CITATION: Vaccaro and Anor v Flammia [2008] NSWSC 1322
JURISDICTION:
FILE NUMBER(S): 20237/07
HEARING DATE(S): 27 November 2008, 28 November 2008
JUDGMENT DATE: 11 December 2008
PARTIES: Federico Vaccaro and Maria Vaccaro (Plaintiffs) Lorenzo Flammia (Defendant)
JUDGMENT OF: Johnson J
LOWER COURT JURISDICTION: Not Applicable
LOWER COURT FILE NUMBER(S): Not Applicable
LOWER COURT JUDICIAL OFFICER: Not Applicable
COUNSEL: Mr PA Beale (Plaintiffs) Mr AS Bell SC; Mr PW Flynn (LawCover Insurance Pty Limited)
SOLICITORS: McGrath Dicembre & Co (Plaintiffs) Yeldham Price O'Brien Lusk (LawCover Insurance Pty Limited)
CATCHWORDS: INSURANCE claim for damages against solicitor for negligence Plaintiffs' Certificate of Title taken from solicitor's office and used to give mortgage over property signatures of Plaintiffs forged on mortgage application for leave to join LawCover to negligence proceedings against solicitor s.6 Law Reform (Miscellaneous Proceedings) Act 1946 LawCover opposes grant of leave relying on dishonesty/fraud exclusion under insurance policy whether Plaintiffs had demonstrated arguable case that solicitor acted negligently but not dishonestly in circumstances giving rise to claim leave granted to join LawCover
[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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Vaccaro v Flammia [2008] NSWSC 1322
Case
[2008] NSWSC 1322
Decision Date
CaseChat Overview and Summary
The plaintiffs, Federico and Maria Vaccaro, brought an action against Flammia, their former solicitor, alleging negligence in the handling of their Certificate of Title. The dispute escalated when their Certificate of Title was used to secure a mortgage without their consent, leading to a claim against them by the mortgagee. LawCover Insurance Pty Limited, the insurer of Flammia, opposed the plaintiffs' application to join them in the proceedings, arguing that the policy excluded coverage for dishonesty or fraud. The court had to determine whether the plaintiffs had demonstrated an arguable case that Flammia's conduct was negligent rather than dishonest, which would allow LawCover to be joined as a party to the proceedings.
The court considered the evidence presented, including the circumstances surrounding the taking and use of the Certificate of Title, the nature of the relationship between Flammia and Caradonna, and the findings in subsequent proceedings. It was noted that the evidence suggested Flammia's negligence in not securing the Certificate of Title and allowing Caradonna access to sensitive areas, while there was no direct evidence of Flammia's involvement in the fraudulent use of the Certificate of Title. The court concluded that it was arguable that Flammia's conduct was negligent and not dishonest, and that the plaintiffs had a claim under the insurance policy.
Accordingly, the court granted the plaintiffs leave to join LawCover in the proceedings, allowing them to pursue their claim for damages against both Flammia and LawCover. The court ordered that LawCover be joined as a party and that the plaintiffs' Statement of Claim be amended accordingly. The final determination of the plaintiffs' entitlement to relief would be made at the trial, taking into account all the evidence and legal arguments.
Orders
Orders of the court
Full text does not contain this section.
