plaintiff pleads at [40] to [44]:

4. [24]

   The pleadings with respect to a duty of care for the Second GHR Accounting Advice are substantially similar to those with respect to the First GHR Accounting Advice. The allegations of breach are pleaded at [51]:

5. [25]

   The plaintiff’s pleadings with respect to the duty of care for the Third GHR Accounting Advice are also substantially similar to those with respect to the First GHR Accounting Advice. The allegations of breach are pleaded at [58]:

6. [26]

   In relation to the first accounting advice, the plaintiff pleads at [82]:

The plaintiff’s statement and draft affidavit dated 8 August 2018

1. [27]

   Around the end of 2002, before Mr Sutherland retained the services of the defendant, his properties in Darlington and Glebe were subject to an existing small mortgage in favour of RAMS. The plaintiff’s residential home in Avalon was unencumbered (Ex A, page 40).

2. [28]

   On 10 July 2008, in reliance upon the Third GHR Accounting Advice, Mr Sutherland granted a mortgage over Avalon in favour of the Bank of Western Australia (P2FASC [27]).

3. [29]

   Mr Sutherland’s introduction to the defendant took place around the end of 2002 at “Skippers”, a restaurant at Mona Vale. Mr Sutherland alleges that after discussions at the restaurant, he and the defendant reached an agreement (the “Skippers agreement”).

4. [30]

   Around that time, Mr Sutherland’s current accountant, Gren Olsen, had been planning to retire and merge with the defendant, GHR Accounting. It was in the context of those plans that Mr Olsen invited the plaintiff to Skippers to meet Bernadette Gore, a partner at GHR Accounting, to discuss their arrangement moving forward. At the meeting, Ms Gore told the plaintiff that GHR Accounting would provide all the services that Mr Olsen had previously provided. For example, they would be able to put the plaintiff in contact with people who could help to develop his business, and would even be able to provide more services than Mr Olsen had done. Ms Gore informed the plaintiff that GHR Accounting was dynamic and proactive, and wanted to develop a long-term business relationship with him and help him grow his business.

5. [31]

   Ms Gore also said to the plaintiff, “Well, Richard, it will be of particular interest for you to know that GHR Accounting has a special expertise in real estate investment. We are able to advise you on wealth creation and loans. So we will be able to help you to increase and develop your real estate interest and develop your investment portfolio. While, of course, we will handle your tax matters, we do not want you to see us as merely tax agents. We can advise you with various things such as identifying suitable investment opportunities in the market and handling cash flow. We will be able to help you in various ways. In short, we will look after your financial interest because we have the skills and expertise to do this.” She concluded the conversation by saying to him, “Don’t worry about anything Richard – we will take good care of you. You can trust us.”

6. [32]

   After the Skippers agreement, the plaintiff largely had dealings with a partner of GHR Accounting, Mr David Gordon.

7. [33]

   In or about September 2006, the plaintiff says in his statement at Ex A page 45:

8. [34]

   In relation to the first advice, the plaintiff deposes (Aff, 5/9/2018 at [11]-[13]):

9. [35]

   The plaintiff referred to the dealings in relation to the Glebe Point Road property. The dealings include a Historical Title search dated 15 June 2016 from Land and Property Information NSW (presumably of the Glebe Point Road property), a Transfer of Folio Identifier X/XXXXXX to Quadratus Pty Limited, and a Mortgage for Folio Identifier X/XXXXXX from Macquarie Bank Limited to Quadratus Pty Limited dated 18 October 2006 (plaintiff’s documents, pages, 43, 57, 73).

10. [36]

    The defendant submitted that there is no evidence that the plaintiff asked Mr Gordon for advice, nor did he ask him about the risks associated with it. It is a claim for pure economic loss, and the risk was obvious that the plaintiff’s outgoings could well exceed his income (T12). Mr Sutherland does provide evidence that the plaintiffs’ relied on Mr Gordon’s advice. In both alleged versions, the plaintiff expressed concern and David Gordon told him to “go ahead”. I shall return to the topic of obvious risk later in this judgment.

