Viscariello v Najjar
[2022] FedCFamC2G 146
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Viscariello v Najjar [2022] FedCFamC2G 146
File number(s): ADG 378 of 2020 Judgment of: JUDGE BROWN Date of judgment: 17 March 2022 Catchwords: BANKRUPTCY – PRACTICE AND PROCEDURE – application under the Personal Properties Securities Act 2009 (Cth) – deed of settlement between former directors of a company – where both practitioners have lost their entitlement to practice the profession of the law – previous charges relating to dishonesty – where one of the previous directors are in prison – where company went into liquidation – where proceedings have occurred in the Supreme Court of South Australia – considerations of the purpose of pleadings and evidence by affidavit material – matters to be considered. Legislation: Fair Work Act 2009 (Cth).
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) Pt 7, Div 16.2, rr 1.04, 1.06, 7.01, 16.11.
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 5, 143, 174, 190.
Federal Circuit Court Rules 2001 (Cth) r 4.05.
Federal Court of Australia Act 1976 (Cth) s 5.
Federal Court Rules 2011 (Cth) Div 16.5, r 8.05.
Personal Property Securities Act 2009 (Cth).Cases cited: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.
Bruce v Odhams Press Ltd [1936] 1 KB 697.
Hearne v Street (2008) 235 CLR 125.
Kalayzich v Santa Sabina College & Anor [2020] FCCA 11.
Kelly v Atanaskovic Hartnell Corporate Services Pty Ltd [2021] FCCA 552.
PPG Developments v Capitanio (2016) 126 SASR 307.
Roberts‑Smith v Fairfax Media Publications Pty Limited (No 5) [2020] FCA 1067.
Takemoto v Moody’s Investors Service Pty Limited [2014] FCA 1081.Division: Division 2 General Federal Law Number of paragraphs: 82 Date of hearing: 13 December 2021 Place: Adelaide Counsel for the Applicant: Mr Doyle SC Solicitor for the Applicant: Gretsas & Associates Counsel for the Respondent: Mr McCarthy Solicitor for the Respondent: Wadlow Solicitors ORDERS
ADG 378 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: JOHN VISCARIELLO
Applicant
AND: WALID NAJJAR
Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
17 MARCH 2022
THE COURT ORDERS THAT:
In relation to the applicant’s application in a case filed 12 July 2021:
1.The applicant, John Viscariello (“the applicant”) is granted leave to amend the final orders and relief sought in his application filed on 11 December 2020 on or before 1 April 2022.
In relation to the respondent’s application in a case filed 23 August 2021:
2.Paragraph (1) of the orders made by Judge Brown on 7 July 2021 be varied to grant the solicitor for the respondent, Walid Najjar (“the respondent”), leave to uplift and copy any and all documents produced pursuant to the subpoena to the Law Society of South Australia NOTING THAT such inspection of the documents held by the Law Society of South Australia is to be completed before 7 April 2022.
3.The applicant file a response to the application in a case and any affidavits in support on or before 5 May 2022.
4.The application in a case filed by the respondent on 23 August 2021 for security of costs is listed on 26 May 2022 at 4:00 pm.
5.Costs in relation to this interlocutory application are reserved.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION
These proceedings relate to the provisions of the Personal Property Securities Act 2009 (Cth),[1] as they apply to a deed of settlement between the applicant John Viscariello and his former business partner Stephen Patrick McNamara.
[1] Hereinafter referred to as “the PPS Act”.
Mr Viscariello claims he is entitled to a sum of money as a consequence of this deed. The respondent, Mr Najjar claims the money belongs to him as the proceeds of litigation conducted on his behalf by Mr McNamara.
The relevant sum has been paid into court by the liquidator of the company through which Mr McNamara formerly conducted his legal practice.
Both Mr Viscariello and Mr McNamara were formerly legal practitioners. Each has now lost their entitlement to practise as a solicitor. Mr McNamara is currently in prison as a consequence of being sentenced following charges of dishonesty relating to his practice as a solicitor.
In July 2007, Mr Viscariello and Mr McNamara formed a company, Commercial & General Law (SA) Pty Ltd,[2] of which they were both directors. They operated a legal practice through this company.
