Dimarti v AB Law Group Pty Ltd

[2023] NSWSC 1595

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Dimarti v AB Law Group Pty Ltd [2023] NSWSC 1595

Hearing dates:

15 December 2023

Date of orders:

15 December 2023

Decision date:

15 December 2023

Jurisdiction:

Equity

Before:

Elkaim AJ

Decision:

See paragraph 43

Catchwords:

CIVIL PROCEDURE — Summary disposal — Dismissal of proceedings — Frivolous or vexatious proceedings — where the plaintiffs seek to set aside a costs assessment in favour of the defendant — where the plaintiffs allege that the costs assessment was supported by reliance on fraudulent documents — where the summons was filed out of time and requires substantial amendments — whether the summons should be dismissed as frivolous or vexatious.

Legislation Cited:

Bankruptcy Act 1966 (Cth), s 41(6A)

Crimes Act 1900 (NSW), s 253(b)(ii)

Legal Profession Uniform Law Application Act 2014 (NSW) ss 89, 91

Uniform Civil Procedure Rules 2005 (NSW), rr 1.18, 50.2, 50.3,

Vexatious Proceedings Act 2008 (NSW)

Cases Cited:

CSR Investments Pty Limited v Alcan Northern Territory Alumina Pty Limited [2003] NSWSC 1137

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, (1964) HCA 69

AB Law Group Pty Ltd v Dimarti (Supreme Court (NSW), Peden J, 10 July 2023, unrep)

Naro Investments Pty Ltd & Ors v Benjamin & Khoury Pty Ltd [2021] NSWSC 262

Naro Investments Pty Ltd & Ors v Benjamin & Khoury Pty Ltd (No 2) [2021] NSWSC 1198

XY v The Council of the Law Society of New South Wales [2021] NSWSC 1263

Category:

Procedural rulings

Parties:

Margherita Dimarti (First Plaintiff)
Rocco Dimarti (Second Plaintiff)
Natalie Dimarti (Third Plaintiff)
AB Pty Ltd (Defendant)

Representation:

Counsel:
Mr J Pope (Plaintiff’s Solicitor)
Mr C Dobbs (Defendant)

Solicitors:
Pope & Spinks Solicitors (Plaintiffs)
Twyford Law (Defendant)

File Number(s):

2023/293321

Publication restriction:

Nil

JUDGMENT

1. The primary proceedings were commenced by the filing of a summons on 14 September 2023.

2. The summons is supported by an affidavit of Mr Rocco Dimarti affirmed on 14 September 2023 and an affidavit of Ms Margherita Dimarti affirmed on 14 September 2023. These two deponents are two of the plaintiffs in the proceedings.

3. The defendant is a law firm holding out, by its title, as being part of a “group”. Notwithstanding its title the firm is not part of any group and does not have any principal or employee bearing the name of the group. The firm’s principal solicitor, perhaps only solicitor, is Ms XY. Her name has been suppressed to achieve conformity with orders in other courts, in particular in relation to criminal proceedings. The name of the defendant law firm has also been anonymised to AB in order to preserve the suppression of Ms XY’s name.

4. Ms XY’s practising certificate was suspended by the Council of the Law Society of New South Wales on 15 July 2021. It remains suspended, but the suspension is being contested. Ms XY denies any wrongdoing.

5. On 19 October 2023 the defendant filed a notice of motion seeking a declaration that the summons is a vexatious proceeding under the Vexatious Proceedings Act 2008 (NSW) and that the summons be dismissed. The motion is supported by an affidavit of Ms XY affirmed on 19 October 2023. The plaintiffs (respondents to the motion) have replied with an affidavit of Ms Margherita Dimarti affirmed on 27 November 2023.

6. Returning to the summons, the orders sought by the plaintiffs are that:

1. a certificate of determination (a legal costs assessment) in favour of the defendant be set aside;

2. the defendant be restrained from enforcing a judgment obtained in the District Court (arising from the costs assessment); and

3. the defendant pays the plaintiffs $106,000 “wrongly withdrawn from AB Law Group’s Trust”.

7. In very short compass, the plaintiffs allege that the costs assessment was “obtained wrongly and supported by reliance on fraudulent documents and involved work which was so lacking in legal skill that costs should not be awarded” (affidavit of Rocco Dimarti 14 September 2023, paragraph 3).

