Khan as Trustee for The Khan Family Trust v Hadid; Hadid v Khan as Trustee for The Khan Family Trust

Supreme Court of NSW|2008-02-22|Before: Rothman J

CITATION : Khan as Trustee for The Khan Family Trust v Hadid; Hadid v Khan as Trustee for The Khan Family Trust (No 3) [2008] NSWSC 819

HEARING DATE(S) : 22 February 2008, 31 March 2008 and subsequent written submissions

A. In 10537/2003 the Court orders: (a) verdict and judgment for the first and second defendants against the plaintiff.

C. In both 10537/2003 and 20052/2003 the Court orders: (a) the fourth, fifth and sixth defendants in 20052/2003 (Mr Flammia, Mr Hancock and Ms Palumbo) pay the costs of the plaintiff in 10537/2003 (Mrs Khan) and the plaintiffs (Mr and Mrs Hadid) and the second defendant (Response Finance Pty Ltd) in 20052/2003 incurred by said parties in either or both proceedings. Such costs to be as agreed or assessed and to include the costs of all cross-claims. Such costs shall include the costs of the steps required to be taken by any such party pursuant to these orders; (b) the cross-defendant to the third cross-claim (American Re-Insurance Company Limited) pay the cross-claimant's (Mr Hancock's) costs of the third cross-claim, as agreed or assessed, including costs of and incidental to the motion for leave to amend with which these reasons for judgment deal.

CATCHWORDS : PRACTICE - leave to amend pleadings to raise new defence after reasons for judgment issued - irreparable damage to another party - leave refused - CONTRACT - legal practitioners - insurance - LawCover - "private legal practice" - liability for misleading and deceptive conduct - indemnity granted - DAMAGES - statutory liability for entire damage by more than one party - "equitable contribution" equality of contribution, not based on relative culpability.

Civil Procedure Act 2005 LEGISLATION CITED : Legal Profession Act 2004 Legal Profession Act 1987

Albion Insurance Co Ltd v Government Insurance Office (NSW) [1969] HCA 55; (1969) 121 CLR 342 Alramadan v Director Of Public Prosecutions (NSW) (No 2) [2008] NSWCCA 69 Autodesk Inc v Dyason (No 2) 1993 HCA 6; (1993) 176 CLR 300 Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 Carr v Swart [2007] NSWCA 337 Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502 CASES CITED : Chamberlain v Deputy Commissioner of Taxation (1991) 28 FCR 21 Elliott v The Queen; Blessington v The Queen [2007] HCA 51; (2007) 82 ALJR 82 Ilvariy v Moss [2008] NSWSC 718 Khan v Hadid (No 2) [2008] NSWSC 119 Port of Melbourne Authority v Anshun [1981] HCA 45; (1981) 147 CLR 589 Queensland v JL Holdings [1997] HCA 1; (1997) 189 CLR 146 Schipp v Cameron [1999] NSWSC 997 Sullivan v Department of Transport (1978) 20 ALR 323

10537/2003 - Abeeda KHAN as Trustee for The Khan Family Trust (Plaintiff) Abdallah HADID (First Defendant) Sanaa HADID (Second Defendant)

20052/2003 - Abdallah HADID (First Plaintiff) PARTIES : Sanaa HADID (Second Plaintiff) Abeeda KHAN as Trustee for The Khan Family Trust (First Defendant/First Cross-Claimant to the First Cross-Claim/First Cross-Claimant to the Second Cross-Claim/First Cross-Defendant to the Fourth Cross-Claim/First Cross-Defendant to the Fifth Cross-Claim) Response Finance Pty Ltd (Second Defendant/Second Cross-Defendant to the Fourth Cross-Claim/Second Cross-Defendant to the Fifth Cross-Claim) Peter Fisher & Co (Third Defendant) Lorenzo FLAMMIA (Fourth Defendant/First Cross-Defendant to the First Cross-Claim/Fourth Cross-Claimant to the Fourth Cross-Claim/Third Cross-Defendant to the Fifth Cross-Claim) John HANCOCK (Fifth Defendant/First Cross-Defendant to the Second Cross-Claim/First Cross-Claimant to the Third Cross-Claim/Third Cross-Defendant to the Fourth Cross-Claim/First Cross-Claimant to the Fifth Cross-Claim) Anna Maria PALUMBO (Sixth Defendant/Fourth Cross-Defendant to the Fourth Cross-Claim) American Re-Insurance Company Limited (First Cross-Defendant to the Third Cross-Claim) Split Cycle International Pty Limited (Fifth Cross-Defendant to the Fourth Cross-Claim/Second Cross-Claimant to the Fifth Cross-Claim)

10537/2003 - P Newton (Plaintiff) A Rogers (First Defendant) A Rogers (Second Defendant)

