Negligence claim against solicitor is a relevant factor in a limitation period extension application

Personal injuries guru recently turned Supreme Court judge, Justice Forrest, declined an application for an extension of time in which to bring an action for negligence against a cruise line. The case was Gordon v Norwegian Capricorn Line (Australia) Pty Ltd [2007] VSC 517. His Honour said the case against the cruise line was a simple, one issue case.  Had the extension application succeeded, the trial would have taken place nine years after the allegedly negligent treatment of a heart attack suffered by the plaintiff at sea.  The representation of the plaintiff by his former solicitors S&G Ltd was characterised by ‘ineptitude’, the judge found.

A key reason for declining the extension was the availability of a reasonably simple cause of action for negligence against the plaintiff’s former solicitors.  Justice Forrest had more material against which to judge the prospects of success in such a claim than in other cases, where the signficance of the availability of a negligence claim against the applicants’ former solicitors was downplayed.  His Honour had enough to conclude that the plaintiff had a ‘powerful if not overwhelming case’ against S&G Ltd (I can feel a settlement coming on…).  His Honour set out the law in relation to the relevance of an extension of time application of the availability of a professional negligence claim against a solicitor as follows:

83 In Morrison & Anor v Judd[43] Kirby P. said:

“The availability of an action against a negligent legal representative is relevant because commonsense says that it is so”.

In Morrison [44] Kirby P. referred, with approval, to what had been said by Smith J in the Appeal Division of this Court in Repco Corporation Ltd v Scardamaglia[45].

“In the present case, if the section does require consideration of the possibility of Mr Scardamaglia’s right to sue his legal representatives I am not persuaded that that possibility is something that should affect my view that on balance it would otherwise be just and reasonable to exercise the discretion in his favour. While it might be said that on the evidence before the court the rights against the legal representatives appear to be strong, there is no admission of negligence by the legal representatives and the issues that may arise in any such action have not been investigated or pursued fully in these proceedings. In any event, confining Mr Scardamaglia to an action against the legal representatives would carry with it its own prejudice. He would be able to seek compensation not in respect of his injuries, but for his loss of his right to sue Repco. He would find himself having to prove two cases – the original case against Repco and a further case, the case against the legal representatives. The proceeding would, therefore, be more time consuming and more costly. There would also be a real risk that, if successful, any sum recovered would be less than any sum that he would have recovered in the original proceeding: for any damages awarded would be for the lost chance to recover damages in the proceeding against Repco: Johnson v Perez; Nikolaou v Papasavas Philips & Co (citations omitted).”

84 Subsequently, in Tsiadis v Patterson[46], the Court of Appeal in this State revisited this issue and stated authoritatively that the plaintiff’s right to sue his former solicitors was a relevant consideration in an application for extension of time. Buchanan JA said:

The weight to be given to the availability of a cause of action against a solicitor will depend upon the circumstances of each case. The liability of a solicitor is not to be equated with that of the original wrongdoer, and accordingly I do not think it is correct to conclude that an applicant with a good prospect of successfully suing his solicitor will suffer no prejudice if his application is refused. The liability of the solicitor will be determined not only by the likelihood of establishing liability on the part of the original wrongdoer, but also by the terms of the solicitor’s retainer, the instructions given by the client from time to time and by the manner in which the solicitor’s work has been performed. If the plaintiff is successful in an action against the solicitor, the damages to be awarded are not based upon an assessment of the losses, pain and suffering caused by the injury sustained by the plaintiff, but are commensurate with the value of the lost chance to recover damages from the original tortfeasor. Proceedings against the solicitor will be more complex and expensive than proceedings against the original wrongdoer. Usually the likelihood that the applicant will succeed in an action against his or her solicitor cannot be known with any precision when an application under s.23A of the Act is decided. In the present case it appears that Turner was in breach of the obligations which he owed to the respondent, but that view is one based upon hearing only the respondent’s version of her engagement of Turner and the events of the succeeding years, for of course no evidence was led or submissions made on behalf of the solicitor. The matters referred to by Smith J in Repco Corporation Ltd v. Scardamaglia should not lead to a plaintiff’s potential cause of action against a negligent solicitor being completely ignored, but rather affect the weight to be given to the availability of the cause of action.”