8. The restraining order is sought because, following the obtaining of the certificate of determination, the certificate was registered in the District Court and judgment was obtained in the sum of $377,277.52. The judgment sum was not paid leading to the defendant filing a bankruptcy notice on 13 September 2023.

9. On 20 September 2023 the plaintiff’s filed an application in the Federal Court to set aside the bankruptcy notice. This application has not yet been heard and will be opposed by the defendant. I understand it has been stood over until February 2024.

10. In relation to the $106,000, the claim is derived from an allegation that Ms XY withdrew the money from the defendant’s trust account without authorisation.

11. The history behind the suspension of Ms XY’s practising certificate is well described in a judgment of Adamson J (as her Honour then was) in XY v The Council of the Law Society of New South Wales [2021] NSWSC 1263.

12. In the Law Society proceedings Ms XY sought orders to have the suspension of her practising certificate, and the appointment of a manager to her practice, set aside. The application failed. It is apparent from the judgment that Ms XY was charged with “making a false document to obtain advantage or cause disadvantage contrary to s 253(b)(ii) of the Crimes Act 1900 (NSW)”. Ms XY denies the charge. The criminal proceedings have been heard in the Local Court. The decision is reserved. There is no connection between the charges and the current dispute.

13. There have been other proceedings in this court involving the parties or at least some of them. In June 2021 the plaintiff (the defendant in the current proceedings) filed a summons seeking a declaration that it had a proprietary interest in property owned by the defendants (who included one of the plaintiffs in the current proceedings). The plaintiff wished to discontinue the proceedings leading to an argument on costs. This argument was decided on the papers, by Peden J in AB Law Group Pty Ltd v Dimarti, (Supreme Court (NSW), unrep) on 10 July 2023. Her Honour allowed the plaintiff to discontinue the proceedings and ordered the plaintiff to pay the costs of the discontinued proceedings.

14. The basis for the notice of motion is that the defendant alleges that the summons is not based on any identifiable cause of action and was filed for “wrongful purposes”, essentially being to delay or prevent the defendant’s rightful entitlement, and recovery of, the sum identified in the costs assessment and the District Court judgment.

15. The costs assessment has a history of its own. An initial costs assessment was made by a costs assessor, Mr Campbell, on 17 June 2022. Mr Campbell decided not to issue a certificate of determination, essentially because “costs that are the subject of a dispute may not be the subject of a costs assessment unless the ‘designated regulatory authority’ is unable to resolve the dispute and has notified the parties of their entitlement to apply for a costs assessment.” There had been no notification to this effect.

16. Following Mr Campbell’s decision, the defendant applied for a review of the determination before a review panel. On 9 September 2022, the panel set aside the original determination and substituted an assessment of $377,277.52. Notably, for present purposes, the certificate issued by the review panel was sent to the parties on 21 December 2022.

17. Before reaching its final conclusion, the panel made the following determinations:

“1. The Law Practice made the Agreement, Disclosure and Estimate as soon as practicable for LPUL s 174(1)(a);

2. The Law Practice complied with LPUL s 174(1)(a) but inexplicably thereafter failed to comply with s 174(1)(b) as it failed to provide a Revised Estimate which conformed to s 174(1)(b), and the non-conforming Revised Estimate for s 174(1)(b) was exceeded;

3. Counsel's estimate given for LPUL s 175(2) was exceeded;

4. Counsel failed to provide a second revised estimate of fees for LPUL s 175(2);   

5. The Law Practice Agreement is void for non-conformance to the obligations in LPUL s 174(1)(b);   

6. Counsel's costs agreement is void for non-conformance to the obligations in LPUL s 175(2);

7. As the respective agreements are void, they cannot be enforced in the same way as a contract, LPUL s 184 (Effect of costs agreement);

8. The Tax Invoices comply with the GST Law: A New Tax System (Goods and Services Tax) Act 1999 (GST Act), ss29.70, 48.57(1), 195.1 (Dictionary) "tax invoice" and the A New Tax System (Goods and Services Tax) Regulation 1999, reg. 29-70.01.   

9. The Tax Invoices show the Work done by the Law Practice and Counsel would have been in accordance with the respective Agreements, if they were not void;

10. It was nevertheless reasonable for the Work to have been carried out by the Law Practice and Counsel. The Work did not go beyond the scope of work in the respective Agreements, if they were not void.”