20052/2003 - A Rogers (First Plaintiff) COUNSEL : A Rogers (Second Plaintiff) P Newton (First Defendant/First Cross-Claimant to the First Cross-Claim/First Cross-Claimant to the Second Cross-Claim/First Cross-Defendant to the Fourth Cross-Claim/First Cross-Defendant to the Fifth Cross-Claim) No Appearance (Second Defendant/Second Cross-Defendant to the Fourth Cross-Claim/Second Cross-Defendant to the Fifth Cross-Claim) No Appearance (Third Defendant) No Appearance (Fourth Defendant/First Cross-Defendant to the First Cross-Claim/Fourth Cross-Claimant to the Fourth Cross-Claim/Third Cross-Defendant to the Fifth Cross-Claim) M Joseph SC/J Merkel (Fifth Defendant/First Cross-Defendant to the Second Cross-Claim/First Cross-Claimant to the Third Cross-Claim/Third Cross-Defendant to the Fourth Cross-Claim/First Cross-Claimant to the Fifth Cross-Claim) No Appearance (Sixth Defendant/Fourth Cross-Defendant to the Fourth Cross-Claim) D Davies SC (First Cross-Defendant to the Third Cross-Claim) M Joseph SC/J Merkel (Fifth Cross-Defendant to the Fourth Cross-Claim/Second Cross-Claimant to the Fifth Cross-Claim)

10537/2003 - Heidtman & Co (Plaintiff) Equity Lawyers (First Defendant) Equity Lawyers (Second Defendant)

20052/2003 - Equity Lawyers (First Plaintiff) SOLICITORS : Equity Lawyers (Second Plaintiff) Heidtman & Co (First Defendant/First Cross-Claimant to the First Cross-Claim/First Cross-Claimant to the Second Cross-Claim/First Cross-Defendant to the Fourth Cross-Claim/First Cross-Defendant to the Fifth Cross-Claim) No Appearance (Second Defendant/Second Cross-Defendant to the Fourth Cross-Claim/Second Cross-Defendant to the Fifth Cross-Claim) No Appearance (Third Defendant) No Appearance (Fourth Defendant/First Cross-Defendant to the First Cross-Claim/Fourth Cross-Claimant to the Fourth Cross-Claim/Third Cross-Defendant to the Fifth Cross-Claim) Hancocks Solicitors (Fifth Defendant/First Cross-Defendant to the Second Cross-Claim/First Cross-Claimant to the Third Cross-Claim/Third Cross-Defendant to the Fourth Cross-Claim/First Cross-Claimant to the Fifth Cross-Claim) No Appearance (Sixth Defendant/Fourth Cross-Defendant to the Fourth Cross-Claim) Wotton & Kearney Lawyers (First Cross-Defendant to the Third Cross-Claim) Hancocks Solicitors (Fifth Cross-Defendant to the Fourth Cross-Claim/Second Cross-Claimant to the Fifth Cross-Claim)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10537/03 Abeeda Khan as Trustee for the Khan Family Trust v Abdallah Hadid & 2 Ors

20052/03 Abdallah Hadid & 1 Ors v Abeeda Khan as Trustee for the Khan Family Trust & 5 Ors

JUDGMENT 1 HIS HONOUR: On 22 February 2008, the Court issued reasons for judgment that dealt with the substantive proceedings between Mrs Khan and Mr and Mrs Hadid. Both Mrs Khan and Mr and Mrs Hadid issued cross-claims (or otherwise joined to proceedings) a number of other parties, including Mr Hancock. In turn, Mr Hancock claimed, in a cross-claim, an indemnity from American Re-Insurance Company ("Am Re"), which administers LawCover (the professional indemnity insurance of the Law Society of NSW). 2 During the course of the judgment of 22 February 2008 ("the earlier judgment"), the Court described the issue between Mr Hancock and Am Re as: "if Mr Hancock were to have any liability, the liability of Am Re under the insurance policy." Mr Hancock was held to be liable. 3 The work undertaken by Mr Hancock, purportedly on behalf of Mr and Mrs Hadid, was described in the earlier judgment and summarised in the following way: "[156] Mr Hancock arranged for the collection of mortgage documents, arranged for the signing and witnessing of those documents (albeit by another solicitor), he sent the direction to pay on behalf of Mr and Mrs Hadid and generally performed tasks that one would expect a solicitor to perform, if the solicitor were instructed as such." ( Khan v Hadid (No 2) [2008] NSWSC 119 at [156]) 4 The third cross-claim ("the Insurance Claim") was separate and distinct from the substantive issues between the other parties. Because the findings by the Court as to the conduct of Mr Hancock may have impacted on the manner in which Am Re puts its submission on the interpretation and application of the Insurance Policy (and therefore the limits of its cover), the Court granted liberty to file further submissions on that question. 5 Am Re sought, after the issue of the reasons for judgment, to amend its defence in the proceedings and to reopen its case in order to rely upon a claim of dishonesty and thereby (together with the submission otherwise made as to the limits of the insurance cover) to defeat any claim for insurance cover by Mr Hancock. As a consequence, the Court is required to determine two issues: whether the Insurance Policy covers the conduct of Mr Hancock (limit of coverage); and, (the proposed new claim) whether Am Re should be permitted to reopen and replead its defence and, for the first time, to allege dishonesty (hereinafter "leave to amend"). Insurance Policy 6 It is necessary to recite the most relevant clauses of the LawCover Policy that operated for the period in question. There is no issue between the parties that the Policy operated. The issues are limited to those already expressed. The relevant Clauses of the Policy are: " WHO IS INSURED

