New South Wales Supreme Court CITATION : Vaccaro and Anor v Flammia [2008] NSWSC 1322 HEARING DATE(S) : 27 November 2008, 28 November 2008 JUDGMENT DATE : 11 December 2008 JUDGMENT OF : Johnson J at 1 1. Leave is granted to the Plaintiffs under s.6(4) Law Reform (Miscellaneous Provisions) Act 1946 to commence proceedings against LawCover Insurance Pty Limited. DECISION : 2. Pursuant to rule 6.24(1) Uniform Civil Procedure Rules 2005, LawCover Insurance Pty Limited is joined as a party to these proceedings. 3. Leave is granted to the Plaintiffs to amend the Statement of Claim in accordance with the document which is MFI1 on the present application. CATCHWORDS : INSURANCE - claim for damages against solicitor for negligence - Plaintiffs' Certificate of Title taken from solicitor's office and used to give mortgage over property - signatures of Plaintiffs forged on mortgage - application for leave to join LawCover to negligence proceedings against solicitor - s.6 Law Reform (Miscellaneous Proceedings) Act 1946 - LawCover opposes grant of leave relying on dishonesty/fraud exclusion under insurance policy - whether Plaintiffs had demonstrated arguable case that solicitor acted negligently but not dishonestly in circumstances giving rise to claim - leave granted to join LawCover Law Reform (Miscellaneous Provisions) Act 1946 Uniform Civil Procedure Rules 2005 Crimes Act 1914 (Cth) Bankruptcy Act 1966 (Cth) LEGISLATION CITED : Legal Profession Act 2004 Evidence Act 1995 Insurance Contracts Act 1984 (Cth) Civil Procedure Act 2005 Evidence Regulation 2005 CATEGORY : Procedural and other rulings Gosford City Council v GIO General Ltd (2003) 56 NSWLR 542 R v Caradonna (2000) 118 A Crim R 312 Colonial Mutual Superannuation Pty Limited v Flammia (No. 2) [2007] FCA 1655 Colonial Mutual Superannuation Pty Limited v Flammia (No. 3) [2007] FCA 2104 Vella v Permanent Mortgages Pty Limited [2008] NSWSC 505 Tzaidas v Child (2004) 61 NSWLR 18 Blair v Curran (1939) 62 CLR 464 Jackson v Goldsmith (1950) 81 CLR 446 Bailey v New South Wales Medical Defence Union Limited (1995) 184 CLR 399 Ramsay v Pigram (1968) 118 CLR 271 Gleeson v J Wippell & Co Limited [1977] 1 WLR 510 Nationwide Building Society v Balmer Radmore [1999] Lloyds Rep PN 241 Hilton v Barker Booth and Eastwood [2005] 1 WLR 567 Law Society of NSW v Harvey (1976) 2 NSWLR 154 McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579 Yaktine v Perpetual Trustees Victoria Limited [2004] NSWSC 1078 Ginelle Finance Pty Limited v Diakakis [2007] NSWSC 60 CASES CITED : Rogers v The Queen (1994) 181 CLR 254 Rippon v Chilcotin Pty Limited (2001) 53 NSWLR 198 Briginshaw v Briginshaw (1938) 60 CLR 336 Dickinson v Motor Vehicle Insurance Trust (1987) 163 CLR 500 Nettle v Mathieson Group Pty Limited [2007] NSWCA 98 Macquarie Underwriting Pty Limited v Permanent Custodians Limited (2007) 240 ALR 519 The Owners - Strata Plan 50530 v Walter Construction Group Ltd (In Liq) [2006] NSWSC 552 Wilkie v Gordian Runoff Ltd [2005] 221 CLR 522 CGU Insurance Ltd v Porthouse [2008] HCA 30 Kuligowski v Metrobus [2004] 220 CLR 363 Kuppers v New South Wales Fire Brigades [2005] NSWSC 193 Murphy v Abi-Saab (1995) 37 NSWLR 280 Jacara Pty Limited v Perpetual Trustees WA Limited (2000) 106 FCR 51 Trylow Pty Limited v Commissioner of Taxation [2004] FCA 446 Cantarella Bros Pty Limited v Andreasen [2005] NSWSC 579 Ibrahim v Pham [2007] NSWCA 215 Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (2008) 167 FCR 314 Lustre Hosiery Ltd v York (1935) 54 CLR 134 Grey v Australian Motorists and General Insurance Co Pty Ltd (1976) 1 NSWLR 669 TEXTS CITED : Spencer Bower, Turner and Handley, "The Doctrine of Res Judicata", 3rd edn, 1996 PARTIES : Federico Vaccaro and Maria Vaccaro (Plaintiffs) Lorenzo Flammia (Defendant) FILE NUMBER(S) : SC 20237/07 COUNSEL : Mr PA Beale (Plaintiffs) Mr AS Bell SC; Mr PW Flynn (LawCover Insurance Pty Limited) SOLICITORS : McGrath Dicembre & Co (Plaintiffs) Yeldham Price O'Brien Lusk (LawCover Insurance Pty Limited) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROFESSIONAL NEGLIGENCE LIST Johnson J 11 December 2008 20237/07 Federico Vaccaro and Maria Vaccaro v Lorenzo Flammia JUDGMENT 1 JOHNSON J: By Amended Notice of Motion filed on 27 November 2008, the Plaintiffs, Federico Vaccaro and Maria Vaccaro, seek leave under s.6(4) Law Reform (Miscellaneous Provisions) Act 1946 to commence proceedings against LawCover Insurance Pty Limited ("LawCover"), together with an order under rule 6.24(1) Uniform Civil Procedure Rules 2005 ("UCPR") that LawCover be joined as a party to the proceedings. 2 The proceedings were initiated by Statement of Claim filed 19 July 2007 whereby the Plaintiffs sue the Defendant, Lorenzo Flammia, their former solicitor, in negligence. The Defendant became bankrupt in November 2007 and is unlikely to appear or participate in the proceedings. 3 LawCover opposes the Plaintiffs' application, relying upon the dishonesty/fraud exception in the policy of insurance. Evidence on Application 4 The Plaintiffs read the following affidavits, without objection, on the application: (a) affidavit of Federico Vaccaro sworn 24 November 2008; (b) affidavit of Maria Vaccaro sworn 24 November 2008; (c) affidavit of Geoff Lloyd affirmed 10 July 2008; (d) further affidavit of Geoff Lloyd affirmed 26 November 2008. None of these deponents were required for cross-examination. In addition, the Plaintiffs tendered a folder of documents (Exhibit A) and copies of correspondence (Exhibits B and C). 5 An affidavit of Timothy Ralph Price sworn 15 October 2008 was read, without objection, for LawCover. Mr Price was not required for cross-examination. A number of documents were tendered in LawCover's case (Exhibit TRP1, Exhibits 1, 2 and 3). Factual Background 6 The following basic facts are not controversial. 7 From about 1990 until April 2006, the Plaintiffs utilised the services of Manna & Flammia Solicitors located at 45 Castlereagh Street, Penrith. 8 The Plaintiffs were the registered proprietors of several properties in the Camden district. The Plaintiffs left a number of Certificates of Title at the Defendant's legal practice for safekeeping. Amongst these was the Certificate of Title for a property at 9 McMinn Place, Narellan Vale ("the Narellan Vale CT"). 9 Prior to 27 November 2003, the Narellan Vale CT was taken from the Defendant's legal practice. On 23 December 2003, a mortgage in favour of Hillsan Pty Limited ("Hillsan") was purportedly executed by the Plaintiffs with respect to the Narellan Vale property. The Plaintiffs contend, and LawCover accepts, that the signatures of the Plaintiffs on the mortgage are forgeries. According to the mortgage, the Plaintiffs' signatures were witnessed by Hugh Johnson, Solicitor, of Sylvania. Both the Plaintiffs and LawCover accept that there was no such person on the roll of legal practitioners at that time. He is a fictitious character. Hillsan advanced the sum of $400,000.00 under the mortgage. The evidence suggests that that sum was distributed between a number of persons. It is common ground that the Plaintiffs did not receive any of this sum. 10 The Hillsan mortgage was not stamped with the Office of State Revenue until 9 November 2005 and was not registered on the title with the Department of Lands until 28 November 2005. The Hillsan mortgage provided for repayment of the principal sum by 23 December 2004 with interest to be charged at the rate of 10.5% per annum. 11 On or about 26 September 2006, Hillsan commenced proceedings (14742/06) against the Plaintiffs in the Possession List of the Common Law Division to seek possession of the Narellan Vale property for failure to comply with the terms of the mortgage. The Plaintiffs state that they did not learn that the Narellan Vale CT had been taken from the premises of the Defendant's legal practice, nor that it had been used for the purpose of giving a mortgage to Hillsan until they learned of the Possession List proceedings being brought against them in 2006. 12 The Possession List proceedings have not yet proceeded to hearing. 13 The evidence reveals that the Defendant's practicing certificate was suspended on or about 29 May 2006. On 9 November 2007, the Defendant attended the Insolvency & Trustee Service of Australia and filed a debtor's petition and became a bankrupt. The Plaintiffs' Negligence Claim Against Mr Flammia 14 The Plaintiffs' claim in negligence against Mr Flammia is encapsulated in paragraphs 8 and 9 of the proposed Amended Statement of Claim (MFI1) which state: "8. The First Defendant negligently breached that duty of care by: (a) failing to keep the Certificate of Title in a safe location; (b) keeping the certificate of title in a metal tin stored in a metal cabinet in a back room which was not locked or in any way secure; (c) failing to keep the Certificate of Title in a secure location as aforesaid; (d) failing to take any reasonable steps to ensure that when Anthony Caradonna a client of his firm was on the premises that he did not and could not gain access to the room in which the said metal cabinet was stored as aforesaid, when he knew that Mr Caradonna had committed criminal offences involving fraudulent conduct and other dishonest conduct during the period from about October 2001 to 1 July 2003; (e) failing to install any or any adequate systems of security or any adequate alarm systems; (f) failing to take reasonable care to avoid the loss or the unlawful taking possession of certificates of title; (g) not having in place a procedure to supervise access by persons to the premise in particular to the room in the back of the premises in which the said metal cabinet was stored or situated; (h) the First Defendant failed to adequately educate or train employees to supervise persons when they were on the premises. 9. By reason of the negligence of the First Defendant as aforesaid, Mr Caradonna obtained possession of the Certificate of Title which he fraudulently used or caused to be used without the knowledge or consent of the Plaintiffs or either of them as security for a loan of $400,000 made by Hillsan Pty Limited which was advanced on or about 23 December 2003. " The LawCover Policy 15 It is common ground that the issues raised on this application fall to be determined by reference to the LawCover Professional Indemnity Insurance Policy 2007/2008, under which the Plaintiffs have sought indemnity insurance with respect to the acts and omissions of Mr Flammia. This is a "claims made" policy (T58.13; Exhibit A, Tabs 14, 15, 16) whereby the insured's right to indemnity, if unmodified by statute, depends upon a claim being made against the insured during the period of insurance: Gosford City Council v GIO General Ltd (2003) 56 NSWLR 542 at 544 [3]. 16 Clauses 4-6 of the policy state: "WHAT WE INSURE YOU FOR AND WHEN 4. We agree to indemnify you against civil liability for a claim that: (a) arises from the provision of legal services; and (b) is first made against you during the period of insurance. 5. However, we will not indemnify you if the claim relates to a circumstance to which this Policy would otherwise respond which you notified to us, any other insurer or any other indemnity provider, before the period of insurance. 6. Our indemnity also extends to claimant's costs and defence costs." 17 Clause 9 of the policy states: "WHEN YOU HAVE TO NOTIFY US 9. You must notify us in writing as soon as practicable of any claim made against you." Mr Flammia informed LawCover on 14 August 2007 of the Plaintiffs' claim against him, immediately after service of the Statement of Claim upon him. 18 Clauses 21 and 22 appear in the policy under the heading "Claims Involving Dishonesty or Fraud" (Exhibit A, Tab 12): "21. We will not indemnify you under this Policy when the claim arises from any dishonest or fraudulent acts or omissions of a sole practitioner, partner or officer of the law practice , whether directly or indirectly. 22. However, we will indemnify a partner, officer or employee of a law practice if the person was not knowingly connected with any dishonesty or fraud relating to the claim and if no other exclusion under clause 25 applies." 