Tomic v Parker

Supreme Court of NSW|2020-05-28|Before: Ierace J

Solicitors: Slattery Thompson (Plaintiffs) Sparke Helmore Lawyers (Defendant) File Number(s): 2017/258039

Judgment

HIS HONOUR: By notice of motion filed on 12 February 2020, the defendant, Lindsay Parker, seeks an order that the proceedings be dismissed pursuant to s 61 of the Civil Procedure Act 2005 (NSW) and/or r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). The defendant also seeks an order that the plaintiffs pay the defendant's costs of, and incidental to, the proceedings, including reserved costs, as well as the costs of, and incidental to, this notice of motion.
The basis of the orders sought, as outlined by the defendant, is that the plaintiffs have failed to lodge security for the defendant's costs in the sum of $35,000 in accordance with orders made by her Honour Harrison AsJ of this Court on 15 February 2019.

On 17 December 2012, the sale of the property to Mr Heizer's partner was settled for $540,000. The sum of $358,548.10 was deposited into a separate St George Bank account set up by Mr Heizer 10 days before ("the separate bank account"), in apparent accordance with cl 6(b) of the Deed.
Documentation subsequently produced by Westpac, as the parent company of St George Bank, established that between 20 and 27 December 2012, there were seven withdrawals from the separate bank account, which effectively exhausted it. Four were by withdrawal slips bearing Mr Heizer's signature, for a total amount of $158,500 in cash. The documentation in relation to the other three withdrawals did not identify the recipient.
Mr Heizer died on 29 November 2014. In January 2015, Ms Tomic, Ms Kures and Brenda Ivetic were notified of his death and learned for the first time that Mr Heizer had sold the property, and that his partner was the purchaser. They had not received the portion of the property sale proceeds that they were due pursuant to cl 6(b) of the Deed and were unaware of what had happened to it. They subsequently obtained, by subpoena, two wills of Mr Heizer, both made in 2008. In the later will, dated 3 November 2008, Mr Heizer appointed his partner as the executor of his estate and the sole beneficiary.

The statement of claim

Ms Tomic, Ms Kures and Brenda Ivetic are the first, second and third plaintiffs respectively. As executor of her deceased husband's estate, of which she was not a beneficiary, Ms Ivetic is only a party to the proceedings for the benefit of others.
In their statement of claim, filed on 24 August 2017, the plaintiffs pleaded that the defendant had negligently and without reasonable or probable cause failed to lodge a caveat to protect their interests in the property, so that they were not notified of the sale to Mr Heizer's partner and were therefore not able "to prevent the sale and/or obtain the benefits from the sale to which they were entitled", being their two thirds interest in the property.
In addition, the plaintiffs pleaded that the representations made by the defendant that he had in fact lodged a caveat on the title of the property were misleading or deceptive, contrary to s 42 of the Fair Trading Act.
The plaintiffs claimed loss and damage of $1,000,000, based on an estimated value of the property of $1,500,000 at the time of the filing of the statement of claim, as well as aggravated and punitive damages.
The defendant has not filed a defence, although he has conceded in other filings that he had not lodged a caveat, but was aware of the earlier caveat lodged by Selby Levitt Solicitors. In 2018, he issued subpoenas in order to ascertain what had happened to the proceeds of the sale of the property. Documentation produced to the Court by Westpac, and thus brought to the knowledge of the plaintiffs, revealed the payment made by Mr Heizer into the separate bank account, apparently in accordance with Mr Heizer's obligations pursuant to the Deed.

