Bell v Hartnett Lawyers [2021] NSWSC 202

Supreme Court New South Wales

Medium Neutral Citation: Bell v Hartnett Lawyers [2021] NSWSC 202 Hearing dates: 26 February 2021 Date of orders: 11 March 2021 Decision date: 11 March 2021 Jurisdiction: Equity - Applications List Before: Slattery J Decision: See paragraph [28]. Catchwords: CIVIL PROCEDURE – Service of originating process – where service of process is said to be defective pursuant to the Uniform Civil Procedure Rules 2005 – where service failed to include a notice under the Service and Execution of Process Act 1992 (Cth) – the Court grants leave to serve originating process. Legislation Cited: Civil Procedure Act 2005, s 56 Jurisdiction of Courts (Cross-vesting) Act 1978 Service and Execution of Process Act 1992 Uniform Civil Procedure Rules 2005, rr 10.3(3), 10.3(4) Cases Cited: Adams v Bank of New South Wales [1984] 1 NSWLR 285 Deakin-Bell v NSW Trustee & Guardian [2016] NSWSC 540 Simone Starr-Diamond v Talus Diamond (No. 3) [2013] NSWSC 351 Category: Procedural rulings Parties: Plaintiff: Robert Anthony Bell Defendant: Beau Timothy John Hartnett Lawyers Representation: Counsel:

Plaintiff: S. Sykes Defendant: I. King

Solicitors:

Plaintiff: D. Pickering, McVittie Legal Defendant: H. Deen, Hartnett Lawyers File Number(s): 2020/00254590 Publication restriction: No