19 Clause 35 of the policy contains, amongst others, the following definitions: "35. In this Policy, unless the context otherwise requires: (a) claim means: (i) a demand for, or an assertion of a right to, compensation or damages; or (ii) an intimation of an intention to seek compensation or damages. … (f) legal services means work done, or business transacted, in the ordinary course of carrying on the business of a lawyer in private practice in Australia or elsewhere; …" Evidence Concerning Mr Flammia, Mr Caradonna and the Narellan Vale CT 20 What follows is drawn from evidence admitted (without objection, unless indicated) at the hearing of the application. In broad terms, it is evidence which is said to touch, in one way or another, on LawCover's submission that the Plaintiffs ought not be granted leave to proceed against LawCover as the conduct of Mr Flammia falls within the dishonesty/fraud exception in the policy. 21 A significant actor in the present application, although not a present or proposed party to the proceedings, is Angelo Antonio Caradonna. In 2000, Mr Caradonna was sentenced to imprisonment for two years to be served by way of periodic detention in the Sydney District Court following his pleas of guilty to three counts of defrauding the Commonwealth contrary to s.29D Crimes Act 1914 (Cth). On a Crown appeal, the original sentence was quashed and, in its place, Mr Caradonna was sentenced to full-time imprisonment for six months to date from 6 October 2000: R v Caradonna (2000) 118 A Crim R 312 (Exhibit TRP1, pages 87-94). 22 By 17 October 2000, Mr Flammia was acting as solicitor for Mr Caradonna. A memorandum of fees dated 15 October 2001 (Exhibit TRP1, pages 100-102) reveals that the services provided by Mr Flammia to Mr Caradonna included conducting and managing his finances whilst in prison, conducting and running his finance business whilst in prison, attending upon him at Silverwater Gaol on 10 occasions (at approximately two hours each) and drafting documents, providing advice and otherwise acting on his behalf in the 12-month period between 17 October 2000 and 15 October 2001. It is apparent that, by the latter date, there was a well-established relationship between Mr Flammia and Mr Caradonna. The Colonial Proceedings 23 In evidence on the present application are judgments of Emmett J of the Federal Court of Australia in Colonial Mutual Superannuation Pty Limited v Flammia (No. 2) [2007] FCA 1655 (1 November 2007) and Colonial Mutual Superannuation Pty Limited v Flammia (No. 3) [2007] FCA 2104 (7 December 2007) (Exhibit TRP1, pages 1-43). In those proceedings ("the Colonial proceedings"), Colonial Mutual Superannuation Pty Limited ("Colonial") sued Mr Flammia and William Anastasiadis, alleging that they had induced Colonial by fraud 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 Mr Flammia. Mr Flammia sought indemnity from LawCover under a professional indemnity policy of insurance. By the policy, LawCover agreed to indemnify Mr Flammia against civil liability for any claim that arose from his legal practice, and that was first made against him during the period of insurance. However, the policy provided that LawCover would not indemnify Mr Flammia for a claim that arose from any dishonest or fraudulent acts or omissions on his part, whether directly or indirectly. LawCover did not accept liability to indemnify under the policy and thus Mr Flammia filed a cross claim against LawCover. 24 Emmett J was satisfied that the money due to Mr Stevens was obtained fraudulently and by use of a forged signature. His Honour observed at [70]-[72], by reference to Mr Flammia's memorandum of fees to Mr Caradonna, that it was quite apparent that Mr Flammia had fairly full knowledge of Mr Caradonna's criminal conduct by late 2001. With respect to the relationship between Mr Flammia and Mr Caradonna in late 2001, Emmett J concluded in Judgment No. 2 at [78]: "Mr Flammia had intimate knowledge of Mr Caradonna's personal affairs, gained while acting for Mr Caradonna while he served his prison sentence. The link between Mr Flammia and Mr Caradonna, in the context of Mr Caradona's [sic] involvement in the fraud, gives rise to an inference, in the absence of anything further, that they each had knowledge of the fraudulent nature of the actions in which they engaged." 25 In finding that Mr Flammia had a case to answer in the civil proceedings, Emmett J concluded in Judgment No. 2 at [102]-[105]: "102 On the current state of the evidence, inferences are open that point to Mr Flammia's involvement in and knowledge of conduct that a reasonable person, and particularly a solicitor, would understand to be dishonest and fraudulent. Mr Flammia knew that Mr Caradonna was a convicted fraudster. Mr Caradonna's contact with both Mr Flammia and the Bogus Stevens Number at crucial times strongly suggests, on the current evidence, that both Mr Caradonna and Mr Flammia were involved in the fraud. 103 The evidence is capable of giving rise to a clear inference that the conduct of Mr Flammia, in causing his letters of 11 October 2001 and 30 October 2001 to be sent to Colonial and in causing his letter of 14 November 2001 be sent to St George Bank, was fraudulent and dishonest. The evidence supports a conclusion that, by sending the letters to Colonial, Mr Flammia was guilty of deceit in that, by doing so, he represented that he had received instructions from a person who was a member of the SuperTrace Fund. That representation was false and the evidence is reasonably capable of supporting a conclusion that it was false to the knowledge of Mr Flammia. It was made with the intention of inducing Colonial to send to Mr Flammia a cheque in payment of Mr Steven's entitlement, Colonial was in fact induced by the representation to do so and Colonial suffered damage as a consequence. 104 The internal memoranda made by officers of Colonial indicate that, before any payment would be made, it was necessary for identification to be produced. That is what led to Mr Flammia's letter of 30 October 2001 and the 30 October Certificate. It was not until after receipt of the 30 October Certificate that Colonial, through its officers, was induced to cause the cheque to be drawn on 9 November 2001. I am persuaded, on the balance of probabilities at least, that the 30 October Certificate induced Colonial to cause the cheque to be drawn. In any event, that was clearly Mr Flammia's intention. An inference can therefore be drawn that Colonial was induced to act as he intended it to act - see Gould v Vaggelas [1985] HCA 75; (1984) 157 CLR 215. 105 I would confidently conclude that there is reliable and cogent evidence in support of Colonial's case in deceit against Mr Flammia and of LawCover's allegation that Colonial's claim against him arises out of fraudulent acts on his part. Accordingly, Mr Flammia must now elect whether to adduce evidence to rebut the conclusions that are provisionally open, on the evidence to date, that Colonial would be entitled to judgment against him in the sum of $438,802.80 plus interest and that his cross-claim would be dismissed. The matter is listed for directions on 9 November 2007, at which time Mr Flammia must elect whether he wishes to go into evidence. If so I will give directions for the further conduct of the proceeding. If not, I will fix a time for final submissions." 26 Despite an initial indication that he would do so, Mr Flammia did not go into evidence in the Colonial proceedings before Emmett J. On 9 November 2007, Mr Flammia filed a debtor's petition and became bankrupt. The Court gave leave to LawCover pursuant to s.58(3)(b) Bankruptcy Act 1966 (Cth) to proceed against Mr Flammia. On 7 December 2007, Emmett J delivered Judgment No. 3 which included the following findings at [17]-[22]: "17 I indicated in my reasons on 1 November 2007 the findings that I would provisionally make in relation to that matter. That is to say, Mr Flammia expressly stated that he was acting on behalf of Stanley G .Stevens, the member of the SuperTrace fund. That statement was clearly false. For present purposes it does not matter whether it was false to the knowledge of Mr Flammia . 18 There is no doubt that, if it was not expressly warranted, Mr Flammia impliedly warranted that he had authority to act on behalf of Stanley Gordon Stevens in seeking payment to him of Mr Stevens' entitlement under the SuperTrace fund. Colonial paid to Mr Flammia a cheque in the sum of $438,802.80 which was presented and paid. Colonial has clearly suffered damage to the extent of the amount of the cheque and the circumstances that I set out in more detail in my earlier reasons. In the circumstances, I am persuaded that there should be judgment for Colonial against Mr Flammia in the sum of $438,802.80. 19 In the second cross-claim, LawCover claims a declaration that it is not liable, by reason of Mr Flammia's dishonest and/or fraudulent acts as pleaded and particularised in paragraph 10.5 of LawCover's amended defence of 21 September 2007, to indemnify Mr Flammia under the policy for any claims arising from the circumstances giving rise to the claim by Colonial against Mr Flammia , including the claim in respect of which I have just indicated Colonial should have judgment. 20 I indicated in my reasons of 1 November 2007 the inferences that I considered that could be drawn from the evidence that has been adduced in the proceeding thus far. Mr Flammia instructed counsel in the proceeding up to the time when, after the cases of Colonial and LawCover closed, he asked for a ruling as to whether or not he had a case to answer on the claims of fraud alleged both by Colonial and LawCover. It is significant that he had filed in the proceeding an affidavit of 14 August 2006, in which he purported to set out in some detail his version of the events relating to the request to Colonial to send to him a cheque payable to Mr Stevens. 21 There has been no explanation as to why Mr Flammia could not at least have attended Court in order to adduce evidence in terms of the affidavit and to endeavour to rebut the inferences that I have indicated can clearly be drawn from the evidence otherwise before me. He has chosen not to do so. The Court, therefore, can feel somewhat more confident in drawing the inferences that are otherwise available. As I have already said, and as I said in my reasons of 1 November 2007, I would confidently conclude that there is presently before me reliable and cogent evidence in support of Colonial's case in deceit against Mr Flammia . 22 More importantly, if LawCover's allegation that Colonial's claim against Mr Flammia arises out of fraudulent acts on his part, in the circumstances, I have no difficulty in making findings in terms of the provisional findings that I have foreshadowed in my reasons of 1 November 2007. It will follow, therefore, that I would be prepared to make the declaration claimed in the second cross-claim." 27 I will return to consider how LawCover seeks to make these findings relevant to the present application. For the moment, it is sufficient to note LawCover's submission that the findings of Emmett J demonstrate a fraudulent relationship between Mr Flammia and Mr Caradonna in 2001 and 2002 in such manner which entitled LawCover to decline indemnity to Mr Flammia upon the dishonesty or fraudulent conduct basis. LawCover submits that this is an important finding given what the evidence reveals concerning the use of the Plaintiffs' Narellan Vale CT. 28 On 7 December 2007, Emmett J made orders and declarations arising from Judgment No. 3, including the following declaration (Exhibit TRP1, page 82): "Declares that LawCover is not liable, by reason of Flammia's dishonest and fraudulent acts as set out in Annexure A hereto, to indemnify Flammia under the contract of insurance between LawCover and Flammia covering the period 1 July 2004 to 30 June 2005 for any claims arising from the circumstances giving rise to the claim by Colonial against Flammia as set out in Colonial's Application dated 16 September 2005 and Colonial's Further Amended Statement of Claim." 