Preston v Nikolaidis

Context

1. These proceedings were commenced in 1993. In 2015, Mr Preston raised certain limitation issues which the Court considered should be the subject of a pleading, and those issues were then put in the form of a statement of claim filed in a new proceeding which has since travelled together with the proceeding commenced in 1993.
2. The very long history of the proceedings since 1993 is described by Slattery J at [37]-[237] of his Honour's reasons for judgment in Preston v Nikolaidis [2017] NSWSC 1527. I gratefully adopt his Honour's careful and detailed account up to November 2017, when his Honour's judgment was delivered. In that judgment, his Honour made declarations sought by Mr Preston to the effect that the defendants' entitlement to costs that were the subject of bills of costs that the Court had referred to assessment in the 1993 proceeding had been extinguished by operation of ss 14 and 63 of the Limitation Act 1969 (NSW). His Honour considered that these declarations would bring the proceedings to an end, and listed the matter for any argument in relation to any consequential orders and the issue of costs.
3. The possibility of an application by Mr Preston for a gross sum costs order, and the need to take into account existing costs orders that had been made during the course of the proceedings since 1993, was raised at one or more subsequent directions hearings before Slattery J.
4. On 15 November 2018, Mr Preston filed a notice of motion seeking an order setting aside all costs orders adverse to Mr Preston made in the proceedings from 1993 to date. Mr Preston relied on Uniform Civil Procedure Rules 2005 (NSW) (UCPR), rr 36.15 or 36.16(3).
5. In a series of subsequent directions hearings before Ward CJ in Eq, directions and orders were made for Mr Preston's application to set aside the previous adverse costs orders to be the subject of points of claim, and then a statement of claim. At a directions hearing on 22 August 2019, it emerged that Mr Preston had still not settled the form of the statement of claim on which he wished to rely in support of his claim to set aside the previous adverse costs orders, and that the defendants had raised issues about the identity of the proper defendants to that claim. Ward CJ in Eq made directions requiring Mr Preston to serve a revised verified statement of claim on the defendants, together with an application for leave to file that revised verified statement of claim.
6. On 25 October 2019, Mr Preston filed and served a notice of motion seeking, relevantly, an order that Mr Preston has leave to file the verified statement of claim dated 17 September 2019.
7. It is convenient to refer to this as the leave application.
8. Mr Preston's verified statement of claim dated 17 September 2019 (the proposed statement of claim or proposed claim) seeks orders setting aside: 1. ten costs orders made by the Court in this proceeding between 28 February 1995 and 13 February 2014 that required Mr Preston to pay the defendants' costs of particular notices of motion, particular hearings, or costs thrown away by certain amendments (the adverse costs orders); and 2. costs orders made by the Court of Appeal on 12 March 2012 and 21 June 2012 that required Mr Preston to pay the defendants' costs of Mr Preston's notice of motion and application for leave to appeal (respectively) that were dismissed by the Court of Appeal on those occasions (the appeal adverse costs orders).
9. The substance of the proposed claim may be summarised briefly as follows: 1. in October 1992, the defendants (who were then practising as solicitors in partnership) claimed that Mr Preston owed the defendants $95,749, but this included charges for legal work that the defendants had not in fact performed (the overcharging claims); 2. in addition, the second defendant engaged in certain allegedly dishonest conduct, but for which the defendants would been holding in excess of $100,000 of Mr Preston's funds in trust as at October 1992 for the defendants to apply to their costs and disbursements (the dishonest conduct claims), in which case Mr Preston would not have commenced these proceedings in 1993 and the adverse costs orders and appeal adverse costs orders would not have been made; 3. further, in an accounting exercise undertaken by the defendants for the purpose of these proceedings in 1994 (referred to by the parties as the "DRAW Report"), the defendants failed to disclose certain amounts received from Mr Preston totalling in excess of $95,750 that the defendants held on behalf of Mr Preston or for which the defendants were liable to account to Mr Preston (the DRAW Report claims); 4. if those amounts had been disclosed in the accounting exercise, the parties would have resolved these proceedings in the second half of 1994, and the adverse costs orders and appeal adverse costs orders would not have been made; 5. the adverse costs orders and appeal adverse costs orders should therefore be set aside under UCPR r 36.15(1) because they were made irregularly and/or illegally and/or against good faith; and 6. further or alternatively, the adverse costs orders and appeal adverse costs orders should therefore be set aside under UCPR r 36.16(3).