The order for security for costs

On 18 April 2018, the defendant filed a notice of motion seeking an order that the statement of claim be struck out pursuant to r 14.28 of the UCPR or, in the alternative, an order pursuant to r 42.21(1)(a), (b) and/or (e) of the UCPR that security for costs be provided within 28 days in the sum of $116,575 or what other amount the Court deems appropriate and that, until the security is provided, the proceedings be stayed.
In an affidavit in support of the notice of motion by a solicitor of the firm appearing for the defendant, the sum of $116,575 was posited as a reasonable minimum estimate of the costs that would be incurred by Lawcover in defending the proceedings.
Rules 42.21(1)(a), (b) and (e) and (1A) of the UCPR relevantly provide: "42.21 Security for costs (1) If, in any proceedings, it appears to the court on the application of a defendant: (a) that a plaintiff is ordinarily resident outside Australia, or (b) that the address of a plaintiff is not stated or is mis-stated in his or her originating process, and there is reason to believe that the failure to state an address or the mis-statement of the address was made with intention to deceive, or … (e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so, … the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given. (1A) In determining whether it is appropriate to make an order that a plaintiff referred to in subrule (1) give security for costs, the court may have regard to the following matters and such other matters as it considers relevant: (a) the prospects of success or merits of the proceedings, (b) the genuineness of the proceedings, (c) the impecuniosity of the plaintiff, (d) whether the plaintiff's impecuniosity is attributable to the defendant's conduct, (e) whether the plaintiff is effectively in the position of a defendant, (f) whether an order for security for costs would stifle the proceedings, (g) whether the proceedings involves a matter of public importance, (h) whether there has been an admission or payment in court, (i) whether delay by the plaintiff in commencing the proceedings has prejudiced the defendant, (j) the costs of the proceedings, (k) whether the security sought is proportionate to the importance and complexity of the subject matter in dispute, (l) the timing of the application for security for costs, (m) whether an order for costs made against the plaintiff would be enforceable within Australia, (n) the ease and convenience or otherwise of enforcing a New South Wales court judgment or order in the country of a non-resident plaintiff."
At the hearing of the motion, counsel for the plaintiffs noted the documents produced by Westpac and sought an adjournment to allow his clients to make further inquiries as to what happened to the funds that had been deposited into the separate bank account. As to the capacity of the plaintiffs to provide security, he stated that the first and second plaintiffs were "pensioners" in Belgrade and the life savings of the third plaintiff were $50,000.
In her judgment handed down on 15 February 2019, Harrison AsJ ordered that the plaintiffs provide security for the defendant's costs in the sum of $35,000 by 29 March 2019. As a consequence of the security not being paid, the proceedings were stayed on and from 29 March 2019. [1]
In relation to some of the considerations in r 42.21(1A) of the UCPR, her Honour observed: "30 As to the discretionary factors, the application for security for costs was brought promptly. The prospects of success or merits of the claims in the proceedings are currently poor, as it is not known who received the funds withdrawn from the trust account. It seems that the defendant did not know of the lapsing 2002 caveat until 2015. The defendant submitted that he has not been the cause of the plaintiffs' impecuniosity. The application for security is not oppressive, as the first and second plaintiffs have some income. There is no public interest in these proceedings. 31 Counsel for the defendant submitted that the plaintiffs are unable to meet an adverse costs order. The defendant's costs are currently estimated to be over $170,000 up to the conclusion of the proceedings, and to date, the sum of $73,514.55 in legal fees have been incurred. As currently disclosed, the plaintiffs have funds of $50,000. Hence, I am satisfied that the plaintiffs are unable to meet an adverse costs order."
Her Honour ordered that the matter be stood over for further hearing and that affidavits and submissions be filed and served by the plaintiffs as to their financial circumstances.
The hearing resumed on 2 May 2019. Affidavits of the second and third plaintiffs were read which, her Honour noted "show that they have pretty well nothing". Counsel for the plaintiffs sought a further adjournment for two and a half months, which was not opposed, to enable further inquiries to be made. He said that he was now aware of the withdrawals from the separate bank account in December 2012: "My suspicions of fraud have been heightened. Nothing suggests that my clients were involved in any of that … I'm not suggesting that it is [the defendant] either. Rather than letting the matter stop at the moment, the statement of claim is quite out-of-date now, because we have become aware of a whole lot of facts that we were not aware of when it was pleaded."
Later, counsel for the plaintiffs said: "To be fair to [the defendant], what happened was at least Mr Heizer appeared to be doing what he is supposed to do, namely, keeping the moneys aside for my three clients … All the withdrawals were made in his name, but they were all cash withdrawals, so who actually received the benefit of all this cash money and the one [telephonic transfer] that needs to be investigated."
The matter was stood over to 26 July 2019, on which date counsel for the plaintiffs informed the Registrar that: "The plaintiffs have now lodged a complaint with the New South Wales police and the police have agreed to investigate the matter … If we're correct and the fraud did occur there's a real possibility now that we can trace the proceeds of this fraud which would mean most likely that there'd be no loss suffered in these civil proceedings and that would resolve the matter."
The matter was again stood over without objection, to 25 October 2019. On that date, counsel for the plaintiffs advised the Registrar that the results of the police investigation might not be known before the end of that year, and expressed sympathy for the defendant, "because the matter's not going anywhere". Later, counsel reiterated: "… it's not suggested that the fraud was committed by the defendant. I don't want people who are sitting in the list thinking that he's a person who is being investigated, it's clearly not him, it's a third party."
The Registrar stood the matter over to 19 February 2020, noting that it was open to the defendant to file a motion to dismiss the proceedings, which the defendant did on 12 February 2020. NSW Police conducted an investigation and concluded it was a civil matter, and therefore declined to take it further.