11. [37]

    In or about February 2008, the plaintiff says he received the Second GHR Accounting Advice. He says (Ex A p 46):

12. [38]

    The plaintiff deposes (Aff, 5/09/2018 at [14]-[17], page 11 plaintiff’s documents):

13. [39]

    The plaintiff pleaded in his P2FASC that he proposed to Mr Gordon that Quadratus sell Glebe Road. This is consistent with his affidavit evidence. Again counsel for the defendant submitted that the plaintiff did not give any evidence that he asked for advice about the risk of not doing anything and in any event the advice concerned a matter of obvious risk. I shall return to this topic later in this judgment.

14. [40]

    In or about June 2008, the plaintiff says a meeting took place at Mr Gordon’s office. While they were waiting for the people from Macquarie Bank to arrive, Mr Gordon said to Mr Sutherland, “This won’t be a problem mate, because Macquarie will sort something out for you. They are Macquarie Bank after all, and they are skilled in financial negotiations. They will sort something out for you”. (Ex A, page 46).

15. [41]

    In attendance at the meeting were the plaintiff, Craig Jeffe and Margot Faraci from Macquarie Bank, and Mr Gordon and Lisa Callaghan from GHR Accounting. During that meeting, the plaintiff says that Mr Gordon gave him the Third GHR Accounting Advice. He says at Ex A pp 47 and 48:

16. [42]

    The plaintiff deposes (Aff 05/09/2018 [20]-[21]):

17. [43]

    Both plaintiffs’ statements and affidavits are consistent in relation to Mr Gordon allegedly advising the plaintiff to refinance the properties. The facsimile from the plaintiff to Craig Jaffe dated 23 April 2008 confirms that the plaintiff was in the process of refinancing at least some of his properties.

18. [44]

    At [26], the plaintiffs plead that Quadratus was in default of its facilities with Macquarie Bank.

19. [45]

    The plaintiff relied on UCPR 12.7, 13.4(1)(b) and 19.4.

20. [46]

    UCPR 12.7 reads:

21. [47]

    The defendant submitted that the forensic history of the matter shows that the plaintiffs have been either unable or unwilling to prosecute his claim with due dispatch.

22. [48]

    I accept that the present proceedings have had a protracted history (as set out earlier in this judgment). The delay has been largely due to Mr Sutherland’s defective pleadings to date, and his need to consult pro bono legal representation for assistance in drafting a P2FASC. He also lacked funds and so required time to pay to have Quadratus restored to the company register at ASIC. He also suffers from ill health However, the plaintiff is a self-represented litigant and he appears to have made earnest attempts to put his claim in legal form. In these circumstances, it would be inappropriate to dismiss the proceedings on the basis that the plaintiff did not prosecute the proceedings with due despatch under UCPR 12.7(1).

23. [49]

    UCPR 13.4(1)(b) provides that the court may dismiss proceedings generally, or in relation to any claim for relief, if no reasonable cause of action is disclosed.

24. [50]

    In O’Brien v Bank of Western Australia Ltd [2013] NSWCA 71, the Court of Appeal applied the High Court decision of Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 (“Spencer”). In Spencer, the High Court was concerned with s 31A(2) of the Federal Court of Australia Act 1976 (Cth), but the following principles are of general application:

25. [51]

    The present application is to strike out the plaintiff’s proposed motion. Accordingly, it is necessary to take the plaintiff’s case at its highest, which is the case set out in the P2FASC.

