Cicek v The Estate of the Late Mark Solomon

Judgment 1HER HONOUR: By amended notice of motion filed in court on 19 July 2013, the first defendant sought an order that the plaintiffs' action against it be dismissed pursuant to s 61 of the Civil Procedure Act 2005 or r 13.4 of the Uniform Civil Procedure Rules 2005. On 11 September 2013, I dismissed the motion but ordered the plaintiffs to pay the first defendant's costs, reserving my reasons. These are my reasons for making those orders. 2The proceedings arise out of a series of property purchases and loans entered into by the plaintiffs. The plaintiffs allege that they retained Mr Mark Solomon to act as their solicitor on those transactions. Mr Solomon died before the commencement of these proceedings. The first defendant is his estate. 3In brief summary, the plaintiffs allege that, when acting for them on a loan to them from Perpetual for the purpose of the development of a property at Blacktown, Mr Solomon negligently directed Perpetual to pay the proceeds of settlement of the loan to the plaintiffs' partner in the development project, Mr Robert Tam. Mr Tam was subsequently made bankrupt and has since also died. His estate is the second defendant in the proceedings but the plaintiffs are not pursuing their claim against that estate. The plaintiffs allege that Mr Tam did not use the Perpetual funds for the purpose of developing the property and that they have accordingly suffered substantial loss. 4Separately, the plaintiffs allege that Mr Solomon acted for them on a further loan from National Australia Bank to the plaintiffs and Mr Tam. The plaintiffs allege that, in representing them on that transaction, Mr Solomon preferred the interests of Mr Tam to their interests. The plaintiffs say that, at the time of entering into the loan, they were unaware that Mr Tam had existing loans with the Bank. The mortgage was an "all monies" mortgage. Mr Tam subsequently entered into negotiations with the Bank to arrange for an extension to the loan, the proceeds of which were paid directly to him. The plaintiffs allege that Mr Solomon negligently failed to advise them of Mr Tam's existing loans with the Bank and of the nature and effect of the mortgage (including the fact that it secured all of Mr Tam's liabilities to the Bank). The plaintiffs rely alternatively on breach of fiduciary duty on the strength of same allegations. They claim that they suffered substantial loss when the Bank enforced its security against them to recover moneys owed by Mr Tam. 5The first defendant initially filed a notice of motion on 1 May 2013 seeking orders for verified discovery by the plaintiffs within categories listed in a schedule to the motion. On 19 July 2013, the Registrar granted the first defendant leave to amend the motion so as to seek to have the action dismissed. The first defendant's application was supported by two detailed affidavits sworn by a solicitor, Mr Lurie, reciting the unhappy history of his attempts to obtain proper discovery from the plaintiffs. The Registrar ordered the plaintiffs to file and serve any evidence in reply to Mr Lurie's affidavits by 30 July 2013 and listed the motion for hearing on 9 August 2013. At that stage, the solicitor on the record for the plaintiffs was Mr Ramel Badal of Lawtime Lawyers. 6When the amended motion came before me for hearing on 9 August 2013, Mr Badal appeared for the plaintiffs. He had failed to file and serve any evidence in respect of the motion as directed by the Registrar. An unsworn affidavit was sent to my Associate by email on 8 August 2013. Apart from being poorly worded and difficult to understand, the affidavit wholly failed to address the issues raised on behalf of the first defendant, offering no more than a bare assertion that the plaintiffs had provided "the best discovery" to the first defendant with practically no detail to sustain that assertion. 7Mr Griscti, who appears for the first defendant, drew my attention on that occasion to an additional hurdle faced by the defendants. On 30 January 2013, the Registrar ordered the plaintiffs to file their evidence in the proceedings by 27 February 2013. Mr Griscti noted that each plaintiff has provided only a slender statement (dated 29 January and 21 February 2013 respectively). Those statements are also poorly worded and difficult to follow but, more importantly, they barely begin to approach proof of the matters pleaded in the statement of claim. On 10 April 2013, on an occasion when the matter was listed for directions and Mr Badal did not appear, the Registrar made a direction prohibiting the plaintiffs from serving any further evidence without leave of the Court. The proceedings are listed for hearing on 8 October 2013. The paucity of the evidence served to date combined with the requirement for leave to rely upon any further evidence presumably prompted the first defendant to include in its amended motion the prayer for an order dismissing the proceedings under r 13.4. 8At my suggestion (having regard to the draconian relief sought) the first defendant very fairly consented to an adjournment to allow Mr Badal to put on a further affidavit as to the steps taken by him to give proper discovery up to that date. I strongly urged Mr Badal to brief counsel to obtain advice as to what was required in that respect and also in order to receive advice as to how to prepare the matter properly for hearing, particularly given the requirement for leave to rely on any additional evidence. 9The matter was re-listed on 16 August 2013. On that occasion, Mr Badal did not appear, informing the Court by email at 8.37am that morning that he was unwell. The email asserted that the plaintiffs had at 10.15pm on 13 August 2013 terminated Mr Badal's retainer. Inconsistently, however, the following day (14 August 2013) Mr Badal filed a notice of intention to file a notice of ceasing to act: cf rules 7.27 and 7.29 of the UCPR. Since a date for trial has been fixed, if the plaintiffs did not terminate his retainer, Mr Badal could not file a notice of ceasing to act without leave until 28 days after the date on which the notice of intention was filed. 