29 Annexure A (referred to in the declaration) listed a number of dishonest and fraudulent acts on the part of Mr Flammia with respect to the withdrawal of Mr Stevens' superannuation funds held by Colonial. It is not necessary to recite these acts for the purpose of this judgment. The Plaintiffs' Claim on the Fidelity Fund 30 On 29 August 2006, the then solicitors for the Plaintiffs wrote to the Law Society of New South Wales ("Law Society") foreshadowing a claim on the Fidelity Fund, based upon possible negligence of Mr Flammia concerning the Narellan Vale CT. On 8 September 2006, the Manager of the Fidelity Fund replied in the following terms (Exhibit 2): "In your letter you refer to possible negligence by Mr Flammia. Please note however that a fundamental element for a successful claim on the Fidelity Fund is dishonesty. If you remain of the view that negligence may be involved, you may wish to contact Mr Flammia's professional indemnity insurer. However, if you are of the view that dishonesty may be involved, please advise further a Fidelity Fund claim form will then be forwarded to you for completion by your clients." 31 On 12 September 2006, the Plaintiffs' solicitors responded in a letter which included the following: "At this stage we are still investigating the matter on our clients' behalf. However, there are certain serious allegations made against Mr Flammia in relation to dealings involving our clients and other parties. As such we wish to proceed with a claim against the fund and would request that a Claim Form be forwarded to us for our clients' consideration." 32 On 15 September 2006, the Manager of the Fidelity Fund provided information to the Plaintiffs' solicitors with respect to the manner of making a claim on the fund. 33 Pursuant to s.438 Legal Profession Act 2004, on 24 May 2007, the Law Society advertised a final date of 28 August 2007 for Fidelity Fund claims regarding the law practice of Manna & Flammia Solicitors and Lorenzo Flammia. The same day, the Manager of the Fidelity Fund wrote to the Plaintiffs' then solicitors informing them of the deadline, and the fact that claims received after that date are barred unless the Fidelity Fund Management Committee or the Supreme Court allowed further time. 34 On 27 July 2007, the Plaintiffs, through their solicitors, made a claim on the Fidelity Fund (Exhibit 1). Given submissions made on behalf of LawCover with respect to the contents of the Plaintiffs' claim on the Fidelity Fund (that they contain admissions by the Plaintiffs), it is appropriate to set out relevant parts of the information provided as part of the claim. 35 Section 7.1 of the claim sought information with respect to the property (other than money received by or held on trust by the solicitor) to which the claim related. The claim form stated: "The solicitor was the holder of the title deeds in safe custody. Annexed hereto is a letter confirming the items in safe custody. The issue in this claim relates to the title deed of 9 McMinn Place, Narellan Vale held in safe custody by the firm." 36 Section 7.3.1 of the claim sought particulars of the nature of the dealing with the property by the law practice, and the manner in which it was said to be fraudulent. The Plaintiffs responded in the claim form: "This matter is currently subject to a Police investigation by the Penrith Fraud department. The title deed was removed without consent and a mortgage registered on the title without knowledge of the owners." 37 In response to s.7.3.2 and 7.3.3, which sought information concerning the time, place and the identity of other parties involved in any fraudulent dealing, the claim form stated: "To be confirmed when the Police report is finalised." 38 In response to s.7.3.4 concerning the effect of the fraudulent dealing on the existence or value of trust property, the Plaintiffs responded: "A mortgage was placed on title to the value of $400,000.00 plus interest and penalties. We are liable for penalties. We are liable for penalties and are the subject of a possession claim in the Supreme Court." 39 In response to s.7.4 which enquired as to whether property had been recovered, the Plaintiffs replied: "No. We have been unable to obtain a return of the certificate of title to the property unless the mortgage is paid in full." 40 Section 7.5 enquired as to whether a demand had been made on the practice for compensation for loss, to which the Plaintiffs replied: "Lorenzo Flammia's licence was suspended. We have lodged a LawCover claim which is attached, however, LawCover is awaiting a response to the Police Report for our Claim of $400,000.00, penalty interest and damages." 41 In response to s.9.2 of the claim form, the Plaintiffs stated that the Penrith Police had referred them to Jim Sofiak of the Law Society who had included Penrith Police in his investigation. 42 In response to s.9.3, the Plaintiffs stated that a LawCover claim had been lodged and enclosed a copy of it. 43 In response to s.9.5 which enquired as to whether legal proceedings had been commenced against the solicitor, the Plaintiffs stated: "Yes. We have commenced a professional negligence claim against Lorenzo Flammia in the Supreme Court. Documents just filed and to be served." 44 Annexed to the claim on the Fidelity Fund were a series of statements from, amongst others, each of the Plaintiffs. Included in the supporting documents was a copy of a COPS entry of the New South Wales Police Service recording a report on 8 March 2001 of a break, enter and steal on the premises of Manna & Flammia Solicitors, 45 Castlereagh Street, Penrith in which a laptop computer was said to have been stolen. No mention was made in the COPS entry of the taking of any documents, let alone the Narellan Vale CT. 45 The Plaintiffs attended Mr Flammia's office on 11 April 2006 following a telephone call from Mr Flammia to Mr Vaccaro the preceding day indicating that one of their title deeds had been "stolen", but that they were "not to worry" as he had "already informed the Law Society". According to the statement of Mrs Vaccaro, she attended Mr Flammia's office with her husband and Mr Cosimo Care on 11 April 2006. During the conversation, Mr Flammia said words to the following effect: "I was broken into at the beginning of the month and your title deed was stolen. Had it not been for the Law Society contacting me I would not have known … Don't worry you will get your title deed back." 46 Mrs Vaccaro enquired, "Why did they take only that title deed?" and Mr Flammia did not respond. According to Mrs Vaccaro, Mr Flammia showed them the room where documents were kept, the room being opposite the bathroom. 47 A statement of Cosimo Care asserted that, on 11 April 2006, he drove the Plaintiffs and his wife to the office of Manna & Flammia to obtain the title deeds from Mr Flammia. Whilst in Mr Flammia's office, Mr Care stated that a conversation took place in which Mr Flammia said words to the effect: "Someone probably took the title deed to purchase or obtain $5,000.00 to $10,000.00 against the property … it is white collar crime." 48 Also provided in support of the claim on the Fidelity Fund was a letter dated 23 February 2007 from Mary Banicevic, who had worked for Manna & Flammia as a conveyancing secretary. In response to a question as to whether a safe custody procedure was in place when she worked at the firm, Ms Banicevic replied that the "safe custody procedure was that once a deed came into the office from a client or after settlement it was entered into the deeds book and placed in a metal tin in a metal cabinet in a rear room of the office". In response to a question as to whether the premises had been broken into on 7 March 2001, Ms Banicevic responded that the "offices were broken into approximately three times to my knowledge" although she was unaware of the exact dates, but that, on each occasion the police were called. She said that "the first time the offices were broken into there were quite a number of items stolen - such as radio and cassette player, Mr Flammia's laptop and other items". 49 In response to a question whether Mr Caradonna ever attended the premises and, if so, whether he was permitted unsupervised access to the premises, Ms Banicevic replied: "Mr Caradonna did attend the office on numerous occasions during business hours. During the time that he was in the office, he would walk around the office by himself and would go into the kitchen which was also at the rear of the office and make himself coffee without asking anyone. My desk was right in front of the kitchen. As to him being permitted access to the premises unsupervised, I am not aware." 50 LawCover submits that the making of the Fidelity Fund claim by the Plaintiffs represents an admission on their part that dishonesty was involved on Mr Flammia's part. A Letter to the Police 51 In a letter dated 19 September 2007 addressed to Senior Constable Davis of the Fraud Squad, the Plaintiffs' then solicitors sought an indication as to the current status of the police investigation concerning Mr Flammia and Mr Caradonna and the loss and unauthorised use of the Narellan Vale CT. As will be seen, LawCover submits that this letter contains admissions by the Plaintiffs. The letter included the following (Exhibit A, Tab 8): "We refer to the above matter and our numerous telephone attendances enquiring as to the progress of your investigation of Lorenzo Flammia and Tony Caradona [sic] . This matter has been progressing for some time however it does not appear that a resolution is near. We advise that our elderly clients have been under considerable pressure and stress since early 2006 when the discovery of their missing title deed and a registered mortgage on title took place. We note that this matter was initially in the hands of the Law Society and was transferred to your department more than one year ago. It appears that we are no closer to resolving this matter than we were six months ago. Since our involvement, we have made numerous enquiries with: 1. Previous staff members of Lorenzo Flammia. We were able to obtain letter responses from all, except one, employee. These letters confirmed Mr Lorenzo's actions over the years and also what occurred on each break and enter; 2. We have obtained Police reports as to the alleged break and enters into the premises and it is evident that no title deeds were reported stolen each time and that Mr Flammia did not act in the best interests of his firm by not ensuring that the alarm was in place, by not ensuring that the title deeds were in a safe and secure location and, lastly, negligently failing to notify the Law Society of any threat to his clients; 3. It is evident from the facts and investigations that this was a scheme between Lorenzo Flammia and Tony Caradona [sic] to the detriment of many Innocent persons , Even based on the above information and our assistance in helping other parties or firms that have contacted us, it appears that we are still no closer to finalising this matter. We advise, that our clients are incurring costs in defending a Possession List claim and also commencing a Professional Negligence claim in the Supreme Court which will only refer us back to the Law Society and in turn back to the Fraud Investigation Department. We advise that up until this point our client has been extremely patient and understands that procedures and processes must be followed, however it has now come to the point where a finalisation of the matter must take place. Should this matter continue unresolved, damages claimed by innocent persons are going to increase and put an extreme pressure on either the Fidelity Fund or LawCover to finalise claims. It is inevitable that some cases be made against Lorenzo Flammia and/or against LawCover or the Fidelity Fund but this constant delay is affecting many innocent persons in moving on with their lives and, unfortunately, It Is affecting a series of elderly persons. As advised to you on many occasions, we are more than willing to assist you in any investigation and to open our files to your office. We will also keep you informed as to the Professional Negligence claim and whether that claim will be amended to a Fraud claim if facts from Lorenzo Flammia draw that conclusion. Are you able to give any indication as to the current status of your investigation? We thankyou in anticipation." (emphasis added) The Hillsan Mortgage 52 The Plaintiffs tendered a bundle of documents obtained from the file of Messrs Hancocks, Solicitors for Hillsan (Exhibit A, Tab 9). These documents provide direct evidence of the involvement of the fictitious Hugh Johnson, Solicitor, in the mortgage transaction concerning the Narellan Vale property. The documents also record the involvement of Mr Caradonna in dealing with Mr Hancock. The evidence points to Mr Caradonna, purporting to act as a type of go-between, stating that he would contact Mr and Mrs Vaccaro, the Plaintiffs, and make arrangements for them to sign relevant documents. As I have said, the Plaintiffs completely deny any involvement in this process and LawCover accepts the Plaintiffs' account in this respect. These documents provide ample evidence of the involvement of Mr Caradonna in this transaction. However, the documents provide no evidence of the involvement of Mr Flammia in the Hillsan mortgage. 