Kowalski v Cole

BACKGROUND 12 It is necessary to set out some of the extensive history of the earlier proceedings. What follows is a summary from the reasons for judgment of the Federal Magistrate, and in part based upon earlier judgments of other Courts which were provided to the Federal Magistrate. 13 In May 1989 the applicant is said to have injured his back in an accident at work. Also, some time in or around 1989 the applicant is said to have sustained an injury to his eye in a separate incident, and an injury to his finger in another incident. All these injuries became the subject of litigation in the course of the following few years. Some of this litigation was handled for the applicant by the respondents, and some by other lawyers. 14 In 1989 the respondents acted for the applicant in a claim in the District Court of South Australia brought against the applicant's then employer, Mitsubishi Motors Australia Ltd ("Mitsubishi"). The claim related to the back injury the applicant allegedly sustained after slipping on some oil in the course of his employment at Mitsubishi. The applicant claimed that the injury was caused by the negligence, breach of contract and breach of statutory duty of Mitsubishi. The claim went to trial. On 3 July 1992, the Court found that the applicant had not sustained the injury in the manner that he alleged and dismissed the claim: Kowalski v Mitsubishi Motors Australia Ltd (Unreported, District Court of South Australia, Judge Lee, delivered 3 July 1992). That action will be called "the Mitsubishi proceeding". 15 Before delivery of that judgment, the respondents rendered a memorandum of costs to the applicant, totalling $18,634.66 for work done in relation to that claim. The bill was sent by post on 30 March 1992. 16 After that judgment, the respondents entered into negotiations for workers compensation on behalf of the applicant with the Mitsubishi solicitors in an attempt to resolve all outstanding matters in relation to the back injury. An agreement was reached for payment of a sum of approximately $55,000, subject to the approval of the general manager of the WorkCover Corporation. 17 Before the approval of the general manager had been given, on 27 August 1992 a Judge of the Industrial Court apparently made an order by consent that part-payment of the sum, $23,000, be paid to the respondents as the applicant's solicitors. The applicant was aware of that order. That sum was then paid by the employer to the respondents. The respondents paid the $23,000 into its trust account on 31 August 1992, and then withdrew the sum of $18,634.66, being their account for the costs of the Mitsubishi proceedings and a small sum of $483.79 in respect of the claim in relation to his eye injury. The balance of $3,881.55 was held in the respondents' trust account in the applicant's name. The respondents did not tell the applicant it had dealt with these monies in this way, until 12 December 1995. 18 The general manager of the WorkCover Corporation withheld his approval of the proposed settlement. The order of 27 August 1992 was therefore set aside on 16 June 1993, and the sum of $23,000 was due to be repaid to Mitsubishi. 19 The respondents forwarded to the Mitsubishi solicitors a trust account cheque for $3,881.55 on 31 May 1994. This left a nil balance in the trust account in the name of the applicant. 20 The respondents then sought to recover the $19,118.45 outstanding to the Mitsubishi solicitors by sending a number of letters to the applicant requiring payment by him of that sum. It appears that they did not disclose to him that they had applied the balance of the $23,000 for their costs, and that they may have sought payment from him for their costs rather than to arrange repayment to Mitsubishi. Subsequently the applicant paid $10,000 to the trust account of the respondents, who then paid that sum out to Mitsubishi solicitors. This left a balance owing to Mitsubishi of $9,118.45. The applicant has not paid any further sums to the respondents or to Mitsubishi. 21 On 4 December 1995 the respondents themselves paid the balance of $9,118.45 into their trust account in the applicant's name. This sum was apparently paid into the trust account in preparation of paying Mitsubishi the balance owed. However the respondents did nothing further to pay Mitsubishi and the money simply remained in the trust account. It remained so until recently. 22 On a date which is not clear, a further sum of $3,000 was also apparently paid into the trust account in respect of a settlement with Mitsubishi in relation to the applicant's eye injury. This figure was not immediately paid to the applicant and was held as a credit against the balance still to be returned to Mitsubishi. 23 On 27 October 1998, the applicant accepted the sum of $200,000 in full and final settlement of all matters between him and Mitsubishi, including the back injury claim and the eye injury claim. That payment was received and accounted for to the applicant. The settlement included an agreement by Mitsubishi not to seek repayment of any monies it claimed to be owing to it (apparently the $9118.45 referred to). 24 It appears that, in the process of accounting to the applicant for the proceeds of that settlement, the $3000 was also accounted for, as the trust account thereafter only held the balance of $9118.45 which the respondents had paid into it. 25 In the meantime, in 1996 the applicant brought proceedings in the District Court of South Australia for damages against the respondents and a fourth party, a solicitor who was employed at the third respondent from 1989 until April 1993 (the negligence proceeding). The matter went to trial. Judgment was given on 21 March 2002: Kowalski v Sim, Harris, Cole, Dowd and RJ Cole & Partners [2002] SADC 30. 