Colonial Mutual Superannuation Pty Limited v Flammia

[2007] FCA 1470

FEDERAL COURT OF AUSTRALIA

Colonial Mutual Superannuation Pty Limited v Flammia
[2007] FCA 1470

COLONIAL MUTUAL SUPERANNUATION PTY LIMITED v LORENZO FLAMMIA AND ANOR

NSD 1714 OF 2005

EMMETT J

18 SEPTEMBER 2007

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1714 OF 2005

BETWEEN:

COLONIAL MUTUAL SUPERANNUATION PTY LIMITED
Applicant

AND:

LORENZO FLAMMIA
First Respondent

WILLIAM ANASTASIADIS
Second Respondent

LORENZO FLAMMIA
Cross-Claimant

LAWCOVER INSURANCE PTY LIMITED
Cross-Respondent

JUDGE:	EMMETT J
DATE OF ORDER:	18 SEPTEMBER 2007
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.Leave be granted to the applicant to file a further amended statement of claim in the form initialled by Emmett J and dated with today’s date.

2.Leave be granted to the cross respondent to file a defence in the form initialled by Emmett J and dated with today’s date.

3.The costs thrown away by those amendments be paid by the parties respectively making the amendments. 

4.The second respondent’s costs of yesterday be his costs of the proceeding. 

5.There be no other order as to the costs of yesterday.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1714 OF 2005

BETWEEN:

COLONIAL MUTUAL SUPERANNUATION PTY LIMITED
Applicant

AND:

LORENZO FLAMMIA
First Respondent

WILLIAM ANASTASIADIS
Second Respondent

LORENZO FLAMMIA
Cross-Claimant

LAWCOVER INSURANCE PTY LIMITED
Cross-Respondent

JUDGE:	EMMETT J
DATE:	18 SEPTEMBER 2007
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. This proceeding first came into my docket from Justice Sackville’s docket, due to his Honour’s commitments in relation to another proceeding.  On 1 December 2006 I fixed the proceeding for hearing for four days commencing on 12 March 2007.  However, on 9 February 2007, on the application of the first respondent (the Solicitor), that fixture was vacated.  There was no opposition to the vacation of the fixture, although the terms upon which it was vacated included that the Solicitor pay the costs of the applicant (Colonial) thrown away by the vacation of the fixture.  On 13 April 2007, I directed that the proceeding be fixed for hearing for four days commencing 17 September 2007.  On the same day, I also gave directions for the final preparation of the proceeding for hearing. 

2. On 30 July 2007, the Court granted leave to the Solicitor to file a cross-claim against LawCover Insurance Pty Limited (the Insurer).  A cross-claim was filed on 30 July 2007 seeking indemnity from the Insurer in respect of the claim made against the Solicitor in the proceeding by Colonial.  On 13 August 2007, the Insurer filed a defence to the cross-claim, in which the Insurer raised cl 19 of the relevant insurance policy, asserting that the claim in respect of which indemnity was sought arose from dishonest or fraudulent acts on the part of the Solicitor.  Notwithstanding that defence, but subject to particularisation, the fixture for 17 September was confirmed. 

3. However, following provision of particulars and the amendment of those particulars, the first respondent (the Solicitor) objected unless the hearing of the cross-claim was deferred.  When the matter was called on for hearing yesterday, the applicant indicated for the first time that it wished to amend its pleadings, in order to allege fraudulent misrepresentation on the part of the Solicitor.  The Solicitor opposed that amendment, unless the fixture for the hearing is to be vacated.  In order to put the question of adjournment into context, it is necessary to say something briefly about the claim. 

4. Colonial conducts a superannuation fund.  One of its members was a Stanley Gordon Stevens of Warrnambool Victoria (the Member).  In about October and November 2001 the Solicitor was involved in an application for withdrawal of the funds held by Colonial on behalf of the Member.  It now appears to be common ground that the Member had nothing to do with the application for withdrawal of his funds at that time.  The Solicitor says, in effect, that he was approached by an individual who claimed to be the Member and that his name was Stanley G. Stevens.  The Solicitor’s involvement in the matter was in his capacity as a solicitor.  The funds were withdrawn and disbursed.  It appears to be common ground that the Member did not receive the funds. 