26. [52]

    The defendant made a number of written and oral submissions. The defendant submitted that the P2FASC discloses no reasonable cause of action. Even assuming the defendant was negligent, the plaintiff did not suffer any compensable loss. The defendant submitted that the plaintiff’s risk of loss was obvious; that the plaintiff did not plead reliance; that the facility from Macquarie Bank was made available to Quadratus and was secured over properties owned by Quadratus, and not the plaintiff himself; and that the plaintiff was not called on to pay any amounts as guarantor pursuant to the facility, and as such did not suffer any compensable loss. Further, if the plaintiff suffered loss by way of diminution in the value of his shares in Quadratus, the prohibition on recovery of reflective loss applies to any claim made by him personally as a shareholder. Finally, the defendant submitted that the causes of action are statute barred.

27. [53]

    The defendant referred to Sutherland (No 1), where Hall J stated at [66]:

28. [54]

    The defendant contends that in spite of Hall J’s statement, the plaintiff has failed to cure the fundamental defects in his claim in this current proceeding.

29. [55]

    The plaintiff has now joined Quadratus as second plaintiff. The plaintiffs have pleaded the terms of the retainer, the scope of the duty of care, the basis for the allegation of breach of duty of care, the particular transactions and the overall investment scheme and loss.

30. [56]

    Counsel for the defendant has submitted that the P2FASC does not adequately set out the case the defendant must answer with respect to the issues of obvious risk, reliance, and loss and damage suffered by the plaintiffs. I shall deal with each of these issues in order.

31. [57]

    During the hearing, counsel for the defendant submitted that the plaintiff’s claim was defective, as under s 5H of the Civil Liability Act 2002 (NSW), the defendant cannot be negligent for failing to warn the plaintiff of an obvious risk. In respect of the three advices, the defendant did not have a duty of care to warn the plaintiffs as these were obvious risks. There is no evidence that the plaintiffs specifically asked the defendant what the risks were. It was submitted that a distinction must be drawn between the plaintiff asking the defendant, “What should we do”, and the plaintiff asking, “What are the risks if we do”.

32. [58]

    The defendant referred to ss 5F and 5H of the Civil Liability Act. They read:

33. [59]

    In Fallas v Mourlas [2006] NSWCA 32; (2006) 65 NSWLR 418 (“Fallas”), Tobias JA stated at [98]:

34. [60]

    Pursuant to s 5F of the Civil Liability Act, it is necessary to consider whether the risk, in the circumstances, would have been obvious to a reasonable person in the position of that plaintiff. It is well established that this is an objective question that must take into account the circumstances of the plaintiff. Whether or not a risk is obvious may depend upon the extent to which the probability of its occurrence is readily apparent to a reasonable person in the plaintiff’s position: see Jaber v Rockdale City Council [2008] NSWCA 98 per Tobias and Campbell JJA and Handley AJA at [27], [28] and [35]; Laoulach v El Khoury [2010] NSWSC 1009 at [167]. Fallas was not a case decided on a summary basis.

35. [61]

    In Takla v Nasr [2013] NSWCA 435 (“Takla”), a Court of Appeal decision involving whether a solicitor had failed to warn of an obvious risk in a financial transaction, McColl JA made reference at [56] to the decision of Sheller JA (with Meagher JA and Abadee AJA agreeing) in Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398:

36. [62]

    Like Fallas, Takla was not a case decided on a summary basis. It concerned a plaintiff who paid an 80 per cent deposit as part of a contract to purchase property, which she lost when the vendor became insolvent. She sued her solicitor for negligent advice. On appeal, McColl, Basten and Hoeben JJA determined that the primary judge did not err in his determination that the risks were obvious to a reasonable person in the plaintiff’s position. McColl JA referred (at [34]) to the primary judge’s consideration at [57] to [58]:

37. [63]

    However, while a certain amount of risk will indeed be obvious in a property venture, the specific risks associated with the viability of purchasing the vacant property, holding off on action until Macquarie Bank assisted the plaintiffs, and requiring refinancing of mortgage arrangements, are not as obvious, particularly where Mr Sutherland says he asked GHR of the risks involved before making his decisions. Mr Sutherland’s evidence shows his own aptitude (or lack thereof) for investment and business dealings. It will be necessary for the facts and circumstances to be ascertained at trial in order to establish whether the risks were obvious in this case.