26 The applicant alleged in that action that the respondents had acted improperly or negligently or both in their conduct of the Mitsubishi proceeding. He claimed there was a breach or breaches of duty of care and or a breach of their various contracts of retainer with him between 1990 and 1994. All of those claims were dismissed. 27 In that action, the applicant also took issue with the way that the respondents dealt with his trust monies, including in relation to the $23,000, on account of compensation in respect of the back injury, which was required to be repaid. The trial judge found that the respondents were entitled to have offset from the $23,000 their costs as they had an equitable right which had arisen as a consequence of having done the work, referring to King CJ's reasons in Kison v Papasian (1994) 61 SASR 567 at 568. His Honour found that it was correct to reverse the trust account entries to the extent that the respondents did, and that they had not been negligent in relation to their accounting to the applicant for funds received on his account. His Honour held that, notwithstanding the entries in computer printouts from Mitsubishi or in the trust account records of the respondents, no net funds payable to the applicant were held by the respondents prior to the 1998 settlement. The applicant did not appeal this decision, although he claims he filed a Notice of Appeal in the Supreme Court which was not accepted by the Registrar. 28 In July 1996, the respondents bought proceedings in the Supreme Court of South Australia under s 41 of the LP Act for their solicitor/client costs of the Mitsubishi proceeding to be taxed (the taxation proceeding). The respondents lodged a bill of costs in taxable form. The applicant lodged a notice of dispute on 14 August 1996. However nothing further happened for many years, apparently waiting the outcome of the proceedings before Judge Anderson in the District Court. Following the delivery of judgment of Judge Anderson on 21 March 2002, the respondents had the taxation proceeding relisted. On 19 May 2004 the applicant filed an amended notice of dispute in which he alleged the costs had all been paid on 31 August 1992. The respondents did not pursue the taxation proceeding further. On 28 June 2005 the applicant took out an application to strike out the bill of costs and the taxation proceeding. On 22 July 2005, Judge Lunn struck out the taxation proceeding and ordered the respondents to pay the applicants costs of $15. 29 The third respondent to this proceeding then issued a proceeding against the applicant in the Christies Beach Magistrates Court for orders to determine who was entitled to the trust account balance of $9,118.45, that is the monies paid into the trust account by the respondents as discussed in [21] above. Magistrate Ward on 16 July 2007 held that, as between the applicant and the respondents, the applicant had no claim to the sum being held in the respondents' trust account and that the third respondent was entitled to the $9,118.45: RJ Cole & Partners v Kowalski (Unreported, Christies Beach Magistrates Court, delivered 16 July 2007). 30 Then, on 16 August 2007 the applicant attempted to reactivate the taxation proceeding by issuing a notice for specific directions in the taxation proceeding seeking an order that the third respondent refund to the applicant the sum of $18,634.66 relating to the respondents' costs in the Mitsubishi proceeding, plus compound interest since 31 August 1992. The order was sought under s 42 of the LP Act. Judge Lunn ordered that the applicant's claim be dismissed: Cole Harris Pty Ltd v Kowalski (Unreported, Supreme Court of South Australia, delivered 15 October 2007). His Honour held that under s 42(3) of the LP Act the Court can only order repayment of costs already paid if there has been a completed taxation of those costs. No such taxation had occurred as the applicant had elected to have the bill of costs struck out and so not to require its taxation. On 25 January 2008 the applicant issued a further application in the taxation proceeding. He sought that the order of 22 July 2005, striking out the respondents' bill of costs, be set aside on the grounds that the justice of the case so required it. Judge Lunn dismissed the application. He found that the applicant had not shown that on 22 July 2005 he was under any mistake of fact in relation to the application which he made, or had been misled in any way by the respondents; Cole Harris Pty Ltd v Kowalski (Unreported, Supreme Court of South Australia, delivered on 31 March 2008). 31 Finally, it is noted that the applicant lodged a complaint of unprofessional conduct with the Legal Practitioners Disciplinary Tribunal claiming to be aggrieved under s 82 of the LP Act. The complaint alleged that the respondents were holding monies in a trust account for him which should be paid to him. He claimed the respondents failed to pay a credit balance of $9,118.45 plus interest. The Tribunal rejected the compliant. Incidentally, it observed that the funds are trust monies, and as trustees the respondents have an obligation under the Trustee Act 1936 (SA) to deal appropriately with the monies. The Tribunal found that there was a genuine dispute in relation to the disbursement of trust monies, but that those issues could not be dealt with by the Tribunal but were issues to be resolved by a court. The Tribunal found that the respondents were not guilty of unprofessional or unsatisfactory conduct as there was no evidence before them to support that assertion; In the matter of William Andrew Sim, Russell John Cole, Philip Andrew Harris and RJ Cole & Partners (Unreported, Legal Practitioners Disciplinary Tribunal, delivered 1 February 2005).