10. As stated above, the hearing of the leave application commenced before me on 18 June 2020. Mr Preston and the defendants acknowledged that Mr Preston would ordinarily be entitled to commence its proposed claim by simply filing a statement of claim in a fresh proceeding. The order made by Ward CJ in Eq on 22 August 2019 requiring Mr Preston to obtain leave in order to file the proposed statement of claim was the result of the manner in which Mr Preston had gone about commencing the proposed claim within this proceeding, initially by filing the notice of motion on 15 November 2018. Mr Preston and the defendants accepted that Mr Preston's application for leave should be determined according to the same principles that would apply if Mr Preston had simply filed the proposed statement of claim in a fresh proceeding and the defendant sought orders for the summary dismissal or striking out of that pleading.
11. This is not the occasion to address the parties' competing submissions in relation to the proposed claim in any detail. The following very high level summary will suffice to explain my reasons for dismissing Mr Preston's application for access to the Law Society documents.
12. Mr Preston submits that the alleged dishonest conduct is a species of fraud and that, even if Mr Preston may not be able to identify freshly discovered facts that would provide a reason for setting aside the adverse costs orders and appeal adverse costs orders, the alleged fraud is nevertheless a basis for setting aside those orders under UCPR r 36.15(1) because the orders are properly characterised as interlocutory. Alternatively, Mr Preston submits that the Court should not rule on the leave application that it is not open to Mr Preston to argue these matters at a trial of the proposed claims.
13. Mr Preston submits that, if UCPR r 36.15(1) does not apply, the adverse costs orders and appeal adverse costs orders should be set aside under UCPR r 36.16(3) because they are interlocutory orders and there have been two material changes in circumstances since the orders were made that justify setting them aside. Mr Preston relies on the judgment of Slattery J in November 2017, and the defendants' destruction of files relating to legal work for Mr Preston. Mr Preston submits that he became aware that the files had been destroyed only in the last year or so.
14. The defendants submit that leave to file the proposed statement of claim should be refused because: 1. Mr Preston seeks to set aside the adverse costs orders and appeal costs orders without seeking to impugn the reasoning of the judicial officers who made those orders by reference to the circumstances of the relevant application or occasion before the Court that had given rise to a need to make a determination about costs; 2. the dishonest conduct claims in the proposed statement of claim lack any, or any sufficient, particulars; 3. the proposed claims are an abuse of process because they are the subject of res judicata, estoppel by record or issue estoppel; 4. further or alternatively, the proposed claims are an abuse of process because Mr Preston has a collateral purpose, namely the pursuit of the second defendant for the conduct alleged in the proposed statement of claim; 5. the defendants are prejudiced by Mr Preston's delay in seeking to bring the proposed claims; 6. to give the 1993 proceedings a further "lease of life" by granting leave to file the proposed statement of claim would result in the proceedings dragging on for many more years, with a significant drain on the publicly funded resources of the Court, in addition to the strain and costs this would occasion to the defendants; and 7. the third defendant is a party to the proposed claims, yet no relief appears to be sought against him.

The subpoena and the Law Society documents

1. At the same time that these proceedings have been on foot, Mr Preston has made complaints to the Council of the Law Society of New South Wales (the Law Society) concerning the conduct of the defendants.
2. On about 23 April 2020, the defendants issued a subpoena to the Law Society requiring production of: Any report or reports (including any documents annexed to such report or reports) prepared by or of Mr Darrell Swindell accountant and/or Mr R Hawthorne solicitor arising out of or relating to or touching upon: (a) the law firm MD Nikolaidis & Co, solicitors and/or the partners of that firm. (b) Leon Nikolaidis solicitor.
3. Mr Leon Nikolaidis is the second defendant in these proceedings and in the proposed statement of claim. The law firm MD Nikolaidis & Co is the name of the firm in which the three defendants in the proceeding practised in partnership, although the third defendant Mr Michael Zwar first became a partner in the firm in 1992.
4. Counsel for Mr Preston informed me that Mr Swindell and Mr Hawthorne were appointed to undertake investigations for the Law Society in relation to MD Nikolaidis & Co and/or the second defendant at some time prior to January 1995 and April 2000 (respectively).