5. Some time after that fact was established by Colonial, it commenced this proceeding against the Solicitor, claiming reimbursement in the amount that had been paid away. Colonial based its claim against the Solicitor on several causes of action, including breach of warranty of authority, negligent misstatement and contravention of s 52 of the Trade Practices Act 1974 (Cth). In addition, Colonial made a claim based on conversion of the cheque drawn by Colonial that was the means whereby the funds were paid out by Colonial.

6. The professional indemnity policy issued by the Insurer to the Solicitor indemnifies him against claims made while acting as a solicitor.  However, there is an exception in respect of a claim arising from dishonest or fraudulent acts or omissions of the insured.  While the Solicitor has claimed indemnity under that policy, the Insurer has to date not yet agreed to indemnify him in respect of Colonial’s claim. 

7. In its defence filed on 13 August 2007, the Insurer repeated the allegations made by Colonial against the Solicitor that he certified identification documents provided to Colonial in connection with the application for payment of the Member’s superannuation benefit.  The defence alleged that the certificate was false and known by the Solicitor to be false by reason of, inter alia, the fact that the Solicitor had not at any time met the Member or any person purporting to be the Member.  The defence also alleged that the Solicitor transferred the moneys received from Colonial from his trust account, without any written authority from the true owner of the funds or any person purporting to be the owner of those funds.  Thus, it was clear enough that, in its defence, the Insurer was alleging that the Solicitor had not had any contact with any person claiming to be the Member. 

8. The proposed amendment of the Insurer’s defence maintains the assertion that the Solicitor knew his certificate to be false by reason that he had not met any person purporting to be the Member.  The Insurer now wishes to allege that the Solicitor engaged in dishonest or fraudulent conduct in a number of respects.  The proposed amendment of Colonial’s statement of claim repeats the Insurer’s assertion that the Solicitor never met with any person who claimed to be the Member or whom the Solicitor believed to be the Member. 

9. The Insurer now wishes to allege that the Solicitor executed his certification and wrote several letters making representations that he knew to be false.  In addition, the Insurer says that, even if, as he claims, the Solicitor did meet a person who claimed to him to be the Member, the Solicitor, nevertheless, committed dishonest acts from which Colonial’s claim arose, insofar as he acted for the person who claimed to be the Member, knowing that that person had sworn a false statutory declaration and had sent documents that the Solicitor knew were false and that the Solicitor knew that the person was not entitled to the funds.  It is also alleged that, with the knowledge of those false acts on the part of the person who claimed to be the Member, the Solicitor wrote letters to Colonial and to Westpac, the result of which was that the funds were ultimately disbursed. 

10. The particulars to the proposed amended defence specify, in some detail, the falsity relied upon.  The proposed amendment by Colonial is to adopt the particulars of the Insurer’s defence as outlined in its proposed amendment.  Colonial says that it does not seek to make any allegation beyond those that the Insurer is allowed to maintain, although the Solicitor says that the proposed amendments to the statement of claim go beyond the allegations made by the Insurer. 

11. The parties have foreshadowed that there will be tendered, and probably without opposition, various documents, or at least, copies of documents, purportedly signed by a Stanley G Stevens.  As I understand it, it is common ground that none of those documents were signed by the Member.  There may be a question as to whether any of the documents was signed by a person who claimed to the Solicitor that he was the Member.  The Solicitor says that he has been, or would be, taken by surprise by the proposed amendments at this stage.  He says that there are two lines of further investigation that he would wish to undertake if the amendments are allowed. 

12. The first line concerns the handwriting of the signature, “Stanley G Stevens”.  The Solicitor says that it may be significant to know whether or not all of the signatures in the documents in question were placed there by the same person.  Secondly, he says that it may be important to know whether a statutory declaration that contains the signature “Stanley G Stevens” and was witnessed by the Solicitor can be shown to have had the two signatures placed on it at the same time.  As to the last question, it is by no means clear that the original of the statutory declaration is still available. 