18. It is evident from the determinations that notwithstanding a number of findings contrary to the interests of the defendant, the panel went on to make a determination of costs, essentially on a quantum meruit basis. Notably the panel found that the costs had “been proportionately and reasonably incurred” and that there was “no evidence that the work done by the Law Practice and Counsel was not of the appropriate quality”.

19. Significantly, for this application, the forging of signatures was raised before the panel. The decision stated:

“The signatures are disputed by the Clients who several years later on 23/5/22 alleged to the Office of the Legal Services Commissioner (OLSC) that these were not their signatures on the Agreement. For the reasons given later, namely that the Agreement is void, the Panel does not have to determine this dispute. Regardless of the authenticity of the signatures, the Work was done, and the Clients obtained a benefit.”

20. Two points arise from the passage just quoted:

1. it seems most unusual that the panel would ignore the possibility of forged signatures; and

2. the plaintiffs strenuously denied they have received any benefit from the work done by the defendant.

21. The summons asks for the decision of the review panel to be set aside. The court has power to do so. An appeal lies from the panel to the Supreme Court pursuant to s 89 of the Legal Profession Uniform Law Application Act 2014 (NSW) (the LPULA).

22. However, as noted above, the parties to the costs assessment were notified of the decision of the review panel on 21 December 2022. The summons was filed on 14 September 2023. The significance of these dates, as pointed out by the defendant, is that an appeal to the Supreme Court from the decision of a review panel must be made within 28 days of the decision being given to the parties: Uniform Civil Procedure Rules 2005 (NSW) rr 50.2 and 50.3(1)(a) (UCPR). Time may be extended but the application for an extension should be included in the summons (UCPR r 50.3). The summons here contains no such application.

23. In addition, s 91 of the LPULA requires that notice must be given of any appeal to the Manager, Costs Assessment. There is no evidence that this has occurred in this case. It should be done. Yet another irregularity is that appeals from a costs panel should be filed in the Common Law Division (UCPR r 1.18) and not in the Equity Division as has occurred in this case.

24. As already noted, the defendant says that the summons does not disclose any cause of action. If it purports to be an appeal from the decision of the costs panel, then it is out of time. If it is an effective application for judicial review no errors of fact or law have been identified. Finally, there is no apparent basis for the return of the $106,000.

25. The defendant submits that the summons has been filed for a wrongful purpose to the extent that the proceedings are vexatious. The wrongful purpose is to delay the bankruptcy action in the Federal Court. The defendant, says the plaintiffs, are using the proceedings “as a tactic to protract the litigation process, evade their financial obligations, and stall the impending bankruptcy proceedings.”

26. In an apparent acknowledgement that the name of the legal practice is somewhat grand the defendant’s written submissions state: “The amount owing is a lot of money for a small suburban practice, and it has been unpaid for years”.

27. The plaintiff’s response to the defendant’s submissions is contained in the affidavit of Ms Margherita Dimarti affirmed on 27 November 2023. Ms Dimarti says at [6] that:

“a. The Defendant forged the Plaintiffs’ signatures on the costs agreement;

b. The Defendant charged for work she did not perform and failed to comply with the Solicitor’s Code of Conduct; and

c. The principal solicitor for the Defendant withdrew monies from the firm’s trust account without authorisation.”

28. The first two responses raise matters which should properly be included in an appeal from the costs panel decision or a judicial review of that decision. However as pointed out above, the summons, if it is an appeal, is out of time and if it is an application for judicial review, that is not apparent from its contents.

29. As to the $106,000, the evidence in the affidavits does not provide the detail on which the allegation could be made. The evidence goes no more than to say that the $106,000 was withdrawn from the trust account without authority.

30. Another matter relating to the $106,000 is that at different times the amount has been recorded as $160,000. I think the defendant is entitled to some certainty about the figure. I note that Mr Pope, on behalf of the plaintiffs, accepted that the claim would not exceed $106,000.

31. The plaintiffs’ written submissions confirm that the intent of the summons is to appeal against the decision of the costs panel, and adds “these proceedings might have been more clearly expressed …” So much is correct.

32. The plaintiffs accept that an assessment may be made on the basis of “payment for work performed” but say that this should not apply to work “fraudulently presented for payment” which work the solicitor “did not do or did not need to do”.