We agree to insure you: (a) the firm named in the Schedule; (b) each principal and employee of the firm ; and … (d) each service or administration company … in relation to the provision of administration and management services to the firm's private legal practice ….

We agree to indemnify you against civil liability for a claim that: (a) arises from the private legal practice of the firm ; …

We may reject a fraudulent claim for an indemnity or any part of a claim for indemnity that is fraudulent.

If we make a payment under this Certificate of Insurance on a claim involving dishonesty or fraud on the part of a principal or corporate firm , we have the right to recover that payment from that principal or corporate firm .

We will not indemnify you under this Certificate of Insurance when: (a) the claim arises from: … (vii) any dishonest or fraudulent acts or omissions of a principal or of a corporate firm , whether directly or indirectly … ; (viii) a contract, other than a contract to provide legal services in connection with the firm's private legal practice , unless liability would have attached in the absence of such contract." 7 There is a "Definitions Clause" (Clause 26), which defines some words, usually in mostly unexceptionable terms. Clause 5 of the Insurance Policy provides that the Policy will cover any compensation ordered, together with the defence costs and any costs awarded against the insured. These costs do not include any amount for the reimbursement of the time expended by the insured on the claim. 8 The Insurance Policy is the implementation of a statutory scheme that requires all solicitors (and barristers) in New South Wales to have professional indemnity insurance. This requirement effects a policy that ensures that the public can be confident, in dealing with legal practitioners, that those practitioners have insurance cover for any actionable wrong committed by the practitioner, in that capacity. 9 The Legal Profession Act 2004 (and the Legal Profession Act 1987, which applied in 2002-2003) requires insurance cover "with respect to civil liability that may arise in connection with … the solicitor's practice": s 406 of the 2004 Act and s 41 of the 1987 Act. 10 Clause 2 of the Insurance Policy specifies cover for a claim that "arises from the private legal practice" of the insured. Given its place in the statutory scheme, the Insurance Policy should be construed in such a way that the word "from" in Clause 2 has a meaning that accords with the phrase "in connection with" in the Act. Limit of Coverage 11 Whatever meaning may be given to the word "from" in Clause 2 of the Insurance Policy, it is not confined to a liability to a client of the firm. The discussion in Carr v Swart [2007] NSWCA 337, referring to the liability to clients and the necessary relationship, was not confining the cover provided by the Insurance Policy to claims of that kind. The Court of Appeal (and Palmer J) referred to clients in order to ascertain the capacity in which the person was acting and because that was the basis of the relationship argued by the claimant and/or insured. 12 The situation before the Court in these proceedings is different. On the findings already made, Mrs Hadid was never a client of Mr Hancock (in any capacity) and Mr Hadid was not relevantly a client of Mr Hancock for the purposes of the transaction in question. In other words, there was no contract between Mr Hancock and either Mr or Mrs Hadid. 13 Nevertheless, the claim by Mrs Khan, and the liability to Mrs Khan (and any other person in these proceedings) is a "civil liability [of Mr Hancock] that arises from the private legal practice" of Mr Hancock. 14 If one were to believe Mr Hancock, he did not consider that he was acting as the solicitor for Mr or Mrs Hadid. But, as found by the Court, Mr Hancock objectively represented he was so acting. All correspondence was on the solicitor's letterhead, it was signed in Mr Hancock's capacity as solicitor, and it was expressly written on behalf of his "clients" (Mr and Mrs Hadid) on whose behalf he was purporting (expressly) to "act". 15 The work that was performed by Mr Hancock was not such that it could be described as activities outside the scope of work performed by solicitors. It included organising title documents for the loan, organising identifying documents (e.g. drivers' licences, rates notices, etc), collecting and arranging the execution of mortgage documents, and the directions as to settlement and payment. 16 It was Mr Hancock's status as the solicitor for Mr and Mrs Hadid that caused Mrs Khan (through Response and/or Heidtman & Co) to proceed with the loan despite the disquiet otherwise felt by them. 17 The conduct of Mr Hancock was a representation by him, as a solicitor, that he was acting in that capacity. As such, it is not conduct that is part of a separate "entrepreneurial activity" but may "readily be described as part of a solicitor's professional practice": Schipp v Cameron [1999] NSWSC 997 at [907]. 18 Another method of analysing the relationship is to examine the relationship (or purported relationship) between Mr and Mrs Hadid, on the one hand, and Peter Fisher & Co. 19 No analysis of the evidence would allow a conclusion that Peter Fisher & Co was, either objectively or subjectively, in any relationship other than one directly with Mr and Mrs Hadid. In that regard, Peter Fisher & Co were not subcontract finance brokers to Ultimo Finance, Split Cycle, or Hancocks Solicitors. 20 The relationship created (or purportedly created) by Mr Hancock with Peter Fisher & Co was a relationship between Peter Fisher & Co and Mr and Mrs Hadid. Mr Hancock was, in that regard, acting (or purporting to act) as the attorney of Mr and Mrs Hadid. Again, this is conduct not inconsistent with the representation (or the fact) that Mr Hancock was acting as a solicitor for Mr and Mrs Hadid. 21 The evidence does not disclose any activity of Mr Hancock that is truly "mortgage broking or financial intermediary activities" (or entrepreneurial), unless the correspondence with and the engagement of Peter Fisher & Co can be so regarded. 22 In some circumstances, such activities may be so regarded. If they had been performed by or in the name of Ultimo Finance (or, perhaps less arguably, Split Cycle), or were otherwise part of a larger financial or entrepreneurial undertaking for Mr and Mrs Hadid, then different considerations would be relevant. 23 It is unnecessary to form the view that the work performed by Mr Hancock was exclusively solicitors' work. As held in the earlier judgment, Mr Hancock is not believed when he says that he did not purport to act as a solicitor: see [94], [95], [96], [154], [155], [156] and [157], amongst others. 24 The objective evidence, i.e. all documents, together with other evidence that is accepted, leads to the conclusion that Mr Hancock was acting as a solicitor and believed that he was so acting: see, also, the earlier judgment at [29]. In other words, even if the subjective view of Mr Hancock (which I repeat is not accepted as an accurate reflection of his belief) were determinative (which it is not), then Mr Hancock, at that time, expressed the view (and held it) that he was the solicitor for Mr and Mrs Hadid. The other factual matters (some already mentioned), on which Mr Joseph SC, who, on this consequential aspect, appears for Mr Hancock, relies, and which are accepted by the Court, are: "(a) The sending of letter dated 15 November 2002 on the letterhead 'Hancock Solicitors' referring to previous telephone conversations (to the law firm) referring to 'clients' and signed 'Hancock Solicitors'. The letter contained particulars of a contract and the identification of security details [18];

