Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Rahme v Kekatos Lawyers Pty Ltd [2024] NSWCA 31 Hearing dates: 29 November 2023 Date of orders: 19 February 2024 Decision date: 19 February 2024 Before: Payne JA at [1]; Mitchelmore JA at [2]; Simpson AJA at [50] Decision: (1) The application for leave to appeal is dismissed. (2) The applicant is to pay the respondent's costs including the costs of the draft notice of contention. Catchwords: CIVIL PROCEDURE — abuse of process — where former solicitors claim payment for legal costs — where client recovers legal costs as damages from third party in Court of Appeal — where client subsequently argues that not liable for the costs CIVIL PROCEDURE — Court of Appeal — application for leave to appeal — where applicant's submissions do not raise any point of principle or general importance, or disclose any substantial injustice — where applicant's success would make no practical difference APPEALS — appeal from Local Court under s 39 or s 40 of Local Court Act 2007 (NSW) — whether findings of fact can be made on appeal Legislation Cited: Legal Profession Uniform General Rules 2015 (NSW), rr 36(4), 42, 47 Legal Profession Uniform Law 2014 (NSW), Pts 4.2, 4.3, ss 135, 138, 144, 180, 198 Local Court Act 2007 (NSW), ss 39, 40, 41 Supreme Court Act 1970 (NSW), s 101(2)(r) Cases Cited: Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300; [1993] HCA 6 Lesley-Swan v Owners SP 32735 [2013] NSWSC 1635 Liao v State of New South Wales [2014] NSWCA 71 Rahme v Benjamin & Khoury Pty Ltd (No 2) [2019] NSWCA 239 Rahme v Benjamin & Khoury Pty Ltd [2019] NSWCA 211 Reichel v Magrath (1889) 14 App Cas 665 Rose v Tunstall [2018] NSWCA 241 Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212; [2016] HCA 44 Tomlinson v Ramsey Foods (2015) 256 CLR 507; [2015] HCA 28 Category: Principal judgment Parties: Dana Rahme (Applicant) Kekatos Lawyers Pty Ltd (Respondent) Representation: Counsel: CJ Bevan / AJ Kaylinger (Applicant) Q Rares (Respondent) Solicitors: Solon Lawyers (Applicant) Kekatos Lawyers Pty Ltd (Respondent) File Number(s): 2023/221770 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of NSW Jurisdiction: Common Law Citation: [2023] NSWSC 528; [2023] NSWSC 651 Date of Decision: 18 May 2023; 16 June 2023 Before: Schmidt AJ File Number(s): 2022/118726 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This headnote is not to be read as part of the judgment] In October 2015, the applicant, Dana Rahme, commenced proceedings in the Supreme Court against her former solicitors, Benjamin & Khoury Pty Ltd (B & K), alleging breach of fiduciary duty including in relation to a caveat lodged by B & K over a property she owned (the B & K proceedings). Mrs Rahme engaged the respondent, Kekatos Lawyers Pty Ltd (Kekatos Lawyers), to remove the caveat. On 8 October 2019, the Court of Appeal gave judgment for Mrs Rahme against B & K in the sum of $302,040.30 including interest. That sum included amounts billed by Kekatos Lawyers and the barrister totalling $35,009.50 (the caveat costs). On 9 December 2020, Kekatos Lawyers filed a Statement of Claim in the Local Court against, relevantly, Mrs Rahme, claiming the caveat costs plus interest. Kekatos Lawyers alleged that it had been retained in the B & K proceedings, that fees were due and payable pursuant to invoices issued under the applicable costs disclosure and costs agreement, and that the fees remained unpaid. Kekatos Lawyers further alleged that the outstanding amounts owed to it and the barrister were incorporated in full in the damages awarded by the Court of Appeal. In her Further Amended Defence to the Statement of Claim, Mrs Rahme admitted that Kekatos Lawyers had issued invoices but denied the other allegations. Kekatos Lawyers applied to strike out the defence, on the ground that it would be an abuse of process for Mrs Rahme to rely on any defects in the retainer agreement as she had successfully claimed the costs as a head of damage in the Court of Appeal. On 29 March 2022, the Magistrate gave judgment in favour of Mrs Rahme. Her Honour relevantly concluded that the Court of Appeal's decision could not give rise to an entitlement in favour of Kekatos Lawyers, nor could it be an abuse of process that Mrs Rahme, who had been unaware that the costs disclosures were inadequate, sought to challenge a claim for costs which had not been formulated in accordance with the relevant legislation. Kekatos Lawyers appealed to the Supreme Court pursuant to ss 39 and 40 of the Local Court Act 2007 (NSW). Its principal contention was that the Magistrate erred in failing to conclude that Mrs Rahme's defence of the Local Court Proceedings was an abuse of process. Schmidt AJ allowed the appeal, concluding that the case which Mrs Rahme successfully advanced in the Court of Appeal necessarily admitted her binding legal obligation to pay the caveat costs, and resiling from that position in the Local Court involved an abuse of process. Mrs Rahme sought leave to appeal, principally on the basis that Schmidt AJ erred in, first, concluding that Mrs Rahme's defence involved an abuse of process, and second, finding that Mrs Rahme had accepted in the Local Court that she had not paid the caveat costs. Mrs Rahme contended the caveat costs had been, or would have been, paid out of the damages paid into the trust account of Kekatos Lawyers, which Kekatos Lawyers had applied, without her authority, in payment of other costs billed to her, in breach of the provisions of the Legal Profession Uniform Law 2014 (NSW). The Court (Mitchelmore JA; Payne JA and Simpson AJA agreeing), dismissing the application for leave to appeal with costs, held: (1) The primary judge did not err in proceeding on the basis that Kekatos Lawyers' abuse of process argument was in issue before the Magistrate and had to be determined, in the absence of a notice of contention before the primary judge in which Mrs