Background
Background to the litigation
An affidavit of Timothy Ralph Price sworn 15 October 2008 was read, without objection, for LawCover. Mr Price was not required for cross-examination. A number of documents were tendered in LawCover’s case (Exhibit TRP1, Exhibits 1, 2 and 3).Factual Background The following basic facts are not controversial. From about 1990 until April 2006, the Plaintiffs utilised the services of Manna & Flammia Solicitors located at 45 Castlereagh Street, Penrith. The Plaintiffs were the registered proprietors of several properties in the Camden district. The Plaintiffs left a number of Certificates of Title at the Defendant’s legal practice for safekeeping. Amongst these was the Certificate of Title for a property at 9 McMinn Place, Narellan Vale (“the Narellan Vale CT”). Prior to 27 November 2003, the Narellan Vale CT was taken from the Defendant’s legal practice. On 23 December 2003, a mortgage in favour of Hillsan Pty Limited (“Hillsan”) was purportedly executed by the Plaintiffs with respect to the Narellan Vale property. The Plaintiffs contend, and LawCover accepts, that the signatures of the Plaintiffs on the mortgage are forgeries. According to the mortgage, the Plaintiffs’ signatures were witnessed by Hugh Johnson, Solicitor, of Sylvania. Both the Plaintiffs and LawCover accept that there was no such person on the roll of legal practitioners at that time. He is a fictitious character. Hillsan advanced the sum of $400,000.00 under the mortgage. The evidence suggests that that sum was distributed between a number of persons. It is common ground that the Plaintiffs did not receive any of this sum. The Hillsan mortgage was not stamped with the Office of State Revenue until 9 November 2005 and was not registered on the title with the Department of Lands until 28 November 2005. The Hillsan mortgage provided for repayment of the principal sum by 23 December 2004 with interest to be charged at the rate of 10.5% per annum. On or about 26 September 2006, Hillsan commenced proceedings (14742/06) against the Plaintiffs in the Possession List of the Common Law Division to seek possession of the Narellan Vale property for failure to comply with the terms of the mortgage. The Plaintiffs state that they did not learn that the Narellan Vale CT had been taken from the premises of the Defendant’s legal practice, nor that it had been used for the purpose of giving a mortgage to Hillsan until they learned of the Possession List proceedings being brought against them in 2006. The Possession List proceedings have not yet proceeded to hearing. The evidence reveals that the Defendant’s practicing certificate was suspended on or about 29 May 2006. On 9 November 2007, the Defendant attended the Insolvency & Trustee Service of Australia and filed a debtor’s petition and became a bankrupt.The Plaintiffs’ Negligence Claim Against Mr Flammia The Plaintiffs’ claim in negligence against Mr Flammia is encapsulated in paragraphs 8 and 9 of the proposed Amended Statement of Claim (MFI1) which state:“8.The First Defendant negligently breached that duty of care by:(a)failing to keep the Certificate of Title in a safe location;(b)keeping the certificate of title in a metal tin stored in a metal cabinet in a back room which was not locked or in any way secure;(c)failing to keep the Certificate of Title in a secure location as aforesaid;(d)failing to take any reasonable steps to ensure that when Anthony Caradonna a client of his firm was on the premises that he did not and could not gain access to the room in which the said metal cabinet was stored as aforesaid, when he knew that Mr Caradonna had committed criminal offences involving fraudulent conduct and other dishonest conduct during the period from about October 2001 to 1 July 2003;(e)failing to install any or any adequate systems of security or any adequate alarm systems;(f)failing to take reasonable care to avoid the loss or the unlawful taking possession of certificates of title;(g)not having in place a procedure to supervise access by persons to the premise in particular to the room in the back of the premises in which the said metal cabinet was stored or situated;(h)the First Defendant failed to adequately educate or train employees to supervise persons when they were on the premises.9.By reason of the negligence of the First Defendant as aforesaid, Mr Caradonna obtained possession of the Certificate of Title which he fraudulently used or caused to be used without the knowledge or consent of the Plaintiffs or either of them as security for a loan of $400,000 made by Hillsan Pty Limited which was advanced on or about 23 December 2003.”The LawCover Policy
Evidence
Evidence Before The Court
