Colonial Mutual Superannuation Pty Ltd v Flammia No 2 [2007] FCA 1655

FEDERAL COURT OF AUSTRALIA

Colonial Mutual Superannuation Pty Ltd v Flammia No 2 [2007] FCA 1655

EVIDENCE – allegations of fraud – whether first respondent has no case to answer – whether evidence to support case of deceit – whether evidence inherently unreliable or equivocal. Prentice v Cummins 124 FCR 67 cited Gould v Vaggelas157 CLR 215 cited COLONIAL MUTUAL SUPERANNUATION PTY LTD v LORENZO FLAMMIA NSD1714 OF 2005

EMMETT J

1 NOVEMBER 2007

SYDNEY IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD1714 OF 2005

BETWEEN: COLONIAL MUTUAL SUPERANNUATION PTY LTD

ABN 56 006 831 983

Applicant

AND: LORENZO FLAMMIA

First Respondent

WILLIAM ANASTASIADIS

Second Respondent

LORENZO FLAMMIA

Cross-Claimant

LAWCOVER INSURANCE PTY LIMITED

Cross-Respondent

JUDGE: EMMETT J

DATE: 1 NOVEMBER 2007

PLACE: SYDNEY

REASONS FOR RULING

INTRODUCTION 1 This proceeding arises out of a fraud committed on the applicant, Colonial Mutual Superannuation Pty Ltd (Colonial). By the fraud, Colonial was induced to cause a cheque in the sum of $438,802.80 to be drawn in favour of Stanley G. Stevens. The cheque was sent to the respondent, Mr Lorenzo Flammia, a solicitor. Colonial believed that it had been instructed to act in that way by Mr Stanley Gordon Stevens, who was a member of the SuperTrace Eligible Rollover Fund (the SuperTrace Fund), a superannuation fund of which Colonial was the trustee. In fact, Mr Stevens had given no such instructions. 2 Mr Flammia paid the cheque into his firm's trust account. He subsequently drew a cheque on that account for the vast bulk of the amount of the bank cheque. The trust account cheque was made payable to Alliance Property Investments Pty Limited (Alliance) and was paid into an account of Alliance with Westpac Banking Corporation. The proceeds of the trust account cheque were withdrawn in cash several days later. 3 Colonial commenced a proceeding against Mr Flammia to recover the sum of $438,802.80, together with interest. The basis for Colonial's claim against Mr Flammia did not originally include a cause of action in deceit. 4 However, Mr Flammia sought indemnity from the cross respondent, LawCover Insurance Pty Limited (LawCover), under a professional indemnity policy of insurance (the Policy) that was in force between LawCover and Mr Flammia at the relevant time. By the Policy, LawCover agreed to indemnify Mr Flammia against civil liability for any claim that arises from his legal practice and that is first made against him during the period of insurance. However, the Policy provides that LawCover will not indemnify Mr Flammia for a claim that arises from any dishonest or fraudulent acts or omissions on his part whether directly or indirectly. 5 Since LawCover did not accept liability to indemnify under the Policy, Mr Flammia filed a cross claim against LawCover. Colonial's claim was first made during the currency of the Policy and LawCover admitted that the claim by Colonial against Mr Flammia in the proceeding is a claim that arises from Mr Flammia's legal practice within the meaning of the Policy. However, in its defence, LawCover denied liability to indemnify Mr Flammia on the ground that the claim in respect of which indemnity was sought arose from dishonest or fraudulent acts or omissions on the part of Mr Flammia. After LawCover filed that defence, Colonial amended its statement of claim to include an allegation of deceit against Mr Flammia.