Rahme challenged this aspect of the Magistrate's decision: [28]. (2) The primary judge correctly concluded that Mrs Rahme's pleading in the Local Court was an abuse of process. The Court of Appeal made a finding, on Mrs Rahme's application, that the caveat costs should form part of the award of damages: [29]. The re-litigation of the same issues would be manifestly unfair to Kekatos Lawyers and bring the administration of justice into disrepute: [31], [33]. Liao v State of New South Wales [2014] NSWCA 71 applied; Reichel v Magrath (1889) 14 App Cas 665; Tomlinson v Ramsey Foods (2015) 256 CLR 507; [2015] HCA 28 considered; Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212; [2016] HCA 44 distinguished. (3) The primary judge did not err in concluding that Mrs Rahme accepted in the Local Court that she had not paid the caveat costs to Kekatos Lawyers: [38]. (4) In respect of Mrs Rahme's second argument, the primary judge correctly concluded that, in an appeal brought pursuant to ss 39 and 40 of the Local Court Act, she did not have power to make the necessary primary findings of fact: [40]. No evidence had been led in the Local Court to support a finding that Kekatos Lawyers transferred funds from the trust account without her authority, or that Mrs Rahme required the caveat costs to be paid first, out of the damages received from B & K: [42]. Moreover, Mrs Rahme did not file a notice of contention before the primary judge seeking to agitate the issue: [41]. Rose v Tunstall [2018] NSWCA 241 applied; Lesley-Swan v Owners SP 32735 [2013] NSWSC 1635 considered. (6) Assuming Mrs Rahme should never have been sued for the caveat costs in the Local Court, the commercial reality is that she remains liable to pay costs of at least $35,000 to Kekatos Lawyers, which tells against the grant of leave: [45]. (7) Mrs Rahme's submissions do not otherwise raise any point of principle or general importance, nor do they disclose any substantial injustice. As a practical matter, considering the correctness or otherwise of the primary judge's decision not to recall her earlier decision would have no bearing on the issues that Mrs Rahme seeks to ventilate on the application: [8], [47]. JUDGMENT 1. PAYNE JA: I agree with Mitchelmore JA. 2. MITCHELMORE JA: This application for leave to appeal arises from a dispute between the applicant, Dana Rahme, and the respondent, Kekatos Lawyers Pty Ltd (Kekatos Lawyers) regarding legal services that Kekatos Lawyers performed for Mrs Rahme in removing a caveat. The amount of money involved is $35,009.50 (the caveat costs). 3. Mrs Rahme's former solicitors, Benjamin & Khoury Pty Ltd (B & K), had lodged the caveat over a property she owned. At the time that Mrs Rahme engaged Kekatos Lawyers to remove the caveat, she was in dispute with B & K, including in relation to the costs agreements pursuant to which B & K lodged the caveat. Mrs Rahme commenced proceedings in the Equity Division against B & K, alleging breach of fiduciary duty and seeking damages and equitable compensation (the B & K proceedings). The Amended Schedule of Damages filed on her behalf included the caveat costs as a specific item. Although Mrs Rahme was unsuccessful at first instance, the Court of Appeal allowed her appeal and made an order that B & K pay damages to Mrs Rahme in an amount that included the caveat costs. 4. On 9 December 2020, Kekatos Lawyers commenced proceedings against Mrs Rahme in the Local Court to recover the caveat costs. In her Further Amended Defence to the Statement of Claim, Mrs Rahme pleaded that she was not liable to pay the caveat costs, prompting Kekatos Lawyers to allege abuse of process in light of the position she had taken in the B & K proceedings with respect to those costs. On 29 March 2022, the Local Court gave judgment for Mrs Rahme. Kekatos Lawyers appealed to the Supreme Court from the Magistrate's decision, pursuant to ss 39 and 40 of the Local Court Act 2007 (NSW). Schmidt AJ allowed the appeal, ordering Mrs Rahme to pay the caveat costs: Kekatos Lawyers Pty Ltd v Rahme [2023] NSWSC 528 ("Rahme No 1"). 5. It was ultimately common ground before Schmidt AJ that the Magistrate had misunderstood the Court of Appeal's decision. In allowing the appeal, her Honour concluded that the Magistrate's decision was affected by legal error, and that Mrs Rahme's defence to the claim for the caveat costs constituted an abuse of process. 6. Mrs Rahme's application for leave to appeal was heard concurrently with the substantive appeal, although it was made clear to counsel appearing for Mrs Rahme that he should not assume that leave would be granted. The concurrent hearing of the leave application and the appeal resulted in a saving of time and cost, but the fact remains that the amount of the caveat costs was well below the statutory threshold in s 101(2)(r) of the Supreme Court Act 1970 (NSW), and was likely far eclipsed by the costs associated with the proceedings in the Local Court and the Supreme Court. 7. In seeking leave to appeal, Mrs Rahme contended that the Magistrate had reached the correct conclusion and that Schmidt AJ erred in concluding to the contrary. In the submissions in reply, Mrs Rahme summarised her case as involving the following question: "Whether the doctrine of abuse of process, based on inconsistent judgments, can operate to overcome, firstly, the non-existence of the costs agreement and tax invoices sued on (or, if they exist, their statutory invalidity), in contravention of Part 4.3 of the [Legal Profession Uniform Law 2014 (NSW) (the Uniform Law)], secondly, the decision of the law practice to apply an award of damages, which includes those costs as a head of damage and held by it as trust money for the client, in payment of other costs claimed by it, which are not a head of damages, in contravention of Part 4.2 of the Uniform Law, thirdly, the absence of any determination by this Court of Mrs Rahme's liability to Kekatos for the caveat costs in the context of the statutory regime for costs disclosure, billing and recovery, and fourthly, the forensic decision by the law practice not to plead abuse of process as a cause of action to support its claim?" 