Attorney-General v Kowalski (No 4) - [2015] SASC 155

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ATTORNEY-GENERAL v KOWALSKI (NO 4)
[2015] SASC 155
Judgment of The Honourable Justice Blue
1 October 2015
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - WHEN APPEAL LIES - GENERALLY
On 28 January 2014, the Court made orders prohibiting Mr Kowalski instituting new proceedings without permission of the Court and staying existing proceedings subject to a number of exceptions in respect of proceedings not proved to have been instituted without reasonable ground.
One of the proceedings that had been alleged by the Attorney-General to be vexatious was a charge laid by Mr Kowalski in the Legal Practitioners Disciplinary Tribunal against Mr Cole and Mr Sim in July 2005 of failure to deal with trust money in accordance with Mr Kowalski’s directions. The Attorney-General failed to prove that this proceeding was instituted without reasonable ground. However, by oversight that proceeding was omitted from the list of proceedings exempted from the stay order.
Mr Kowalski applies to vary the stay order to add the charge to the list of exempt proceedings. The application is opposed by the practitioners on the ground that the charge is doomed to fail because a Magistrate subsequently decided in July 2007 that the money was not trust money.
Held:
1.       Prima facie the error in the Court’s order made on 28 January 2014 should be corrected under rule 242 of the Supreme Court Civil Rules 2006 (at [20]).
2.       The Magistrate’s decision does not give rise to an issue estoppel that is binding in disciplinary proceedings before the Tribunal (at [23]-[25]).
3.       The order made on 28 January 2014 is varied to add the charge to the list of exempt proceedings (at [32]).
Supreme Court Act 1935 (SA) s 39, referred to.
Attorney-General v Kowalski [2014] SASC 1; Kowalski v Cole and Sim [2015] SASC 154, discussed.
R v Storey (1987) 140 CLR 364; Rogers v The Queen (1994) 181 CLR 251, considered.

ATTORNEY-GENERAL v KOWALSKI (NO 4)
[2015] SASC 155
BLUE J:

I previously made an order under section 39 of the Supreme Court Act 1935 (SA) prohibiting Kasimir Kowalski from instituting further proceedings and staying certain existing proceedings without permission of the Court.[1]
[1] Attorney-General v Kowalski[2014] SASC 1.
Mr Kowalski seeks a direction that a charge he laid in July 2005 in the Legal Practitioners Disciplinary Tribunal against Russell John Cole and William Andrew Sim is not the subject of my stay order or alternatively a variation of the stay order or permission to prosecute the charge.
Background
Mr Cole and Mr Sim are partners in the law firm RJ Cole & Partners (the Firm).
The Firm acted for Mr Kowalski inter alia in actions in the District Court against Mitsubishi Motors Australia Limited (Mitsubishi).
On 30 March 1992, the Firm issued an invoice to Mr Kowalski for $18,634.66.
In August 1992, Mr Kowalski and Mitsubishi agreed to settle all disputes in relation to injuries governed by the Workers Compensation Act 1971 (SA) for $23,000 and injuries governed by the Workers Rehabilitation and Compensation Act 1986 (SA) for $53,000. Mitsubishi paid $23,000 to Mr Kowalski which the Firm deposited into its trust account. The Firm had rendered invoices to Mr Kowalski totaling $19,118.45 and transferred $19,118.45 of those trust monies to its general account in payment of those invoices.
WorkCover in due course declined its consent to the settlement in respect of the injuries governed by the 1986 Act. Mitsubishi asserted that there was a single settlement agreement or two interdependent settlement agreements pursuant to which the entire settlement was conditional on WorkCover’s consent in respect of injuries governed by the 1986 Act. Mitsubishi demanded repayment of the sum of $23,000. In response, the Firm paid the balance of the monies in trust to Mitsubishi together with $10,000 paid to the Firm by Mr Kowalski, leaving a balance that Mitsubishi claimed to be owing of $9,118.45. On 4 December 1995, the Firm transferred that sum from its general account into its trust account.
In 1996, RJ Cole & Partners lodged in this Court an application to tax a bill of costs for acting for Mr Kowalski (1563 of 1996). By consent, the taxation was deferred pending an action in the District Court by Mr Kowalski against RJ Cole & Partners for professional negligence, which action was ultimately dismissed in March 2002.
