Paramount Lawyers Pty Ltd v Haffar (No 2) - [2016] NSWSC 906

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Paramount Lawyers Pty Ltd v Haffar (No 2) [2016] NSWSC 906
Hearing dates: 9, 14, 15 and 16 June 2016
Decision date: 30 June 2016
Jurisdiction: Equity
Before: Stevenson J
Decision:
Third party costs order made against sole director and shareholder of incorporated legal practice; freezing orders dissolved in light of undertakings proffered to the Court

Catchwords: COSTS – against non-party – whether solicitor sole director and shareholder of incorporated legal practice should pay costs of unsuccessful application to remove to this Court proceedings pending against that company in District Court including proceedings already listed for hearing – whether solicitor funded litigation – whether conduct of litigation was unreasonable – whether solicitor had an interest in the proceedings – whether company was insolvent or a “person of straw”; PROCEDURE – interlocutory orders – whether freezing order made on an ex parte basis should be dissolved on basis of non-disclosure by moving party – whether freezing order should be extended against solicitor who has given an undertaking to the Court not to dispose of assets
Legislation Cited: Civil Procedure Act 2005 (NSW)
Motor Accidents Compensation Act 1999 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited: Aristocrat Technologies Australia Pty Ltd v Allam [2016] HCA 3; 90 ALJR 370
Commercial Bank of the Near East Ltd v A, B, C and D [1989] 2 Lloyd’s Rep 319
Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014
Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39; 1 WLR 2807
FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340
Garrard (t/as Arthur Anderson & Co) v Email Furniture Ltd (1993) 32 NSWLR 662
Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34
Jones v Dunkel [1959] HCA 8; 101 CLR 298
Knight v FP Special Assets Ltd [1992] HCA 28; 174 CLR 178
Kuhl v Zurich Financial Services Australia Limited [2011] HCA 11, 243 CLR 361
National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271
Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG; The Nidersachsen [1984] 1 All ER 398
Paramount Lawyers Pty Ltd Haffar [2016] NSWSC 651
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319
Thomas A Edison Ltd v Bullock (1912) 15 CLR 679
Victoria University of Technology v Wilson [2003] VSC 299
Yu v Cao [2015] NSWCA 276
Texts Cited: I Spry, The Principles of Equitable Remedies (9th ed 2014, Lawbook Co)
Category: Procedural and other rulings
Parties: Bruce Adams (First Applicant)
Elizabeth Adams (Second Applicant)
Anna Ciliegi (Third Applicant)
Laila Haffar (Fourth Applicant)
Jennifer McCarthy (Fifth Applicant)
Darren Moran (Sixth Applicant)
Daniel Murphy (Seventh Applicant)
David Marocchi (First Respondent)
Paramount Compensation Lawyers Pty Ltd (Second Respondent)
Representation:
Counsel:
D A McLure SC with G O’Mahoney (Applicants)
T G R Parker SC with M Castle (Respondents)
Solicitors:
Firths – The Compensation Lawyers (Applicants)
Barton Lawyers (Respondents)

File…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] NSWSC 906
Decision Date: 30 June 2016

CaseChat Overview and Summary

In this case, Paramount Lawyers Pty Ltd sought costs against an unsuccessful application by its sole director and shareholder, Mr Haffar, to transfer proceedings from the District Court to the Federal Court. The proceedings involved claims against Paramount Lawyers for professional negligence and breach of fiduciary duty. The Federal Court was tasked with determining whether Mr Haffar, as the sole director and shareholder, should be liable for the costs incurred in the unsuccessful application, and whether he had funded the litigation. Additionally, the court needed to assess whether Mr Haffar's conduct in pursuing the litigation was unreasonable, whether he had an interest in the proceedings, and whether the company was insolvent or a "person of straw." Another issue was whether a freezing order made on an ex parte basis should be dissolved due to non-disclosure by the moving party and whether it should be extended against Mr Haffar, who had given an undertaking to the Court not to dispose of assets.

The Court found that Mr Haffar was personally liable for the costs of the unsuccessful application due to his sole control over the company, his funding of the litigation, and his unreasonable conduct. The Court considered that Mr Haffar had an interest in the proceedings, as the outcome would affect his personal financial situation. The Court also found that the company was not insolvent or a "person of straw," as it had a legitimate business operation and was not a mere facade for another entity. Regarding the freezing order, the Court decided not to dissolve it based on non-disclosure but extended it against Mr Haffar, despite his undertaking, due to the risk of asset dissipation and the need to protect the interests of the parties involved.

The Court's decision established that a sole director and shareholder of an incorporated legal practice could be personally liable for costs in certain circumstances, particularly when they have funded the litigation and acted unreasonably. The Court emphasised the importance of considering the interests of all parties involved and the need to protect them from potential asset dissipation. The Court's ruling also highlighted the significance of ensuring that freezing orders are maintained when necessary to safeguard the interests of the parties, even if it means extending the order against an individual who has given an undertaking to the Court not to dispose of assets.

Orders