1. Although the overall question was described as one of law, it raises, at best, a question of mixed fact and law; and each of the four parts involves a question of fact. In respect of the factual questions, the application for leave faces the insuperable difficulty that the appeal to the primary judge was brought pursuant to s 39 and/or s 40 of the Local Court Act, which do not permit the making of findings of primary fact. Even apart from that difficulty, the questions said to arise on the application for leave are tied to the particular circumstances of the case. There is no issue of principle or question of general importance, or a reasonably clear injustice. The application for leave to appeal should be dismissed, with costs. Background to the application for leave to appeal 1. In October 2015, Mrs Rahme commenced the B & K proceedings, claiming that B & K had breached fiduciary duties owed to her and seeking damages and equitable compensation. The Amended Schedule of Damages filed on her behalf included the heading "Costs payable to Kekatos Lawyers – Caveat Proceedings" and itemised amounts billed by Kekatos Lawyers and the barrister totalling $35,009.50. 2. On 21 November 2018, Emmett AJA dismissed the B & K proceedings: Rahme v Satouris [2018] NSWSC 1753. Mrs Rahme appealed from Emmett AJA's decision. On 30 August 2019, the Court of Appeal upheld her appeal and directed the parties to bring in short minutes of order: Rahme v Benjamin & Khoury Pty Ltd [2019] NSWCA 211. Macfarlan JA, with whom Bathurst CJ and McCallum JA agreed, relevantly stated at [138]: "Having succeeded in her claim against B&K for breach of fiduciary duty, Mrs Rahme is entitled to have an amount equivalent to the legal costs that she paid B&K paid back to her by way of restitution and to obtain from B&K equitable compensation for the amount she paid to third parties in consequence of B&K's breaches of fiduciary duty. If she incurred liabilities to third parties in such circumstances, she is entitled to compensation in respect of the liabilities also even if she has not yet satisfied them. These amounts appear to total $342,193.69, plus interest. As noted earlier, the primary judge said that he did not believe that there were any outstanding issues in respect of the quantum of Mrs Rahme's claim." 1. On 8 October 2019, the Court of Appeal handed down Rahme v Benjamin & Khoury Pty Ltd (No 2) [2019] NSWCA 239, in which it addressed and resolved a number of contentious matters arising on the competing short minutes of order. Relevantly for present purposes, B & K submitted that the caveat costs, which were calculated on a full indemnity basis, should not be included in the monetary judgment in Mrs Rahme's favour. In rejecting that submission, the Court stated at [4]: "As the agreements between Mrs Rahme and B & K were, on the basis of the Court's judgment on the appeal, entered into in breach of B & K's fiduciary duty, B & K's caveat was not properly lodged and Mrs Rahme was entitled to take proceedings to have it removed. The costs she incurred in doing so were therefore consequential on B & K's breach of fiduciary duty." 1. The orders of the Court of Appeal included giving judgment for Mrs Rahme against B & K in the sum of $302,040.30 including interest to 6 September 2019. That sum included the caveat costs. 2. On 9 December 2020, Kekatos Lawyers filed a Statement of Claim (SOC) in the Local Court against, relevantly, Mrs Rahme, claiming the caveat costs plus interest. Kekatos Lawyers alleged that it had been retained in the proceedings relating to removing the caveat, that fees for legal services and disbursements were due and payable pursuant to invoices issued under the applicable costs disclosure and costs agreement, and that the fees remained unpaid (SOC [4]-[8]). Kekatos Lawyers further alleged that the outstanding amounts owed to it, along with outstanding fees invoiced by the barrister, Mr Allen, were incorporated in full in the damages awarded by the Court of Appeal (SOC [9]-[12]). 3. In the Further Amended Defence (FAD), Mrs Rahme admitted that Kekatos Lawyers had issued invoices (FAD [1]), but denied the other allegations, including that fees were due and payable, that there were outstanding fees, and that the fees were incorporated in the damages the Court of Appeal had ordered (FAD [2]-[3]). In further answer to the whole of the Statement of Claim, Mrs Rahme pleaded that: 1. she did not enter a cost agreement with Kekatos Lawyers within the meaning of s 180 of the Legal Profession Uniform Law 2014 (NSW) (the Uniform Law) (FAD [4(a)-(aa)]); 2. alternatively, the costs agreement that Kekatos Lawyers relied upon did not comply with the requirements of the Uniform Law and was void or unenforceable, such that Kekatos Lawyers was precluded from suing to recover its costs unless it applied for an assessment under s 198 of the Uniform Law, and because the time to apply for assessment had expired Kekatos Lawyers could not proceed against her for recovery of the unpaid costs (FAD [4(b)-(cd)]); 3. further, Kekatos Lawyers had breached ss 135(1) and (3), 138(1)(b) and 144(2)(b) of the Uniform Law, and rules 36(4), 42 and 47 of the Legal Profession Uniform General Rules 2015 (NSW), in applying the money it held in trust to pay outstanding costs without her express or implied knowledge or approval, and what had been paid out either exceeded, at best, or satisfied, at worst, Kekatos Lawyers' entitlement to recover its fair and reasonable legal costs (FAD [4(e)-(f)]). The particulars included that Kekatos Lawyers had transferred, from its trust account to its general account, various amounts totalling $361,122.35 or thereabouts. 