[2] Hereinafter referred to as “Commercial & General Law”.
Mr Viscariello owned the commercial property, located at 82 Flinders Street, Adelaide, which the company leased from him, as its practice premises. He claims to be due rent from Commercial & General Law.
Mr McNamara provided professional legal services to the respondent, Walid Najjar between 2009 and 2012, particularly in respect of Supreme Court proceedings involving a company, Bolivar Road Pty Ltd,[3] of which he was a director against Indigo Financial Money Pty Ltd,[4] and John Tsoulos.
[3] Hereinafter referred to as “Bolivar Road”.
[4] Hereinafter referred to as “Indigo Financial Money”.
Mr Viscariello lost his entitlement to practise law in June 2013 and, as a consequence, resigned as a director of Commercial & General Law. Mr McNamara continued to be a director and to practise law through the company.
It is Mr Viscariello’s evidence that he obtained a number of clients for Commercial & General Law, to whom Mr McNamara provided professional services. As a consequence, he asserts that he is owed monies by the company.
In these circumstances, on 29 January 2014, Mr Viscariello asserts that he entered into a deed with Mr McNamara and Commercial & General Law to enable him to recoup fees and rent owed to Mr Viscariello by the company from future earnings of the legal practice, which would be operated by Mr McNamara.
It is this deed which is at the centre of these proceedings, as it is Mr Viscariello’s position that Mr McNamara secured the registration of the relevant deed, pursuant to the provisions of the PPS Act, on the Personal Property Security Register on 7 February 2015.
On 19 December 2014, a manager was appointed by the Law Society of South Australia to manage the client files of Commercial & General Law. In November 2016, the company itself was placed into liquidation and Martin Lewis was appointed its liquidator.
Mr Viscariello informed Mr Lewis that he was of the view that the sum of $600,400.38 was owed to him by the company and was secured pursuant to the PPS deed. In his administration of Commercial & General Law, Mr Lewis identified that the company held a sum of $229,419.05 in its accounts at the date of its liquidation.
It is Mr Viscariello’s position that this sum represents fees collected by Commercial & General Law, whilst Mr McNamara was operating the legal practice and to which he is entitled pursuant to his deed of settlement with Mr McNamara.
On the other hand, Mr Najjar asserts that the monies in question relate to his entitlements pursuant to the settlement of litigation, in which he was involved, which had been conducted on his behalf by Mr McNamara in the Supreme Court of South Australia.
A deed of settlement entered into between him, Bolivar Road, on the one hand, and Indigo Financial Money and Mr Tsoulos, on the other, required Indigo Financial Money and Mr Tsoulos to pay Commercial & General Law a sum of $400,000.00 in instalments, commencing with $100,000.00 on 17 July 2014, and thereafter 68 monthly instalments of $5,000.00, which on my calculations comes to $440,000.000 in total. Mr Najjar asserts that the monies held by Commercial & General Law, referable to him, on its winding up, are referrable to this deed and are therefore his. The relevant deed is dated 18 July 2014.
Mr Viscariello concedes that Commercial & General Law did receive the settlement sum, but a sum in excess of this amount was due to Commercial & General Law to recoup legal fees levied by it against Mr Najjar and/or entities referrable to him in litigation conducted by the firm on his behalf.
In this context, it is Mr Viscariello’s evidence that whilst he was a director of Commercial & General Law, he was aware that Mr Najjar and Bolivar Road were involved in complex legal proceedings, in the Supreme Court of South Australia, between 2009 and 2012 and Mr Najjar generally failed to pay tax invoices for professional services provided to him by Commercial & General Law to him.
Given this dispute, Mr Lewis has paid the sum in question into the litigant’s fund maintained by the court, pending the outcome of the dispute between Mr Viscariello and Mr Najjar as to who of them is entitled to the sum in question. The amount paid into court is $229,419.05, of which Mr Najjar contends he is entitled to approximately $203,000.00.
Mr Viscariello commenced these proceedings on 11 December 2020 seeking a declaration that he is entitled to the sum in question, as a secured party, pursuant to the personal property security deed executed between him and Mr McNamara, which had been registered pursuant to the applicable legislation, the PPS Act.