EX-TEMPORE Judgment 1. The plaintiff, Mr Anthony Bell, is the executor and sole beneficiary of the estate of his late mother, Ms Mabel Dawn Deakin-Bell. The defendant, Mr Beau Hartnett, is the principal of Hartnett Lawyers, a firm on Queensland's Gold Coast. 2. The defendant's application before the Court concerns a dispute about the service of process. There are many other disputes between these parties. But for the purposes of this application, it is not necessary to detail these extra disputes at length. 3. The connecting factor in these disputes is the late Mr Robert Deakin-Bell, who was married twice, first to Mabel Deakin-Bell and later to Gwendoline Deakin-Bell. Without intending any disrespect to any party, the Court will refer to family members by their first names in the balance of this judgment. 4. Mabel was married and divorced from Robert, with whom she had her son, Anthony. When this marriage ended, Mabel became the registered proprietor of certain matrimonial real property in Ballina ("the Ballina property"). Their November 1994 property settlement left Mabel's ownership of the Ballina property encumbered by a registered first mortgage to Robert for the sum of $30,000. 5. Robert went on to marry Gwendoline. But this marriage only lasted a few years. Following Robert and Gwendoline's separation, in August 2003, Robert transferred his mortgage over the Ballina property to Gwendoline. Mabel died in September 2013, leaving a will naming Anthony as the executor of her estate. But he did not take out probate directly after his mother's death. 6. Gwendoline sought to enforce her first mortgage against Mabel's estate. She exercised her power of sale as mortgagee. Hartnett Lawyers brought proceeding for Gwendoline before Davies J in April 2016 (Deakin-Bell v NSW Trustee & Guardian [2016] NSWSC 540), seeking possession of the Ballina property ("the possession proceedings"), Gwendoline obtained orders for possession and sale of the property. Davies J made the following orders on 29 April 2016, including Orders (5) allowing deduction of certain costs and expenses "in relation to the Mortgage" and (6) directing payment of the net proceeds of sale to Mabel's estate or otherwise into Court: "1. The plaintiff be granted leave to file and serve the notice of motion for default judgment dated 26 April 2016. 2. Judgment for the plaintiff for possession of all of the land comprised in Lot 13 in Deposited Plan 242676 being the land situated at 4 Apsley Street, Parish of Ballina in the County of Rous, in the State of New South Wales (the Property). 3. Leave be granted to the plaintiff to issue a writ of possession to enforce Order 2. 4. Execution of the writ of possession for the Property be stayed until midnight on Tuesday 5 July 2016. 5. After the Property has been sold, the plaintiff be entitled to apply the proceeds of sale towards payment of: 5.1. the principal sum of $30,000.00 owing under the registered Mortgage dated 11 November 1994 (the Mortgage); 5.2. pursuant to the terms of the Mortgage, and on an indemnity basis, the costs and expenses she has incurred in relation to the Mortgage and these proceedings to date, and any such costs that she incurs in the future; and 5.3. pre-judgment interest on the principal sum of $30,000.00 pursuant to section 100 of the Civil Procedure Act 2005 (NSW) for the period 6 September 2013 to 29 April 2016. 6. After deduction of the amounts referred to in Order 5 above, the plaintiff pay the balance of the proceeds of sale of the Property to: 6.1. any person who has by that time been appointed as administrator or executor of the Estate of Ms Mabel Deakin-Bell; or 6.2. if no person has been appointed administrator or executor, then to the Court." 1. The Ballina property was sold, generating net proceeds of sale of $352,137.02. After the deduction of agent's expenses, the proceeds were paid into the defendant's trust account with Mr Hartnett on 27 October 2016. 2. In circumstances that are not yet clear to the Court, within weeks of the sale of the Ballina property, Gwendoline's trust account with Hartnett Lawyers was debited with various payments. Payments were made on 31 October 2016 of $2,525.35 to Ballina Shire Council, on 18 November 2016 of $39,089.57 to Gwendoline, and then another payment on 18 November of $288,601.03 to Harnett Lawyers, apparently on account of legal fees, leaving a balance of $33,792.46 in the trust account of Gwendoline as mortgagee. 3. Gwendoline died in May 2018. No-one represents her estate at present. Hartnett Lawyers remained as the solicitor on the record for the plaintiff, Gwendoline, in the possession proceedings, at least until her death. 4. Through over four years of voluminous correspondence, Mabel's estate has essentially been seeking an account of the use of the sale proceeds from Gwendoline, as the mortgagee, and then after May 2018, from Gwendoline's estate. In the absence of a representative of Gwendoline's estate, the solicitors for Mabel's estate, McVittie Legal, corresponded with Mr Hartnett. The correspondence has involved complaints to the Law Society of Queensland. A cost assessment was completed between the estates of Gwendoline and Mabel in September last year. But Mr Hartnett did not participate in that costs assessment, claiming that he did not act for Gwendoline's estate. 5. Anthony has now obtained probate of Mabel's estate, giving him standing to commence these proceedings, seeking relief as follows: "1. A declaration that the defendant, Mr Hartnett, holds the amount of $287,551.30 as trustee for the plaintiff. 2. An order that the defendant pay the amount of $287,551.30 to the plaintiff." 1. The interlocutory relief sought in the Summons was in effect a freezing order that that sum of $287,551.30 not be disposed of by the defendant. This sum appears to have been calculated as being more or less the sale proceeds less the $67,556.68 claimed in the Amended Statement of Claim in the possession proceedings. 2. The initial contest in this case is about service. Anthony's lawyers attempted service of the Summons at Mr Hartnett's legal office on the Gold Coast in September of last year. But it is common ground that the necessary notice under the Service and Execution of Process Act 1992 ("SEPA") was not attached to the Summons served in September 2020. It is conceded that that service therefore could not be effective. It was also in issue whether the September 2020 service had actually occurred physically. But on Wednesday of this week, physical service on the defendant took place. This is not disputed. 