Supreme Court New South Wales Medium Neutral Citation: Paramount Lawyers Pty Ltd v Laila Haffar and six others [2016] NSWSC 651 Hearing dates: 3 May 2016 Date of orders: 04 May 2016 Decision date: 04 May 2016 Jurisdiction: Equity Before: Rein J Decision: Application refused [26] Catchwords: EQUITY: Practice and Procedure- application to transfer proceedings from District Court to Supreme Court- Claim of 'connected' matter, with separate proceedings by solicitor (defendant in District Court proceedings) against former partner and for all District Court matters to be heard together and leave for applicant to cross claim against former client. Overlap insufficient to justify disadvantaging plaintiffs in District Court proceedings, application refused. EQUITY: Alleged breach of deed, breach of obligations of confidentiality and non-disparagement clause. Legislation Cited: Civil Procedure Act 2005 Cases Cited: Hadley v Baxendale (1854) 9 Ex 341 Hammond v Bussey (1887) 20 QBD 79 Pinnock v Lewis [1923] 1 KB 690 McCourt v Cranston [WASC] 56 Category: Procedural and other rulings Parties: Paramount Lawyers Pty Ltd (Plaintiff) Laila Haffar (1st Defendant) Bruce Adams (2nd Defendant) Elizabeth Adams (3rd Defendant) Jennifer McCarthy (4th Defendant) Darren Moran (5th Defendant) Daniel Murphy (6th Defendant) Representation: Counsel: Mr G Parker SC (Plaintiff) Mr DA McLure SC (Defendant) Solicitors: Barton Lawyers (Plaintiff) Firth Lawyers (Defendant) File Number(s): 2016/104582 Publication restriction: Nil Judgment - EX TEMPORE 1. The Plaintiff, Paramount Lawyers Pty Ltd ("Paramount") in both cases listed before the Court yesterday, is an unincorporated legal partnership. The shareholders and practitioners involved in Paramount were, until 2014, Mr David Marocchi and Mr Jason Di Michiel. They had a falling out and agreed to separate. A Deed was entered into by them on 30 June 2014 to manage their separation. 2. The Deed provided for the allocation of matters between each of them. It seems that this was not a particularly difficult exercise because each of Mr Marocchi and Mr Di Michiel had run their own files. It was a term of the Deed that each would refrain from disparaging the other and would maintain the confidentiality of the information pertinent to the other's files. It was agreed that Mr Di Michiel operating as Premier Legal Pty Ltd ("Premier") would continue in the office premises and that Paramount under the control of Mr Marocchi would be able to occupy a part of the premises for a further six months. 3. In 2015 proceedings were commenced in the District Court by seven former clients of Paramount claiming that they had been overcharged in the personal injury litigation conducted for them by Paramount. All of those matters were matters under the control of Mr Marocchi. Four of those District Court cases have been given hearing dates and one of them, involving a Mr Murphy, is set down for hearing next Wednesday on the 12th of May 2016 i.e. next week. The solicitors on the record in each of the seven District Court cases are Firths Lawyers. Mr McLure SC (with Mr O'Mahoney) appears in this Court for those seven Plaintiffs, who are respondents in this Court to Paramount's Notice of Motion. 4. By the Notice of Motion Paramount seeks to have the District Court proceedings transferred to this Court. Each of the seven Plaintiffs in the District Court proceedings opposes that transfer. 5. In all seven District Court cases orders have been made for the filing of lay and expert evidence by both sides. All of the District Court Plaintiffs (to whom I shall refer to "the Clients") have filed their witness statements and filed an expert report from a costs assessor. Paramount has chosen not to file any evidence, lay or expert, and the time for it to do so has in some, or all, cases now expired. 6. Mr McLure is not briefed in the District Court proceedings to be heard next week and Mr Parker is not yet briefed but may be. Notwithstanding this they were both able to give an indication of the nature of the issues likely to arise in the Client proceedings. 7. The Clients claim that the fees that could be charged by Paramount were the subject of a cap and that out of the proceeds of the settlement obtained or judgment awarded in each case Paramount has taken in excess of the capped amounts. Further it is contended that the amounts charged were in any event excessive. There is a question of whether the various costs agreements were the subject of an implied term as the former clients contend and Paramount disputes. There is, at least in the Murphy proceedings an issue about whether a particular document which on its face is relevant to fee disclosure was fraudulently created subsequently to the date which it bears. 