10Mr Cicek appeared for himself on 16 August 2013. He informed the Court that he had not terminated Mr Badal's retainer but that Mr Badal had demanded further payment from him and threatened not to appear if the money was not paid. Mr Cicek informed the Court that he believed he had already paid Mr Badal over $200,000 (his new solicitor later informed the Court that the sum is probably $180,000. Mr Badal thought he had been paid about $155,000 and claims that he is owed a further $100,000 in unpaid fees for past work). 11In Mr Badal's absence due to ill health and since there was a real issue as to whether he required leave under r 7.29 to cease to act, I stood the first defendant's motion over again, to 23 August 2013. 12On 23 August 2013, Mr Cicek was represented by a new solicitor, Mr Liu. Mr Liu frankly acknowledged that he was not in a position to meet the first defendant's application that day. After two further listings of the proceedings for the purpose of resolving a potential dispute as to whether Mr Badal was entitled to exercise a lien over the plaintiffs' file, the proceedings were ultimately listed to conclude the hearing of the motion on 10 September 2013. 13The plaintiffs were represented at the further hearing of the motion by Dr Tarrant of counsel. In opposing the relief sought, Dr Tarrant frankly acknowledged based on inquiries undertaken by Mr Liu that the plaintiffs' discovery had been inadequate. He relied upon an affidavit sworn by Mr Liu stating that the plaintiffs had identified additional documents in their possession which they are obliged to discover. Mr Liu's affidavit annexed a list of those folders and documents amounting to some 1,164 pages. He said that a verified list of the documents had not yet been prepared. Mr Liu also annexed a list of further documents obtained by him upon his attendance at the first plaintiff's office revealing a further 195 pages of discoverable documents. Mr Liu stated that he had asked the first plaintiff a series of questions by reference to the categories for discovery ordered by the Court and could identify no further documents that would meet those categories. 14By way of explanation for the plaintiff's acknowledged default in earlier compliance, Mr Liu said: As best as I can understand, from the files, the reason for the slow or inadequate response to the orders for discovery lies with the language comprehension difficulties of the first plaintiff, limited resources of the previous solicitors (single person law firm), the difficulty of getting documents from third parties and the state of the business records of the plaintiffs (un-indexed, un-kept, disorder and unknown locations). 15The adequacy of that explanation and of the steps proposed to rectify the default must be assessed in the context of the history of the litigation, set out in detail in Mr Lurie's two affidavits. It appears that orders for discovery were first made on 20 September 2012, as follows: (1)By 4 October 2012 the parties to request categories of documents for discovery. (2)By 18 October 2012 the parties to notify each other of any dispute as to the categories sought. (3)By 15 November 2012 the parties tor provide to each other with verified lists of documents and give discovery of any categories of documents not in dispute between them. 16An unverified list was served on 25 January 2013. The first defendant disputes the adequacy of that list. 17On 30 January 2013, the Court ordered the plaintiffs to provide a verified list of documents and to give discovery of any categories of documents not in dispute by 13 February 2013. That order was not complied with. 18As already noted, on 1 May 2013, the first defendant filed a notice of motion seeking orders for discovery by reference to specified categories annexed to the motion. That notice of motion was returnable on 24 May 2013 for directions. The solicitor for the first defendant mentioned the plaintiff's appearance, apparently at Mr Badal's request. 19It was on that occasion that the matter was listed for hearing on 8 October 2013 with an estimate of 4 days. In respect of the first defendant's motion seeking discovery, the Registrar made orders affording the plaintiffs an opportunity to resist any category for discovery opposed by them and otherwise to produce documents in the categories listed by 18 June 2013. To the extent that any category was opposed, the motion was listed for hearing on 19 July 2013. 20The plaintiffs did not advise the first defendant that any of the orders in the motion were opposed within the time ordered by the Registrar. Nor did they give discovery by 18 June 2013. It was presumably in light of that further default that the first defendant determined to amend its motion to seek to have the proceedings dismissed. 21What emerges from that history is that, on the one hand, the evidence reveals an unsatisfactory record of failures to comply with orders of the Court. Conversely, however, there is every indication that the categories for discovery proposed in the first defendant's notice of motion filed 1 May 2013 survived by default, without any attention on the part of Mr Badal as to whether it was reasonable to commit his clients to having to produce such a broad range of material. 22In those circumstances, I invited Mr Griscti to address me as to specific examples of actual prejudice to the defendants flowing from any default on the part of the plaintiffs. In suggesting that course, I was not labouring under the misapprehension that the first defendant had to establish the existence of actual prejudice in order to persuade the Court to exercise its discretion to dismiss the proceedings. Rather, it was a question of my wanting to understand in as much detail as possible the true position, so as to assess the fairness of granting the relief sought. I acknowledge that, in all likelihood, an aspect of the prejudice to the defendants where the plaintiffs' attention to the task has been so poor is the inability to demonstrate with specificity what it is that ought to have been done that has not been done. Mr Lurie's affidavits reveal that he has been left to piece a picture together largely from inference. 