Mr Najjar filed an affidavit in opposition to this application (but not a formal response) on 8 April 2021.[5] He confirmed Mr McNamara had acted on his behalf and for Bolivar Road in respect of a property development and related litigation, brought by Indigo Financial Money, the trial of which occurred in the first half of 2009 in the Supreme Court of South Australia.
[5] See Affidavit of Walid Najjar filed on 8 April 2021.
He also deposed that he was successful in defending this litigation and a subsequent appeal was also dismissed, with a further order for costs made in his favour. In this context, Mr Najjar asserts that Mr McNamara attended a mediation with the representatives of Indigo Financial Money and Mr Tsoulos at which the issue of the costs awarded in his favour was resolved. Mr Najjar further asserts that this ostensible resolution occurred without his instruction and consent, but he executed the relevant deed under sufferance.
In this context, Mr Najjar deposes as follows:
Whilst I was extremely upset about the settlement of costs and the deed, I felt I had no alternative in the cirucmstances, but to agree to the deed…The only other alternative, as I understood it, was to sue Mr McNamara and/or his firm.
I remember at the time of the telephone call and at the meeting where I signed this settlement deed, that Mr McNamara advised me that Bolivar Road Pty Ltd and I owed approximately $150,000.00 in costs to he and his firm, and that would be paid from the payments due under the settlement deed and that would be paid from the payments due under the settlement deed and anything over and above that amount would be paid back to me.
I had also separately recalled that there was an outstanding debt to Mr McNamara and the firm of about $150,000.00. If Mr McNamara had told me a different figure, I would have challenged him about it.[6]
[6] See Affidavit of Walid Najjar filed on 8 April 2021 at [30]-[32].
Mr Najjar denied ever having any professional relationship with Mr Viscariello. He also asserted that he did not have access to records in respect of the issue as these had been supplied to the liquidator of Bolivar Road, when it had been wound up. In addition, he pointed to the fact that the events in question had occurred over a decade earlier.
In response, Mr Viscariello relies on evidence obtained from Hugh Martin, who was appointed as the liquidator of Bolivar Road. The effect of his evidence is that he was aware that Bolivar Road had a significant liability, for legal fees, to Commercial & General Law, in respect of its litigation with Indigo Financial Money and Mr Tsoulos.
Mr Martin asserts that the liability was in excess of $400,000.00 and Mr Najjar had confirmed this debt, as Bolivar Road’s director, when he completed the necessary statement of affairs on the company’s winding up. However, given the impecuniosity of both Indigo Financial Money and Mr Tsoulos, he was satisfied that the compromise of the action with them, by Bolivar Road, was an appropriate one.
It is to be expected that if Commercial & General Law maintained proper records of the work completed for Mr Najjar, these records are likely to shed significant light on the factual issues arising in the case. In this context, in 8 June 2021, the solicitor for Mr Najjar directed a subpoena to the manager, who been appointed by the Law Society of South Australia to manage the practice of Commercial & General Law, and relevant documents pertaining to the following:
·Correspondence, tax invoices, bank statements reports, bills of costs, receipts, trust account records arising between Commercial & General Law, and Mr Najjar in respect of legal professional services provided by the former to the latter;
·Similar documentation relating to litigation arising between Mr Najjar, Bolivar Road and Indigo Financial Money and Mr Tsoulos in various designated South Australian Supreme Court proceedings.
After an initial objection by the Law Society, it is my understanding that a significant volume of documentation has been surrendered to the custody of the court. On 1 October 2021, the solicitor for Mr Viscariello filed another subpoena seeking production of records of a number of cheque accounts operated by Commercial & General Law, including its trust account and Mr McNamara, as well as related entities.
THE CURRENT PROCEEDINGS
These reasons for judgment do not relate to the determination of the major controversy arising in the case. Rather, they are concerned with two interim issues, which Mr Viscariello and Mr Najjar respectively seek to agitate. These issues were raised in an application in a case filed on 12 July 2021 by Mr Najjar and an application in case filed by Mr Najjar on 23 August 2021.