38. [64]

    The defendant submitted that the plaintiffs have not pleaded reliance.

39. [65]

    On this topic, Mr Sutherland in his submissions referred to a memorandum from George Gengos (now deceased), a solicitor who did a lot of work for his family and was a great friend of his mother. The memorandum reads (T31.1-8):

40. [66]

    Mr Sutherland says that this is just another illustration that he does not possess mathematical or economic acumen, which is why he says he sought the advice of the accounting firm and relied upon that advice.

41. [67]

    Mr Sutherland says that he asked for Mr Gordon’s advice in writing, but that Mr Gordon failed to provide it (T38.26-29).

42. [68]

    Although, so far as each of the three accounting advices are concerned, the plaintiffs do not plead that they relied on those advices, it is clear from Mr Sutherland’s evidence that they did so. They do however plead “reliance” in relation to each claim for misleading or deceptive conduct arising out of the three advices at [67], [74] and [81]. This oversight with the claims in contract and tort can be easily remedied by pleading it. In these circumstances, I would not be minded to disallow the filing of the P2FASC, as Mr Sutherland’s evidence shows that the plaintiffs relied on the advice of the defendant and can be cured by pleading it.

43. [69]

    The common law test for causation is no longer relevant. It has been replaced by s 5D of the Civil Liability Act: Adeels Palace (2009) 239 CLR 420; (2009) 260 ALR 628 at [41] and [44].

44. [70]

    Section 5D of the Civil Liability Act provides:

45. [71]

    Section 5E of the Civil Liability Act deals with the onus of proof:

46. [72]

    In order to succeed, the plaintiff must show that it is more probable than not that, but for the breach, “particular harm” would not have been suffered. This involves two elements “factual causation” and “scope of liability”: Adeels Palace at [42]; Wallace v Kam [2012] NSWCA 82 at [12].

47. [73]

    Determination of factual causation under s 5D(1)(a) is a statutory restatement of the “but for” test of causation. That determination is “entirely factual, turning on proof by the plaintiff of relevant facts on the balance of probabilities in accordance with s 5E”: Wallace v Kam at [14]. Proof that a change in circumstances might have made a difference does not alone prove factual causation: Adeels Palace at [50].

48. [74]

    The determination of “scope of liability” involves a value judgment (Wallace v Kam), as does the determination of “factual causation” (Paul v Cooke (2013) 85 NSWLR 167 at [11]).

49. [75]

    The application of the subtractive effect of s 5D(1)(b) will be a finely-balanced one: Paul v Cooke, Leeming JA at [117].

50. [76]

    Section 5D(1)(b) provides a limiting factor upon the liability of a negligent party, despite the existence of factual causation, whereas, as discussed below, s 5D(2) provides for the imposition of liability despite the absence of factual causation. The operation of such a limiting factor is unlikely to arise other than in cases analogous to Paul v Cooke.

51. [77]

    The requirement of s 5D(1) for “factual causation” and “scope of liability” do not include the common law concepts of material contribution or increase in risk: see Woolworths Ltd v Strong [2010] NSWCA 282 at [47]-[48]; instead, causation requires a determination that “the negligence was a necessary condition of the harm”.

52. [78]

    Section 5D(2) provides for the imposition of liability where the ‘but for’ test of factual causation is not established: see Adeels Palace at [53]. That section applies in circumstances of “an exceptional case”. In Adeels Palace the High Court stated at [54]:

53. [79]

    The application of s 5D(2), inter alia, requires evidence (see King v Western Sydney Local Health Network [2013] NSWCA 162 per Hoeben JA at [155]) and needs to be raised on the pleadings (King per Ward JA at [222]). This is not an exceptional case.