(b) Making of calls at his office to Mr Littleford identifying himself as a solicitor and referring to his 'clients' [29];

(c) Speaking to Mr Theos on the phone concerning the availability of mortgage documents and arranging them to be collected [31];

(d) Involvement in the circumstances concerning the registration of the mortgage, including taking calls from Mr Theos, forwarding certificate of insurance to Heidtman & Co, viewing the security documents and obtaining the insurance record created on 22 November 2002 [51];

(e) The sending of letter of 22 November 2002 on the letterhead of 'Hancocks Solicitors', referring to various phone calls, seeking cheques on settlement to be drawn in a certain manner and advising that Mr Hancock will come and collect the cheques [55];

(f) Phone calls between Mr Theos and Mr Hancock where Mr Hancock referred to the fact that he had formal instructions from them [Mr and Mrs Hadid] as well as verbal instructions to act for them and to draw the money as directed to you. Mr Hancock went on to refer to my clients [57];

(g) A further conversation between Mr Theos and Mr Hancock concerning the direction to pay;

(h) Every piece of correspondence written by Mr Hancock was on the letterhead of 'Hancock Solicitors' and signed under the nomenclature 'Hancock Solicitors' by Mr Hancock [153]." [The references are to paragraphs of the earlier judgment.] 25 Applying the rationale in Carr v Swart, supra, and on the basis of the factual findings in the earlier judgment, the liability of Mr Hancock is a "civil liability for a claim that … arises from the private legal practice" of Mr Hancock and satisfies the requirement of Clause 2 of the Insurance Policy. 26 Further, the claim is not a claim that "arises from … a contract, other than a contract to provide legal services in connection with [Mr Hancock's] private legal practice." The claim, upon which liability is based, does not arise from a contract at all. If it were to be so classified, i.e. by construing the liability and claim to be in connection with a contract (an extremely broad and unwarranted construction), it must, for the same or similar reasons previously given as to why it arises from the private legal practice, be a "contract to provide legal services in connection with [Mr Hancock's] private legal practice". 27 As a consequence of the foregoing, and subject to that which now follows, the Insurance Policy covers (and Am Re must indemnify) the liability of Mr Hancock. Leave to Amend 28 As previously stated, after the earlier judgment was issued, Am Re moved for leave to amend its defence, by then the second amended defence to the third cross-claim (hereinafter "the defence"). The proposed amendment to the defence was particularised in a document entitled third further amended defence to the third cross-claim (hereinafter "the amended defence"). 29 The amended defence asserts, for the first time, that the claims against Mr Hancock "arise from dishonest acts" of Mr Hancock. Am Re particularised findings in certain enumerated paragraphs of the earlier judgment. Mr Davies SC, who appeared for Am Re, stated that it would seek to adduce no further evidence. 30 Mr Joseph SC, who appeared for Mr Hancock only on these consequential aspects, submits that this new aspect requires further evidence and, if it had been originally pleaded, may have affected the forensic decision to call Mr Hancock. 31 There is no doubt that the amended defence raises a substantial new ground, which, if it were made out, would answer the claim for indemnity completely: see Clause 19(a)(vii) of the Insurance Policy at [6] above. 