These issues can be summarised as follows:
·Firstly, Mr Viscariello seeks to amend his claim to seek that Mr Najjar pay him the sum of $767,653.07 said to be due to Commercial & General Law pursuant to a retainer agreement dated 19 November 2008, in respect of legal fees incurred between 1 November 2013 up to 31 March 2019, together with as yet unbilled amounts for legal fees relating to litigation against Indigo Financial Money. These sums are said to be due to him as a consequence of the PPS Deed between him and Mr McNamara;
·Secondly, Mr Najjar seeks orders allowing him and his solicitor to uplift and copy the documents which have been produced by the Law Society. Given the considerable volume of documents relating to Commercial & General Law, which have been subpoenaed by the parties, logistical issues arise as to what are the appropriate arrangements for those documents to be copied and disseminated between the parties and how should any issue relating to professional privilege claimed by Mr Najjar be resolved.
The first issue turns on the application of the PPS deed. Essentially, Mr Viscariello asserts that, if Mr Najjar (and or Bolivar Road) remains indebted to Commercial & General Law in respect of unpaid legal fees, he is entitled to recoup those fees pursuant to his agreement with Mr McNamara. In this context, he asserts that at trial he will rely on the evidence provided by Mr Martin and potentially Mr McNamara himself, as well as others who were involved in the administration of the practice and counsel who appeared on Mr McNamara’s instructions at the trial of the proceedings brought by Indigo Financial Money.
It is Mr Viscariello’s position that if, as Mr Najjar contends, both he and Bolivar Road have paid all the relevant invoices for legal services provided to them by Commercial & General Law, it should be a comparatively easy process for him to obtain documentary proof to this effect from his bank in the form of relevant statements indicating the debiting of the relevant account.
In the context of the second issue, Mr Viscariello seeks the imposition of a number of court directives, if documents are to be copied. These include the following:
·His solicitor be provided with all documents so copied;
·A list of any documents in respect of which legal professional privilege is claimed;
·Access to the documents be utilised as a fishing expedition;
·If the documents are removed from the court premises for copying, the respondent guarantee secure and exclusive possession.
A further interlocutory issue has been raised by Mr Najjar. In an application in a case filed on 23 August 2021, security for costs in an amount of $65,000.00 was sought. Given that no response had been filed in respect of the substantive application had been made, this application has not as yet been allocated a hearing date. It will need to be so fixed following the resolution of the two issues currently being pressed.
Mr Najjar has now filed a response to the unamended application on 8 December 2021. In summary, it is denied that the PPS deed gives Mr Viscariello any priority over Mr Najjar in respect of the sum held by the court. Mr Najjar makes other allegations regarding the probity of the actions of Mr McNamara in compromising the issue of costs arising from the Indigo Financial Money litigation at the mediation of June 2014. He further complains that he was not provided with proper statements in respect of monies advanced by him to Commercial & General Law.
In support of his application for security for costs, Mr Najjar relies on an affidavit of his solicitor Mr Wadlow filed 9 December 2021, which details a number of other proceedings, involving Mr Visciariello, particularly his efforts to avoid the effects of disciplinary action brought against him by the South Australian Legal Practitioners Conduct Commissioner and others, in which issues of costs have been raised and it has been recognised that Mr Visciarello is generally impecunious. In this context, Mr Wadlow further asserts that various corporations, of which Mr Visciariello has been a director, have been wound up.
Mr Najjar objects to the application to amend the application in the manner proposed (that is to seek unpaid legal fees) on the basis that Mr Visciarello has no standing to bring such an application, as there was never any retainer existing between him and either Mr Najjar or Bolivar Road to provide legal services and Mr Visciarello was never his solicitor.
In any event Commercial & General Law has been placed into liquidation and it is the liquidator who is entitled to bring any such application for fees alleged to be owed to the company. Finally, it is asserted that in all likelihood, such an application is, in any event, out of time. In these circumstances, it is submitted that the court should exercise its discretion to decline to allow the amendment sought.
LEGAL PROVISIONS APPLICABLE
The proceedings were commenced in the Federal Circuit Court, prior to the creation of Division 2 of the Federal Circuit and Family Court of Australia pursuant to the provisions of the Federal Circuit and Family Court of Australia Act 2021 (Cth). [7] At the time, the applicable provisions of the Federal Circuit Court Rules 2001 (Cth) required applications to be commenced by the filing of an approved form.[8]
[7] Hereafter referred to as “the FCFCOA Act”.