85 Recently, the New South Wales Court of Appeal in Andresakis & Skouteris v Alexus Holdings Pty Ltd[47] considered the application of the principles set out in Scardamaglia and Tsiadis in the context of a notice of motion endeavouring to set aside a preliminary dismissal order made in the District Court. McColl JA then said:

“Accordingly, it is correct to say that the primary judge erred in dismissing the prospect that the respondent had a cause of action against its former solicitors as ‘an impermissible consideration’. It was a relevant consideration, though one whose weight depended on the circumstances. The authorities to which I have referred have accorded the prospect of a secondary cause of action little weight, partly because of the difficulty of evaluating the prospects of success.[48] (My emphasis.)

86 It follows that a potential claim against former solicitors is a relevant consideration, but that the question of what weight is to be given to it depends on the circumstances; a court must be careful in ascribing weight to the prospect of such a claim, given that the full circumstances surrounding such a claim may not be known. A Court may also take into account the prejudice to the plaintiff in prosecuting the claim against the solicitors as opposed to prosecuting the claim that is potentially statute barred. That prejudice may take several forms – diminution in the value of the claim as well as any added costs and the complexity of the proceeding against the former solicitor.’

Applying the law to the facts, his Honour said:

‘107 Nowhere is it suggested that [S&G Ltd] have any answer for their conduct in permitting the claim to become statute barred. I think it fair to say that as against [S&G Ltd], the plaintiff has a powerful, if not overwhelming, case.

109 I repeat that I do not believe that this case falls into that category of an application described by Buchanan JA in Tsiadis where “usually the likelihood that the applicant will succeed in an action against his or her solicitor cannot be known with any precision”. This is not a case where a solicitor did not issue the process because there was a concern about the prospects of success; or that there was trouble identifying potential defendants, or that there was a concern about establishing the quantum of damages. Apart from issuing the writ, the case was simply not prosecuted adequately – with no plausible explanation for the failure to do so.

110 I accept that any view I may take about the conduct of [S&G Ltd], in particular, is not a final determination of its liability. Contrary to Mr Quinn’s submission, I think that this is a case where the strength of the claim against the solicitors can be determined. [The letter from S&G Ltd’s successor as the plaintiff’s solicitor to S&G Ltd’s professional indemnity insurer] sets out comprehensively the basis for any claim against [S&G Ltd]. Apart from the fact that the claim (which had been on its books for two years and ten months at the time the three year limitation period expired) was not served within time and was struck out for failure to attend Court, the file is littered with admissions as to the conduct (ie failings) of [S&G Ltd]. It is, in my view, not possible to see what defence [S&G Ltd] could mount to a claim in professional negligence. It is, as I have already noted, significantly different to the facts in Scardamaglia and Tsiadis where neither Court had available to it, it would appear, evidence of the type presented to me.

111 As was pointed out in Scardamaglia and Tsiadis, there are other relevant factors in assessing the weight to be given to a potential claim against a negligent solicitor. The plaintiff will be confined to suing [S&G Ltd] for the loss of his right to sue the defendant. He would have to prove two cases, and the case would necessarily become more time consuming and more costly. There may be a real risk that any sum recovered would be less than the sum he would recover in a claim against the defendant, given that it is a claim for the loss of the chance to bring the action.

112 In the context of this case these considerations are, in my view, not as strong as they might be. I accept that any case against [S&G Ltd] will be based on the plaintiff’s loss of opportunity to pursue his claim against the defendant: That case is itself a loss of opportunity case. I accept for present purposes that there may be a diminution in the value of his claim if he is restricted to suing his former solicitors – although given the nature of the assessment of damages in that type of claim against the defendant it may not be of great significance. I am by no means satisfied that the prosecution of a claim against [S&G Ltd] will be significantly more complex or costly than the prosecution of the claim against the defendant. If I am correct in my assessment of the strength of the claim against [S&G Ltd], that part of the claim against the firm will only take a short period of Court time, if any. Whilst I accept that the forensic processes may be more difficult, what will take up the substance of the hearing will be the same evidence which would be led against the defendant if this hearing was to proceed, i.e. evidence concerning the failure to have the thrombolytic medication on board, evidence relevant to the plaintiff’s ascertainment of the terms of the conditions, evidence relevant to the quantification of the prospect of a better outcome for the plaintiff if the thrombolytic medication had been provided and evidence as to damages.

113 I have formed the view that in the circumstances of this case rather than being a matter of little, if any weight, as it was in Scardamaglia and Tsiadis, the prospect of a successful claim against the former solicitors must be given real consideration.’

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