Solicitors:
Morgan Ardino & Co (Applicant)
Kennedy & Cooke Lawyers (Respondent)
File Number(s): 2019/177241
Decision under appeal Court or tribunal: District Court of New South Wales
Jurisdiction: Civil
Citation: [2019] NSWDC 223
Date of Decision: 4 June 2019
Before: Dicker DCJ
File Number(s): 2016/137741
[2]
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[3]
Judgment
THE COURT: By notice of motion filed on 2 September 2019, the applicant, Mr Phillip Soloman, seeks leave to appeal from orders made by a judge of the District Court (the primary judge) on 4 June 2019. By the motion, Mr Soloman sought to set aside or vary a judgment of the District Court entered on 27 November 2017 against him in favour of the respondent, Mr Robin Savage. The judgment was in the sum of $173,400 comprising a claim of $60,000 and interest of $113,400. On 4 June 2019, the primary judge ordered that the notice of motion be dismissed and ordered that he pay Mr Savage's costs of the motion.
The litigation between Mr Savage and Mr Soloman dates back to 3 May 2016, when Mr Savage filed a statement of claim in the Bega Registry of the District Court claiming that, by an agreement in writing dated 9 August 2012 (the Agreement) between Mr Savage and Mr Soloman, Mr Savage agreed to lend the sum of $60,000 to Mr Soloman for a period of three months from 9 August 2012. Mr Savage alleges that it was an express term of the Agreement that Mr Soloman would pay interest monthly on that sum.
On 21 June 2016, Mr Soloman filed a notice of appointment of Mr Edmund El-Khoury as his solicitor for the purposes of the proceedings. On the same day, a defence was filed on behalf of Mr Soloman in which Mr Soloman denied liability. Mr Soloman did not admit that the Agreement was binding or that, on its proper construction, it gave rise to the obligation alleged by Mr Savage.
On 31 July 2016, a cross claim was filed on behalf of Mr Soloman against Mr Savage alleging that there was an arrangement between the parties from which Mr Savage withdrew and that because of the "inconsistence and the last-minute withdrawal of the deal", Mr Soloman was entitled to be compensated "for the irritable losses of $300,000 which is the approximate foreseen profit that would have been made if the deal completed".
On 2 August 2016, at a hearing before the Registrar of the District Court at Bega, it was held that the cross claim was filed out of time and leave for it to be filed out of time was refused. However, the Registrar granted Mr Soloman leave to file an amended defence. On 15 August 2016, Mr Soloman filed an amended defence, which included a new paragraph repeating in substance the allegations made in the cross claim. The amended defence also asserted that Mr Soloman would start new proceedings in the District Court:
"…to compensate for the irritable losses of $300,000 which is the approximate foreseen profit that would have been made if the deal completed."
There is no evidence that any such proceedings were commenced by Mr Soloman.
On 21 December 2016, orders were made by the District Court for the filing of affidavit evidence by the parties. The proceedings were listed for final hearing in Bega on 27 November 2017. On 26 November 2017, Mr El-Khoury filed, electronically, a notice of motion with an affidavit in support sworn by Mr Soloman seeking orders adjourning the hearing and requesting a transfer of the proceedings from Bega to Sydney.
When the matter was called on for hearing before Blackmore DCJ on 27 November 2017, there was no appearance on behalf of Mr Soloman. The matter was mentioned at 10am, 11am and later in the afternoon. In the absence of any attendance on behalf of Mr Soloman, Blackmore DCJ proceeded to hear the matter. His Honour dismissed the notice of motion for want of prosecution and, after reading the affidavits filed on behalf of Mr Savage, entered judgment for Mr Savage against Mr Soloman in the sum of $60,000 plus $113,400 for interest. His Honour also ordered Mr Soloman to pay the costs of the proceedings.
On 3 December 2017, a notice of motion was filed on behalf of Mr Soloman seeking to have the orders made on 27 November 2017 set aside as a default judgment. The notice of motion was discontinued in January 2018.