LawCover opposes the Plaintiffs’ application, relying upon the dishonesty/fraud exception in the policy of insurance. Evidence on Application The Plaintiffs read the following affidavits, without objection, on the application:(a)affidavit of Federico Vaccaro sworn 24 November 2008;(b)affidavit of Maria Vaccaro sworn 24 November 2008;(c)affidavit of Geoff Lloyd affirmed 10 July 2008;(d)further affidavit of Geoff Lloyd affirmed 26 November 2008.None of these deponents were required for cross-examination. In addition, the Plaintiffs tendered a folder of documents (Exhibit A) and copies of correspondence (Exhibits B and C). An affidavit of Timothy Ralph Price sworn 15 October 2008 was read, without objection, for LawCover. Mr Price was not required for cross-examination. A number of documents were tendered in LawCover’s case (Exhibit TRP1, Exhibits 1, 2 and 3).Factual Background The following basic facts are not controversial. From about 1990 until April 2006, the Plaintiffs utilised the services of Manna & Flammia Solicitors located at 45 Castlereagh Street, Penrith. The Plaintiffs were the registered proprietors of several properties in the Camden district. The Plaintiffs left a number of Certificates of Title at the Defendant’s legal practice for safekeeping. Amongst these was the Certificate of Title for a property at 9 McMinn Place, Narellan Vale (“the Narellan Vale CT”). Prior to 27 November 2003, the Narellan Vale CT was taken from the Defendant’s legal practice. On 23 December 2003, a mortgage in favour of Hillsan Pty Limited (“Hillsan”) was purportedly executed by the Plaintiffs with respect to the Narellan Vale property. The Plaintiffs contend, and LawCover accepts, that the signatures of the Plaintiffs on the mortgage are forgeries. According to the mortgage, the Plaintiffs’ signatures were witnessed by Hugh Johnson, Solicitor, of Sylvania. Both the Plaintiffs and LawCover accept that there was no such person on the roll of legal practitioners at that time. He is a fictitious character. Hillsan advanced the sum of $400,000.00 under the mortgage. The evidence suggests that that sum was distributed between a number of persons. It is common ground that the Plaintiffs did not receive any of this sum. The Hillsan mortgage was not stamped with the Office of State Revenue until 9 November 2005 and was not registered on the title with the Department of Lands until 28 November 2005. The Hillsan mortgage provided for repayment of the principal sum by 23 December 2004 with interest to be charged at the rate of 10.5% per annum. On or about 26 September 2006, Hillsan commenced proceedings (14742/06) against the Plaintiffs in the Possession List of the Common Law Division to seek possession of the Narellan Vale property for failure to comply with the terms of the mortgage. The Plaintiffs state that they did not learn that the Narellan Vale CT had been taken from the premises of the Defendant’s legal practice, nor that it had been used for the purpose of giving a mortgage to Hillsan until they learned of the Possession List proceedings being brought against them in 2006.
Decision
Reasons for decision
I have considered the findings of Young CJ in Eq in the Vella proceedings. As these events post-date the events surrounding the taking and use of the Narellan Vale CT, it is doubtful that this material would be admitted at the final hearing of this matter. I admitted it, over objection, at this interlocutory hearing. The judgment throws light upon the relationship between Mr Flammia and Mr Caradonna in 2006 and contains serious findings against each of them. The issue before me is the arguability of the Plaintiffs’ case that Mr Flammia was negligent (and not dishonest) in his conduct concerning the Narellan Vale CT up to and in 2003. The Vella judgment does not stand in the way of the Plaintiffs demonstrating such an arguable case.Conclusion The Plaintiffs have pleaded a case in negligence against Mr Flammia. For present purposes, it may be taken that he owed a duty of care to the Plaintiffs with respect to the safe keeping of the Narellan Vale CT. The evidence available to the Plaintiffs at this time includes the letter from Ms Banicevic referred to at [48]-[49] above. This suggests that Mr Caradonna had an unusual degree of access to Mr Flammia’s office, including access to private areas. The evidence indicates that the Narellan Vale CT was at Mr Flammia’s office but that, at a later point in time, it was being used for the purpose of the Hillsan mortgage. The evidence suggests that Mr Caradonna was directly involved in the use of the Narellan Vale CT for that unauthorised purpose. There is no direct evidence of Mr Flammia’s dishonest or fraudulent involvement in this process. I have referred to the various arguments advanced by LawCover and expressed my conclusions with respect to them. I have considered the cumulative effect of the matters relied upon by LawCover, in assessing the totality of the evidence on the application. In my view, the Plaintiffs have demonstrated on this application that it is arguable that Mr Flammia was negligent, and not dishonest, on this occasion. Accordingly, the Plaintiffs have demonstrated that it is arguable that they have a claim under the relevant policy. I propose to grant the Plaintiffs the relief sought in the Amended Notice of Motion. Given these conclusions, it is not necessary to resolve the arguments of the Plaintiffs concerning s.54 Insurance Contracts Act 1984 (Cth). It will be a matter for the trial judge, at the final hearing, to determine whether the Plaintiffs are entitled to relief in light of the totality of the evidence adduced at that hearing and after considering all relevant legal arguments advanced by the parties. Upon the basis of the evidence before me, however, I am satisfied that the relevant discretion ought be exercised in favour of the Plaintiffs.Orders I make the following orders:(a)I grant leave to the Plaintiffs under s.6(4) Law Reform (Miscellaneous Provisions) Act 1946 to commence proceedings against LawCover Insurance Pty Limited; (b)pursuant to rule 6.24(1) Uniform Civil Procedure Rules 2005, I order that LawCover Insurance Pty Limited be joined as a party to these proceedings;(c)I grant leave to the Plaintiffs to amend the Statement of Claim in accordance with the document which is MFI1 on the present application.