54. [80]

    Counsel for the defendant referred to paragraphs [17] to [19] of the affidavit of Brendan Miller sworn 10 September 2015, where he deposed:

55. [81]

    The defendant submitted that the two properties that were mortgaged to Macquarie Bank by way of security of the loans which were advanced to Quadratus (and the subject of this claim) were discharged in full by the exercise of a power of sale by Macquarie Bank. In other words, Mr Sutherland himself did not reach into his own pocket to pay out that loan as guarantor (T9.7-13).

56. [82]

    The defendant made oral submissions that there is a real problem with the pleading. The plaintiff submitted that after the demand issued in December 2008, both Mr Sutherland and Quadratus were able to repay they moneys owing, with the result that they eventually lost all their properties. However, the defendant submitted that is no causal link between the default and the issue of notice of demand, and the fact that on Mr Sutherland’s evidence, Macquarie Bank sold the two properties and discharged the mortgage. The plaintiff’s claim also ignores Mr Sutherland’s evidence there was a refinancing, and that the default occurred only after a period of time after the refinancing when a bank was willing to lend money to Mr Sutherland and Quadratus. Instead of addressing the issue of causation clearly, the plaintiff’s pleadings merely contain a statement that the plaintiffs lost everything because Quadratus and Mr Sutherland could not repay the demand in December 2008.

57. [83]

    In oral submissions, the defendant rhetorically asked, “How is it said that any negligence could have caused loss following a refinancing by an independent financier?” (T21.24-47). The defendant submitted that there is no causation. It is so remote, both in terms of years, events, financiers and advice that it cannot possibly succeed.

58. [84]

    The defendant further submitted that Sutherland did not actually suffer any personal loss, as he was not required to reach into his own pocket in relation to Macquarie Bank’s call on Quadratus’ $4,000,000 revolving credit facility. He was merely the guarantor; he did not pay any money. The guarantee was discharged over the sale. The balance of the properties were refinanced, and security granted, by reference to the other properties. Most of those properties were owned by Quadratus (T22.31-41). The loss was therefore claimed when the new mortgagees sold the properties in 2009.

59. [85]

    The plaintiffs’ evidence is that Mr Gordon suggested the properties be refinanced, even though the situation was overall impaired.

60. [86]

    The plaintiffs allege that Mr Gordon advised that the properties should be put in the name of Quadratus. When Quadratus fell over, it was inevitable that Mr Sutherland personally would fall over as well, because as a result of the way in which GHR Accounting had set things up, without Quadratus, Mr Sutherland had no personal source of income. He had no further investment properties. His only remaining property was his Avalon residence, which was subject to a mortgage on the advice of Mr Gordon.

61. [87]

    Mr Sutherland submitted that the causation is not too remote for the Court, because Mr Gordon was aware of all the issues that have been raised in Mr Sutherland’s submissions. Mr Gordon should have known about the relevant duties he owed a client like Mr Sutherland under the Certified Practising Accountants of Australia’s Accounting Professional and Ethical Standards. Mr Sutherland alleged that Lisa Callaghan, an accountant working in GHR Accounting, said, “Oh, this tax obligation is enormous, I haven’t seen a tax obligation of this magnitude”. Mr Sutherland stated he was not was not the type of person to walk off the street once every 12 months to get his tax done. He was meeting with GHR Accounting on a regular basis over quite a considerable period of time, and obtaining their ongoing financial advice.

62. [88]

    Quadratus alleges that it suffered loss and damage caused by the defendant by the forced sale of the Darlington and Glebe properties. The defendant argues that it is not responsible for the losses of the properties, as they had been refinanced by another mortgagee. However, it is the plaintiffs’ case that Mr Sutherland’s reliance on the defendant’s advice, first to purchase the Glebe property and then not to sell it, caused him to default on his mortgage payments with Macquarie. In my view, it is arguable that the refinancing of those mortgages was caused by the negligent advice of the defendant, with the result that the properties were sold earlier than they should have been sold and for less than the current market value.

63. [89]

    It will be for the plaintiff to prove factual causation, and whether it is appropriate for the scope of the defendant’s liability to extend to the harm so caused. While the plaintiffs’ case on causation may be weak, I cannot say it is hopeless. It will depend on the facts and circumstances ascertained at trial.