Mr Soloman's affidavit evidence before the primary judge was that he intended to attend the hearing with his solicitor, Mr El-Khoury, and counsel. He said that he organised travelling from Sydney to Bega for himself, his solicitor and counsel. Mr Soloman asserted that, on 24 November 2017, he received anonymous threatening text messages referring to the hearing in Bega. Mr Soloman then sent a message to Mr El-Khoury forwarding the text messages and saying that he was very worried about going to Bega and asking Mr El-Khoury to "do something for me for my safety and the safety of the people with me."
Mr Soloman's affidavit said that he was worried about going to the hearing in Bega and for the safety of his legal team and that, even if his legal team did attend he was concerned that they would not be able to concentrate. He said that he instructed Mr El-Khoury to file a notice of motion seeking adjournment of the hearing and for the transfer of the hearing to Sydney. Mr Soloman said that he accepted advice from Mr El-Khoury that he would send documentation to the Court to adjourn the date and the relocation of the hearing to Sydney. Mr Soloman said had full confidence in Mr El-Khoury.
Mr El-Khoury also gave evidence by affidavit sworn on 21 November 2018. Mr El-Khoury said that he had a conversation with Mr Soloman in which Mr Soloman asked him not to go to Bega, saying that he wanted Mr El-Khoury to adjourn the matter and transfer it to Sydney. However, Mr El-Khoury gave no evidence of the advice alleged to have been given by him to Mr Soloman. Mr El-Khoury set out in his affidavit the attempts he said that he made to obtain legal representation for Mr Soloman at the hearing scheduled for 27 November 2017 in Bega. He said that he could not travel to Bega himself because of health reasons relating to his wife, who became stressed and unwell when she heard of the threats. Mr El-Khoury said that he honestly believed that the notice of motion and affidavit were appropriate explanation to the Court for the non-appearance of Mr Soloman at the hearing.
On 21 March 2018, Mr Soloman filed a notice of appeal to the Court of Appeal from the orders made by Blackmore DCJ. On 29 March 2018, Mr Soloman filed the notice of motion that ultimately came before the primary judge. Mr Soloman prosecuted his appeal to the Court of Appeal rather than to seek to have the notice of motion of 29 March 2018 heard. The primary judge observed that it was unclear why that choice was made.
The appeal to the Court of Appeal was heard on 18 October 2018 and, on 1 November 2018, for reasons published on that day, the Court of Appeal ordered that the appeal be dismissed with costs. [1] At the hearing of the appeal, there was no appearance by Mr Savage. However, the Court considered that Mr Soloman had an appeal as of right and the appeal proceeded on a final basis. [2]
Leeming JA, with whom Macfarlan JA and Sackville AJA agreed, concluded that there had been no denial of procedural fairness on the part of Blackmore DCJ and that there was therefore no occasion to consider Mr Soloman's application to extend time to appeal. His Honour observed that there was no dispute that the District Court was obliged to accord procedural fairness to Mr Soloman, which extended to his having an opportunity to be heard before the issues in the litigation were decided. However, his Honour said, there could also be no dispute that an opportunity had been given to him, the hearing having been delayed in order that he or his representative might exercise that right to be heard.
Leeming JA observed that a highly remarkable aspect of the appeal was that, despite the extraordinary content of the text messages said to have been received by Mr Soloman and forwarded to Mr El-Khoury, nothing further was adduced by way of evidence about what happened after they were received. His Honour also observed that, on the hearing of the appeal, almost a year later, there continued to be an absence of evidence explaining why no one was able to appear either on the day fixed for hearing or to make an appropriate application in the 14 days following entry of judgment.