3. The argument before the Court arises today because the service last Wednesday was said to be defective in another way. The necessary notice under the SEPA accompanied last Wednesday's originating process. But that originating process did not contain an endorsement with words that complied with Uniform Civil Procedure Rules 2005 ("UCPR"), r 10.3(3), namely, that the plaintiff intended to proceed under the SEPA, rather than under the UCPR, r 10.3, which provides as follows: "10.3 Service of originating process in Australia (1) This rule applies to proceedings in the Supreme Court. (2) Subject to this Part, originating process may be served anywhere in Australia, whether in New South Wales or elsewhere. (3) An originating process for service in Australia, but outside New South Wales, must bear a statement either that the plaintiff intends to proceed under the Service and Execution of Process Act 1992 of the Commonwealth or that the plaintiff intends to proceed under the Uniform Civil Procedure Rules 2005. (4) The plaintiff may proceed otherwise than in accordance with the intention stated under subrule (3), but only with the leave of the court." 1. The question for decision is whether the Court should grant the plaintiff leave to proceed under UCPR, r 10.3(4). Lengthy argument has taken place about this. For the following reasons, the Court will grant that leave. 2. First, Mr Hartnett says this defect is fatal. But, in the Court's view, it is minor in the present circumstances. The endorsement of the intention to proceed under the SEPA could be readily assumed from the fact that the SEPA notice was served with the originating process. The defendant is an experienced solicitor. The Court can infer, from the nature of the correspondence issued on behalf of his firm, he is a person of some commercial and legal sophistication. He would have little difficulty in concluding that the provision of a notice under the SEPA with the originating process readily implies that the plaintiff would seek to rely upon the SEPA. 3. Second, Mr Hartnett argues that the proceedings are in such a poor state of preparation and construction that it is vulnerable to being struck out in any event, and therefore the Court should not now grant leave. 4. There is a degree of merit to this argument. There are difficulties with the plaintiff's case for relief against Mr Hartnett alone. As the Court has pointed out in the course of submissions, Gwendoline and her estate (as mortgagee) must account as a trustee to Mabel's estate (as mortgagor). The solicitor acting for Gwendoline's estate is not the party immediately accountable to Mabel's estate. The solicitor for the mortgagee does not ordinarily have a trustee relationship with the registered proprietor but is only the trustee's agent: Adams v Bank of New South Wales [1984] 1 NSWLR 285; (1984) NSW ConvR 55-179. Unless other facts can be pleaded, alleging for example, that the defendant received funds with knowledge of a breach of trust by the mortgagee, the proceedings may be vulnerable to a strikeout. But as service issues have intervened, an opportunity to plead this case has not yet occurred. Nor has consideration yet been given to joining Gwendoline's estate. It is premature to conclude that the proceedings are vulnerable to strikeout, unless an opportunity is first given for the plaintiff to plead its claim for relief against Mr Hartnett and Gwendoline's estate. So leave under UCPR, r 10.3(4) should not be refused on the ground of weakness in the plaintiff's case. 5. Other arguments were put on behalf of the defendant. This was said to be a misconceived claim for an account from the mortgagee, Gwendoline's estate, and that her estate is not a party. But this is not much more than a restatement of the issues already considered. Attention must indeed be given to the proper parties to these proceedings, and what is the real cause of action, if any, against the defendant solicitor. 6. Now the Court has granted leave under UCPR, r 10.3(4), the Court is required under Civil Procedure Act 2005, s 56 to bring the real issues in these proceedings to resolution and to quell the controversy between these parties which has now gone on for five years. 7. The circumstances raise a number of questions for an objective observer. They may all be readily able to be answered when issue is joined. One of those questions is how the defendant solicitor was able to issue a memorandum of fees, if that is what happened, to authorise the transfer of $288,601.03 out of his client's trust account to his firm on 18 November 2016, so soon after the sale of the Ballina property. So large a bill for about seven months' work from the commencement of the possession proceedings (in March 2016) up to the sale of the Ballina property (in October 2016), calls for explanation. Mabel's estate was prima facie entitled to an account from Gwendoline in relation to the transfer of that sum, which Gwendoline had held on trust for her. It may be that the transfer of this sum by Gwendoline to Mr Hartnett can be readily explained by proper payment authorities and the production of regular bills of costs itemizing what work had been done for Gwendoline in relation to the exercise of the power of sale up to that date. But that will be a matter for later analysis. 8. The Court has an obligation to get these proceedings into order. It will be necessary for the plaintiff to join Gwendoline's estate to these proceedings. It is also necessary for these proceedings to be joined with the possession proceedings brought by Gwendoline and in which Davies J made orders (Order 6) which on the material presently available appear to have not been complied with by Gwendoline's estate, at least in respect of the admitted trust account balance of $33,792.46. 9. The Court will initiate this of its own motion. The Court will adjourn these proceedings for three weeks to allow the plaintiff to bring in an amended process to join the estate of Gwendoline and for the file in the possession proceedings to be retrieved. 10. If Mr Bell wishes to make any application in the possession proceedings, he will first need to substitute himself for the NSW Trustee and Guardian. After his grant of probate, he now fully represents the interests of Mabel's estate. 11. The fact that Gwendoline's estate is unrepresented in the possession proceedings is readily curable by the application of UCPR, r 7.10; the Court can make an order for someone to represent the estate of a deceased person or for the matter to proceed against the estate in the absence of a representative. 12. Thought will also have to be given to how Gwendoline's estate will be represented in the present proceedings and whether or not an order will be made for the appointment of someone to represent that estate as a possible second defendant. But it may be that because Gwendoline died domiciled in Queensland, orders may need to be considered under the Queensland law in accordance with this Court's extended interstate jurisdiction under the Jurisdiction of Courts (Cross-vesting) Act 1978: see Simone Starr-Diamond v Talus Diamond (No. 3) [2013] NSWSC 351. 13. The lengthy correspondence between the parties in this case has partly been the product of a lack of focus on correct legal principles. The Court is now endeavour to apply the correct principles, so that both these proceedings can be resolved after full compliance with the Court's orders for the possession proceedings.