The defendant's submissions

The defendant submitted in writing that the concessions made by counsel for the plaintiffs to her Honour Harrison AsJ and the Registrar, in the context of the proceedings having been on foot since August 2017, demonstrate real uncertainty as to whether the plaintiffs believe their claim has any prospect of success. The plaintiffs have been in breach of the order for security for costs since 29 March 2019 while, it seems, the plaintiffs consider whether they in fact have a case against the defendant. The continuation of the proceedings causes prejudice to the defendant both in respect of costs and his professional reputation as a legal practitioner.
In oral submissions, the defendant relied upon, firstly, the failure of the plaintiffs to advance the proceedings since the statement of claim was filed; and secondly, their non-compliance with the order for security for costs and acceptance that they are unable to do so.
Thirdly, the plaintiffs were put on notice of this application on 25 October 2019 when the matter came before the Registrar, and subsequently in correspondence to the plaintiffs' solicitor on 13 December 2019 and 7 February 2020. The plaintiffs' solicitor did not respond to this correspondence.
Fourthly, it was submitted that the continuation of the proceedings prejudices the defendant "both in respect of costs and his professional reputation as a legal practitioner". The proceedings have been on foot for over three years and have the potential to damage the defendant's reputation, as well as cause the defendant unnecessary costs and inconvenience.
Finally, having regard to the objects of case management and the dictates of justice under ss 56 and 58 respectively of the Civil Procedure Act, the continuation of inactive proceedings is a waste of judicial and court resources.
The defendant submitted that, although the prospects of success of the substantive proceedings was not directly relevant to the application, it may have some indirect relevance to this last factor. The defendant submitted that the plaintiffs' prospects of success are "extremely low" and relied on observations by Harrison AsJ to that effect; namely, the fact that Mr Heizer was always entitled to sell the property in accordance with the Deed, and he did in fact do so by directing that two-thirds of the sale of proceeds be held on trust for the first and second plaintiffs and Mr Ivetic. Thus, the defendant submitted, even if there was negligence or misleading conduct by him, which he denied, it is not clear from the plaintiffs' statement of claim what conduct on his part caused the plaintiffs any loss and damage, given that there was never an ability on behalf of the plaintiffs to prevent a sale of the property.
The defendant also pointed to a number of occasions on which the plaintiff conceded that their prospects of success were low; that a third party fraudster may be responsible for the loss suffered; and that their claim against the defendant may have to be abandoned.

The plaintiffs' submissions

The plaintiffs submitted in writing that the Court: "… in the exercise of its discretion, [should] dismiss the application so that they can obtain a hearing date for the matter and subpoena [Mr Heizer's partner], who the plaintiffs believe to be a key witness but probably adverse to their interests, to give evidence … the plaintiffs note that two of them reside in Belgrade, Slovakia [sic] and all are impecunious."
At the hearing, counsel for the plaintiffs agreed with most of the defendant's submissions but relied on the Court's discretion expressed in r 42.21(3) of the UCPR to "what I concede to be an indulgence to be able to call this witness", being Mr Heizer's partner.
The plaintiffs submitted that there is clear evidence that the defendant breached the duty of care he owed to the plaintiffs as their solicitor, by either failing to notify his office as the new address for service of any notice under the caveat, or by failing to lodge a new caveat. As a consequence, the plaintiffs were not notified of the sale of the property and therefore could not engage in negotiation and discussion at settlement with respect to the appropriate allocation of the net proceeds of the sale. It was submitted that the defendant expressly recognised this duty of care in his letter and memorandum of costs dated 19 September 2008 and, by reason of this letter, the plaintiffs' loss was foreseeable.
The plaintiffs conceded that the caveat could not have been used to impede Mr Heizer from dealing with the property in the way that he did; rather, that it would have put them on notice that he was intending to sell the property.
The plaintiffs also conceded that it is still to be determined whether the plaintiffs suffered any loss that was consequent to the defendant's negligence. However, it was submitted that it is in the defendant's interest that the withdrawals be further investigated by calling Mr Heizer's partner to determine whether the loss suffered by the plaintiffs was recoverable.
The plaintiffs submitted that, should the Court be minded to grant the orders sought by the defendant, the defendant is not entitled to his costs.