1. Mrs Rahme also pleaded that the proceedings constituted an abuse of process because they had been brought for an ulterior purpose (FAD [5]). The particulars to this allegation referred to a larger dispute between Mrs Rahme and Kekatos Lawyers in respect of the costs that Kekatos Lawyers incurred in representing her in the B & K proceedings. Mrs Rahme pleaded that Kekatos Lawyers brought the proceedings in the Local Court either to bankrupt her and preclude her from applying for a costs assessment, or to hive off part of the larger costs dispute. 2. On 25 March 2022, Kekatos Lawyers applied to strike out the Further Amended Defence as an abuse of process. Kekatos Lawyers submitted that it would be an abuse of process for Mrs Rahme to rely on any defects in the retainer agreement as she had successfully claimed the costs as a head of damage in the Court of Appeal. At the hearing on 28 March 2022, the Magistrate dismissed the notice of motion due to the lack of reasonable notice to Mrs Rahme. However, she permitted Kekatos Lawyers to raise the issue by way of an informal reply, noting that Mrs Rahme had been able to deal with the issue and did not seek an adjournment. 3. On 29 March 2022, the Magistrate gave an ex tempore judgment in favour of Mrs Rahme. In support of the costs agreement on which it relied for its claim to the caveat costs, Kekatos Lawyers relied on evidence from Jim Kekatos and Marissa Kopoulos regarding the firm's usual practice of signing retainer agreements and mailing them to the client without keeping a copy of the signed version. The Magistrate stated that this evidence was insufficient to conclude on the balance of probabilities that the agreement on which Kekatos Lawyers relied was sent to Mrs Rahme in or around December 2015. Her Honour would otherwise have found that the costs agreement could not be enforced as it was issued under the repealed Legal Profession Act 2004 (NSW), although save for its failure to refer to the correct legislation it was, in substance, compliant. 4. The Magistrate noted that the Uniform Law acted to regulate how legal fees are to be charged and to protect clients, and Kekatos Lawyers had failed to comply with the statutory obligations. Referring to the fact that Kekatos Lawyers had run the Court of Appeal litigation, her Honour considered that it could not be the case that the firm could rectify its own disclosure errors by submitting them to the Court as evidence of a liability to pay costs. The Magistrate also found that there was no evidence that the Court of Appeal had considered quantifying the loss, and there was no evidence that Mrs Rahme knew that the costs disclosures were inadequate. 5. The Magistrate concluded that the Court of Appeal's decision could not give rise to an entitlement in favour of Kekatos Lawyers, nor could it be an abuse of process that Mrs Rahme, now properly advised, sought to challenge a claim for costs which had not been formulated in accordance with the relevant legislation. Her Honour found that the Court of Appeal had only invited the parties to submit an agreed sum that reflected its findings. The passages from the decisions of the Court of Appeal that I have extracted above (at [10] and [11]) demonstrate that the Magistrate was plainly wrong in this respect. The decision of the primary judge 1. Kekatos Lawyers appealed to the Supreme Court. Its principal contention was that the Magistrate erred in failing to conclude that Mrs Rahme's defence of the Local Court proceedings was an abuse of process, on the basis that the matters raised in her defence had been the subject of a claim determined in her favour in the B & K proceedings. 2. At the outset of her Honour's reasons in Rahme (No 1), Schmidt AJ noted that the following matters were not in dispute (at [5]): "It was accepted in the Local Court that there had been no issue about Kekatos' retainer; the work which it had performed for Mrs Rahme, to which the disputed costs and invoices related; Mrs Rahme's successful claim on her appeal from the judgment given in her Equity Division proceedings against her former solicitors, Benjamin & Khoury, in relation to a caveat which she had applied to have removed; that the costs invoices she there successfully pursued as damages were the same as those relied on by Kekatos in the Local Court; that it was those costs which had been the subject of the orders Mrs Rahme had obtained in her favour in the Court of Appeal; that she had been paid those damages; but still she had neither paid Kekatos, nor sought to have the disputed costs assessed under the Legal Profession Uniform Law (NSW) 2014." 1. It was also common ground before the primary judge that the Magistrate had misunderstood what the Court of Appeal had decided in the B & K proceedings: at [8]. After referring to the passages from the Court of Appeal's decisions which I have extracted above, the primary judge noted that neither Mrs Rahme nor B & K had suggested in the Court of Appeal "that there was any available basis on which she could successfully refuse to pay Kekatos its costs": at [38]. The primary judge concluded that as a result of the Magistrate's misunderstanding, she wrongly preferred Mrs Rahme's evidence despite it being inconsistent with her claim in the Supreme Court and with the Court of Appeal's decision: [41]-[45]. 