53 In this respect, LawCover is left to submit that there is a clear inference that the Narellan Vale CT was taken from Mr Flammia's office and used, without authority, by Mr Caradonna to give a mortgage to Hillsan by use of forged signatures of the Plaintiffs. All of this, LawCover submits, must be viewed against a background of the pre-existing relationship between Mr Flammia and Mr Caradonna involving fraudulent and dishonest activity as found by Emmett J in the Colonial proceedings. The Vella Proceedings 54 LawCover relies upon the judgment of Young CJ in Eq in Vella v Permanent Mortgages Pty Limited [2008] NSWSC 505 (Exhibit 3) in support of an argument that there was a fraudulent and dishonest relationship between Mr Flammia and Mr Caradonna in 2006, after the Narellan Vale property was mortgaged to Hillsan. Mr Bell SC, for LawCover, conceded that this judgment was of less assistance than the judgments of Emmett J in the Colonial proceedings, given that the events occurred after those involving the taking and use of the Narellan Vale CT. 55 Mr Vella sought relief in circumstances where his signature had been forged on mortgages over property given to Permanent Mortgages Pty Limited. In the course of complex litigation, cross claims were brought by various parties against Mr Flammia and Mr Caradonna. Young CJ in Eq elaborated upon the relationship between Mr Flammia and Mr Caradonna at [21]-[24]: "21 There was a very close relationship between Mr Caradonna and Mr Flammia. First they were cousins. Secondly, Mr Flammia had acted for Mr Caradonna as a solicitor on previous occasions. In particular, when Mr Caradonna was imprisoned for forging group certificates in 2000 and 2001, Mr Flammia managed his finances, visited him in gaol on at least ten occasions, dealt with Mr Caradonna's parole officer, his doctor and his wife. 22 Mr Caradonna is now bankrupt. Leave was given to continue the proceedings against him up until judgment, but he did not appear in the proceedings, nor did he give evidence, and nor did his Trustee in Bankruptcy appear. 23 Mr Flammia, solicitor, who is a respondent to the fifth cross-claim in 4059/06 is also now a bankrupt. Again, leave was granted to continue the proceedings against him, but he did not give evidence, nor did he appear in the proceedings by himself or his Trustee in Bankruptcy. 24 At the time of his bankruptcy in November 2007, Mr Flammia stated he was owed approximately $400,000 by Mr Caradonna. In January 2006, there were 170 telephone calls made by Mr Flammia on his mobile phone to Mr Caradonna's mobile phone and one call to his office at Blaster Promotions, many of the calls being outside business hours." 56 After recounting detailed factual findings, Young CJ in Eq referred to the activities of Mr Flammia and Mr Caradonna at [172]-[173]: "172 These inferences receive further support from the use of Mr Flammia on occasions when a solicitor was required, and otherwise, using no solicitor. Mr Flammia was the creature of Mr Caradonna. Mr May was not retained, notwithstanding that he had been named in the Fincorp application. Mr Rutty could give no clear explanation for this, other than that Mr Caradonna told him to use Mr Flammia. 173 Mr Flammia attested the forged Vella signatures on the Mitchell Morgan mortgage. Mr Flammia had acted for Mr Caradonna whilst in prison. Mr Caradonna had been convicted for defrauding the Commonwealth by dishonestly claiming that he had been in receipt of income from which income tax deductions had been made, whereas that was not the case. Mr Flammia must be taken to have known that Mr Caradonna was an unsuitable person to be giving instructions in a mortgage transaction. According to Mr Flammia's statement of affairs, Mr Caradonna owed him $400,000." 57 His Honour made further findings concerning Mr Flammia and Mr Caradonna at [179]-[180]: "179 It will be remembered that one of the documents which was uttered to lenders was a certificate by a solicitor, Lorenzo Flammia. Mr Vella said that he did lend his passport, driver's licence and Medicare card to Mr Caradonna who said that he needed them because of the default problem with Wreck Air in order to secure the loan from the St George Bank. He said that just before Christmas 2005: 'Tony Caradonna came past my house and picked me up and told me 'I'm going to my cousin's place. He is a solicitor. Come for a drive'.' ( T103). 180 Accordingly the two of them went for a drive from Mr Vella's home, presumably at Horsley Park. They drove to Penrith where Mr Flammia's office was and both men went into the office though Mr Vella said he waited in the waiting room. They then appear to have driven to Camden where they went to a Christmas party, or at least went there for a few minutes. It was there that Mr Vella may have caught sight of Mr Rutty and been introduced to Mr Jones, but he cannot really remember. He certainly says that he never gave Mr Rutty any instructions about a loan." 58 In the course of resolving a submission concerning Mr Vella, Young CJ in Eq made findings concerning Mr Caradonna and Mr Flammia at [236]: "Although there are, as I have said, considerable problems with some of Mr Vella's evidence, in the whole, where there is external evidence or corroboration, Mr Vella's evidence is confirmed rather than contradicted. Further reinforcement of Mr Vella's story is provided by the fact which I can easily and do infer from the evidence that Mr Caradonna was a fraudster and probably Mr Flammia was too." 59 His Honour stated at [590]: "However, of the various wrongdoers, the most morally blameworthy was Mr Caradonna who orchestrated the fraud. Mr Flammia played a significant, but relatively minor part." 60 LawCover submits that there is a pattern of dishonest and fraudulent conduct between Mr Flammia and Mr Caradonna, before and after the Hillsan mortgage, so that the Court may readily conclude, by the drawing of appropriate inferences and reliance upon what LawCover contends is tendency evidence, that Mr Flammia was involved in a dishonest and fraudulent way, directly or indirectly, in the taking and unauthorised use of the Narellan Vale CT. Involvement of LawCover 61 On 19 July 2007, the Plaintiffs commenced proceedings against Mr Flammia by filing a Statement of Claim in the Professional Negligence List of the Common Law Division of the Court. On 14 August 2007, the Statement of Claim was served on Mr Flammia who immediately passed it on to LawCover (Exhibit TRP1, page 103). 62 On 4 April 2008, the solicitors for LawCover wrote to Mr Flammia seeking further information in connection with the claim (Exhibit TRP1, pages 109-111). The letter reminded Mr Flammia of the dishonesty exclusion contained in clause 21 of the policy. Mr Flammia responded by email dated 1 May 2008 (Exhibit TRP1, page 112). Mr Flammia made no admission of dishonesty or fraudulent conduct on his part with respect to the Narellan Vale CT and expressed the expectation that LawCover would indemnify him in the matter. 63 By letter dated 14 August 2008 to Mr Flammia, the solicitors for LawCover informed him that "LawCover denies liability to indemnify you for this claim on the grounds that the dishonesty exclusion applies to the claim". 64 On 1 April 2008, the then solicitors for the Plaintiffs wrote to the solicitors for LawCover seeking an indication as to whether LawCover would consent to an application to be joined in the proceedings against Mr Flammia pursuant to s.6 Law Reform (Miscellaneous Provisions) Act 1946 (Exhibit TRP1, page 116). In a lengthy letter dated 4 April 2008, the solicitors for LawCover recited a number of matters, including the judgments of Emmett J in the Colonial proceedings, and invited responses to a number of questions. The letter included the following (paragraphs 14-16): "14 Whilst our client reserves its position in respect of the policy generally, the exclusions set out above are likely to be relevant and may apply to this claim. 15 Subject to your response to this letter and our further investigations, we put you on notice that, if appropriate, our client may, pursuant to sections 97(1)(a) and 98(1)(a) of the Evidence Act 1995 rely on the factual findings in the Colonial judgments as evidence of tendency and/or coincidence evidence in either opposition to any motion to join our client or, alternatively, at any final determination of any proceedings against our client. 16 If, upon review of the information provided in response to this letter and our further investigations, our client takes the view that the dishonesty exclusion and/or the fidelity fund exclusion apply to this claim then there would be a serious question as to the utility of these proceedings, including the foreshadowed application." 65 On 14 July 2008, the Plaintiffs filed a Notice of Motion seeking, inter alia, an order that LawCover be joined as a party to the proceedings against Mr Flammia. Thereafter, further correspondence passed between the solicitors for LawCover and the Plaintiffs, including a lengthy letter dated 14 August 2008 in which LawCover set out arguments of the type advanced at the present hearing and invited the Plaintiffs' solicitors to withdraw the application to join LawCover to the proceedings (Exhibit TRP1, pages 126-130). Submissions of the Plaintiffs and LawCover 66 Detailed written submissions were furnished by counsel for the Plaintiffs and LawCover and counsel addressed at the hearing of the application. Although it is the Plaintiffs who bear the onus with respect to the claim for relief in the Amended Notice of Motion, it is appropriate first to refer to submissions made on behalf of LawCover. LawCover's Submissions 67 Mr Bell SC, for LawCover, submits that the central issue on this application is whether it is arguable that Mr Flammia was not dishonest in relation to the loss suffered by the Plaintiffs (T25.11). The onus lies on the Plaintiffs, as the parties seeking leave, to satisfy the Court, by reference to the evidence on the application, that it is arguable that Mr Flammia was not dishonest on this occasion. 68 LawCover submits that leave to proceed against LawCover should be refused for the reason that it is not arguable that LawCover is obliged to indemnify Mr Flammia for the claim made by the Plaintiffs, by reason of LawCover's entitlement to disclaim liability on account of Mr Flammia's dishonesty. 69 LawCover further submits that the Plaintiff should be refused leave to join LawCover and to amend its pleadings, on the basis that such an amendment involves an abuse of process. 70 Mr Bell SC submits that the relevant principle in relation to leave to proceed against LawCover is as expressed by Giles JA (MW Campbell AJA agreeing) in Tzaidas v Child (2004) 61 NSWLR 18 at 25-26 [23]. 