The relevant law and legal principles

This Court has an express discretionary power to dismiss proceedings where a plaintiff fails to comply with an order for security for costs pursuant to r 41.21(3) of the UCPR, which provides: "42.21 Security for costs … (3) If the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed."
Rule 42.21(3) of the UCPR was considered by Tobias JA in Porter v Gordian Runoff Ltd (No 3) [2005] NSWCA 377. In that case, Tobias JA held that the remarks of Einstein J in Idoport Pty Limited v National Australia Bank Limited [2002] NSWSC 18, which concerned the Court's discretion to dismiss an appeal under r 24 of the Supreme Court Rules 1970 (NSW), were applicable to an application to dismiss proceedings under r 42.21(3) of the UCPR. Tobias JA said: "24 In Idoport at first instance ([2002] NSWSC 18), Einstein J (at [24]) accepted as correct the defendant's submission in that case that the following five factors were required to be taken into account in determining whether the Court should exercise its discretion to dismiss proceedings (at first instance) for failure to comply with an order for the payment of security for costs. Those factors were: (a) The period that has elapsed since the security was ordered; (b) The fact that the plaintiff has been on notice of the application for dismissal; (c) The seeming inability of the plaintiff to further fund the proceedings; (d) The prejudice to the defendant; and (e) The position of the Court. 25 His Honour (at [24]) accepted that those five matters were appropriate to be taken into consideration in the exercise of the relevant discretion. Nevertheless, he also acknowledged that that list was by no means exhaustive and that all the relevant circumstances were required to be taken into account including the Court's straining wherever practicable consistently with the interests of justice to avoid taking the radical step of denying a plaintiff its day in Court. The proper exercise of the Court's discretion required all relevant factors to be weighed in balance, the ultimate decision reflecting the interests of justice. 26 On appeal from the decision of Einstein J, Mason P, with the agreement of Stein and Giles JJA, rejected a submission that Einstein J had erred in the exercise of his discretion in giving weight or undue weight to the first four of the factors identified above. The President then observed (at [51]): 'There is no minimum period established by legislation, rules or practice within which an application for dismissal might be made following default in compliance with an order for payment of security. No judicial discretion is uncontrolled, but it is common ground that the discretion to dismiss conferred by rule 4 is a broad one, unfettered by any express limitations … There is no written or unwritten minimum time, although I would accept that something more than a technical reduction or accidental default is required.' 27 I would agree with the submission that the remarks of Einstein J and this Court in Idoport were applicable to an application to dismiss an appeal as they were to such an application with respect to proceedings at first instance …"
This Court also has a separate power to dismiss proceedings under s 61(3)(a) of the Civil Procedure Act where a party fails to comply with directions or orders made by the Court under that section. Section 61 relevantly provides: "61 Directions as to practice and procedure generally (1) The court may, by order, give such directions as it thinks fit (whether or not inconsistent with rules of court) for the speedy determination of the real issues between the parties to the proceedings. … (3) If a party to whom such a direction has been given fails to comply with the direction, the court may, by order, do any one or more of the following - (a) it may dismiss the proceedings, whether generally, in relation to a particular cause of action or in relation to the whole or part of a particular claim …"
As s 61(3) is found in Div 2 of Pt 6 of the Civil Procedure Act, the Court's power to dismiss proceedings pursuant to that section is expressly subject to s 58: Civil Procedure Act, s 58(1)(iv); see also Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230 at [36]-[37]. Section 58 provides: "58 Court to follow dictates of justice (1) In deciding - (a) whether to make any order or direction for the management of proceedings, including - (i) any order for the amendment of a document, and (ii) any order granting an adjournment or stay of proceedings, and (iii) any other order of a procedural nature, and (iv) any direction under Division 2, and (b) the terms in which any such order or direction is to be made, the court must seek to act in accordance with the dictates of justice. (2) For the purpose of determining what are the dictates of justice in a particular case, the court - (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant - (i) the degree of difficulty or complexity to which the issues in the proceedings give rise, (ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, (iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties, (iv) the degree to which the respective parties have fulfilled their duties under section 56 (3), (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case."
As described in s 58(2)(a), in determining what the dictates of justice are in a particular case, the Court must have regard to the overriding purpose of civil litigation and the objectives of case management under ss 56 and 57 of the Civil Procedure Act, which provide, relevantly: "56 Overriding purpose (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. (3A) (Repealed) (4) Each of the following persons must not, by their conduct, cause a party to civil proceedings to be put in breach of a duty identified in subsection (3) - (a) any solicitor or barrister representing the party in the proceedings, (b) any person with a relevant interest in the proceedings commenced by the party. (5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs. … 57 Objects of case management (1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects - (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. …"
Dismissal under s 61 of the Civil Procedure Act does not involve a determination on the merits of a case and does not, subject to any terms imposed, preclude the bringing of fresh proceedings: Greywolf Resources NL v Wilkinson [2011] NSWSC 1604 per White J at [12], [16].