2. As to Mrs Rahme's reliance upon Kekatos Lawyers' alleged non-compliance with its costs disclosure obligations under the Uniform Law, her Honour stated: "[59] To the contrary, it was Mrs Rahme who successfully pursued and obtained orders in respect of the damage she had suffered when she incurred the legal costs which she was bound to pay Kekatos, having retained it to act for her as she did in relation to her caveat dispute with Benjamin & Khoury. Her successful claim necessarily depended on her having a legal obligation to pay Kekatos its invoiced costs for that work, under a valid agreement regulated by the 2014 Act, as I have explained. [60] Given the case Benjamin & Khoury advanced, the details of that agreement did not need to be examined by the Court of Appeal. But the result, which was accepted by the Court, was that Mrs Rahme was bound to pay Kekatos the invoices it later pursued in the Local Court. That was an outcome from which she could not later resile. [61] It follows that what her Honour also failed to recognise, given her errors about what the Court of Appeal had decided, was that the cost agreement on which Mrs Rahme's successful recovery of the disputed costs had rested, was not void. The case she had successfully advanced necessarily admitted her binding legal obligation to pay Kekatos' invoices for the work it had performed, with the result that she could not later resile from the Court of Appeal's conclusions." 1. It followed that Mrs Rahme's resiling from the case she had successfully pursued in the Court of Appeal involved an impermissible abuse of process: at [63]. Mrs Rahme's success in the Local Court was "in the circumstances, inexplicable": at [65]. The Magistrate's decision had the undoubtedly unjust result that Mrs Rahme gained a considerable windfall at the expense of both B & K and Kekatos Lawyers, which the Court of Appeal could not have intended or envisaged: at [70], [72]. Her Honour also considered the outcome in the Local Court to be contrary to the indemnity principle; and it was the result of wrongdoing on Mrs Rahme's part: at [73], [74]. 2. The primary judge ordered that the parties confer and file orders to reflect her Honour's conclusions. Instead, Mrs Rahme applied to recall the primary judgment and set it aside, and sought an order that the caveat costs be deemed to have been paid in full out of the damages that had been paid into Kekatos Lawyers' trust account. The primary judge dismissed that application with costs and made no orders in favour of Mrs Rahme: Kekatos Lawyers Pty Ltd v Rahme (No 2) [2023] NSWSC 651 ("Rahme (No 2)"). 3. Relevantly to the application for leave to appeal, in applying to recall the judgment in Rahme (No 1), Mrs Rahme submitted that paragraph 5 of the primary judge's reasons in Rahme (No 1) was incorrect, because Mrs Rahme had paid the caveat costs. As her Honour summarised the argument in Rahme (No 2), Mrs Rahme contended that "without her instructions and contrary to applicable requirements of [the Uniform Law], Kekatos had improperly taken money which it held in trust, that having satisfied any obligation which she had to pay the disputed costs": at [14]. In rejecting that contention, her Honour stated: "[15] I am satisfied that there was no error in paragraph [5] of the judgment. Mrs Rahme had not sought to have the disputed costs assessed, nor had she taken any steps to pay them before the Local Court proceedings were brought. As was explained in the submissions advanced for Mrs Rahme on the appeal, her case in the Local Court included that the disputed costs had been satisfied by funds impermissibly withdrawn by Kekatos from its trust account and used for other purposes without her instructions. But that was disputed. [16] This claim was not determined in Mrs Rahme's favour in the Local Court. But she did not, as she could have, either appeal the Local Court's decision or file a notice of contention raising these issues on Kekatos' appeal. Instead, over objection, she was permitted to explain in her submissions the case she had advanced in the Local Court about the withdrawal from trust. It was those submissions on which her application to have the first judgment set aside rested. [17] Mrs Rahme's case for withdrawal of the judgment and orders being made in her favour on the appeal thus depend on factual findings which have not been made in her favour, as well as on a disputed construction of the legislative scheme, which was not determined by the Local Court. [18] Even if either had arisen to be determined on Kekatos' appeal, under s 39 of the Local Court Act 2007 (NSW), when an error of law has been established, the Supreme Court does not have the power to make findings of primary fact: Rose v Tunstall [2018] NSWCA 241 at [31]. Without such findings, no orders can be made in favour of Mrs Rahme." (Emphasis added.) The application for leave to appeal 1. Mrs Rahme's draft notice of appeal challenged the primary judge's decision in Rahme (No 1) (proposed grounds 1 to 4) and Rahme (No 2) (proposed grounds 4 to 7). In his oral submissions, Counsel for Mrs Rahme emphasised two aspects of these grounds. The first was that the primary judge erred in concluding that Mrs Rahme's defence of the Local Court proceedings involved an abuse of process. The second was that her Honour erred in finding that Mrs Rahme had accepted in the Local Court that she had not paid the caveat costs, and that she could not determine Mrs Rahme's allegation that those costs had been, or would have been, paid out of the damages paid into the trust account of Kekatos Lawyers, which Kekatos Lawyers had instead applied, without her authority, in payment of other costs billed to her, in breach of the provisions of the Uniform Law. Alleged abuse of process 1. In proposed grounds 1 to 3, Mrs Rahme took issue with the primary judge's conclusion, in Rahme (No 1), that the Magistrate erred in concluding that her defence of the Local Court proceedings did not constitute an abuse of process. Mrs Rahme contended that the primary judge wrongly treated Kekatos Lawyers' reliance on the doctrine of abuse of process as a discrete cause of action that was pleaded in its statement of claim. As I have noted above, Kekatos Lawyers relied on abuse of process in the Local Court in response to Mrs Rahme's Further Amended Defence. The Magistrate permitted Kekatos Lawyers to raise this argument effectively in reply, noting that Mrs Rahme addressed the argument and did not seek an adjournment. In the absence of a notice of contention before the primary judge in which Mrs Rahme challenged this aspect of the Magistrate's decision, the primary judge did not err in proceeding on the basis that Kekatos Lawyers' abuse of process argument was in issue before the Magistrate and had to be determined. 