32 As is also probably clear from the aforementioned description of the pleadings, Am Re had ample opportunity (advantage of which was taken) to plead its defence and amend it. Mr Davies SC submits that the factual findings, upon which Am Re relies, were unknown prior to the earlier judgment. There are two, and only two, theoretical possibilities: the findings were based on evidence adduced; or they were not. 33 If the findings were not based on the evidence, then Am Re cannot succeed in the amended defence. If the findings were based on the evidence (which, for obvious reasons, the Court considers they were, and no party suggests otherwise), then the amended defence was available to Am Re prior to judgment. Indeed, the evidence in chief, in these proceedings, was adduced by affidavit. Mr Hadid (and Mrs Hadid) denied, in those affidavits, signing any presently relevant documents. Further, the terms of the relevant conversations and the letters from Mr Hancock were all adduced (or available) well prior to the commencement of the hearing. 34 As to the opportunity to plead this defence at an earlier time (and particularly before judgment), the various pleadings, by almost all of the parties, were amended a number of times during the course of the hearing itself. The third cross-claim was amended during the trial, as was the defence thereto. Am Re had ample opportunity to raise "dishonesty" as a defence during the hearing, and prior to judgment. Further, if it were acting reasonably, Am Re should have (assuming the allegations are reasonably available) amended the defence, if it considered its interests were advanced thereby. 35 In fact, it seems that Am Re, quite reasonably and understandably, took the forensic and tactical decision that its interests were better served supporting Mr Hancock's contention that he was not, at any relevant time, acting as a solicitor. It could, however, have pleaded dishonesty in the alternative. It did not. Given the evidence or material available, there was no ethical or other impediment to Am Re pleading this defence at an earlier time. 36 The effect of the motion is that Am Re, having failed in its original tactic, seeks to reopen the proceedings in order to argue a matter that was available to it earlier, but it chose not to pursue. 37 The principles to be applied have been stated on a number of occasions. No final orders have been entered and, relevantly, the Court has issued reasons for judgment but not made final orders, and, therefore, the Court must determine, as a matter of discretion, whether to allow Am Re to replead (and to reopen). 38 As the High Court has stated: "[31] It is well settled that a superior court of record such as the Supreme Court has a power to 'reopen' a proceeding until judgment in the case in question has been drawn up, passed and entered. But by what criteria is that authority to be exercised?

[32] It is here that guidance is provided by remarks of Mason CJ in Autodesk Inc v Dyason (No 2) . His Honour gave examples from jurisdictions in this country (including the New South Wales Court of Appeal) and the United Kingdom where the power to reopen had been exercised on grounds not limited to denial of a fair hearing, but went on. What must emerge, in order to enliven the exercise of the jurisdiction, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing. The purpose of the jurisdiction is not to provide a backdoor method by which unsuccessful litigants can seek to reargue their cases. The circumstance in Autodesk that Mason CJ dissented as to the outcome of the reopening application which was before this Court does not detract from his remarks": Elliott v The Queen; Blessington v The Queen [2007] HCA 51; (2007) 82 ALJR 82 at 89. 39 The reference in Elliott & Blessington, supra, to Autodesk Inc v Dyason (No 2) 1993 HCA 6; (1993) 176 CLR 300 needs, for present purposes, to be expanded. In Autodesk, Mason CJ said:

"The exercise of the jurisdiction to reopen a judgment and to grant a rehearing is not confined to circumstances in which the applicant can show that, by accident and without fault on the applicant's part, he or she has not been heard. It is true that the jurisdiction is to be exercised with great caution, having regard to the importance of the public interest in the finality of litigation. It is equally true, as this Court said in Wentworth v Woollahra Municipal Council , that '[g]enerally speaking, it will not be exercised unless the applicant can show that by accident without fault on his part he has not been heard.'