In October 1998, Mr Kowalski and Mitsubishi entered into a new settlement agreement pursuant to which Mitsubishi agreed to pay $200,000 to Mr Kowalski. Mitsubishi did not thereafter pursue repayment of the sum of $9,118.45.
In August 2004, Mr Kowalski filed in the Disciplinary Tribunal a charge of unprofessional conduct against Mr Cole and Mr Sim (action 8 of 2004). He alleged that they were wrongfully withholding $9,118.45 held on his behalf in their trust account.
On 1 February 2005, the Disciplinary Tribunal summarily dismissed Mr Kowalski's charge. The Tribunal expressed the following view:
The issue ought to be resolved as soon as practicable by the practitioners taking steps to establish their entitlement to the whole or part of the funds. The funds are trust monies and as trustees the practitioners have a legal obligation under the Trustee Act to deal appropriately with the money in order to resolve the issue.
On 17 June 2005, Hanna Kowalski wrote to Mr Cole and Mr Sim requesting them to pay the sum of $9,118.45 to her. On 21 June 2005, Mr Kowalski wrote to Mr Cole and Mr Sim referring to his wife’s letter and directing them to dispose of the trust monies as specified therein.
On 22 July 2005, Master Lunn struck out RJ Cole & Partners’ application to tax their costs for want of prosecution (1563 of 1996).
On 22 July 2005, Mr Kowalski wrote to Mr Cole and Mr Sim informing them of Master Lunn’s order and directing them to dispose of the trust monies as specified in his wife’s letter of 17 June 2005.
On 25 July 2005, Mr Kowalski laid in the Tribunal a charge of unprofessional conduct against Mr Cole and Mr Sim for failure to comply with the directions given to them by Mrs Kowalski and Mr Kowalski on 17 and 21 June and 22 July 2005 (the July 2005 charge).
On 29 June 2006, the Firm filed in the Magistrates Court a claim against Mr and Mrs Kowalski for a declaration that the sum of $9,118.45 held in their trust account was not trust money and that they were entitled to that money or in the alternative that they had a claim against the money held in trust for the balance of their costs (778 of 2006).
On 16 July 2007, Mr Ward SM made a declaration that the sum of $9,118.45 held by the Firm in their trust account was not trust money and that they were entitled to that money.
The hearing of this action and my orders
The Attorney-General claimed in the action that the July 2005 charge was instituted by Mr Kowalski without reasonable ground. I found that the Attorney-General failed to prove this. I said:
Mr Kowalski’s letters to RJ Cole & Partners were not tendered before me, nor any responses which might have been sent by RJ Cole & Partners to those letters. No documents were tendered in relation to this charge apart from the charge itself. I do not have sufficient material to decide whether Mr Kowalski had reasonable ground to bring the charge.
The Attorney-General has not established that Mr Kowalski brought the charge without reasonable ground.[2]
[2] Attorney-General v Kowalski[2014] SASC 1 at [1316]-[1317].
When I made the stay order in the action on 28 January 2014, I exempted from the stay order those actions in respect of which the Attorney General had not established that Mr Kowalski instituted the proceeding without reasonable ground. However, the July 2005 charge was erroneously omitted from the schedule of exempted proceedings.
Given that my order did not reflect my reasons for judgment, the order should be varied to correct the error under rule 242 of the Supreme Court Civil Rules 2006 (SA) unless there is some other reason not to do so.
The judgment of Mr Ward SM
Mr Cole and Mr Sim oppose the order sought by Mr Kowalski. They rely on the judgment of Mr Ward SM given on 16 July 2007 in their action against the Kowalskis in which Mr Ward SM made a declaration that the sum of $9,118.45 held in their trust account was not trust monies and that they were entitled to those monies.
The first contention put by Mr Cole and Mr Sim is that Mr Ward SM’s judgment gives rise to an issue estoppel that the sum of $9,118.45 belonged to them and they could not therefore be guilty of unprofessional or unsatisfactory conduct by not paying it to the Kowalskis or otherwise.