2. Mrs Rahme next submitted that in circumstances where the Court of Appeal had not considered the application of the Uniform Law to Kekatos Lawyers' claim for the caveat costs, the primary judge erred in concluding that Mrs Rahme's pleading in the Local Court was an abuse of process. In oral submissions, Counsel for Mrs Rahme submitted that a finding of abuse of process required more than "just an assumption that the statement of liability is correct". Far from relying on an assumption, however, the Court of Appeal made a finding, on Mrs Rahme's application, that the caveat costs should form part of the award of damages. As the primary judge stated, her success on that claim "necessarily depended upon her having a legal obligation to pay Kekatos its invoiced costs for that work, under a valid agreement regulated by the 2014 Act": Rahme (No 1) at [59]. 3. In Liao v State of New South Wales [2014] NSWCA 71, Barrett JA said the following regarding abuse of process (at [194]): "In the end, the question is that identified by Sir Andrew Morritt V-C in Secretary of State for Trade and Industry v Bairstow [[2003] EWCA Civ 321; [2004] Ch 1] (above, at [38]) in a passage approved by the Privy Council in Calyon v Michailaidis [2009] UKPC 34 at [35]-[36]: it must be shown either that that it would be manifestly unfair to the plaintiffs in the second action that the same issues should be re-litigated or that to permit such re-litigation would bring the administration of justice into disrepute." 1. The primary judge correctly concluded that the answer to that question in the present case was "yes". By her Further Amended Defence in the Local Court, Mrs Rahme sought to relitigate the issue of her liability to pay the caveat costs so as to achieve the opposite result to the result she had achieved in the Court of Appeal. In concluding that the Magistrate's decision was "inexplicable", the primary judge stated that "[j]ustice could not permit [Mrs Rahme] to depart from the result she had earlier achieved, in order that she could avoid paying the costs which she had established that she had a legal obligation to pay to Kekatos, by the evidence which she had led in the first instance Equity proceedings, about the damages she had suffered": at [64]. 2. Mrs Rahme's reliance in this context on the decision of the High Court in Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212; [2016] HCA 44 ("Timbercorp") was misplaced. Timbercorp involved representative proceedings in which common questions were identified and answered on the basis of what the appellant contended were certain assumptions of fact about particular loan agreements. The appellant, which succeeded in the representative proceedings and then sought to enforce the loan agreements against individual group members, contended that the group members were precluded from challenging the validity of the loan agreements in their respective defences, given the potential for inconsistent findings. In dismissing that contention, the joint judgment observed that for all intents and purposes the efficacy of the loan agreements was not adverted to in the group proceeding. The respondents were thus not estopped from challenging the validity of those agreements: at [62]-[63] (French CJ, Kiefel, Keane and Nettle JJ). Nor did the pleading of such a challenge in their respective defences involve an abuse of process: at [73]. By contrast, and contrary to the contention of Mrs Rahme, her position in the Local Court was directly and fundamentally inconsistent with what the Court of Appeal had found, on her application. 3. The more apposite authorities were those on which the respondent relied, including Reichel v Magrath (1889) 14 App Cas 665 and Tomlinson v Ramsey Foods (2015) 256 CLR 507; [2015] HCA 28 ("Tomlinson"). The joint judgment in Tomlinson described abuse of process as "inherently broader and more flexible than estoppel", and "capable of application in any circumstances in which the use of a court's procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute": at [25] (French CJ, Bell, Gageler and Keane JJ). Mrs Rahme's Further Amended Defence in the Local Court gave rise to both of those circumstances. 4. I note finally that on a number of occasions in this Court, Mrs Rahme, both in writing and in oral submissions, relied on the Magistrate having made a positive finding that the costs agreement or costs disclosure regarding removal of the caveat did not exist. That is not an accurate reflection of what the Magistrate found. As I noted above, her Honour concluded that the agreement had not been proved, and went no further. To the extent that Mrs Rahme's submissions rested on the broader finding having been made, they must be rejected. The so-called payment defence 1. Mrs Rahme's proposed ground 4 was in the following terms: "The primary judge erred when she found, firstly, in the principal judgment, that it was accepted in the Local Court by Mrs Rahme that she had not paid the caveat retainer costs to Kekatos, and, secondly, in the second judgment, that the primary judge was unable to determine Mrs Rahme's ground of defence alleging that the caveat retainer costs had been paid, or would have been paid, by Mrs Rahme, out of damages paid into the trust account of Kekatos, but which Kekatos had instead applied, without her authority, in payment of other costs billed to her in breach of the trust account regulatory regime in the Uniform Law ('the payment defence')." 