But these statements do not exclude the exercise of jurisdiction to reopen a judgment which has apparently miscarried for other reasons, at least when the orders pronounced have not been perfected by the taking out of formal orders. So much was acknowledged by Brennan, Dawson, Toohey and Gaudron JJ in Smith v NSW Bar Association when their Honours said: 'if reasons for judgment have been given, the power is only exercised if there is some matter calling for review.' It is sufficient to give three examples. In In re Harrison's Share under a Settlement, orders were set aside following a decision of the House of Lords which overruled authorities on the basis of which the orders had been made. In New South Wales Bar Association v Smith , the New South Wales Court of Appeal reconsidered orders previously made in view of an argument that the Court had mistakenly assumed that particular evidence had not been given at earlier hearings. And, in Pittalis v Sherefettin , a judge recalled orders the day after they were made upon determining that he had 'erred in a material matter in his approach to the case'.

These examples indicate that the public interest in the finality of litigation will not preclude the exceptional step of reviewing or rehearing an issue when a court has good reason to consider that, in its earlier judgment, it has proceeded on a misapprehension as to the facts or the law.…

However, it must be emphasized that the jurisdiction is not to be exercised for the purpose of re-agitating arguments already considered by the Court; nor is it to be exercised simply because the party seeking a rehearing has failed to present the argument in all its aspects or as well as it might have been put. What must emerge, in order to enliven the exercise of the jurisdiction, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing. The purpose of the jurisdiction is not to provide a backdoor method by which unsuccessful litigants can seek to re-argue their cases." (Per Mason CJ at 302 et seq.) 40 The Court of Criminal Appeal recently had occasion to consider these principles as they applied to criminal appeals and the application of the Rules of Court relating thereto. After considering both judgments of the High Court, cited above, the Court of Criminal Appeal said: "[12] Accepting that it was necessary to reopen the appeal to call further evidence, the applicant assayed that task, but without providing any explanation as to why such further, and arguably more persuasive, material had not been presented on the appeal…. In substance, the applicant has sought to reopen the appeal so as to remedy a deficiency in the material presented at the hearing. That approach would appear to fall squarely within the impermissible purpose of seeking 'by a backdoor method' to reargue an unsuccessful appeal. It cannot be justified on the criteria explained by Mason CJ in Autodesk (No 2) ." ( Alramadan v Director Of Public Prosecutions (NSW) (No 2) [2008] NSWCCA 69 (27 March 2008) per Basten JA, Latham and Rothman JJ.) 41 Each of the above principles has been adumbrated, in the above citations, in the context of an appeal. The overriding purpose relating to finality of judgments may need a slightly more flexible approach at first instance. But, as is clear from the extract from Autodesk, the principles are the same. 42 The exercise of the discretion must be informed by the statutory injunctions in ss 56, 57, 58 and 59 of the Civil Procedure Act 2005. 43 The exercise of discretion must balance the interests of all relevant parties. Primarily, parties are entitled to a proper opportunity to prepare and present their case: Sullivan v Department of Transport (1978) 20 ALR 323 at 343 (per Deane J). But the Court is not obliged to require the party to take advantage of the opportunity provided: ibid. 44 Am Re could have pleaded this defence earlier and, but for the timing of it, had and has a right so to do. If there be unavailable to Am Re further proceedings that could agitate these issues, that, then, would be a strong factor in favour of allowing the amendment. 45 Case management, if that were the only consideration, ought not deprive a party of its right to put its case: Queensland v JL Holdings [1997] HCA 1; (1997) 189 CLR 146 at 154. But as the High Court said in Sali v SPC Ltd (1993) 67ALJR 841 at 843: "an adjournment which, if refused, would result in a serious injustice to the applicant should only be refused if that is the only way that justice can be done to another party in the action." (Per Brennan, Deane and McHugh JJ.) 46 I take into account in favour of the grant of leave to amend that Am Re would seem to be unable to proceed subsequently on this precise point. The issue, being a complete defence, could and should have been agitated in these proceedings: Blair v Curran [1939] HCA 23; (1939) 62 CLR 464; Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502; Chamberlain v Deputy Commissioner of Taxation (1991) 28 FCR 21; Port of Melbourne Authority v Anshun [1981] HCA 45; (1981) 147 CLR 589. 