[8] Hereinafter referred to as “the FCC Rules”.
Pursuant to rule 4.05 of the former FCC Rules, an applicant was ordinarily required to file an affidavit stating the facts relied upon in support of the relevant application. This was the course followed by Mr Viscariello. Pleadings were not generally required. Pleadings were mandated in certain specified proceedings, particularly general protection applications under the Fair Work Act 2009 (Cth).
Otherwise, pursuant to rule 4.05(3), an applicant had an option to commence a proceedings by means of a statement of claim. Generally speaking, how this election was to be exercised depended upon the nature of the action concerned and whether the issues it threw up were more readily defined by a process of pleadings or an early filing of written evidence. In this context, as Judge Driver pointed out in Kalayzich v Santa Sabina College & Anor:
[I]t is pertinent to note that the Federal Circuit Court, unlike the Federal Court, is not generally a court of pleadings. Matters most commonly proceed in the absence of pleadings on the basis of written evidence. It is with this in mind that this Court has simply adopted the rules of the Federal Court in relation to pleadings for the relatively small number of cases in which pleadings are necessary. The Parliament has tasked this Court to deal with matters of less complexity than those dealt with by the Federal Court and the Family Court... Drawn out interlocutory disputes as to the quality of a pleading so sought and provided are alien to the normal practice and procedure of the Court and should, in my view, be discouraged.[9]
[9] Kalayzich v Santa Sabina College & Anor [2020] FCCA 11 at [134] (Driver J).
Pursuant to rule 4.05(3) of the former FCC Rules, if a statement of claim or points of claim are filed, any relevant respondent must file a defence or points of defence instead of an affidavit. It is apparent to me that the parties, whether consciously or otherwise, have adopted an amalgam approach to the matter, in the sense that they have filed documents with the quality of pleadings, together with affidavits of evidence.
An application with elements of a statement of claim with an affidavit has been filed, whilst belatedly a response, denying elements of that application and some affidavit evidence has been filed in response. I acknowledge that the case throws up complex issues of both law and fact. In these circumstances, the court must make some form of evaluation as to whether the case should be conducted by means of pleadings or, in its interlocutory stages, by way of affidavits.
The term pleading refers to the formal documents, in which litigants set out the presentation of their claims and defences to those claims, in the suit, which they wish the court to determine. They are filed and served sequentially, according to the rules of the particular court in question. In Takemoto v Moody’s Investors Service Pty Limited,[10] Justice Flick observed that as a general proposition the function of pleadings is to state with sufficient clarity the case that must be met.
[10] Takemoto v Moody’s Investors Service Pty Limited [2014] FCA 1081 at [23] (Flick J).
A statement of claim must identify a set of alleged facts that have a particular quality, which if established at trial, will entitle the applicant to the remedy or remedies claimed. A defence is the formal rebuttal of those alleged facts. Pleadings are required to contain statements of material fact, which a defence, in turn, will either admit or deny.
An admission will have the effect of ending the factual controversy about an allegation made in a statement of fact. The intent is to confine the issues to be determined by the court invoked to resolve the dispute between the parties concerned.
Essentially, a respondent is made aware of the case it is required to meet and an applicant knows which elements of that case are in dispute. From the court’s perspective, the controversies which it is required to adjudicate are clearly delineated at an early stage. The object being, for all concerned, the ready clarification of issues and a saving of time and resources as any need for investigation of superfluous issues is avoided.
Material facts, in this context, have been defined as facts, whose existence is necessary for the purpose of formulating a complete cause of action.[11]By necessary implication, to provide a legal answer to the cause of action so raised, a defence must provide a rebuttal of each such material fact. Accordingly, there must be a connection between the material fact alleged and a legal principle, which founds the relevant cause of action.
[11] See Bruce v Odhams Press Ltd [1936] 1 KB 697, 712 (Scott LJ).