THE FEDERAL MAGISTRATE'S DECISION 32 The amended statement of claim includes assertions that the respondents were negligent, breached fiduciary duties and breached their contract of retainer with him by bringing and conducting the Mitsubishi proceeding. It also makes allegations that it was improper for the respondents, having received $23,000 from Mitsubishi for payment of a provisional settlement for compensation for a back injury, to have transferred their costs and disbursements to the respondents' office account. It also asserts the respondents unconscionably obtained $10,000 from the applicant on 14 June 1994, ostensibly for legal costs and disbursements that they were not entitled to, as they had already taken $18,634.66, but really to facilitate repayment of part of the $23,000 to Mitsubishi. 33 After setting out the orders being sought by each party, and the procedural history of this proceeding, the Federal Magistrate recited the "Background information" including the circumstances surrounding and the history of the disputes between the parties leading up to the proceeding. 34 The Federal Magistrate then set out his conclusions under the heading "Submissions." His Honour found that the applicant's amended statement of claim did not comply with Order 11 Rules 1, 2, 3 and 16 of the FC Rules and therefore should be struck out. He described the amended statement of claim as rambling, convoluted and contained much material that was totally irrelevant. 35 The Federal Magistrate also concluded that the applicant should not be permitted to file a further amended statement of claim, and that the proceeding should be dismissed summarily pursuant to s 17A(2) of the FM Act. This conclusion was on the basis that the proceedings are "frivolous, vexatious or an abuse of process" as the applicant sought to re-litigate matters that had already been determined in other proceedings. 36 His Honour held that the applicant was seeking by the amended statement of claim to get relief that related to or was in connection with one or more of the various proceedings previously determined by a tribunal or a court. He considered that the applicant's written and oral submissions related to matters that had already been fully ventilated in earlier proceedings. Therefore, his Honour found, that the applicant was estopped from raising matters in the current proceeding that either were or should have been raised in the earlier proceedings.

CONSIDERATION 37 The application is supported by the applicant's supporting affidavit sworn 4 January 2010, which includes a document entitled "Draft Notice of Appeal." The "Draft Notice of Appeal" contains 29 grounds of appeal which are to a degree repetitious. It is not necessary to address each of them in turn, although it has been necessary to consider each of them to identify the basis of the present application. 38 The main ground of appeal asserted in the applicant's oral submissions and in paragraph 3 of the "Draft Notice of Appeal" is that the Federal Magistrate erred in law by refusing to disqualify himself from hearing the proceeding. There was some dispute over whether the applicant formally applied to Federal Magistrate Simpson to disqualify himself or not. 39 There is no formal "application" by document seeking orders that the Federal Magistrate disqualify himself. I have reviewed all the transcript of that proceeding. At the outset of the first directions hearing, on 10 June 2008, Federal Magistrate Simpson disclosed the fact that he was a partner at Baker McEwin (later known as Baker O'Loughlin and later Minter Ellison) from about 1987 until 1999. Baker McEwin acted against the applicant in a matter in which they were representing Mitsubishi. His Honour stated that he did not remember if he had any involvement in that matter. After his Honour disclosed this fact, the applicant said "[i]t wouldn't bother me, your Honour." The matter then proceeded. 40 The next mention of disqualification occurred in the transcript of the hearing on 13 November 2008. The issue was again raised, this time by the first respondent. He drew to the Federal Magistrate's attention a letter from Baker O'Loughlin which was annexed to the applicant's outline of argument dated 7 August 2008. The letter is signed by the Federal Magistrate and relates to settlement negotiations between the applicant and Mitsubishi. After this was raised, the first respondent and the applicant both said that they were not asking Federal Magistrate Simpson to disqualify himself. At page 8 line 15 of the transcript, the applicant made it clear that he did not want his Honour to disqualify himself and said: "I had an opportunity, and Mr Cole had an opportunity, to ask your Honour to disqualify himself. I said I didn't want your Honour to disqualify himself at a previous occasion. I don't want your Honour to disqualify himself now because I think your Honour's the appropriate magistrate to hear this claim…" 41 His Honour then said he would like to adjourn for a short while to consider whether or not he should disqualify himself, notwithstanding the fact that both the applicant and the respondents did not ask his Honour to. After a short adjournment, the proceedings were resumed. Federal Magistrate Simpson said that he did not think that he should disqualify himself. His Honour said that the limited involvement that he had in certain other proceedings was insufficient for any reasonable person to believe that he should be disqualified from hearing the current proceedings. 