23In any event, Mr Griscti was able to give examples. First, he stated that, during an earlier show cause hearing, a file allegedly obtained from the first defendant by the plaintiff concerning a dispute the plaintiff had with his brother was shown to the first defendant's legal representatives, apparently for the purpose of persuading them that Mr Solomon had in fact been retained by the plaintiffs as alleged. Whilst that file was sighted by the legal representatives at court, Mr Griscti said that it has never been produced. He submitted that the file would have fallen within the categories for discovery. In particular, category 2 in the schedule calls for "any files received by the plaintiffs from Mark Solomon & Associates" while category 4(d) calls for documents relating to "any partnership or business dealings between [the first plaintiff] and Davut Cicek". The first defendant apprehends that such documents would reveal the existence of a partnership dispute between the plaintiff and his brother apparently arising from their conduct of a carpet laying business. Whilst the file referred to would apparently fall within those descriptions, it is difficult to assess whether it would have had any great relevance to the issues in the present action. 24Mr Griscti also gave the example of documents held by the plaintiffs' previous solicitor (before Mr Badal) in these proceedings, Mr Brian Gillard. The first defendant has obtained Mr Gillard's file on subpoena. Indeed, owing (once again) to a failure on the part of Mr Badal to appear in court when required, the defendants have been granted access to all of the documents produced by Mr Gillard, where some if not all could plainly have been the subject of a proper claim for client legal privilege. As fairly observed by Mr Griscti, it is not insignificant that the plaintiffs failed to discover those documents themselves. However, in terms of assessing actual prejudice, it appears that the first defendant has been able to obtain access to them through the process of issuing a subpoena, and has indeed obtained access to considerably more material than it should have (but for Mr Badal's failure to appear on the return of the subpoena). 25A series of other categories of documents for discovery is in the same position, that is, there are documents which it appears the plaintiffs ought perhaps to have discovered but which the first defendant has been able to obtain by means of issuing subpoenas. Those documents include documents relating to proceedings in the District Court commenced by Mr Cicek against the executor of his father' estate, proceedings brought by Perpetual and Family Court proceedings. Mr Griscti submitted that the evidence revealed a pattern of non-discovery of material where it is potentially prejudicial to the plaintiffs' cause. 26A further example given by Mr Griscti was the second plaintiff's failure to discover documents relating to her studies at TAFE. In paragraph 2 of the statement of claim, she asserts that she was at all relevant times a person with a limited capacity to read and write in English and was at a special disadvantage in judging the effect of various transactions the subject of the claim. Mr Griscti stated that other documents obtained by the first defendant reveal that the second plaintiff has in fact completed a course in advanced accounting in Australia. As with a number of other categories, the chief complaint is that such material was not discovered by the plaintiffs themselves but had to be obtained from other sources. To that I would add, as already acknowledged, the difficulty for the defendants in identifying such prejudice as may have been caused by matters of which, by reason of the plaintiffs' conduct, the defendants are not aware. 27A separate category of documents is banking and financial records of the plaintiffs. Categories 16 and 17 in the schedule to the motion call for the plaintiffs' individual and any partnership taxation returns and company taxation returns for the first plaintiff's carpet business. Those documents are sought as being potentially relevant to the plaintiffs' contention that they were at a special disadvantage in entering into transactions of the kind about which Mr Solomon allegedly advised them. 28The plaintiffs' response has apparently been that any such documents are in the possession of Mr Cicek's accountant, Mr Bolos. The first defendant has obtained partial production of documents from Mr Bolos but remains concerned that not all documents have been produced. Mr Liu's affidavit states that the first plaintiff has provided what he can and does not know of any further documents. 29All of the foregoing complaints were relied upon in the context that, as noted by Mr Griscti, the first defendant is particularly reliant upon the integrity of the discovery process in this case, since Mr Solomon is deceased. 30It is extremely difficult on the strength of the evidence before me to assess the extent, if any, of the problem complained of by the first defendant. Part of the difficulty arises from the fact that Mr Liu proposes to discover a considerable number of further documents, which the first defendant has not yet seen. The extent to which the proposed further discovery will address the first defendant's concerns is a matter of speculation at this stage. 31Further, whilst the point about the plaintiffs' having failed to give proper discovery themselves may be well made, it appears in a number of instances that the failure is confined to having omitted to list documents previously in the possession of the plaintiffs but which were no longer in their possession as at the time when they were obliged to give discovery. Further, it appears that the first defendant has to a large extent been able to obtain such documents from other sources. 