5. According to Mr Preston's submissions, the Law Society has produced approximately between 4,000 and 5,000 documents in response to the subpoena. The defendants have had access to those documents. Mr Zwar is the defendants' solicitor, in addition to being named as the third defendant in the proposed statement of claim. In his affidavit sworn on 17 June 2020, Mr Anastasi deposed that he understands from Mr Zwar that some of the documents produced relate to complaints made by Mr Preston to the Law Society, and other documents relate to other clients of MD Nikolaidis & Co.
6. Mr Preston accepts that documents produced by the Law Society relating to other clients of MD Nikolaidis & Co are not relevant to the leave application. However, he seeks an order granting his solicitor and counsel access to all of the documents produced, for the purpose of them extracting the documents that relate to complaints made by Mr Preston and undertaking not to disclose or make use of, and destroy any copies of, documents relating to other clients of MD Nikolaidis & Co. It was common ground between the parties that the process of extracting those documents from the 4,000 to 5,000 documents produced by the Law Society would be very time consuming, and Mr Preston submitted that he would wish to have the opportunity to tender any of the extracted documents that might be relevant and helpful to his leave application. This would inevitably mean that the hearing of the leave application would not be completed with the two days allocated by the Court based on the parties' estimated hearing time.
7. It will be recalled that the defendant issued the subpoena to the Law Society. Nevertheless, the defendant submitted that the Court should decline to grant Mr Preston access to the Law Society documents (irrespective of any confidential regime that might be put in place) on the basis that there was no legitimate forensic purpose for which Mr Preston required access to the documents.
8. The defendant submitted (and I accept) that the test for determining whether a party should be granted access to documents produced on subpoena is that stated by Simpson J, as her Honour then was (with Spigelman CJ and Studdert J agreeing), in R v Saleam [1999] NSWCA 86 at [11]: "The principles governing applications [for an order that documents not be produced] are no different from those governing applications for access to documents produced in answer to a subpoena. Before access is granted (or an order to produce made) the applicant must (i) identify a legitimate forensic purpose for which access is sought; and (ii) establish that it is 'on the cards' that the documents will materially assist his case. So much was established in earlier proceedings brought by this applicant: R v Saleam (1989) 14 NSWLR 14 per Hunt CJ at CL…"
9. Whilst the applicant must show, or it must appear, that the documents are relevant to the issues in the proceedings, relevance alone is not sufficient to warrant an order to produce documents or leave to inspect documents produced. Documents may be relevant even if they are unhelpful to the applicant's case. It is necessary for the applicant to satisfy the second element of the test - that it is "on the cards" that the documents "will materially assist" the applicant's case. It is not sufficient for the applicant to show that there is a "reasonable chance" or "reasonable possibility" that the documents will assist the applicant: Attorney-General (NSW) v Chidgey (2008) 182 A Crim R 536; [2008] NSWCCA 65 at [58]-[80] (Beazley JA, James and Kirby JJ agreeing).
10. These principles apply in civil as well as in criminal cases: see, for example, Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 410 at [52].
11. At this stage, I need only determine whether the Law Society documents are relevant to the leave application and whether it is on the cards that they will materially assist Mr Preston in the leave application. Unless and until Mr Preston is granted leave to file the proposed statement of claim, any desire to inspect the Law Society documents for the purpose of the proposed claims (as opposed to the leave application) would not be a legitimate forensic purpose. However, as will be apparent from the summary of Mr Preston's submissions below, Mr Preston relied on the potential relevance of the Law Society documents to the proposed claims because, to the extent that the documents may assist Mr Preston in establishing the proposed claims, that may be relevant to any assessment of the strength of Mr Preston's claims undertaken by the Court in determining the leave application.
12. Mr Preston submitted that he should be permitted to inspect the Law Society documents for the following reasons.
13. First, Mr Preston submitted that the documents annexed to the investigators' reports are likely to include contemporaneous documents relevant to the complaints made by Mr Preston to the Law Society. Those contemporaneous documents "may assist" Mr Preston's leave application because they "may assist" Mr Preston in proving the alleged dishonest conduct in the proposed statement of claim and, the strength or weakness of Mr Preston's evidence in support of the proposed statement of claim "might be one matter, among others, the Court takes into account" in determining the leave application. Mr Preston referred to Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; [2006] HCA 27 at [238] (Heydon J, dissenting).