In Gaven & Gaven (No 2), Judge Jarrett, of this court, succinctly summarised the distinction between an affidavit and a pleading in the following terms:
An affidavit is a statement, sworn or affirmed, by a deponent who gives evidence. The purpose of an affidavit is to provide evidence. An affidavit is different to a pleading. A pleading alleges facts and facts alone (or at least is intended so to do). An affidavit, however, is of a quite different character.[12]
[12] Gaven & Gaven (No 2) [2012] FMCAfam 1005 at [8] (Jarrett J).
Formal pleadings were not mandated in the former Federal Circuit Court by the FCC Rules. However, at the same time, the FCC Rules recognised that some types of proceedings are likely to be better served by the use of pleadings. The FCC Rules did not specifically indicate which type of cases is better suited to the use of affidavits and which is more amenable to pleadings.
As a consequence of the inception of Division 2 of the Federal Circuit and Family Court, the respondents’ application is to be determined by reference to the FCFCOA Act. Section 174 of the FCFCOA Act authorises the court to make rules to govern its practice and procedure.
The relevant rules of Division 2 of the court are the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).[13] However, if circumstances arise which lead to these rules proving to be deficient, the court may apply the Federal Court Rules 2011 (Cth).[14] The court is entitled to modify these rules to suit its own idiosyncratic jurisdiction.
[13] Hereinafter referred to as “the Division 2 Rules”. Rule 1.06 provides that these Rules principally govern general federal law proceedings in Division 2 of the Federal Circuit and Family Court of Australia.
[14] See Federal Court Rules 2011 (Cth) r 1.06 (Cth). Hereinafter referred to as “the FCA Rules”.
In the context of the current controversies between the parties and the court’s place as a lower level court of general federal law, section 190 of the FCFCOA Act is germane. It provides a directive to the court to, in the application of its practice and procedure, to facilitate the just resolution of disputes according to law, as quickly, inexpensively and efficiently as possible. This reflects the objects of the FCFCOA Act as contained in section 5 and is referred to as the court’s overarching purpose.
Rule 1.04 of the Division 2 Rules delineates the obligation of parties to assist the court to achieve its objectives delineated in the overarching purpose. Parties are required to avoid undue delay, expense and technicality. They are also directed to consider options for primary dispute resolution as early as possible.
In respect of the manner in which proceedings are to be commenced, the requirement for the filing of an affidavit and the modification of these requirements in general protection proceedings to allow for pleadings, the new rules do not modify the old regime. Accordingly, the discretion as to whether utilise pleading or not remains extant.
In this context, by necessary implication, it seems to me to be self-apparent that parties are required to consider which of the mechanisms of pleadings, on the one hand or the filing of affidavits of evidence, on the other, is the option which will best fulfil the aspirations of the overarching purposes, both in terms of the reduction of delay, expensive and technicality and achieving the expeditious application of primary dispute resolution, if appropriate.
Apparently, in keeping with its aspiration that the court not be unduly technical in its approach it adopt in conducting civil litigation, Part 7 of the Division 2 Rules provides the court with an unfettered discretion to allow amendment. It reads as follows:
Power to amend
(1) At any stage in a proceeding, the Court or a Registrar may allow or direct a party to amend a document (other than an affidavit) in the way and on the conditions the Court or the Registrar thinks fit.
(2) Subject to rule 7.03, the Court or a Registrar may allow an amendment even if the effect would be to include a cause of action arising after the proceeding was started.[15]
[15] Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 7.01.
In a later case, Kelly v Atanaskovic Hartnell Corporate Services Pty Ltd, Judge Driver, after having noted the court’s remit as a lower level court directed towards resolving cases in a quick and cost effective manner, with as little adherence to legal technicality as possible, observed further as follows:
The Federal Circuit Court is not generally a court of pleadings. Most of the work of the Court is conducted without pleadings on the basis of affidavit evidence. However, in more substantial cases, particularly those where damages are claimed, pleadings are commonly employed. The Court, and I include myself in this, generally takes a reasonably liberal attitude to the drafting of pleadings. It is not unusual for pleadings to be amended several times at the interlocutory stage, leading up to a trial.[16]
[16] Kelly v Atanaskovic Hartnell Corporate Services Pty Ltd [2021] FCCA 552 at [3] (Driver J).