71 He submits that the focus is on the outcome - if Mr Flammia is liable, what are the prospects that LawCover would be obliged to provide indemnity? - and anything bearing on the outcome is relevant. In the present case, Mr Bell SC points to the following reasons why, focusing on the outcome, leave should be refused: (a) admissions by the Plaintiffs show that the circumstances giving rise to their claim arose from circumstances of dishonesty on the part of Mr Flammia, thus providing LawCover with an entitlement to exclude indemnity pursuant to clause 21 of the policy; (b) insofar as the Plaintiffs seek to claim through Mr Flammia's professional indemnity policy, they are Mr Flammia's privy and are bound by issue estoppels between LawCover and Mr Flammia (as a result of the judgments of Emmett J in the Colonial proceedings) to the effect that Mr Flammia: (i) knew that Mr Caradonna, the fraudster referred to in paragraph 8(d) of the Amended Statement of Claim had been convicted of serious fraud offences, (ii) had, prior to the circumstances giving rise to the Plaintiffs' claim, previously been himself engaged in fraudulent and dishonest conduct with Mr Caradonna, (c) in the context of the fiduciary obligation owed by Mr Flammia to the Plaintiffs, Mr Flammia's failure to disclose to the Plaintiffs his previous fraudulent and dishonest conduct with Mr Caradonna was a dishonest omission, and had such a disclosure been made, it may readily be inferred that the Plaintiffs would not have entrusted, or continued to entrust, the Narellan Vale CT to Mr Flammia for safe keeping; (d) accordingly, the Plaintiffs' claim against LawCover arose from a dishonest omission, and LawCover has an exclusion pursuant to clause 21 of the policy; (e) evidence of Mr Flammia's conduct in relation to Colonial, as reflected in the judgments of Emmett J, and which is admissible against and binding upon the Plaintiffs as parties claiming through Mr Flammia, manifests tendency evidence within the meaning of s.97 Evidence Act 1995 of the most powerful kind which renders inherently likely that the Plaintiffs' loss was occasioned by, or arose directly or indirectly from, Mr Flammia's dishonesty in association with Mr Caradonna. 72 With respect to the argument referred to at paragraph [71](a) above, Mr Bell SC submits that the Plaintiffs made admissions in their Fidelity Fund claim form. He points to the fact that the Plaintiffs answered Question 7.3 (which is only required to be answered if the claim relates to fraudulent dealing), as an admission by the Plaintiffs that Mr Flammia had fraudulently dealt with trust property namely, the Narellan Vale CT. The Plaintiffs made a joint statutory declaration confirming that the matters set out in the Fidelity Fund claim form were true and correct. He submits that these matters constitute admissions by the Plaintiffs that the circumstances giving rise to the claim against Mr Flammia arose from his fraudulent dealing with the Narellan Vale CT and such dealing constitutes dishonesty within the meaning of clause 21 of the policy. 73 LawCover submits that a further admission is contained in the letter dated 12 September 2006 from the Plaintiffs' then solicitors to the Fidelity Fund (see [31] above). Further reliance is placed upon the letter dated 19 September 2007 from the Plaintiffs' then solicitors to Senior Constable Davis of the Fraud Squad (see [51] above) which asserted that "this was a scheme between Lorenzo Flammia and Tony Caradonna to the detriment of many innocent people". 74 Mr Bell SC submits that these admissions are admissible against the Plaintiffs, as proof of their truth, pursuant to ss.81 and 87(1)(a) Evidence Act 1995. He submits that Mr Flammia is a bankrupt and will not defend himself in these proceedings. Accordingly, he submits that, on a final hearing, the Court will inevitably make a finding in accordance with the Plaintiffs' admissions. 75 With respect to the submission at paragraph [71](b) above, Mr Bell SC notes that, in 2007, LawCover was joined by Mr Flammia as a cross respondent in the Colonial proceedings in the Federal Court. He refers to the findings of the Federal Court and notes that the conduct pre-dated fraudulent use of the Narellan Vale CT in this case, where the Hillsan mortgage is dated 23 December 2003. 76 With respect to issue estoppel, LawCover submits that Mr Flammia and the Plaintiffs are privies: Blair v Curran (1939) 62 CLR 464 at 531. He submits that both LawCover and Mr Flammia were parties to the Colonial proceedings and judgments. If LawCover was to be joined in the present proceedings, both LawCover and Mr Flammia would be parties to these proceedings. That establishes the identity of parties necessary for an issue estoppel to be pleaded at the final hearing. Accordingly, Mr Bell SC submits that LawCover and Mr Flammia would be bound, in the present proceedings, by all matters which were necessary to decide as the groundwork of the Colonial proceedings' judgments. He submits that, for the purposes of determining which matters were necessary to decide, the Court may have regard to the Federal Court's reasons for judgment, the pleadings, particulars and evidence: Jackson v Goldsmith (1950) 81 CLR 446 at 467. 77 Mr Bell SC submits that the Colonial proceedings' judgments establish issue estoppels as between LawCover and Mr Flammia in respect of matters including the following: (a) prior to Mr Caradonna's fraudulent use of the Narellan Vale CT in December 2003, Mr Caradonna had, to Mr Flammia's knowledge, been convicted of and imprisoned for serious fraud offences; and (b) Mr Flammia had, prior to Mr Caradonna's fraudulent use of the Narellan Vale CT in December 2003, himself engaged in fraudulent and dishonest conduct with Mr Caradonna (as found by Emmett J), namely Mr Flammia and Mr Caradonna had, acting together, been involved in a fraudulent conspiracy whereby Mr Flammia, purportedly acting as a solicitor, assisted Mr Caradonna to impersonate a member of a superannuation fund so as to fraudulently obtain that member's superannuation entitlement; (c) that fraud involved, inter alia, Mr Caradonna and Mr Flammia faxing a forged document from Mr Flammia's office. 78 Mr Bell SC submits that s.6(1) Law Reform (Miscellaneous Provisions) Act 1946 creates a charge on all insurance monies that are or may become payable in respect of a liability, and that if no insurance monies are payable, the statutory charge has nothing to which it may attach: Bailey v New South Wales Medical Defence Union Limited (1995) 184 CLR 399. Accordingly, the Plaintiffs' rights against LawCover under s.6(1) are no better than Mr Flammia's rights against LawCover. If Mr Flammia's claim against LawCover under the policy is affected by an issue estoppel, then so is the Plaintiffs' derivative claim against LawCover. An alternative way of making the same point is to say the Plaintiffs are Mr Flammia's "privy in interest" for the purpose of issue estoppel because the Plaintiffs' claim is "under or through" Mr Flammia: Ramsay v Pigram (1968) 118 CLR 271 at 279. LawCover submits that there is sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings in to which the other is party: Gleeson v J Wippell & Co Limited [1977] 1 WLR 510 at 514-516. LawCover submits that the Plaintiffs have a sufficient degree of identification with Mr Flammia to make it just to hold that the decision in issue estoppels between LawCover and Mr Flammia in the Colonial proceedings should be binding in these proceedings as against the Plaintiffs, because the Plaintiffs claim under and through Mr Flammia. 79 With respect to the submissions at paragraph [71](c) and (d), Mr Bell SC submits that Mr Flammia, as the Plaintiffs' solicitor, owed the Plaintiffs a fiduciary obligation in respect of his safe keeping of the Narellan Vale CT. As such, he submits that Mr Flammia had an obligation to disclose to the Plaintiffs all matters within his knowledge which may be relevant to the magnitude of the risk involved in the Plaintiffs leaving the title deed with Mr Flammia for safe keeping. Mr Bell SC referred to Nationwide Building Society v Balmer Radmore [1999] Lloyds Rep PN 241 at 263-264, where Blackburne J held that a solicitor acting for a lender who has knowledge that there is a risk that a borrower is intending to defraud the lender, is obliged to disclose that matter to the lender, regardless of any other obligations owed by the solicitor to the borrower. LawCover relies as well upon the decision of the House of Lords in Hilton v Barker Booth and Eastwood [2005] 1 WLR 567. There, the House of Lords held that the solicitor acting for two clients (Mr Hilton and Mr Bromage) in a sale by Mr Hilton to Mr Bromage had an obligation to inform Mr Hilton that Mr Bromage had recently been released from prison after pleading guilty to offences involving fraudulent trading and participating in the management of a company whilst an undischarged bankrupt. The solicitor knew of those matters by reason of having acted for Mr Bromage in the criminal proceedings. The House of Lords held that, as between the solicitor and Mr Hilton, the solicitor was obliged to disclose those matters to Mr Hilton, regardless of whether that would constitute a breach of the solicitor's duty to Mr Bromage. 80 Mr Bell SC submits that position is a fortiori in this case, because in relation to the superannuation fraud perpetrated by Mr Flammia and Mr Caradonna, there is no confidence in an iniquity: Nationwide Building Society v Balmer Radmore at 264. He submits that the following matters were plainly relevant to the magnitude of the risk involved in the Plaintiffs leaving the title deed with Mr Flammia for safe keeping: (a) a convicted and recidivist fraudster, Mr Caradonna, had access to Mr Flammia's office where the Narellan Vale CT was kept; (b) Mr Flammia and Mr Caradonna had, acting together, in 2001 been engaged in a fraud whereby Mr Flammia fraudulently assisted Mr Caradonna to impersonate a member of a superannuation fund so as to fraudulently obtain that member's superannuation entitlement, as described in more detail in the judgments of Emmett J in the Colonial proceedings; (c) the fraud involved the extensive use of forged signatures and fictitious personalities; (d) that fraud involved, inter alia, Mr Caradonna and Mr Flammia faxing forged documents from Mr Flammia's office; (e) far from being a place of safe keeping, Mr Flammia's office was in fact an office operated by a fraudulent solicitor, and a venue at which overt acts in relation to frauds had previously been committed by Mr Flammia acting with Mr Caradonna. 81 Mr Bell SC submits that Mr Flammia was obliged to disclose those matters to the Plaintiffs, in accordance with the principles in Nationwide Building Society v Balmer Radmore and Hilton v Barker Booth and Eastwood. The fact that the disclosure would involve the disclosure of Mr Flammia's own fraudulent conduct could not prevent that duty from arising, because Mr Flammia's personal interest in not disclosing his own fraudulent conduct could not be preferred over his fiduciary obligation to the Plaintiffs to disclose all matters relevant to the Plaintiffs' decision to entrust, or to continue to entrust, their title deed to him. 82 LawCover submits that Mr Flammia's failure to disclose these matters must inevitably be described as dishonest. Reliance is placed, by way of analogy, upon Law Society of NSW v Harvey (1976) 2 NSWLR 154 at 173-174 and McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579 at 597 [62]. Mr Bell SC argues that the only plausible inference is that Mr Flammia did not disclose those matters because it would involve the divulging of his own previous fraudulent conduct, and that he wished his own fraudulent conduct to remain undetected. Any such preferment of Mr Flammia's own interests, he submits, was also dishonest because Mr Flammia would have known that he had a fiduciary duty to bring those matters to the attention of the Plaintiffs: McCann v Switzerland Insurance Australia Limited at 579 [61]-[62]. There can be no suggestion that Mr Flammia could have honestly forgotten that he had previously engaged in a fraudulent conspiracy with Mr Caradonna, or that Mr Flammia could have honestly overlooked the previous fraudulent conspiracy, or honestly considered that it was not a relevant matter which ought to have been disclosed to the Plaintiffs. 83 LawCover submits that the causal connection encompassed by the wording "arises from … whether directly or indirectly" in clause 21 of the policy is extremely broad. In McCann v Switzerland Insurance Australia Limited at 589 [22]-[23], the High Court applied a broad notion of causation to the words "brought about by" in a previous version of the LawCover policy. Mr Bell SC submits that the clause in the present version of the policy is even wider than that considered by the High Court, referring as it does to a claim which "arises from" any dishonest or fraudulent acts "whether directly or indirectly". He submits that those words are to be given a wide construction: Yaktine v Perpetual Trustees Victoria Limited [2004] NSWSC 1078 at [58]; Ginelle Finance Pty Limited v Diakakis [2007] NSWSC 60 at [138]. 