42 After the hearing, but before judgment was delivered, a letter was sent by the applicant to Federal Magistrate Simpson on 17 November 2009. An annexure to the letter was the letter from Federal Magistrate Simpson to the third respondent (referred to above in [40]). The applicant now says that the letter suggested that the applicant perceived Federal Magistrate Simpson to be biased because of his Honour's relationship with the third respondent, and that his Honour should not hear and determine the proceeding. 43 Before considering the content of the letter of 17 November 2009 it is necessary to consider its status. It was not formally filed. It was sent to Federal Magistrate Simpson after the hearing, without leave of the court to do so. It was sent to "Federal Magistrate Simpson, Federal Magistrates Court, Fax: 8219 1001". That facsimile number is the Federal Magistrates Court General Registry number. It discloses documentation that was not apparently previously before his Honour, namely a schedule of Consent Determinations and Notations dated 3 September 1992 and a letter from WorkCover's CEO to the third respondent dated 25 September 1992. 44 The first question to decide is whether the letter and annexures are material which was in fact before his Honour, and which his Honour ought to have considered before giving judgment. 45 The authorities make it clear that sending correspondence or submissions subsequent to the hearing of matter purporting to deal with additional issues is to be discouraged: Foggin v Lacey [2003] FCAFC 147. Moore and Bennett JJ there observed at [35]: While the appellant's supplementary submissions purported to deal with this additional issue and the respondent, under protest, addressed it also, there was no examination of it in any real detail. As has already been said, it was not dealt with substantively during oral argument. 46 It was made clear by Mason J in Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246 at 257 to 258, that the hearing is the time and place for the presentation of arguments: After argument had concluded in this court lengthy written submissions dealing with issues not hitherto raised and a further affidavit were filed. … The material was submitted without leave having been given by the court. The impression, unfortunately abroad, that parties may file supplementary written material after the conclusion of oral argument, without leave having been given beforehand, is quite misconceived. We have to say once again, firmly and clearly, that the hearing is the time and place to present argument, whether it be wholly oral or oral argument supplemented by written submissions. 47 In any event, putting aside the fact that that letter and enclosed documents should not have been sent after the close of submissions, without leave of the court to do so, it was not read by the Federal Magistrate. On the same date, 17 November 2009, the letter and enclosures were returned to the applicant with a letter of that date. It read in part: As you were informed in the letter from the Court dated 15 September 2009, the Court does not conduct litigation by way of correspondence and as such your letter has not been provided to His Honour and will be returned with this letter. 48 That is sufficient to dispose of that point. So far as the Federal Magistrate was concerned, he had not been asked to disqualify himself and he ruled (on the material then before him, on a basis that was not challenged) that he should not do so. The applicant did not apply for leave to reopen the case to formally apply for the Federal Magistrate to disqualify himself. 49 In any event, even if the letter and the documents it enclosed were considered material by the Federal Magistrate, the material does not in my view suggest that the applicant was seeking that his Honour to disqualify himself. It was to the contrary. It asked the Federal Magistrate to hear and decide the claim promptly. It does not support the proposition that the applicant wanted to have Federal Magistrate Simpson disqualify himself. 50 A number of other grounds of appeal were asserted by the applicant (at paragraphs [5] to [13] of the "Draft Notice of Appeal") which relate to alleged omissions in the Federal Magistrate's reasons. The alleged omissions all relate to information in the summaries of previous litigation between the parties. These summaries were under the heading "Background information". I have set out some of the background to each of these proceedings in greater detail under the heading "Background" above. 