The Federal Court, as befit a superior court of record,[17] contains a specific part of its rules, dealing with the issue of pleadings and requires that applications more often than not be commenced with a statement of claim, in distinction to the Federal Circuit and Family Court.[18] Rule 16.02 of the FCA Rules provides that pleadings are required, amongst other things, to detail:
·The issues required to be resolved by the court;
·To state the material facts on which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial but not the evidence by which such facts are to be proved; and
·The provisions of any statute relied upon.
[17] See Federal Court of Australia Act 1976 (Cth) s 5.
[18] See Federal Court Rules 2011 (Cth) r 8.05.
The formality of this process of pleadings results in the Federal Court being able to know what specific allegations are admitted and which are denied, thus allowing the parameters of the applicable case to be defined well in advance of any trial before it.
In this context, there is more formality required in the Federal Court regarding the amendment of a pleading. However one amendment is allowed without leave prior to the closure of pleadings, with a right to allow for disallowance. Otherwise the leave of the Federal Court is required.[19]
[19] Ibid at Div 16.5.
In my view, it cannot be said that the application to amend, regardless of its merits or otherwise, comes at a late stage or anywhere near the close of pleadings or any other analogous process designed to refine the issues in dispute between the parties. In addition, the application comes prior to any referral to a process of alternative dispute resolution.
In its pursuit of efficient case management, the High Court, most notably in Aon Risk Services Australia Ltd v Australian National University,[20] has generally eschewed the approval, by trial courts, of any late amendment of statements of claim on the basis that such amendments are contrary to the proper administration of justice, particularly in terms of not being conducive to the reduction of delay, and expense in litigation.
[20] Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 189 [25] (French CJ).
In Roberts‑Smith v Fairfax Media Publications Pty Limited (No 5),[21] Justice Besanko has summarised the principles applicable to such late amendments as follows:
•The nature and importance of the amendment sought to be made;
•The extent of any delay which the amendment will occasion and any costs associated with it;
•Any delay in applying for the amendment and the reason for such delay;
•Any prejudice occasioned to the opposing party by the amendment;
•How the parties have previously chosen to conduct the litigation;
•Possible detriment to other court users;
•Potential loss of confidence in the administration of justice by the court too readily acceding to an application to amend without adequate explanation or justification.[22]
[21] Roberts‑Smith v Fairfax Media Publications Pty Limited (No 5) [2020] FCA 1067.
[22] Ibid [16]-[23] (Besanko J).
Mr Doyle of senior counsel for Mr Viscariello, also relied on the list provided in PPG Developments v Capitanio,[23] which also included the possible merits of any amendment at least in the sense that the court should consider whether it raised issues that were arguable or tenable. Accordingly, it seems to me that caution needs to be taken to avoid turning an amendment application into a quasi-summary dismissal application.
[23] PPG Developments v Capitanio (2016) 126 SASR 307, 319 [39] (Doyle J).
Division 16.2 of the Division 2 Rules deals with the production of documents in response to a subpoena. Rule 16.11 authorises the inspection and copying of such documents and places limits on how such copies can be used. It reads as follows:
(1)This Division:
(a)applies to a subpoena for production; and
(b)does not apply to a subpoena for production and to give evidence.
(2)A person who inspects or copies a document under these Rules or an order must:
(a)use the documents only for the purpose of the proceedings; and
(b)not disclose the contents of the document or give a copy of it to any other person without the Court’s permission.
(3)However:
(a)a solicitor may disclose the contents or give a copy of the document to the solicitor’s client or counsel; and
(b)a client may disclose the contents or give a copy of the document to the client’s solicitor.
This rule codifies the principles summarised by the High Court Hearne v Street,[24] namely that documents produced pursuant to a subpoena, if subsequently inspected or copied, cannot be used for any other purpose, other than those related to the litigation. In the case Hayne, Heydon and Crennan JJ said as follows in their joint judgment:
Where one party to litigation is compelled, either by reason of a rule of court or by reason of a specific order of the court or otherwise to disclose documents or information, the party obtaining the disclosure cannot without the leave of the court use it for any purpose other than for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include documents inspected after discovery, answers to interrogatories, documents produced on subpoena, documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits.[25]
[24] Hearne v Street (2008) 235 CLR 125.