33. The plaintiffs submitted that they had suffered significant losses from the defendant’s conduct in representing them in Naro Investments Pty Ltd & Ors v Benjamin & Khoury Pty Ltd [2021] NSWSC 262 and Naro Investments Pty Ltd & Ors v Benjamin & Khoury Pty Ltd (No 2) [2021] NSWSC 1198, both being decisions of Slattery J.

34. Prima facie the defendant’s motion has merit in that it has identified both breaches of rules (in relation to the appeal from the costs panel) and an absence of foundation for the claim for $106,000.

35. The difficulty facing the defendant however is that there is material which, if properly and regularly presented, could form the basis for a sound appeal and action. In respect of the costs panel decision, while a quantum meruit claim may be permissible, it would seem unjust that such a claim could succeed against a background of fraudulent conduct including the forging of signatures on a costs agreement.

36. As pointed out by the defendant, relying on the test in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, the plaintiffs’ case must be effectively and obviously hopeless for it to be struck out. The test was analysed by Einstein J in CSR Investments Pty Limited v Alcan Northern Territory Alumina Pty Limited [2003] NSWSC 1137, from [18]:

“18. The applicable principle is conveniently summarised in the joint judgment of Northrop, Lindgren and Lehane JJ in Australian Building Industries Pty Limited v Stramit Corporation Limited & Anor - BC9706333. At page 17 under the heading “Legal Principles”, their Honours address statements of principle made in:

· Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 and 92;

· General Steel Industries Inc. v Commissioner for Railways (NSW) (1964) 112 CLR 125;

· Fancourt v Mercantile Credits Limited (1983) 154 CLR 87;

· Webster v Lampard (1993) 177 CLR 598;

· Munnings v Australian Government Solicitor (1994) 68 ALJR 169 (at 171) and 429.

19. All the statements cited are to much the same effect and are fairly represented by the passage from Fancourt cited in Stramit which includes the passage:

“The power to avoid summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried. ...””

37. I am not prepared to go so far as to say that there is no real question to be tried. I think the issue of fraud is a real question and does need to be litigated. However, there needs to be substantial amendments made to the summons. The plaintiffs have suggested the possibility of the proceedings continuing by way of a statement of claim. While there is some attraction in that suggestion, the court rules contemplate an appeal proceeding by way of a summons.

38. I intend therefore to give the plaintiffs leave to file an amended summons in which it is to be clearly stated that the proceedings involve an appeal from the decision of the cost panel and also include an application for leave to appeal out of time.

39. In the course of the hearing, learned counsel for the defendant submitted that any order made in favour of the plaintiffs, for example allowing the filing of an amended summons, could only be made pursuant to a separate application. It was not contemplated by the defendant’s motion which, I note, does not include the often used alternative of “such other order as the court sees fit”.

40. In my view the court has a discretion to make alternative orders in a notice of motion of this sort without requiring the costly and time-wasting necessity of a separate notice of motion. There has certainly been no prejudice to the defendant whose counsel presented her argument in a comprehensive and forceful manner both as to the motion’s principal objective and any alternative resolution.

41. The plaintiffs, by the summons, have sought an order restraining the enforcement of the District Court judgment. I understood that order to be pursued as part of the motion. To do so would qualify as inappropriate without a separate application. In any event the proper course is to ask the District Court to set aside the judgment, and also to make an application for an extension of the bankruptcy notice under s 41(6A) of the Bankruptcy Act 1966 (Cth).

42. In relation to costs of the motion, I think they should be paid by the plaintiffs. Although the defendant has not succeeded in having the proceedings dismissed, it has highlighted the deficiencies in the summons, nearly all of which require rectification.

43. I make the following orders:

1. The plaintiffs have leave to file an amended summons by 25 January 2024.

2. The amended summons is to explicitly state that the relief sought is by way of an appeal from the decision of the cost panel.

3. The amended summons is to include an application for an extension of time for the appeal.

4. The plaintiffs are to pay the defendant’s costs of the motion filed on 19 October 2023.

5. Noted that if the amended summons seeks any orders in relation to the defendant’s trust account, then the claim is restricted, subject to interest, to $106,000.

6. The identity of Ms XY and the Law Firm for which she works are suppressed until further order.

7. Leave to both parties to relist the matter in respect of any issue arising from the amended summons.

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Amendments

29 May 2024 - Para 11 plaintiff's changed to Ms XY's

Decision last updated: 29 May 2024