Consideration

In view of the order for security for costs made by Harrison AsJ, it is appropriate to initially consider the application for an order for dismissal pursuant to r 42.21(3) of the UCPR, as it has more immediate application to the history of the matter.
The evidence in relation to each of the five factors identified by Einstein J in Idoport Pty Limited v National Australia Bank Limited at [24], as recited by Tobias JA in Porter v Gordian Runoff Ltd (No 3) at [24], favours the defendant, as follows:

By the time of the hearing, a period of 14 months had elapsed since the date by which security for costs was to have been lodged: Porter v Gordian Runoff Ltd (No 3) at 24.
The plaintiffs have been on notice of the application for dismissal since 25 October 2019, being a period of three months before the notice of motion was filed: Porter v Gordian Runoff Ltd (No 3) at 24.
The plaintiffs concede that they will not be able to comply with the order for security for costs, which was a modest amount fixed by her Honour, more in line with the plaintiffs' ability to provide funds than the likely quantum of costs, should the defendant prevail at hearing: Porter v Gordian Runoff Ltd (No 3) at 24.
The prejudice to the defendant is real; he is a legal practitioner who is the subject of a claim alleging professional negligence that, at the time of this hearing, had been on foot for two years and nine months: Porter v Gordian Runoff Ltd (No 3) at 24.
The position of the Court, having regard to the overriding purpose of the Civil Procedure Act at ss 56(1) and (2) and taking into account the significant delay thus far and the purpose for which the plaintiffs seek that the proceedings be permitted to continue, favours dismissal: Porter v Gordian Runoff Ltd (No 3) at 24.

In relation to the last factor, the plaintiffs seek the exercise of the Court's discretion to not dismiss the proceedings so that at the hearing, Mr Heizer's partner can be called and cross-examined as to what happened to the funds in the separate bank account. That would be an improper use of the Court's process, since whether there is a cause of action against Mr Heizer's partner is unrelated to the defendant's liability as pleaded in the statement of claim. As counsel for the plaintiffs fairly concedes, whether the plaintiffs have a case against the defendant remains unknown.
Further, the plaintiffs framed their submissions on this motion on the basis that the defendant became aware of the caveat that had previously been lodged by Selby Levitt Solicitors and failed in his duty to update those details. However, that was not the duty of care that was pleaded in the statement of claim. The only breach of a duty of care by the defendant that the plaintiffs pleaded was that he did not register a caveat on the property, contrary to his assertion that he had done so.
Accordingly, I am of the opinion that, pursuant to r 42.21(3), the proceedings should be dismissed. It is therefore unnecessary to consider the alternative basis on which the order for dismissal is sought, pursuant to s 61 of the Civil Procedure Act. I note that it remains open to the plaintiffs to bring fresh proceedings if, in their view, the evidence evolves to a point that there is a proper basis to do so.
As to the question of costs, I have considered the difficult financial position of the plaintiffs, but there is no proper basis for finding other than that costs should follow the event.

Orders

I make the following orders: 1. Dismiss the proceedings pursuant to r 42.21(3) of the Uniform Civil Procedure Rules 2005 (NSW); 2. The plaintiffs to pay the defendant's costs of and incidental to the proceedings, including reserved costs; 3. The plaintiffs to pay the defendant's costs of and incidental to the defendant's notice of motion filed 12 February 2020.

Endnote

I note that in the course of her judgment, her Honour referred to the amount as $30,000, which also appears in the orders reproduced on the judgment's cover sheet. However, the penultimate paragraph of the judgment and the terms of the order itself at the conclusion of the judgment identified the quantum as $35,000. 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: 17 May 2021

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