[25] Ibid 154 [96] (Hayne, Heydon and Crennan JJ).
Accordingly, the respondent’s solicitor would be bound by this implied undertaking not to do or permit anything unorthodox, to use a neutral expression, in respect of any documents inspected by him. In my view, this implied undertaking, when coupled with the professional obligations attached to all legal practitioners, is the greatest safeguard to the integrity of the documents in question.
CONCLUSIONS
The application to amend comes at an early stage of proceedings, and prior to the case being set down for trial. As such, it has no implications for the court’s capacity to manage the flow of cases coming before it or to cause prejudice to other litigants.
I accept that the proposed amendment is likely to be significant to Mr Visciarello, as it greatly broadens the financial ambit of his claim against Mr Najjar. I do not consider that the amendment, of itself, causes any prejudice to Mr Najjar as it is on fours with the original aspect of Mr Visciarello’s claim that, as a consequence of the PPS deed between him and Mr McNamara, he is entitled to claim legal fees alleged to be due to Commercial & General Law.
More significantly, the relevant Division 2 rules allow amendment without leave. In addition, this is a court which has a limited use of pleadings and, in the current proceedings, each party has elected to utilise affidavit material to a significant degree. It seems to me that the most efficient way of the case been managed, is if it proceeds by way of the filing of affidavits of evidence.
At this stage, the respondent has been able, to a significant degree, outline his view that Mr Visciarello’s application is incapable of being sustained given the lack of professional relationship between him and the applicant and the fact that even if there were any fees outstanding by him, they would be due to the liquidator of Commercial & General Law.
However, in my view, in determining whether to exercise a discretion to disallow an amendment given the court’s inherent jurisdiction to manage the litigation before it, the court is precluded from considering the overall merits of the application concerned, unless the amendment concerned is clearly untenable or fanciful. I do not consider that the proposed amendments satisfy these descriptors.
In any event, it is open to the respondent to bring an application for summary dismissal of the claim against him pursuant to the provisions of section 143 of the FCFCOA Act on the basis that it has no reasonable prospects of being successfully prosecuted. In all these circumstances I propose to allow the amendment proposed by the applicant.
Clearly, the respondent has a legitimate forensic interest in the various documents which have been subpoenaed from the Law Society, as indeed does the applicant. It seems probable that these records will be central in the resolution of the issue of how the monies currently subject to the court’s control should be directed. In these circumstances, in order to advance the case it will be necessary for Mr Najjar’s solicitor to inspect the voluminous records.
In this context, I accept that issues of practicality dictate that the process of inspection take place away from the court’s premises. It will be far easier and cheaper if the solicitor concerned has access to a photocopier at his own office.
The Division 2 Rules authorise a solicitor to release inspected documents to his client. However, in my view, the import of the relevant rule, is that any solicitor concerned retains oversight of, and responsibility for the probity of the process involved. In addition, as previously indicated, the use of such documents are subject to the undertaking that they are not to be used for any purpose other than one relating to the litigation in question, unless the court otherwise authorises such a purpose.[26]
[26] Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 16.11.
I have been provided with detailed correspondence, which has passed between the respective solicitors for Mr Visciarello and Mr Najjar, in respect of the subpoena issue. In particular, in correspondence dated 29 July 2021, Mr Wadlow has indicated his willingness to abide by a strict protocol in respect of his firm’s management of the documents once they are in its custody.
Given the fact that Mr Wadlow is an officer of the court, and subject to the implied undertaking in respect of the use of documents, I do not propose to make a specific order to this effect or generally requiring that he maintain exclusive possession of them. It is implicit that he has the trust of the court to ensure the integrity of the documents concerned when they are in his possession and control.
I will fix the application for security of costs for two hours on 26 May 2022 at 4:00 pm and direct that Mr Visciarello file a response to this application, and any affidavits in support on or before 5 May 2022.
As I have directed that the case is to be determined by way of an application, followed by a response and an affidavit, I will make the order sought in respect of an amended response, but will direct it be filed after the completion of the inspection process. In addition, I will reserve the issue of costs raised in these interlocutory application generally.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 17 March 2022
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