In the course of his reasons, Leeming JA observed that, in the material before the Court of Appeal there were matters that, subject to any explanation Mr El-Khoury may offer, may be capable of suggesting that he had departed from the standards to be expected of a competent legal practitioner aware of his obligations to the Court. Those matters include the following:
whether Mr El-Khoury was retained to act on Mr Soloman's behalf in the proceedings in the District Court and to brief counsel;
whether there is an explanation for Mr El-Khoury's apparent failure to appear in the District Court or to proffer an explanation to the District Court for his non-appearance;
whether Mr El-Khoury was informed by counsel who appeared for Mr Soloman on the appeal that Mr El-Khoury was in a position of conflict with his client;
if Mr El-Khoury was made aware of the conflict, whether he nonetheless continued to represent Mr Soloman either as a solicitor or as a friend;
what is the explanation for Mr El-Khoury's apparent failure to comply with the rules governing a solicitor seeking leave to cease to act for a litigant.
Leeming JA observed that in the absence of a satisfactory explanation of those matters, there may be a basis for the Court referring Mr El-Khoury's conduct to the Law Society. For that reason, the Court granted leave to Mr El-Khoury to file and serve any submissions and evidence within 21 days from the date of judgment on 1 November 2018.
Pursuant to that leave, Mr El-Khoury filed submissions on 21 November 2018 together with an affidavit sworn by him on that day. On 28 November 2018, the Court of Appeal directed that the papers in the matter be referred to the Law Society. The Court observed that Mr El-Khoury's submissions suggested a defective appreciation of the difference between evidence and submission and that Mr El-Khoury's affidavit was entirely silent as to how the documents in the Court of Appeal bearing his name and signature came about. The Court considered that Mr El-Khoury's submissions suggested a serious failure to appreciate his overriding obligation to the Court. The Court observed that while Mr El-Khoury believed that the filing of the notice of motion and supporting affidavit constituted an adequate explanation to the Court for his own non-compliance with the rules, it remained unclear as to the reason for Mr El-Khoury apparently making no attempt to contact the Court directly to explain his position. On 29 January 2019, Mr El-Khoury filed a notice of ceasing to act on behalf of Mr Soloman.
In his reasons, the primary judge observed that absence by a party at a hearing was not of itself a proper basis for setting aside an order in favour of another party and that there must be some added factor that makes it unjust for the order to stand. His Honour said that the Court must exercise great caution in any such application because of the public interest in maintaining the finality of litigation. His Honour said that some injustice must be established and that delay in the application to set aside the judgment is of relevance. His Honour said that in any application to set aside a judgment, the applicant is expected to adduce evidence as to the reasons for non-appearance and to establish that the claim of the applicant has arguable merit.
The primary judge found that the Court had power to make the orders sought by Mr Soloman in his notice of motion. However, his Honour said, the question was whether the Court should make those orders in the exercise of its discretion. His Honour concluded that Mr Soloman had an arguable defence and that there was a triable issue. However, his Honour considered that, on an interlocutory basis, the defence did not appear to be a strong one.
The defence of Mr Soloman took various forms throughout the course of the proceedings. On 21 June 2016 a defence was filed on behalf of Mr Soloman in which Mr Soloman denied liability. Mr Soloman did not admit that the Agreement was binding or that, on its proper construction, it gave rise to the obligation alleged by Mr Savage. On 15 August 2016 Mr Soloman filed an amended defence which included a new paragraph 8 which in substance repeated the allegations in the cross claim. On 22 March 2019 the court received a proposed further amended defence in which Mr Soloman denied liability because he had "already repaid the same in full either by payments made directly to [Mr Savage] or alternatively, by way of set-off or adjustment of moneys which were already owing by [Mr Savage] to [Mr Soloman]".
One concern of the primary judge as to the defence proposed by Mr Soloman was that the defence pleaded in the amended defence of 15 August 2016 was different in substance from the proposed further amended defence of 22 March 2019. Further submissions on behalf of Mr Soloman also referred to possible defences under the Contracts Review Act 1980 (NSW) and in equity for unconscionability. However, the amended defence and proposed further amended defence do not refer to either of those potential defences. His Honour also observed that they did not raise facts that would support the application of either defence.
[4]
Endnotes
See Soloman v Savage [2018] NSWCA 249.
See at [2].
See House v The King (1936) 55 CLR 499.