1. The first part of this proposed ground is not consistent with what occurred either in the Local Court or in the court below. In the Local Court, having requested an opportunity, early in the hearing, to explain what had happened in this case, Counsel for Mrs Rahme relevantly stated (Tcpt, 28 March 2022, p 6): "In 2018 and 2019 most of the judgment, ballpark figure is about $350,000, was paid to the plaintiff's trust account. Of that amount, approximately $30,000, I think 32, to be precise, was paid to Mr Rahme, and $324,000 was transferred from the trust account to the office account of the plaintiff to pay costs. Now, the costs that were paid did not include the $25,000 for the caveat, even though the caveat costs were part of the damages paid into the trust account. Rather, the costs that were paid were costs relating to the principal proceeding, that's the proceeding that was heard at first instance before Emmett AJA and in the Court of Appeal." (Emphasis added.) 1. Consistently with her Further Amended Defence which I have summarised above, Counsel then submitted that the case raised two overriding issues, being: the validity of the costs agreement and costs disclosure; and whether a solicitor could "take money out of his trust account to pay costs, either contrary to his client's instructions or without his client's instructions" (Tcpt, 28 March 2022, p 6-7). Critically, both issues rest on the premise that the caveat costs had not been paid. That was the position that Mrs Rahme's Counsel maintained before the primary judge, as is apparent from the following exchange (Tcpt, 20 April 2023, p 76-77): "HER HONOUR: Right. So is what you're saying or submitting – the position that the damages which were paid as a result of the Court of Appeal's orders went into trust. BEVAN: Correct. HER HONOUR: They were dispersed by Mr Kekatos without [Mrs Rahme's] instructions. BEVAN: Correct. HER HONOUR: They were used to pay – they were not used to pay the disputed $35,000. BEVAN: Correct." (Emphasis added.) 1. There is thus no substance in the first part of proposed ground 4. The second part of proposed ground addresses the second of the issues that Mrs Rahme's counsel included in his outline of the case to the Magistrate. As I have noted above, Mrs Rahme contended in the Further Amended Defence that Kekatos Lawyers received a damages payment from B & K into its trust account at Mrs Rahme's direction and, instead of allocating a portion of those funds to the caveat costs, it allocated the funds to the payment of other costs billed for other, later retainers. Mrs Rahme submitted that this occurred contrary to her approval as the client and trust account beneficiary, or without such approval, in breach of the trust account regulatory regime. Mrs Rahme submitted that she alone had the right to allocate her trust money and wished to do so by paying her liabilities to Kekatos Lawyers in chronological order. 2. The first difficulty with this aspect of Mrs Rahme's proposed challenge was that the Magistrate made no findings of fact in respect of it. When Mrs Rahme applied to recall the decision in Rahme (No 1) in relation to this issue, the primary judge noted that she did not have power to make the necessary primary findings of fact: Rahme (No 2) at [18]. Her Honour cited the decision of this Court in Rose v Tunstall [2018] NSWCA 241 ("Rose v Tunstall"), in which Payne JA stated at [31] that when an error of law is established in an appeal under s 39 of the Local Court Act, the Supreme Court does not have the power to make findings of primary fact. Payne JA referred with approval, relevantly, to the decision of Beech-Jones J in Lesley-Swan v Owners SP 32735 [2013] NSWSC 1635 at [71], in which his Honour stated that it followed from the terms of s 39 to s 41 of the Local Court Act that "this Court does not have the power to make findings of primary fact on a Local Court appeal even if an error of law has been established or even if an error of mixed fact and law has been established". 3. Contrary to Mrs Rahme's contention in the proposed grounds of appeal that the primary judge erred in her approach to s 39 of the Local Court Act, her Honour correctly applied the authority of Rose v Tunstall. Mrs Rahme thus finds herself in the position of having no findings of primary fact on which to advance this argument, and no means of obtaining such findings from the primary judge in the event the matter were remitted. The application of the provisions of the Uniform Law or the general law, which was the focus of Mrs Rahme's argument, would require such findings, and their absence tells strongly against a grant of leave to argue this point on appeal, as does Counsel's further submission that the matter should be remitted from to the Local Court to make those findings (an outcome that was not sought before the primary judge). Mrs Rahme's submission that the primary judge had endorsed, "expressly or by implication", an argument of Kekatos Lawyers to the effect that it alone had the power to determine how it allocated trust money to pay outstanding costs, is without foundation. 