84 Mr Bell SC submits that, if Mr Flammia had acted in accordance with his duty and disclosed these matters to the Plaintiffs immediately after the fraudulent conduct occurred with Mr Caradonna in 2001, it cannot seriously be suggested that the Plaintiffs would have done anything other than retrieve the Narellan Vale CT from Mr Flammia's purported safe keeping. Had the Plaintiffs retrieved the title deed in 2001, it could not have been fraudulently used by Mr Caradonna in 2003 as alleged in the Amended Statement of Claim. Accordingly, LawCover submits that the Plaintiffs' claim against Mr Flammia "arises, directly or indirectly" from Mr Flammia's dishonest omission to disclose to the Plaintiffs the matters relied upon by LawCover. In these circumstances, LawCover submits that clause 21 of the policy is engaged, the contrary is not arguable and leave to join LawCover and proceed against it should accordingly be refused. 85 With respect to the submission at paragraph [71](e), Mr Bell SC submits that the judgments of Emmett J in the Colonial proceedings are admissible as tendency evidence pursuant to s.97 Evidence Act 1995. He submits that the conduct there disclosed bears a strong similarity to what occurred in the present case, namely the use of an innocent person's document (in the present case, a title deed; in the Colonial proceedings, a redemption form) coupled with forged signatures to obtain money from financial institutions. He submits that any suggestion that the use of the Narellan Vale CT by Mr Caradonna to obtain funds by deception was a coincidence, with Mr Flammia not being involved, should be rejected. He submits that the overwhelming probability is that this was a further instalment of the dishonest and fraudulent conduct in which the two men were engaged. 86 Finally, Mr Bell SC submits that, in the light of the Plaintiffs' admissions and the other matters dealt with in the Colonial proceedings' judgments, the amendment sought to be made by the Plaintiffs involve an abuse of process. He submits that the categories of abuse of process are not closed and that, in assessing whether there has been an abuse of process, a broad-based merits approach ought be taken. There may be an abuse of process, absent an estoppel, where there is an attempt to litigate a newer matter already determined in earlier proceedings: Rogers v The Queen (1994) 181 CLR 254 at 156. The original agitation of the issue need not have been in proceedings to which the party alleging abuse was a party. The relevant abuse may be in terms of unconscionability, blowing hot or cold or approbating and reprobating. It may also be in terms of an act which brings the administration of justice into disrepute. In the present case, Mr Bell SC submits that an abuse of process arises because: (a) even if there is no issue estoppel strictly binding upon the Plaintiffs, Emmett J has found Mr Flammia to be a dishonest solicitor and there is an abuse of process, analogous to that discussed in Rippon v Chilcotin Pty Limited (2001) 53 NSWLR 198, if the Plaintiffs are allowed to litigate this question afresh in the context of a claim against Mr Flammia's policy; and (b) the Plaintiffs are approbating and reprobating by, on the one hand, asserting in the Fidelity Fund claim form that Mr Flammia has, in dealing with the Narellan Vale CT, fraudulently dealt with trust property, and, on the other hand, seeking to assert in the present proceedings that he acted honestly in dealing with their title deed. 87 Accordingly, LawCover submits that the Court should refuse the relief sought by the Plaintiffs in the Amended Notice of Motion. Submissions of Plaintiffs 88 Mr Beale, counsel for the Plaintiffs, contends that the unlawful removal of the Narellan Vale CT from Mr Flammia's office, at some time prior to 27 November 2003, constitutes an event giving rise to a claim for damages or compensation, which the Plaintiffs have against Mr Flammia for the purpose of s.6(1) Law Reform (Miscellaneous Provisions) Act 1946. He submits that, pursuant to paragraph 4 of the policy, LawCover indemnified Mr Flammia for liability in respect of the claim commenced against him by the Plaintiffs, and that the provision of the service of holding in safe custody valuable securities, including the Narellan Vale CT, falls within the definition of "the provision of legal services" in paragraph 35(f) of the policy. 89 Mr Beale submits that the event which gave rise to the claim by the Plaintiffs against Mr Flammia, and which gave rise to the charge under s.6, was the unauthorised removal of the Narellan Vale CT from the office of Mr Flammia. 90 Mr Beale accepts that the critical issue for determination on this application is whether, on the evidence adduced on this application, leave should not be granted because, under the terms of the policy, LawCover is entitled to disclaim liability for the purposes of s.6(4) Law Reform (Miscellaneous Provisions) Act 1946. 91 The Plaintiffs submit that LawCover has presented no evidence which demonstrates that Mr Flammia, notwithstanding his connection with Mr Caradonna, was either directly or indirectly involved in the dishonest removal of the Narellan Vale CT from Mr Flammia's office. 92 Mr Beale submits that the judgments of Emmett J in the Colonial proceedings do not give rise to any relevant issue estoppel as a consequence of which LawCover is entitled to disclaim liability. He submits that Emmett J was concerned with a distinct set of facts, in an earlier time period, and a completely separate cause of action to that contained in the present application. Mr Beale submits that the findings of Emmett J concerning Mr Flammia's dishonesty related to the particular facts and circumstances as found in that case and that those findings have no application to this case in such a way as to found the basis for application of the doctrine of issue estoppel. 93 The Plaintiffs submit that they have established an arguable case that LawCover is obliged to provide indemnity and that, accordingly, the Court cannot be satisfied that LawCover is entitled under the terms of the contract of insurance to disclaim liability: Tzaidas v Child at 25 [19]-[20]. Further, Mr Beale submits that LawCover has not established the second limb in relation to disclaimer under s.6(4) of the Act, namely "that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken". 94 In answer to LawCover's submission that the documents provided by the Plaintiffs in support of the claim on the Fidelity Fund contain admissions that Mr Flammia had acted dishonestly, Mr Beale submits that the contents of these documents are not capable of being admissions with respect to Mr Flammia's conduct. Rather, they constitute no more than allegations on the part of the Plaintiffs (and unsubstantiated allegations), since no evidence has been adduced of dishonesty on Mr Flammia's part. Alternatively, Mr Beale submits that the question whether the pleadings or other assertions constitute admissions under s.81 Evidence Act 1995 should be treated as a question of fact properly left to trial. 95 Mr Beale submits that the case against LawCover should be determined on the evidence available at a trial, not by reference to propositions contained in earlier pleadings or correspondence, as part of a precautionary application to the Fidelity Fund made under time constraints in 2007. He submits that the present proceedings allege negligence against Mr Flammia, and that nothing asserted on behalf of the Plaintiffs constitutes an admission which is capable of demonstrating dishonesty on Mr Flammia's part. He submits that these statements in earlier documents could not be used to preclude the Plaintiffs from leading evidence which was consistent only with negligence, and not dishonesty. 96 Mr Beale contends that the evidence relied upon by LawCover involves suspicion and innuendo, but that it is incumbent upon LawCover to adduce evidence of dishonesty or fraudulent conduct on the part of Mr Flammia of a type which meets the standard of proof in s.140 Evidence Act 1995 and Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-363. 97 Mr Beale submits that the terms of clauses 21 and 22 of the policy make clear that, for the purpose of disclaiming liability, it is necessary that "the claim" arises from dishonest or fraudulent acts or omissions. The dishonesty or fraud must relate to the factual circumstances of "the claim", and not some other facts and circumstances. If there be any ambiguity in this respect, and Mr Beale submits that there is not, he contends that the contra proferentem rule would operate strictly against the party drafting the policy, LawCover, so as to support the Plaintiffs' argument: Dickinson v Motor Vehicle Insurance Trust (1987) 163 CLR 500. 98 Mr Beale submits that s.54 Insurance Contracts Act 1984 (Cth) has the effect of limiting the right of an insurer to refuse indemnity because of "some act of the insured or of some other person, being an act that occurred after the contract was entered into …". He relies upon Tzaidas v Child at 50 [130], 52 [136]-[137] (per Santow JA). 99 Mr Beale submits that nothing in McCann v Switzerland Insurance Australia Limited, or the English authorities relied upon, assists LawCover in its argument that Mr Flammia's failure to disclose to the Plaintiffs his past relationship with Mr Caradonna was itself a dishonest omission within clause 21 of the policy. 100 With respect to LawCover's submission that the joinder of LawCover to the present proceedings would constitute an abuse of process, Mr Beale submits that permitting the Court to determine whether the conduct comes within clause 21 of the policy in the circumstances of this case is not an attempt to re-litigate an issue already determined by Emmett J in the Colonial proceedings. In response to LawCover's argument that the Plaintiffs are approbating and reprobating, Mr Beale submits that the lodging of a claim on the Fidelity Fund (requiring dishonesty) is not such as to operate to prevent the Plaintiffs from seeking to establish negligence on Mr Flammia's part in the present proceedings. In reality, Mr Beale submits that these were alternative steps taken by the Plaintiffs, in a manner similar to alternative pleadings advanced by litigants upon differing (and inconsistent) bases in fact and law. The fact that a claim was made on the Fidelity Fund (upon the limited basis contained in the supporting documentation) ought not be used to prevent the Plaintiffs from pressing the present claim and joining LawCover to the proceedings. 101 Mr Beale submits that the Court should exercise discretion in favour of joinder of LawCover and a grant of leave unde s.6(4) of the Act, and that questions of admissibility and weight of evidence with respect to facts relevant to the present proceedings ought be left to the trial of the Plaintiffs' claim. Resolution of Competing Submissions The Issue to be Determined 102 The onus lies upon the Plaintiffs to establish their claim for discretionary relief as sought in the Amended Notice of Motion: Nettle v Mathieson Group Pty Limited [2007] NSWCA 98 at [21]. 103 Section 6 Law Reform (Miscellaneous Provisions) Act 1946 creates "a new right with an associated remedy to enforce it": Bailey v New South Wales Medical Defence Union Ltd at 446. The right is the charge as created by s.6(1). The remedy to enforce performance of the obligation secured by such a charge is the direct right of action against an insurer given by s.6(4), subject to the requirement for leave. Section 6(4) does not direct the Court to deny leave only in a case where it is satisfied both of the entitlement to disclaim liability and that necessary steps have been taken to establish entitlement to do so. Leave must be refused in those cases but may also be refused, as a matter of discretion, even if the prohibition does not apply: Bailey v New South Wales Medical Defence Union Ltd at 448; Tzaidas v Child at 24 [17]. 104 LawCover has not argued that a charge has not arisen in this case by the making of the claim under the policy. Rather, the argument has focused upon the question whether discretion should be exercised in favour of the Plaintiffs by reference to the dishonesty/fraud exclusion clause. 