14. Second, Mr Preston submitted that investigators' reports "may" annexe or include responses from the second defendant in relation to complaints made by Mr Preston to the Law Society which are also the subject of the dishonest conduct allegations in the proposed statement of claim, and that any such responses "may assist [Mr Preston] in proving his allegations of dishonest conduct, for example, if the responses are inconsistent with contemporaneous documents which form part of [Mr Preston's] evidence".
15. Third, Mr Preston submitted that the investigators' reports "may" contain findings adverse to the second defendant concerning Mr Preston's complaints which are also the subject of Mr Preston's dishonest conduct allegations, and Mr Preston "wants an opportunity to consider" whether any such findings could be used in evidence in support of the proposed statement of claim.
16. Fourth, Mr Preston submitted that the Law Society documents "may" be relevant to the question of whether the second defendant knew that Mr Preston was making, and intended to pursue, complaints that are in substance the same as the dishonest conduct allegations in the proposed statement of claim, at the time when the second defendant destroyed files relating to the matters that are now the subject of those dishonest conduct allegations. This submission assumes that the investigators' reports address complaints made by Mr Preston that are the same as the dishonest conduct allegations. Mr Preston submitted that, if the Law Society documents revealed that the second defendant was aware of the substance of those claims, then any prejudice he claims that he would suffer by reason of delay if leave were granted to file the proposed statement of claim, then Mr Preston would submit in support of the leave application that the second defendant had brought that prejudice upon himself by destroying the files when he had knowledge of the complaints.
17. Fifth, Mr Preston submitted that the Law Society documents "may" assist the second defendant to overcome some of the prejudice that he may suffer as a result of the passage of time since the events the subject of the dishonest conduct allegations, by providing a source of contemporaneous documents from which the second defendant could refresh his memory.
18. Sixth, Mr Preston submitted that, if the Law Society documents reveal that matters now alleged in the proposed statement of claim were not the subject of complaints made by Mr Preston to the Law Society, "this may be relevant (perhaps in favour or perhaps against) to the question of whether leave should be granted".
19. In my opinion, Mr Preston's submissions identify layers of possibility upon possibility, and fall short of demonstrating that it is "on the cards" that the Law Society documents will materially assist Mr Preston on the leave application. I have formed this opinion on the assumption that the strength of Mr Preston's proposed claims may be relevant to the leave application. However, I do note that the circumstances in Batistatos were quite different from the present case, in that delay was the sole basis on which the proceedings were said to be an abuse of process. There was no suggestion of res judicata or estoppel. The judgment of Heydon J, on which Mr Preston relies, was a dissenting judgment.
20. In addition, the fourth submission referred to above does not withstand scrutiny. Assuming (without deciding) that the second defendant destroyed files that were relevant to matters about which Mr Preston had complained to the Law Society in the mid-1990s or early 2000s, and assuming (without deciding) that the defendant knew about those complaints at the time when he destroyed the files in about the mid-late 1990s, this could only be said to be the true cause of any prejudice that the defendants suffer as a result of Mr Preston seeking leave to commence the proposed claims approximately 30 years after the relevant events if knowledge of the mid-1990s to late-2000s complaints should have caused the defendants to retain those files until the present day. Given the manner in which the matters in issue in the 1993 proceeding were progressively reduced from 1993 up to and including the judgment of Slattery J in November 2017, as described in [37]-[237] of his Honour's reasons for judgment, I do not consider that it could be fairly suggested that the second defendant should have retained all files until the present day in anticipation of Mr Preston taking some further step.
21. Finally, the fifth and sixth submissions referred to above relate to whether documents may assist defendant, not whether it is on the cards that they will materially assist Mr Preston.
22. Because I have concluded that Mr Preston has failed to satisfy the "test" in R v Saleam, it has not been necessary for me to consider whether the overriding purpose and dictates of justice would have warranted refusal of leave to inspect the Law Society documents on the basis that Mr Preston had not sought to subpoena the documents himself and the time required to inspect the documents and adduce any additional evidence in relation to the leave application arising from that inspection would have delayed the hearing and determination of the leave application in these already ancient proceedings: Civil Procedure Act 2005 (NSW), ss 56-58.
23. For all of those reasons, Mr Preston's notice of motion filed on 17 June 2020 is dismissed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 June 2020