4. A related problem was that Mrs Rahme did not file a notice of contention before the primary judge seeking to agitate this issue, a point to which the primary judge referred in Rahme (No 2) at [16]. Mrs Rahme also contended in the proposed grounds of appeal that contrary to the primary judge's reasoning in Rahme (No 2), her Honour had in fact permitted him to run this point and dispensed with the requirement to file a notice of contention. It is not clear from the passages of transcript from the hearing before her Honour, on which Counsel relied, that this was the case. When the primary judge specifically referred to a notice of contention not being required (Tcpt, 20 April 2023, p 89-90), her Honour was addressing a different issue that Mrs Rahme had raised, namely, whether Kekatos Lawyers was precluded from commencing the proceedings because in doing so it was subverting the costs regime in the Uniform Law. I note in passing that Counsel for Mrs Rahme sought to resurrect that argument in oral submissions in this Court in circumstances where the proposed grounds of appeal do not address it. 5. In any event, a more fundamental problem with Mrs Rahme's arguments on the so-called payment defence emerged in the course of oral argument, when Counsel for Mrs Rahme accepted that no evidence had been led in the Local Court to support a finding that Mrs Rahme required the caveat costs to be paid first, out of the damages received from B & K. There is also no evidence that Kekatos Lawyers' transfer of funds from the trust account to other accounts was without her authority. The level of generality at which this argument was advanced was problematic in circumstances where there was evidence that showed that Kekatos Lawyers sought approval to disburse funds from its trust account on at least one occasion. An email from Kekatos Lawyers to Mrs Rahme and Mr Rahme dated 28 November 2019, sought approval to disburse $82,968.35 from its trust account, including a sum of $20,000 to be transferred to the Rahmes' chosen account. 6. When confronted with this difficulty, Counsel for Mrs Rahme sought to reframe the argument in more general terms, contending that a solicitor who holds money on trust is required to pay costs in the order in which they are billed, given the client is liable for interest on them under s 195 of the Uniform Law. When asked to identify the applicable provisions of the Uniform Law or any authority for that proposition, Counsel submitted that it arose "from the obligation of the solicitor as the creditor of the client under the tax invoice and as the trustee of the trust fund to apply the trust fund in a manner which is beneficial to the beneficiary of the trust fund by minimising liability for interest on the debt". 7. As Counsel for Kekatos Lawyers observed, there is authority as to whether a creditor can allocate a payment to any bill, or must instead allocate a particular bill in a particular order: see for example Poletti v Ecob (No 2) (1989) 31 IR 321 at 333 (Keely, Ryan and Gray JJ). Having regard to the difficulties I have referred to above, the present application presents a wholly unsuitable vehicle for resolving the application of such authority to the context with which the Court is here concerned, which includes a complex statutory regime for the regulation of trust accounts maintained by legal practitioners. 8. There is another aspect of this case that bears mentioning in this context. There is no question that Kekatos Lawyers performed legal services for Mrs Rahme in respect of which it has not yet been paid. The precise amount of what is outstanding is the subject of a separate proceeding between Mrs Rahme and Kekatos Lawyers, and counsel for both parties informed this Court that a significant amount of money has been paid into Court. During argument, Counsel for Mrs Rahme accepted that if the amount of the caveat costs was wrongly reallocated to another invoice, she would still be liable for $35,000. Even if one assumes for the sake of argument the correctness of the factual premise underlying Mrs Rahme's responsive submission, that she should never have been sued for the caveat costs in the Local Court, the commercial reality is that she remains liable to pay costs of at least $35,000 to Kekatos Lawyers. That is highly relevant to an application for leave to appeal and, again, tells against the grant of leave. Other arguments regarding Rahme (No 2) 1. In relation to Rahme (No 2), Mrs Rahme also submitted that the primary judge not recalling her first judgment because she was functus officio was erroneous in principle due to the extensive power to recall the judgment referred to in Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300; [1993] HCA 6 ("Autodesk (No 2)"). She submitted that until the final orders were made, no Court can ever be functus officio, and the primary judge thus failed to appreciate the jurisdiction explained in Autodesk (No 2). Mrs Rahme also submitted that her Honour had overlooked determining the payment defence in Rahme (No 1) and declined to deal with it when this was drawn to her attention, in Rahme (No 2). 2. Dealing with the latter submission first, while it is the case that her Honour did not address the so-called payment defence in Rahme (No 1), for the reasons she gave at [76], her Honour did address the payment defence in Rahme (No 2). Her Honour there identified, correctly, the difficulties that attended determining it on an appeal under s 39 and s 40 of the Local Court Act, to which I have referred above. Mrs Rahme's submissions on the issue do not otherwise raise any point of principle or general importance, nor do they disclose any substantial injustice. As a practical matter, considering the correctness or otherwise of the primary judge's decision not to recall her earlier decision would have no bearing on the issues that Mrs Rahme seeks to ventilate on the application. Conclusion 1. The application for leave to appeal should be dismissed, with costs. The costs awarded should include the costs of the draft notice of contention filed by Kekatos Lawyers, which my determination of the application for leave has made it unnecessary to consider. 2. I note that Kekatos Lawyers sought indemnity costs. Kekatos Lawyers relied on the primary judge's award of indemnity costs, with her Honour finding, in Rahme (No 2), that justice required such an order in light of her conclusions about the abuse of process Mrs Rahme had pursued in the Local Court: at [20]-[24]. However, I am not satisfied that it is appropriate to make an order for indemnity costs on the application for leave to appeal, in which Mrs Rahme sought to challenge those conclusions. 3. SIMPSON AJA: I agree with Mitchelmore JA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 February 2024