105 The question to be answered is whether, by reference to evidence available on the application, it was arguable that the insured had a claim under the relevant policy: Tzaidas v Child; Macquarie Underwriting Pty Limited v Permanent Custodians Limited (2007) 240 ALR 519 at 522 [15]. In the circumstances of this case, have the Plaintiffs demonstrated, in light of the material in evidence on the application, that it is arguable that Mr Flammia was not dishonest in the circumstances in which the Narellan Vale CT came to leave Mr Flammia's office, and be used for the purpose of the Hillsan mortgage in 2003? The demonstration of an arguable case has been said to be "a relatively modest hurdle": Tzaidas v Childs at 52 [140] (per Santow JA). 106 I should keep firmly in mind that the issue on this interlocutory application concerns arguability. And it falls to be determined by reference to the evidence before me. The limitations on the extent of decision making in the course of an interlocutory hearing have been recognised, in particular where contested questions of fact and/or law are involved: The Owners - Strata Plan 50530 v Walter Construction Group Ltd (In Liq) [2006] NSWSC 552 at [29]. 107 I am not purporting to determine the Plaintiffs' claim for relief against LawCover, as if at a final hearing upon the assumption that LawCover had been joined as a party to the proceedings. There is a volume of documentary evidence before the Court on this application. It is likely that there will be a range of additional evidence, oral and documentary, at any final hearing should LawCover become a party to the proceedings. As Graham J observed in Macquarie Underwriting Pty Limited v Permanent Custodians Limited at 539 [106], a finding, for the purposes of s.6(4), that there is an arguable case of entitlement to indemnity will not affect the ultimate outcome of the matter following a trial and detailed argument in relation to the whole of the evidence and the impact of the relevant statutory provisions upon the question of liability in the matter. 108 A number of the issues raised on this application concern the potential use of evidence, including tendency evidence, at a final hearing. It will fall to the trial judge to determine the admissibility and weight of such evidence. That does not mean that I should disregard or in some way downgrade the value, or potential value, of such evidence on this application. However, I am conscious of the limitations in determining issues on an interlocutory application. Construction of the Policy 109 A policy of insurance is a commercial contract and should be given a businesslike interpretation, requiring attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure: McCann v Switzerland Insurance Australia Limited at 589 [22] (per Gleeson CJ); Wilkie v Gordian Runoff Ltd [2005] 221 CLR 522 at 528-529 ]15]; CGU Insurance Ltd v Porthouse [2008] HCA 30 at [43]. Maxims and rules of construction, developed as tools to aid the tasks of interpretation, are subordinate to the primary duty, which is to uphold the contract between the parties. The contra proferentem rule is one of last resort: McCann v Switzerland Insurance Australia Limited at 600-603 [74] (per Kirby J). 110 Clause 21 of the policy allows LawCover not to indemnify Mr Flammia "when the claim arises from any dishonest or fraudulent acts or omissions … whether directly or indirectly". I accept that these are words of wide import: Yaktine v Perpetual Trustees Victoria; Ginelle Finance Pty Limited v Diakakis. 111 It is necessary, however, that there be some link revealed in the evidence with respect to the Plaintiffs' claim arising from the taking and unauthorised use of the Narellan Vale CT and dishonesty or fraud on the part of Mr Flammia. Issues Arising From the Judgments of Emmett J in the Colonial Proceedings 112 For the doctrine of issue estoppel to apply in the present proceedings, it is necessary that, in the Colonial proceedings, the same question has been decided, the judicial decision which is said to create the estoppel was final and the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies: Kuligowski v Metrobus [2004] 220 CLR 363 at 373 [21]. The onus lies upon LawCover, as the party seeking to rely upon an estoppel, to establish this requirement: Kuppers v New South Wales Fire Brigades [2005] NSWSC 193 at [22]; Spencer Bower, Turner and Handley, "The Doctrine of Res Judicata", 3rd edn, 1996, paragraph 98. In ascertaining whether there is an issue estoppel, a court is entitled to look not only at the record, but also at any material that shows what issues were raised and decided, including the evidence in the first proceedings: Jackson v Goldsmith at 467; Rogers v The Queen at 263; Murphy v Abi-Saab (1995) 37 NSWLR 280 at 288; Spencer Bower, Turner and Handley, "The Doctrine of Res Judicata", above, paragraph 204. 113 The first judgment of Emmett J determined a no-case submission and was interlocutory in nature. However, the second judgment of Emmett J made findings and determinations with respect to the proceedings and constituted a final judicial decision. Accordingly, that element of an issue estoppel is made out. 114 LawCover and Mr Flammia were parties to the Colonial proceedings which gave rise to the judgments of Emmett J. If LawCover becomes a party to the present proceedings, then Mr Flammia, the Plaintiffs and LawCover will all be parties to the proceedings. For present purposes, I accept that this state of affairs satisfies the element for issue estoppel in that the parties to the judicial decision or their privies were the same parties as the parties to the proceedings in which the estoppel is raised or their privies. Relevantly, the Plaintiffs and Mr Flammia would be privies for this purpose. 115 Is the same question to be decided in the present proceedings as was decided by Emmett J so as to satisfy the remaining element of issue estoppel? The Plaintiffs submit that this element does not exist in this case. In Ramsay v Pigram, Barwick CJ at 276 encapsulated what was involved in enquiring whether the same question has been decided, so as to attract the doctrine of issue estoppel: "Long standing authorities, in my opinion, warrant the statement that, as a mechanism in the process of accumulating material for the determination of issues in a proceeding between parties, an estoppel is available to prevent the assertion in those proceedings of a matter of fact or of law in a sense contrary to that in which that precise matter has already been necessarily and directly decided by a competent tribunal in resolving rights or obligations between the same parties in the same respective interests or capacities, or between a privy of each, or between one of them and a privy of the other in each instance in the same interest or capacity. The issue thus determined, as distinct from the cause of action in relation to which it arose, must have been identical in each case." 116 In Blair v Curran at 532-533, Dixon J said that what is precluded by issue estoppel is what is legally indispensable to the conclusion. In the case of matters of fact, the issue estoppel is confined to the ultimate facts which form the ingredients in the cause of action – facts fundamental to the decision. In Murphy v Abi-Saab, Gleeson CJ (Kirby P and Rolfe AJA agreeing), said at 288E-F: "The difficulty is to distinguish between decisions of fact or law fundamental or cardinal to the judgment and other decisions. One thing, however, is clear. Only a decision about a matter which it was necessary to decide can create an issue estoppel. It is, therefore, essential to approach reasons for judgment which are said to create an estoppel with an accurate understanding of what the author of the reasons was required to decide. A practical test of whether a decision is fundamental is to ask whether it is possible to appeal against the finding: Spencer Bower and Turner, the Doctrine of Res Judicata , 2nd ed (1969) at 182; Talyancich v Index Developments Limited (1992) 3 NZLR 28." 117 It will be apparent from the recital of the circumstances of the case determined by Emmett J, and the circumstances of the Plaintiffs' claim in the present proceedings, that there is a distinct prospect that overlapping issues will arise between the two sets of proceedings. For present purposes, I am prepared to accept that, in the present proceedings, the Plaintiffs would be bound by the findings of Emmett J with respect to the earlier relationship between Mr Flammia and Mr Caradonna and their dealings with the funds extracted from Mr Stevens' superannuation scheme. An issue may arise, at any final hearing, concerning the admissibility of such evidence in these proceedings. On this application, that evidence was admitted without objection. I will have regard to it. 118 However, the issue to be determined in the present proceedings will concern the conduct of Mr Flammia (and Mr Caradonna) with respect to the storage, removal and unauthorised use of the Narellan Vale CT to give a mortgage to Hillsan in 2003. Clearly, that is a different question to any of those determined by Emmett J in the Colonial proceedings. For present purposes, I accept that the findings of Emmett J give rise to an issue estoppel with respect to the precise issue in these proceedings concerning the nature of the relationship between Mr Flammia and Mr Caradonna, and their dishonest dealings in 2001-2002 with respect to Mr Stevens' superannuation funds. However, that issue constitutes one part only of the evidence before me. 119 I do not consider that the availability of the findings of Emmett J in the Colonial proceedings and the consequential application of the doctrine of issue estoppel, operate against the discretionary determination in favour of the Plaintiffs to join LawCover to the present proceedings. The fact that Mr Flammia acted dishonestly on an earlier occasion in the manner found by Emmett J does not preclude the Plaintiffs from contending that Mr Flammia was negligent (but not dishonest) in this case, nor does it stand in the way of the Plaintiffs having an arguable case of liability under the policy concerning this claim. 120 The Plaintiffs' claim in negligence in these proceedings will be determined by reference to the totality of the evidence concerning the retention, removal and unauthorised use of their title deed prior to November 2003. The availability of an issue estoppel argument to LawCover, with respect to certain antecedent events, does not mean that the Plaintiffs do not have an arguable claim against LawCover under the policy. Tendency Evidence 121 Relevant evidence may be admitted as tendency evidence in civil proceedings if the statutory criteria for admissibility under s.97 are met and the evidence is not otherwise excluded under s.135 or confined under s.136 of the Act: Jacara Pty Limited v Perpetual Trustees WA Limited (2000) 106 FCR 51 at 56 [17]ff; Trylow Pty Limited v Commissioner of Taxation 2004] FCA 446 at 108]ff; Cantarella Bros Pty Limited v Andreasen [2005] NSWSC 579 at [9]ff; Ibrahim v Pham [2007] NSWCA 215 at [229]ff. A decision on admissibility of proffered tendency evidence involves a determination whether it provided any evidence of a relevant or material tendency and, if it did, whether it had significant probative value for the purpose of s.97(1)(b) of the Act. If the evidence passed through the s.97 gateway, then an issue may arise concerning the application of s.135 of the Act to it. These issues would fall to be determined following service of a tendency notice (complying with s.99 of the Act and clause 5 Evidence Regulation 2005), and identification by LawCover of the precise way in which the evidence was said to be admissible as tendency evidence. 122 A realistic and effective determination on the admissibility of such evidence will be a matter for the trial judge at a final hearing. For present purposes, however, I will approach the issue on this interlocutory application on an assumption favourable to LawCover. Treating the findings of Emmett J in the Colonial proceedings as tendency evidence available to be used adversely to Mr Flammia (and thus the Plaintiffs), I do not consider that the effect of that evidence, taken in combination with other evidence, leads to a conclusion that the Plaintiffs have no arguable case that Mr Flammia was negligent (but not dishonest) with respect to their claim. Suggested Admissions Made By Plaintiffs 123 The evidence relied upon by LawCover as admissions by the Plaintiffs falls into two categories: (a) the fact that the Plaintiffs made a claim on the Fidelity Fund, where a condition precedent for such a claim was that it arose from dishonest or fraudulent conduct on the part of the solicitor; (b) statements made in correspondence written by the Plaintiffs' solicitors to a police officer, and in pleadings or other documents drawn on behalf of the Plaintiffs. 