Tomic v Parker

1. [1]

   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.

2. [2]

   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.

The proceedings

1. [3]

   The proceedings, which were commenced by way of a statement of claim filed on 24 August 2017, concern a claim for damages against the defendant, a solicitor, for negligence and misleading and deceptive conduct contrary to s 42 of the Fair Trading Act 1987 (NSW) (since repealed).

2. [4]

   The claim is pleaded as arising from the defendant’s alleged failure to lodge a caveat on behalf of the plaintiffs over an apartment in the Eastern suburbs of Sydney (“the property”), which was the subject of the estate of the late Rosa Ivetic.

3. [5]

   Rosa Ivetic died on 8 April 2002. In her will, made on 3 February 2000, she appointed Frank Heizer as her sole executor and trustee and directed that her estate, which was essentially the property, be distributed equally between Mr Heizer and three others: Snezana Kures Tomic, Zlata Kures and Peter Ivetic. At the time of Ms Ivetic’s death, Ms Tomic and Ms Kures resided in Serbia, where they continue to reside, and Mr Ivetic resided in Australia.

4. [6]

   On 10 May 2002, probate of the will was granted to Mr Heizer and the following month the property was transferred into his name. On about 27 December 2002, a caveat was lodged over the property by Selby Levitt Solicitors, acting on behalf of Ms Tomic and Ms Kures. On 17 July 2003, Levitt Robinson Solicitors, who appear to have acquired the file previously held by Selby Levitt, wrote to Ms Tomic and Ms Kures, enclosing a copy of the caveat and confirming that the firm’s address was the address for service. They stated that as no further instructions had been received it would be closing their file, advising that they should “immediately contact Land and Property Information and have the address for service changed to an address where you can be notified”. Ms Tomic and Ms Kures did not do so.

5. [7]

   In October 2003, Mr Heizer commenced family provision proceedings in this Court in which he contested the will, claiming a greater share of the estate in view of a 23 year de facto relationship that he claimed he had enjoyed with the deceased. Ms Tomic, Ms Kures and Mr Ivetic retained the defendant as their solicitor in those proceedings, which were resolved in a deed of settlement executed on 6 April 2006 (“the Deed”).

6. [8]

   The Deed noted that the “estimated gross value” of the property was $526,000 and that Mr Heizer had been resident there at the time of the deceased’s death. The relevant parts of the Deed are as follows:

7. [9]

   On 31 January 2007, the defendant wrote to Mr Heizer’s solicitor requesting a copy of Mr Heizer’s will “which protects our clients’ interest pursuant to the Deed of the 6 April, 2006”. Mr Heizer’s solicitor responded by letter dated 2 February 2007, stating:

8. [10]

   By letter dated 19 September 2008, the defendant forwarded his memorandum of costs to his three clients, which included the item “lodging caveat”. In the covering letter, he stated:

9. [11]

   In 2012, Mr Heizer decided to sell the property. He instructed P Dobrich & Co, solicitors, on the conveyance, who were not the solicitors he had previously instructed. By registered letter dated 4 October 2012, P Dobrich & Co wrote to Selby Levitt Solicitors attaching a notice to the caveator of a lapsing caveat, which stated that the caveat would lapse in 21 days after service, unless an order by the Supreme Court was lodged with the Registrar-General within that period. The letter was returned, as the firm no longer existed. Although P Dobrich & Co were aware of the terms of the Deed, they did not make inquiries with the defendant, presumably because they had not acted for Mr Heizer on the family provision proceedings and were therefore unaware of the defendant having acted for the Ms Tomic, Ms Kures and Mr Ivetic. By letter dated 5 December 2012, P Dobrich & Co reported to Mr Heizer on their unsuccessful efforts to trace them, stating that they had written to them at their last known addresses and their possible solicitors:

10. [12]

    The letter proposed that, on settlement, the proceeds would be divided as follows:

11. [13]

    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.

12. [14]

    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.

13. [15]

    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.

14. [16]

    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.

15. [17]

    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.

16. [18]

    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.

17. [19]

    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.

18. [20]

    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.

19. [21]

    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.

20. [22]

    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.

21. [23]

    Rules 42.21(1)(a), (b) and (e) and (1A) of the UCPR relevantly provide:

22. [24]

    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.

23. [25]

    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]

24. [26]

    In relation to some of the considerations in r 42.21(1A) of the UCPR, her Honour observed:

25. [27]

    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.

26. [28]

    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:

27. [29]

    Later, counsel for the plaintiffs said:

28. [30]

    The matter was stood over to 26 July 2019, on which date counsel for the plaintiffs informed the Registrar that:

29. [31]

    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:

30. [32]

    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 parties’ submissions

1. [33]

   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.

2. [34]

   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.

3. [35]

   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.

4. [36]

   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.

5. [37]

   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.

6. [38]

   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.

7. [39]

   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.

8. [40]

   The plaintiffs submitted in writing that the Court:

9. [41]

   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.

10. [42]

    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.

11. [43]

    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.

12. [44]

    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.

13. [45]

    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

1. [46]

   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:

2. [47]

   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:

3. [48]

   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:

4. [49]

   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:

5. [50]

   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:

6. [51]

   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

1. [52]

   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.

2. [53]

   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:

3. [54]

   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.

4. [55]

   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.

5. [56]

   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.

6. [57]

   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

1. [58]

   I make the following orders:

   1. (1)

      Dismiss the proceedings pursuant to r 42.21(3) of the Uniform Civil Procedure Rules 2005 (NSW);

   2. (2)

      The plaintiffs to pay the defendant’s costs of and incidental to the proceedings, including reserved costs;

   3. (3)

      The plaintiffs to pay the defendant’s costs of and incidental to the defendant’s notice of motion filed 12 February 2020.