64. [90]

    Paragraphs [82] and [83] of the P2FASC are in similar terms. Paragraph [82] pleads:

65. [91]

    Paragraph [84] pleads:

66. [92]

    Identical losses and damages are pleaded in respect of the first, second and third accounting advices as set out in [82], [83] and [84] respectively. I accept that the amount of loss and damage have not been quantified by an expert.

67. [93]

    The defendant submitted that the plaintiff cannot claim reflective loss. The plaintiff had claimed personal loss to himself. Button J discussed this topic in Sutherland (No 3). Mr Sutherland’s claim for reflective loss arises because the defendant allegedly provided him personally with negligent advice, as a result of which his personal guarantee was called up, leading to the personal loss of real property of which he was the registered proprietor: Sutherland (No 3) at [20].

68. [94]

    Counsel for the defendant referred to Ekes v Commonwealth Bank of Australia (2014) 313 ALR 665; [2014] NSWCA 336 (“Ekes”).

69. [95]

    In Ekes, Bathurst CJ stated at [150]-[151]:

70. [96]

    Button J considered in some detail the topic of Mr Sutherland’s claim for reflective loss in Sutherland (No 3) at [23] to [38] and [44], which I reproduce and respectfully adopt is as follows:

71. [97]

    The plaintiffs’ pleadings now differ from what was before Button J, as Quadratus is now joined as second plaintiff. Mr Sutherland is a director of Quadratus and Quadratus has suffered loss. In Sutherland (No 3), Button J accepted that Mr Sutherland’s claim for reflective loss fell within the middle of the punitive spectrum. According to Button J, Mr Sutherland’s claim for reflective loss is not hopeless.

72. [98]

    I have already covered the alleged loss suffered by Quadratus. Subject to the next issue, whether the plaintiffs’ claim is statute barred, I am not satisfied that the plaintiffs’ claims are hopeless. Therefore, I refuse to make an order that the plaintiffs’ proceedings be summarily dismissed.

73. [99]

    Finally, the defendant also relied on UCPR 19.4. It reads:

74. [100]

    The defendant submitted that despite having repeated opportunities to cure fundamental defects in the claim, including receiving pro bono legal advice and clear direction from Hall J, the P2FASC does not disclose a reasonable cause of action, and is likely statute barred. I have already declined to make an order dismissing the defendant’s claim for summary judgment. I shall deal with the Limitation Act 1969 (NSW) issue next. The P2FASC contained some passages in italics that require the plaintiff to fill in. As the plaintiffs’ claims are not hopeless, for the reasons given earlier, I will allow the proposed amendments.

Limitation Act

1. [101]

   Counsel for the defendant further submitted in the hearing that the plaintiffs’ claim should be struck out on the basis that the limitation period had expired. This is because the plaintiffs’ action had accrued in either 2009 or 2010. While Mr Sutherland submitted that the limitation period could be suspended due to the fact that Quadratus have been deregistered for a period of time, the circumstances in the present case do not clearly align with existing authority. Specifically, in Re Auzhair Supplies Pty Ltd (in liq) [2013] NSWSC 1, the suspension of the limitation was ordered because the liquidators were reinstating the company to sue the directors. Brereton J stated at [19]-[21]:

2. [102]

   In Wardley Australia Limited v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514, where the High Court stated at 533 that:

3. [103]

   Again this is a question that can only be decided when the facts and circumstances are ascertained at trial. In my view, these proceedings do not fall within “the clearest of cases”.

Costs

1. [104]

   As there may be an argument concerning costs, the appropriate order is that costs are reserved.

Disposition

1. [105]

   The first defendant’s notice of motion filed 7 June 2017 is dismissed. Leave is granted to the plaintiff to join Quardatus Pty Limited as second plaintiff. The plaintiff is to file and serve the second proposed amended statement of claim within 14 days.