Judgment Summary
Supreme Court
New South Wales
Court of Appeal
14 May 2014
Maxwell-Smith v S & E Hall Pty Ltd [2014] NSWCA 146
Beazley P, McColl and Barrett JJA
This appeal concerned the duties owed by solicitors to former clients and the tort
of collateral abuse of process. It is significant because of the Court’s findings in
relation to the legal elements a plaintiff must prove in order to establish that tort.
The court held that in an action for collateral abuse of process a plaintiff must
prove that an alleged tortfeasor (1) used a court process for an improper purpose
and (2) also engaged in some overt act or threat, distinct from initiating the
proceeding itself, in furtherance of that purpose.
In 1995, Mr and Mrs Maxwell-Smith purchased land at Tura Beach. They retained
Mr White, a solicitor, to act for them in relation to that purchase. Later in the same
year, they retained S & E Hall Pty Ltd, a building company, to construct a house
on the land. A dispute arose between Mr and Mrs Maxwell-Smith and S & E Hall
in relation to the building work. That dispute became the subject of litigation.
Orders for costs were made against Mr and Mrs Maxwell-Smith in favour of S & E
Hall. S & E Hall obtained the issue of bankruptcy notices in 2002 and 2006 based
on costs orders and served them on Mr and Mrs Maxwell-Smith. Mr White acted
for S & E Hall in respect of the litigation relating to the building dispute.
Mr and Mrs Maxwell-Smith alleged that Mr White breached his retainer
agreement with them by acting for S & E Hall in the manner that he did. Mr and
Mrs Maxwell-Smith also alleged that Mr White breached a tortious duty of care
and an equitable duty owing to them that arose out of that agreement.
The Court found that there was no retainer in force between Mr and Mrs MaxwellSmith and Mr White when Mr White began to act for S & E Hall and that no
continuing contractual or equitable duty of loyalty was owed once the solicitorclient retainer had come to an end. By acting for S & E Hall, Mr White did not
threaten to compromise the confidences of Mr and Mrs Maxwell-Smith or threaten
the integrity of the judicial process or the due administration of justice. Mr White
was therefore under no duty not to act for S & E Hall in the manner that he did.
The Court held that Mr and Mrs Maxwell Smith’s claim for breach of duty failed
accordingly.
Mr and Mrs Maxwell-Smith also alleged that Mr White and S & E Hall committed
the tort of collateral abuse of process by obtaining the issue of and serving the
2002 and 2006 bankruptcy notices on them for the allegedly improper purpose of
recovering debts.
This summary has been prepared for general information only. It is not intended to be a substitute
for the judgment of the Court or to be used in any later consideration of the Court’s judgment.
The Court dealt with authorities relating to the tort of collateral abuse of process
in Australia and elsewhere and traced the genealogy of the principles governing
the tort to the decision in Grainger v Hill (1838) 4 Bing (NC) 212; 132 ER 769 in
order to ascertain the elements required to establish the tort. The Court held that,
on the basis of recent Queensland and New South Wales Court of Appeal
decisions, reinforced by clear and considered dicta of members of the High Court,
an action for collateral abuse of process will only lie if a plaintiff can prove that
that an alleged tortfeasor (1) used the court’s processes for an improper purpose
and (2) also engaged in some overt act or threat, distinct from initiating the
proceeding itself, in furtherance of that purpose.
The Court held Mr and Mrs Maxwell-Smith failed to establish both elements of the
tort. S & E Hall did not serve the bankruptcy notices on Mr and Mrs MaxwellSmith for an improper purpose. Mr and Mrs Maxwell-Smith were also unable to
point to any overt act or threat, distinct from the proceedings themselves,
engaged in by S & E Hall in furtherance of any allegedly improper purpose. Mr
and Mrs Maxwell-Smith’s claim for collateral abuse of process failed accordingly.
The Court also held that a cause of action for the tort of collateral abuse of
process cannot lie against a someone who is not a party to the proceedings said
to constitute the abuse. The Court dismissed the claim against Mr White because
he was not a party to the proceedings, albeit that he acted for S & E Hall in his
professional capacity as a solicitor.
The Court also noted that most of Mr and Mrs Maxwell-Smith’s claims were
statute barred by virtue of s 14 of the Limitation Act 1969 (NSW). Challenges to
the decision of the District Court on procedural fairness grounds were not upheld.
The appeal was dismissed with costs.
This summary has been prepared for general information only. It is not intended to be a substitute
for the judgment of the Court or to be used in any later consideration of the Court’s judgment.