47 The foregoing does not address whether Am Re could take proceedings for recovery from Mr Hancock, after it had paid out money arising from this claim: see Clause 18 of the Insurance Policy at [6] above. I will assume, without deciding, that it could not, because, at least arguably, "dishonesty", being a defence, would be denied as the basis of a separate cause of action, in that, while separate and distinct, it may involve an attempt to have the Court reach an inconsistent judgment: see references in [46] above. The Clause 18 recovery cannot have yet arisen: see Ilvariy v Moss [2008] NSWSC 718. 48 As early stated, I do not need to decide these issues. I shall assume, for the purpose of this aspect, that, without this leave, Am Re would be forever denied recompense. If so, I would consider that to be a strong factor in favour of the grant of the application by it. 49 Against that consideration is the failure of Am Re to take the point in a timely manner, the undermining of the finality of the judgment, the inconvenience, the delay, and the extra costs. Some or all of those factors may be overcome or ameliorated by a requirement on Am Re to pay the costs, regardless of the outcome. 50 In addition, and most importantly, is the fact that Mr Hancock suffers tactical prejudice. Mr Hancock gave evidence. The decision to give evidence was based, inter alia, on the issues before the Court at that time. Mr Joseph SC submits, and I accept, that if "dishonesty" were in issue at the time, the decision would probably (or may well have been) otherwise. The decision to give evidence, made by Mr Hancock, significantly affected the findings of the Court and cannot now be undone. Even without the Autodesk principles, this factor has the consequence that to refuse leave to amend is the only way that justice can be done to Mr Hancock in these proceedings. 51 It is necessary to deal with further aspects of this question. If, contrary to the above, Am Re were entitled to take other proceedings raising this issue, notwithstanding the foregoing, that also would be a strong factor in favour of the grant of the application by it. 52 That factor would involve the avoidance of duplication. Nevertheless, even in those circumstances, I would refuse leave. If the proceedings may be taken separately, it is appropriate that it be based upon different evidence and not be heard by a judge who has already made adverse findings of credit against Mr Hancock. 53 In making that comment, I should clarify that my preliminary view is that I do not consider that my Reasons for Judgment, earlier given, establish "dishonesty" by Mr Hancock from which the claim against him arises. As expressed at [94] of the earlier judgment, Mr Hancock commenced acting honestly, believing he had instructions. It seems Ms Palumbo gave him that impression. That belief may have been unprofessional, or involved negligence, but it was initially believed, honestly. My preliminary view is that the "dishonesty", if any, of Mr Hancock occurred after the loss or damage was caused and is therefore irrelevant to this issue. 54 The Court does not accept the submission of Am Re that the Court ought assume that if the defence based on "dishonesty" had been advanced initially (or prior to judgment), Mr Hancock would still have given evidence (and it would have been the same). Without the evidence of Mr Hancock, there would have been no suggestion that he acted otherwise than as a solicitor, as evidenced by his correspondence. 55 While it must be accepted that Mr Hancock cannot establish a contract between him and Mr or Mrs Hadid (to act as solicitor or otherwise), the tactical decision to give evidence seemed to depend on two considerations: avoiding any allegation of professional misconduct (presumably because Mr Hancock was not acting as a solicitor); and, the likelihood that there would be no duty of care owed to Mr or Mrs Hadid, who, on one scenario, would suffer loss occasioned by the operation of the principle of indefeasibility of title. 56 The liability attaches because, ultimately, it was Mrs Khan who suffered damage and to whom Mr Hancock is liable on account of the conduct of his private practice as a solicitor (negligently, without proper instructions, misleadingly and/or deceptively). 57 Contrary to the submission of Am Re, Mr Hancock had a great deal to gain from conducting his defence in the manner that he did. So too did Am Re. Unfortunately for both of them, the facts did not support the defence. And it is now too late to reverse the forensic decisions taken by Am Re and seek to run its defence, differently. 58 For the foregoing reasons:

(a) Am Re is seeking to reopen and reargue a case that, for tactical reasons, it declined to argue initially; (b) A grant of leave to amend in these proceedings would cause irreparable injustice to Mr Hancock; (c) Such irreparable injustice, in the circumstances, outweighs the injustice to Am Re; and (d) Leave to amend is refused. Contribution 59 Mr Hancock submits that the contribution from Mr Flammia towards the award of damages ought to be 50 percent because the damages are statutory and not tortious. 60 Mr Hancock also seeks to amend the pleadings to cross-claim against Mr Flammia to claim contribution. The proceedings were advanced on the basis of cross claims for contribution from all parties. It seems that, by some slip, this claim for contribution was not pleaded. 61 No party is prejudiced by Mr Hancock's application, in the way in which the proceedings were conducted, and all parties operated on the basis that contribution from each had been sought. Leave to amend is granted to Mr Hancock. 62 Statutory "contribution" is based on "equitable contribution", which, in turn, is founded on fairness and justice: Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 at 294 [22], per Gaudron ACJ and Hayne J; Albion Insurance Co Ltd v Government Insurance Office (NSW) [1969] HCA 55; (1969) 121 CLR 342 at 351, per Kitto J. 63 Where the liability in damage is (or would be) the same for each "contributing party", then the obligation is on each, and neither should, in fairness, bear a greater burden than the other. "Relative culpability" is not the criterion. Equality of the burden is. In each case now before the Court, Mr Hancock and Mr Flammia have a statutory liability for all of the damage and must, therefore, bear the burden equally. This was one of the issues on which the parties were given liberty to address. Orders 64 The Court makes the following orders:

A. In 10537/2003 the Court orders: (a) verdict and judgment for the first and second defendants against the plaintiff.

B. In 20052/2003 the Court orders: (a) verdict and judgment on the amended statement of claim for the first defendant, the second defendant, the fourth defendant, the fifth defendant, the sixth defendant and the seventh defendant against the plaintiffs; (b) declaration that registered mortgage number 9253502J is void and of no effect; (c) the first defendant (Mrs Khan) forthwith do all things, take all steps and execute all documents necessary to have registered mortgage number 9253502J removed from the register held by the Registrar-General in relation to the land described in Folio Identifier 17/12834; (d) the first defendant (Mrs Khan) forthwith do all things, take all steps and execute all documents necessary to have caveat number 9158104C removed from the register held by the Registrar-General in relation to the land described in Folio Identifier 17/12834; (e) verdict and judgment on the first cross-claim for the first cross-claimant (Mrs Khan) against the first cross-defendant (Mr Flammia) in the sum of $130,000 plus interest on that sum at Supreme Court rates from 25 December 2002 to date of these orders; (f) verdict and judgment on the second cross-claim for the cross-claimant (Mrs Khan) against the cross-defendant (Mr Hancock) in the sum of $130,000 plus interest on that sum at Supreme Court rates from 25 December 2002 to date of these orders; (g) verdict and judgment on the fourth cross-claim for the first plaintiff (sixth cross-defendant) (Mr Hadid) and the first, second and fifth cross-defendants therein (Mrs Khan, Response Finance Pty Ltd, and Split Cycle International Pty Ltd) against the fourth defendant (cross-claimant) (Mr Flammia); (h) verdict and judgment on the fourth cross-claim for the cross-claimant (Mr Flammia) against the third cross-defendant (Mr Hancock) in the sum of $65,000 plus interest on that sum at Supreme Court rates from 25 December 2002 to date of these orders; (i) verdict and judgment on the fifth cross-claim for the first cross-defendant (Mrs Khan) and the second cross-defendant (Response Finance Pty Ltd) against the fifth defendant (first cross-claimant) (Mr Hancock); (j) verdict and judgment on the fifth cross-claim for the first cross-claimant (Mr Hancock) against the third cross-defendant (Mr Flammia) in the sum of $65,000 plus interest on that sum at Supreme Court rates from 25 December 2002 to date of these orders; (k) on the third cross-claim, the Court orders that the first cross-defendant to the third cross-claim (American Re-Insurance Company Ltd) indemnify the cross-claimant (Mr Hancock) for the liability of the third cross-claimant under any and all orders in 10537/2003 and 20052/2003, including any order for costs and the liability of the third cross-claimant (Mr Hancock) to pay the legal fees for its defence in the aforesaid matters, other than any reimbursement of costs for the time of Mr Hancock on said defence. C. In both 10537/2003 and 20052/2003 the Court orders: (a) the fourth, fifth and sixth defendants in 20052/2003 (Mr Flammia, Mr Hancock and Ms Palumbo) pay the costs of the plaintiff in 10537/2003 (Mrs Khan) and the plaintiffs (Mr and Mrs Hadid) and the second defendant (Response Finance Pty Ltd) in 20052/2003 incurred by said parties in either or both proceedings. Such costs to be as agreed or assessed and to include the costs of all cross-claims. Such costs shall include the costs of the steps required to be taken by any such party pursuant to these orders; (b) the cross-defendant to the third cross-claim (American Re-Insurance Company Limited) pay the cross-claimant's (Mr Hancock's) costs of the third cross-claim, as agreed or assessed, including costs of and incidental to the motion for leave to amend with which these reasons for judgment deal.

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Judgment (39 paragraphs)

Cases Cited (22)

Cited By (2)