124 LawCover tenders these various statements as admissions by the Plaintiffs under ss.81 and 87 Evidence Act 1995. The Dictionary to the Act defines "admission" as a previous representation that is made by a person who is or became a party to a proceeding (including a defendant in a criminal proceeding) and which is adverse to the person's interest in the outcome of the proceeding. In effect, LawCover contends that the Plaintiffs have made admissions by words (in documents) and admissions by conduct (in making a claim on the Fidelity Fund). 125 It is important to observe that the suggested admissions do not relate to the conduct or thought processes of the Plaintiffs themselves. The evidence reveals that they left the Narellan Vale CT (and other documents) for safe keeping at Mr Flammia's legal practice and had no idea that the title deed had been taken and used for the purpose of the Hillsan mortgage, until the undoubtedly surprising news was broken to them in 2006. 126 On the evidence before me, the Plaintiffs have no greater knowledge concerning the circumstances in which the title deed left Mr Flammia's office, and came to be used in this way, than is revealed by the totality of the evidence before me. There is no direct evidence before me of dishonesty or fraudulent conduct on Mr Flammia's part with respect to the Narellan Vale CT. There is considerable evidence of dishonesty and fraudulent conduct on Mr Flammia's part (in conjunction with Mr Caradonna) in other contexts. The case of dishonesty or fraudulent conduct against Mr Flammia is based upon inference, and conclusions which might be reached by reference to evidence of other wrongdoing on his part (in conjunction with Mr Caradonna) before (the Colonial proceedings' judgments) and after (the Vella judgment) the events involving the Plaintiffs. 127 It does not seem to me that the matters relied upon by LawCover as admissions by the Plaintiffs take the matter very far. For present purposes, I accept that statements made by the Plaintiffs' then solicitors are capable of being admissions by the Plaintiffs: Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (2008) 167 FCR 314 at 318-319 [18]. The fact that the Plaintiffs have no real knowledge whether Mr Flammia acted dishonestly or fraudulently with respect to their claim does not mean that any purported admissions by them to that effect cannot be received into evidence: Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd at 323-324 [37]-[39]. However, it may be that little weight will be given to such an admission. Its probative force must be determined by reference to the circumstances in which it is made and may depend all together upon the party's source of knowledge: Lustre Hosiery Ltd v York (1935) 54 CLR 134 at 143-144; Grey v Australian Motorists and General Insurance Co Pty Ltd (1976) 1 NSWLR 669 at 684-685. At a final hearing, the trial judge may not be satisfied that this evidence ought be treated as admissions. Once again, for the purpose of this application, I will treat this as evidence of admissions and assess what weight ought be given to it. 128 I accept Mr Beale's submission that the claim on the Fidelity Fund was made under time constraints, to ensure an application was on foot in case evidence ever emerged which meant that this was the only avenue left to the Plaintiffs to seek some form of redress arising from the taking and use of the Narellan Vale CT. Neither the contents of the claim, nor the fact that it was made, provides any real assistance to LawCover. The statements by the Plaintiffs which form part of that claim, and the documentation provided in support of it, do not demonstrate any objective basis for a conclusion that Mr Flammia had acted dishonestly or fraudulently with respect to the Narellan Vale CT. Indeed, the claim form states that the matter was still under police investigation. In circumstances where the Plaintiffs were told that any claim on the Fidelity Fund had to be made by a certain date, it does not seem to me that the making of the claim constitutes any reliable or weighty admission by conduct. In reality, the Plaintiffs do not know what happened, apart from their basic knowledge that the title deed had been left with Mr Flammia for safe keeping, but ended up being used for the purpose of the Hillsan mortgage. 129 The suggested admissions in correspondence and other documents rise no higher than the Fidelity Fund claim material. This is not a case where the Plaintiffs have knowledge of the true facts and, in those circumstances, make a statement against interest. Rather, it is a case of the Plaintiffs (being uncertain of the true facts) wishing to protect their own interests by keeping open all lawful avenues by the commencement of proceedings in negligence against Mr Flammia, an application to join LawCover to those proceedings and, in the event it was ever necessary, a claim on the Fidelity Fund if it turned out (and could be demonstrated) that Mr Flammia had acted dishonestly or fraudulently with respect to the Narellan Vale CT. 130 In my view, none of these matters constitutes reliable or weighty admissions which operate against the Plaintiffs on this application. Dishonest Omission to Inform the Plaintiffs 131 LawCover contends that the Plaintiffs' claim arises from a dishonest omission of Mr Flammia and thus falls within the exclusion in clause 21 of the policy. The argument developed by Mr Bell SC depends upon acceptance of the proposition that Mr Flammia was under a fiduciary duty to disclose to the Plaintiffs (and presumably all his clients) that he had been dishonestly and fraudulently involved with Mr Caradonna in 2001-2002 with respect to Mr Stevens' superannuation funds, and that Mr Flammia's failure to so inform the Plaintiffs constituted a dishonest omission falling within clause 21 of the policy. 132 I have considered the authorities relied upon by LawCover in this respect. I am not satisfied that these authorities make out the argument which is advanced. It is important to keep in mind the factual circumstances of those particular cases. In my view, the facts of those cases are significantly different to the present case. I am not satisfied that those authorities extend to demonstrate a fiduciary duty on the part of Mr Flammia to disclose to all his clients, including the Plaintiffs, that he had a dishonest and fraudulent relationship with Mr Caradonna in 2001 and 2002 with a failure to so inform being a dishonest omission capable of falling within clause 21 of the policy. In particular, the circumstances in Hilton v Barker Booth & Eastwood involved a conflict of interest as between two clients involved in the same transaction. That is some considerable distance from the circumstances of this case. 133 In any event, even if such an argument is available to LawCover, I do not consider that it stands in the way of a finding that the Plaintiffs have demonstrated an arguable case for a claim under the policy. Of course, it will remain open to LawCover to pursue this argument, if it wishes, at the final hearing of the matter. Abuse of Process 134 I do not accept that the Plaintiffs' application to join LawCover, if allowed, would constitute an abuse of process. I accept that there is no closed category of abuse of process. In the present case, however, the evidence rises no higher than the Plaintiffs (who do not have direct knowledge of the true facts) bringing proceedings in negligence against Mr Flammia and LawCover based upon the professional indemnity policy, whilst there remains on foot a claim on the Fidelity Fund. The Plaintiffs wish to pursue a claim in negligence against Mr Flammia. Because of evidence concerning Mr Flammia's dishonest conduct on other occasions, there is suspicion concerning the nature of his involvement in events affecting the Narellan Vale CT. However, there is not, at this time, any clear and unequivocal evidence that Mr Flammia acted dishonestly or fraudulently in that respect. 135 It does not seem to me that the conduct of the Plaintiffs constitutes an abuse of process. To have alternative claims on foot (when the true facts are not known) does not, in my view, constitute a case of approbating and reprobating. The Vella Proceedings 136 I have considered the findings of Young CJ in Eq in the Vella proceedings. As these events post-date the events surrounding the taking and use of the Narellan Vale CT, it is doubtful that this material would be admitted at the final hearing of this matter. I admitted it, over objection, at this interlocutory hearing. The judgment throws light upon the relationship between Mr Flammia and Mr Caradonna in 2006 and contains serious findings against each of them. The issue before me is the arguability of the Plaintiffs' case that Mr Flammia was negligent (and not dishonest) in his conduct concerning the Narellan Vale CT up to and in 2003. The Vella judgment does not stand in the way of the Plaintiffs demonstrating such an arguable case. Conclusion 137 The Plaintiffs have pleaded a case in negligence against Mr Flammia. For present purposes, it may be taken that he owed a duty of care to the Plaintiffs with respect to the safe keeping of the Narellan Vale CT. The evidence available to the Plaintiffs at this time includes the letter from Ms Banicevic referred to at [48]-[49] above. This suggests that Mr Caradonna had an unusual degree of access to Mr Flammia's office, including access to private areas. The evidence indicates that the Narellan Vale CT was at Mr Flammia's office but that, at a later point in time, it was being used for the purpose of the Hillsan mortgage. The evidence suggests that Mr Caradonna was directly involved in the use of the Narellan Vale CT for that unauthorised purpose. 138 There is no direct evidence of Mr Flammia's dishonest or fraudulent involvement in this process. 139 I have referred to the various arguments advanced by LawCover and expressed my conclusions with respect to them. I have considered the cumulative effect of the matters relied upon by LawCover, in assessing the totality of the evidence on the application. 140 In my view, the Plaintiffs have demonstrated on this application that it is arguable that Mr Flammia was negligent, and not dishonest, on this occasion. Accordingly, the Plaintiffs have demonstrated that it is arguable that they have a claim under the relevant policy. I propose to grant the Plaintiffs the relief sought in the Amended Notice of Motion. 141 Given these conclusions, it is not necessary to resolve the arguments of the Plaintiffs concerning s.54 Insurance Contracts Act 1984 (Cth). 142 It will be a matter for the trial judge, at the final hearing, to determine whether the Plaintiffs are entitled to relief in light of the totality of the evidence adduced at that hearing and after considering all relevant legal arguments advanced by the parties. Upon the basis of the evidence before me, however, I am satisfied that the relevant discretion ought be exercised in favour of the Plaintiffs. Orders 143 I make the following orders: (a) I grant leave to the Plaintiffs under s.6(4) Law Reform (Miscellaneous Provisions) Act 1946 to commence proceedings against LawCover Insurance Pty Limited; (b) pursuant to rule 6.24(1) Uniform Civil Procedure Rules 2005 , I order that LawCover Insurance Pty Limited be joined as a party to these proceedings; (c) I grant leave to the Plaintiffs to amend the Statement of Claim in accordance with the document which is MFI1 on the present application. 144 Counsel did not address on costs at the hearing of the Amended Notice of Motion. The Plaintiffs have succeeded following a substantial contest on this application. My present view is that costs should follow the event and that LawCover should be ordered to pay the Plaintiffs' costs of the application. However, I will give the parties an opportunity to make submissions, if they wish, before a costs order is made. ********** 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.