13. The Solicitor says that he may wish to adduce expert opinion evidence on those questions.  The Insurer has indicated that, if it can be shown that either of those questions is relevant, and that expert opinion evidence as to those questions could bear on the proceeding, there would be no opposition to an adjournment at that stage to enable further evidence along those lines to be adduced.  At the moment, I am by no means satisfied that those questions are relevant to the issues that I will have to determine in the proceeding. 

14. The second line of inquiry that the Solicitor says he wishes to pursue, in the light of the amendments, would be directed to establishing that there was, in fact, an individual who was not the Member but who was claiming to be Stanley G. Stevens.  First, the Solicitor points to several possible specific inquiries that he would wish to pursue, in order to show that a person claiming to be Stanley Geoffrey Stevens applied to the Commonwealth Bank to establish an account, but was refused an account because he could not produce adequate identification. 

15. Next, the Solicitor says that a mobile telephone number was provided to him by a person claiming to be the Member.  In 2002, that number was answered by someone who identified himself as Rick Oliver.  

16. Finally, the evidence suggests that the Member had a connection with a chain of cinema operators.  Colonial has records of telephone discussions with two individuals, identified as Sean Burns and Shaun Driscoll who claimed to be involved with the cinema chain. 

17. The Solicitor says that he wishes to pursue inquiries of Messrs Burns and Driscoll, of the Member, and of Mr Oliver, with a view to establishing that there was, in fact, an individual who was claiming to be the Member.  The Solicitor says that it was not until the final particulars were provided by the Insurer, and until Colonial indicated it wished to make similar claims, that he decided that it was desirable to make those sorts of inquiries. 

18. However, as I have said, in the defence first filed by the Insurer, there was an assertion that the Solicitor had not met any person purporting to be the Member and that he dispersed money without the written authority of any person purporting to be the owner of the funds.  The Insurer indicated that it relied for that assertion on a statement by an officer of Colonial about a telephone conversation that the officer says that he had with the Solicitor in 2002, in which the Solicitor acknowledged that he had not met anybody who had claimed to be the Member.  Thus, from the time of the first filing of the Insurer’s defence, the question of whether or not there was an individual claiming to be the Member was an issue.  I do not consider that the further particularisation of the Insurer’s defence raises a relevantly different factual issue from that which had already been raised when the defence was first filed. 

19. As I have said, this matter was originally fixed for hearing some months ago, but was vacated at the request of the Solicitor.  It was not until quite recently that the Solicitor elected to cross-claim against the Insurer, although I make no comment one way or the other as to whether he was justified in taking the stance that he had up until that time.  However, the fact is that the Insurer has only recently been brought into the proceeding, notwithstanding that it has been on foot since 2005.  In all of the circumstances, I do not consider that, as I presently understand the issues, there is any unfair prejudice to the Solicitor by reason of the matter continuing this week. 

20. I, therefore, propose to give leave to the Insurer and to Colonial to amend their pleadings.  However, I will not vacate the hearing.  Nevertheless, I will entertain any reasonable application that is made in the course of the hearing by the Solicitor if some question arises that indicates that fairness would require that he have further time to investigate the matters to which I have briefly adverted. 

I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:        21- September 2007

Counsel for the Applicant:	Mr T M Thawley
Solicitor for the Applicant:	Henry Davis York
Counsel for the First Respondent:	Mr P T Taylor with Mr J de Greenlaw
Solicitor for the First Respondent	Veritas Legal
Counsel for the Second Respondent:	Mr J A Jobson
Solicitor for the Second Respondent:	Juris Lawyers
Counsel for the Cross-Respondent:	Dr A S Bell SC with Mr P Flynn
Solicitors for the Cross-Respondent:	Yeldham Price O’Brien Lusk
Date of Hearing:	17 September 2007
Date of Judgment:	18 September 2007