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Decision last updated: 05 December 2019
The primary judge accepted Mr Soloman's evidence that he felt threatened by the text messages that he received and had decided that he did not wish to appear at the final hearing in Bega. He also accepted Mr El-Khoury's evidence that he was instructed by Mr Soloman not to attend in person and that he decided not to attend partly because of the position of his ill wife. His Honour took into account, however, the fact that the advice set out in Mr Soloman's affidavit was not replicated in Mr El-Khoury's affidavit.
The primary judge considered that there was no evidence explaining the failure of counsel said to have been briefed in the proceedings from appearing or even establishing that counsel briefed was even aware of the threatening text messages or that counsel had received instructions not to attend. His Honour said that Mr Soloman's affidavit clearly asserted that Mr El-Khoury had engaged counsel to attend Bega from Sydney and that Mr Soloman had organised travelling to Bega for himself, his solicitor and counsel. However, there was no evidence about why the barrister briefed to attend on 27 November 2017 did not in fact appear. That matter was referred to expressly by Leeming JA, who noted that, at date of the judgment, of the Court of Appeal, there continued to be an absence of evidence explaining why no one was able to appear either then or to make an appropriate application in the 14 days following entry of judgment. The primary judge considered that there remained a significant gap in the evidence as to why counsel retained in the matter did not appear, there being no evidence that counsel was told of the threats or given any instructions not to appear. His Honour considered that that was a major and unsatisfactory gap in the evidence explaining non-appearance and considered that it was a significant factor against the exercise of discretion.
Mr Soloman's notice of motion of 29 March 2018 also sought leave to reopen the proceedings or to file an amended defence or cross claim. The primary judge concluded that it was inappropriate to grant that leave. His Honour observed that Mr Soloman was at liberty to file fresh proceedings seeking the amounts and making the claims that he sought to make in the cross claim.
The primary judge concluded that, having regard to the fact that the proposed defence was not strong or overwhelming, the lack of proper explanation as to why counsel briefed in the proceedings did not attend Court on 27 November 2017, the delay of Mr Soloman in filing the notice of motion and the decision to proceed with the appeal rather than seeking to have the notice of motion determined expeditiously and the public interest in the finality of judgments and the length of time that orders had existed, he should not exercise his discretion in favour of setting aside the orders made on 27 November 2017. His Honour therefore ordered that the notice of motion of 29 March 2018 be dismissed and ordered Mr Soloman to pay Mr Savage's costs of the motion.
Mr Savage was granted several indulgences in connection with the present application for leave to appeal. He was not ready to proceed on the day first fixed for hearing and was given the opportunity of filing further material. A second adjournment was given and he failed to appear at the third hearing. The parties agreed that the application should be dealt with without any oral argument on the basis of the written submissions.
The draft notice of appeal filed in support of the present application for leave was apparently prepared by Mr Soloman himself, not a qualified lawyer. The grounds are long and argumentative and it is difficult to identify a specific ground of appeal. The summary of argument filed in support of the application for leave asserts that the questions raised by the appeal are as follows:
1. whether the primary judge correctly understood Mr Soloman's evidence in respect of an alleged agreement between the parties as to set off;
2. whether inconsistencies in Mr Soloman's evidence were of significance;
3. whether the delay of 18 months in bringing forward the application was a sufficient ground to refuse to set aside the judgment having regard to Mr Soloman's claim that the delay was not his fault but the fault of his former solicitor;
4. whether gross negligence and incompetence on the part of Mr El-Khoury was an additional factor;
5. whether Mr Soloman's claim that he received personal threats was an additional factor;
6. whether Blackmore DCJ took sufficient notice of Mr Soloman's claim that he received threats to his personal safety; and
7. whether Blackmore DCJ, having been made aware of the possible interference with the judicial process by reason of the threats, should have adjourned the matter for further investigation.
The last two grounds appear to be matters that have been disposed of by the earlier decision of the Court of Appeal.