I reject that contention. The doctrine of issue estoppel does not apply to criminal proceedings.[3] Disciplinary proceedings under the Legal Practitioners Act 1981 (SA) are sui generis but are more akin to criminal proceedings than civil proceedings. They do not determine the civil rights of the parties. The Tribunal or the Court exercises jurisdiction in the public interest and not in the interest of the parties. The same rationale why issue estoppel does not apply in criminal proceedings applies to disciplinary proceedings.
[3] R v Storey (1978) 140 CLR 364 at 371-374 per Barwick CJ, 379-389 per Gibbs J and 440-401 per Mason J; Rogers The Queen (1994) 181 CLR 251 at 254-255 per Mason CJ and 278 per Deane and Gaudron JJ.
In hearing and determining the July 2005 charge, the Tribunal would not be bound by Mr Ward SM’s decision and would be obliged to form its own views as to the issues.
The alternative contention by Mr Cole and Mr Sim is that a failure by a solicitor to comply with a request by a client is incapable of being unprofessional or unsatisfactory conduct if ultimately the solicitor is vindicated by a finding of a court in contested proceedings that the solicitor was not obliged to comply with the request. I reject the alternative contention. It relies implicitly upon issue estoppel arising from Mr Ward SM’s decision.
Leaving aside their reliance on the judgment of Mr Ward SM, Mr Cole and Mr Sim do not put a contention based on the underlying merits of the proposition that the sum of $9,118.45 held in their trust account was not trust money but belonged to them absolutely. For the reasons given in Attorney-General v Kowalski[4] and in my concurrent judgment in Attorney-General v Kowalski(No 3),[5] there is a strong argument that the money was trust money. In the recent matter of Kowalski v Cole and Sim,[6] the Tribunal concluded that the money took on the mantle of trust money when it was paid by Mr Cole and Mr Sim into their trust account.
[4] [2014] SASC 1 at [1326]-[1327].
[5] [2015] SASC 154 at [26].
[6] Legal Practitioners Disciplinary Tribunal, unreported, 5 August 2015 at [103].
The merits of the charge
Leaving aside their reliance on the judgment of Mr Ward SM, Mr Cole and Mr Sim do not put a contention based on the underlying merits of the July 2005 charge.
The gravamen of the charge is not merely that Mr Cole and Mr Sim did not pay the monies in question to the Kowalskis. It is that they were holding trust monies to which there were competing claims as between themselves as solicitors and their clients. Mr Kowalski claimed entitlement to the monies on the basis that they were the residue of the sum of $23,000 paid to RJ Cole & Partners as trustees for him. Mr Cole and Mr Sim claimed a lien over the monies for the balance of their professional charges. In those circumstances, unless they abandoned their lien, it may be expected that Mr Cole and Mr Sim would not simply pay the monies over to Mr Kowalski. However, it may also be expected that they would not leave the monies in their trust account earning no interest but would take steps expeditiously to resolve the contest of claims over the money, whether by making a fresh application to tax their costs (to determine quantum), suing Mr Kowalski for their costs (to determine liability) or issuing proceedings claiming a lien over the monies. They did not take any of these steps following receipt of the correspondence from Mr and Mrs Kowalski in June 2005 for 12 months until they instituted action 778 of 2006 in the Magistrates Court.
I do not have any evidence before me from Mr Cole or Mr Sim why they did not earlier take steps to resolve the contest of claims over the money. The hearing before me has been confined to the limited issues addressed above.
It is the role of the Tribunal under section 82 of the Legal Practitioners Act 1981 (SA), and not this Court under section 39 of the Supreme Court Act 1935 (SA), to determine whether Mr Cole and Mr Sim engaged in unsatisfactory or unprofessional conduct (although I observe in passing that, if ultimately established, the charge appears to involve conduct at the lower end of seriousness apposite to unsatisfactory as opposed to unprofessional conduct). It can only be determined on the evidence adduced by both parties which is not available to me at this stage. My role is confined to determining whether the charge was laid by Mr Kowalski without reasonable ground. For the reasons given above, Mr Kowalski had reasonable ground to lay the charge but this is a different question whether it will ultimately be established.
The order I made on 28 January 2014 staying the prosecution of the charge should be varied to give effect to my original reasons for judgment.
Conclusion
I vary the order made on 28 January 2014 by adding to Schedule 2 an additional row “10. Charge laid in the Legal Practitioners Disciplinary Tribunal against Russell John Cole and William Andrew Sim dated 25 July 2005.