51 Although some of that information was not expressly referred to in the Federal Magistrate's reasons, and the applicant disputes the factual accuracy of some of the information that is noted, that does not, in my opinion, give rise to any arguable error on the part of the Federal Magistrate. The information set out was intended to be background to the disputes between the parties. It is not shown that any deficiency in the recorded background lead in any way to his Honour's consideration of the real issues being diverted. The complaints the applicant has made (although no doubt important to him about how litigation in the past proceeded), they are not directly relevant to the Federal Magistrate's conclusion that the amended statement of claim in the present case was to be struck out and the proceedings summarily dismissed. 52 The applicant, in the balance of the draft notice of appeal, makes a variety of points. 53 He asserts that the Federal Magistrate wrongly concluded that the amended statement of claim is a "rambling and convoluted diatribe". It is a 22 page document of in excess of 100 paragraphs or subparagraphs. It alleges facts extending back to 1989. It is partly factually and partly argumentative. Its recitals, so far as they are apparently factual, demonstrate that those facts have variously been part of one or more of the earlier proceedings involving the applicant and the respondents. That aspect is dealt with below. It is repetitive, and in many instances, it is difficult to discern where the line is between fact and argument. It has a number of apparently factual conclusions (such as assertions of extortion or fraud) without a clear factual basis being specified. It quotes communications from or to third parties without it being clear what the primary fact is which is being alleged. It quotes findings or remarks from other judgments without it being clear what the primary fact is which is being alleged. 54 In my view, there is no real prospect of the applicant demonstrating on an appeal that the amended statement of claim should not have been struck out. I do not consider that part of the Federal Magistrate's orders, or the reasons giving rise to them, are attended with sufficient doubt to warrant them being reconsidered by a Full Court. 55 The next question is whether the proceeding itself was properly dismissed. It does not avail the applicant simply to assert that the Federal Magistrate "perverted the course of justice" or "fabricate[d]" his conclusions because the applicant disagrees with them. The Draft Notice of Appeal does not, however, go much beyond that. 56 The material before the Federal Magistrate, as his Honour concluded, showed that (a) the respondents had carried out legal work on instructions from the applicant in the conduct of the Mitsubishi proceeding, and had submitted an account for that work; (b) the applicant had not, within the time allowed by s 41(2) of the LP Act, sought to challenge the amount of that account and thereafter the proceedings to have those costs taxed had been brought to an end by the applicant; (c) the applicant had unsuccessfully sued the respondents for negligence in their conduct of the Mitsubishi action on his behalf; (d) the applicant had unsuccessfully challenged the entitlement of the respondents to have taken the amount of those costs from the freight account, from the payment of the provisional settlement of $23,000; (e) the applicant had no claim against the respondents for the monies held in the trust account until recently $9118.45) and that the respondents were entitled to that money; and (f) the respondents had not otherwise misapplied monies or failed to account to the applicant for monies in their trust account in any way which, by the time of the proceedings in the Federal Magistrates Court, entitled him to recover any amounts from them. 57 The culmination of the proceedings, by which time those various issues had been resolved, was the decision of Magistrate Ward on 10 July 2007. It is noteworthy that that Magistrate comprehensively reviewed many of the applicant's assertions of impropriety against the respondents, raised largely by his counterclaim in that action, and determined their significance in the context of any ongoing entitlement on his part against the respondents. 58 In my judgment, the decision of the Federal Magistrate that the issues sought to be raised by the applicant had been raised and determined in one or more of those earlier proceedings is clearly correct. If, as his Honour found, the applicant sought in party to apply fresh labels to his claims, to use as vehicles for his claims statutory provisions which he may not previously have explicitly referred to, their foundation existed in matters which he had already ventilated in earlier proceedings: see Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. 59 Accordingly, I am not persuaded that the Federal Magistrate's orders or his reasons are attended with sufficient doubt to warrant them being considered by a Full Court. The applicant has, in earlier proceedings, had the opportunity to seek to expose the improper conduct on the part of the respondents which he alleges. There is no injustice now in denying him the further opportunity to do so. 60 The application for leave to appeal is refused. I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.