Mr Soloman's written summary of argument may be restated as follows:
1. the primary judge took the view that the appeal proceedings were of little use or benefit and only further delayed the matter;
2. advice to proceed with the appeal instead of the motion to set aside the judgment was given negligently by Mr El-Khoury and Mr Soloman should not be blamed for the 12 month delay;
3. the primary judge erred in the application of the relevant principles in respect of delay in the following respects:
1. his Honour erred in failing to find there was an additional factor over and above the non-appearance of Mr Soloman at Court in that the failure of Mr El-Khoury to protect Mr Soloman's interests was the underlying and overwhelming cause for the lengthy delay;
2. Mr El-Khoury owed a duty to Mr Soloman to protect his interests and failed to file a proper notice of appeal which could have included an application to set aside the judgment;
3. Mr El-Khoury failed to give any satisfactory explanation for the non-attendance at the hearing of a junior barrister;
4. the Court of Appeal regarded that failure as a major factor in the outcome of the appeal as did the primary judge;
5. there was no attempt made by Mr El-Khoury to file a motion expeditiously to set aside the judgment;
6. the failings of Mr El-Khoury in protecting Mr Soloman's interests pointed to major or gross incompetence or negligence on his part;
7. the gross neglect of Mr Soloman's interests by his own solicitor was a factor indicative of an injustice;
8. Mr El-Khoury's gross negligence indicates that it was unjust to let the perfected order stand;
9. it is in the public's interest that members of the public such as Mr Soloman can rely upon and trust their own solicitors to comply with their duty of care to protect their client's interests;
10. Mr El-Khoury's conduct exposed Mr Soloman to a personal costs order yet the primary judge erred in not requiring the solicitor to account to the parties for his conduct;
11. the primary judge erred in failing to make a finding that there was another underlying additional factor over and above the non-appearance of Mr Soloman at the Bega hearing being the unusual circumstance of the threats of violence that he had received two days before the hearing; and
12. it was unjust for the judgment to stand in circumstances where the lengthy delay was not caused by any default on the part of Mr Soloman but by the gross negligence of his solicitor.
The written outline also asserts that Mr Soloman would seek leave at the hearing of the appeal to adduce further evidence. However, there is no material before the Court in connection with the present application to indicate the additional evidence. The outline asserted that the additional evidence will be to the effect that, in obtaining the monies, Mr Savage deceived the bank that lent the money and also deceived Mr Soloman, who was the financial broker assisting him in obtaining the loan funds. The outline asserts that the loan funds, having been obtained by fraud, constitute the proceeds of crime and should be repaid to the bank and that Mr Soloman deceived the District Court by failing to disclose that the funds were not his as they had been obtained by fraud. The summary asserts that Mr Soloman did not raise that issue of fraud in the original proceeding before Blackmore DCJ because he had been previously advised by Mr El-Khoury that such issues could be raised at a later date or in later proceedings. Mr Soloman asserts that that advice was given by virtue of gross incompetence and negligence on the part of Mr El-Khoury.
The application for leave to appeal was opposed by Mr Savage. He contends that Mr Soloman's submissions do not identify an error that would satisfy the criteria for interfering with the exercise of a judicial discretion. [3] Mr Savage points out that the primary judge expressly addressed the factor indicative of injustice, where Mr El-Khoury failed to protect Mr Soloman's interests. Further, Mr Savage contends, the appeal would not raise an issue of principle, a question of general public interest or any clear injustice. Mr Savage relies upon principles requiring certainty and finality in litigation and points to the tortuous history of the litigation as outlined above. He also points to the fact that some of the questions said to be raised have already been addressed by the Court of Appeal in the earlier proceedings. Finally, Mr Savage asserts, Mr Soloman is at liberty to file fresh proceedings seeking the amounts in making the claims that he sought to make in the cross claim referred to above.
The summary of argument filed on behalf of Mr Soloman does not point to any error of principle on the part of the primary judge in the exercise of discretion. He has had ample opportunity to file evidence filling in the gaps adverted to above. The application for leave to appeal should be dismissed with costs.