32Finally I would observe that, had the plaintiffs been properly advised at the time the categories for discovery were served, there would in all likelihood have been some negotiation or contest as to the breadth of the categories sought. I do not mean to suggest that the first defendant has sought irrelevant documents but only that close attention to that issue and more robust legal representation on behalf of the plaintiffs might have seen the categories substantially narrowed. 33In all the circumstances, I am not persuaded that there has been irremediable prejudice to the defendants in the failure to give discovery of any particular category of document. 34In summarising his client's position, Mr Griscti noted that default in giving proper discovery is acknowledged. He submitted that there has been no proper explanation for that. However, I would have no difficulty in drawing the inference that poor legal representation has been a substantial factor. It appears that other factors are also at play, such as poor record keeping on the part of the plaintiffs. Mr Griscti accepted that Mr Liu's affidavit reveals the prospect of improved discovery but noted that that process is still not complete. 35Separately, Mr Griscti noted the hurdle faced by the plaintiffs in having to obtain the leave of the Court before relying on any evidence beyond the two statements which have been filed to date which, as I have already noted, are plainly inadequate proof of their claim. 36On behalf of the plaintiffs, Dr Tarrant resisted the proposition that the evidence reveals a pattern of non-compliance. He submitted that much of the material allegedly not discovered by the plaintiffs would not have been discoverable, having regard to the terms of r 21.4 of the Uniform Civil Procedure Rules. Specifically, he noted that, in the case of documents no longer in the possession of a party, r 21.4(2) requires the deponent of an affidavit verifying a list of documents to address only those documents that have been in the possession of the party within the last six months before the commencement of the proceedings. He observed that many of the categories relied upon by the first defendant may well be thought not to fall within that description. 37Dr Tarrant submitted on that basis that it would be wrong to regard documents which the first defendants have been able to obtain from other sources as documents which the plaintiffs ought to have discovered. He submitted that there is no obligation on a party to subpoena documents himself so as again to be in possession of documents held at an earlier point in time. 38Mr Griscti resisted that proposition. Noting that the definition of "possession" includes "custody or control", he submitted that there is an obligation when giving discovery to go to a third party to obtain documents held on behalf of the litigant. 39Again, it is difficult to reconcile those submissions on the strength of the evidence before me. To determine those issues definitively would require further investigation out of all proportion to the significance of the present issue in dispute. 40Dr Tarrant noted the injustice that would undoubtedly accrue to the plaintiffs were the proceedings against the first defendant to be dismissed at this stage. It may be accepted that, if the plaintiffs were confined to the evidence filed to date, their claim is weak. However, with a new solicitor on the record, I think I should approach that issue on the premise that there is a reasonable prospect that the case will now be properly prepared and that there is at least some prospect that leave to file additional evidence will be granted. It the prospects of the claim are assessed by reference to the matters pleaded in the statement of claim (on the assumption that they can be proved) the claim cannot be described as weak. 41Dr Tarrant further noted that, according to the evidence before me, the plaintiffs have incurred liability for some $280,000 in legal costs. In that circumstance, the prejudice of their losing the entitlement to prosecute the claim at this stage is manifest. 42Both parties addressed me as to the mandatory considerations in part 6 of the Civil Procedure Act. In determining what are the dictates of justice in the present case, I have had regard to the fact that at least some of the plaintiffs' default appears to have arisen from their reliance on a solicitor who does not appear to have the skills or perhaps the capacity to attend to the preparation of a matter of this nature with due expedition. The evidence reveals occasions on which he has failed to appear or else asked the defendants to mention his appearance on dates when he ought to have appeared; he allowed the categories sought by the first defendant to pass without objection; he has served woefully inadequate evidence and, in his absence from court on a day on which the matter was listed for directions, allowed the position to be reached where leave is required to rectify that problem. 43A defendant ought not necessarily to suffer the burden of poor representation of a plaintiff. Each case will turn on its own facts. I considered that the degree of injustice that would have been suffered by the plaintiffs were their claim to be dismissed at this stage outweighed the degree of injustice to the defendants established by the evidence. I also had regard to the fact that the plaintiffs have now retained Mr Liu and briefed counsel. The steps undertaken by the new legal representatives to bring the proceedings back in order played a substantial role in persuading me not to accede to the first defendant's application. 44For those reasons, I determined to dismiss the first defendant's application but to order the plaintiffs to pay the first defendant's costs of the application.