8. From what Mr Parker says it seems likely that if the cap was exceeded and if it is found that no agreement was reached for the cap not to apply then Paramount will have to refund the amounts sought by the former clients. 9. Paramount on 26 April 2016 commenced proceedings in this Court against Mr Di Michiel. Paramount claims, by its Statement of Claim, that Mr Di Michiel has breached his obligations of confidentiality and non-disparagement by making negative comments about Mr Marocchi and his conduct of cases whilst employed by Paramount and contacting former clients of Paramount to advise them that they may have been overcharged by Paramount. Paramount claims that as a result of these actions Paramount now faces claims that could impose on it a liability. 10. I have referred to the seven District Court cases in which Paramount is involved. There are at least four further matters which are likely to generate claims of a similar kind because there have been letters written by Firths on behalf of those four clients to Paramount or to the lawyers who have been acting for Paramount to date. 11. Further I should note that Mr Parker pointed out that Paramount's claims for breach of the Deed extend beyond the existing and foreshadowed overcharging matters and include claims in respect of clients that were Mr Marocchi's clients but have become clients of Mr Di Michiels, due, it is alleged, to breaches of the Deed by Mr Di Michiel including soliciting work from those clients and making disparaging comments. 12. One of Paramount's difficulties is that whilst it has evidence of calls being made to clients it does not have evidence that Mr Di Michiel was the caller or the person who provided material negative to Mr Marocchi that apparently appeared in newspapers. The material that was said to have to have been sent was not placed before me in evidence notwithstanding reference to newspaper articles having been given to some of the clients: see for example p.277 to Mr Barakat's affidavit of 6 April 2016. 13. I shall refer to Paramount's case against Mr Di Michiel as the "Deed case." 14. Mr Parker contended that it was appropriate that all of the Client cases be transferred to the Supreme Court and heard together with the Deed case, both because the Client cases and the Deed case are sufficiently 'connected' and because there is an overlap between the two sets of proceedings with evidence common to both such as to make it expedient that they be heard together. 15. There have been some further matters concerning the history of the proceedings to date which I need to note: 1. Each of the four matters set down for hearing in the District Court were by consent. 2. In the matters which have not been given a hearing date the Plaintiffs wanted a hearing date but the District Court was reluctant to fix a date given the foreshadowing by Paramount of an application for transfer of those remaining matters to this Court. 3. Paramount has filed no evidence in any of the District Court matters, even in the matter fixed for hearing next week. 4. Paramount did, in December 2015, file a Notice of Motion in the Murphy proceedings seeking to have the hearing date vacated and leave to file a cross claim in the form attached to the Notice of Motion or affidavit in support but it did not press to have that Motion heard and it has not been heard and ruled upon by the Court. 5. Mr Parker advised the Court, on instructions, that should the Paramount application to have the District Court proceedings transferred fail, Paramount will not seek to agitate the application for vacation of the Murphy hearing date or for leave to file a cross claim before the District Court prior to or at the hearing next week. 6. Mr Marocchi in his evidence endeavours to provide an explanation for Paramounts' failure to raise the possibility of a cross claim in the District Court or to seek to have the District Court matter transferred, before December 2015. He claims that he did not appreciate that he might have equitable remedies against Mr Di Michiel and only became aware of the possibility in December 2015. He did have a firm of solicitors acting for Paramount at all the relevant times till October 2015 when he says he became aware of the possibility and nothing was done till December. No action was taken to commence proceedings in this Court till April 26 2016. 1. Mr Parker contended that in deciding whether to transfer the District Court proceedings to this Court the Court should take into account the following matters: 1. That in the Deed proceedings a relevant matter will be whether or not Paramount is liable to refund fees paid by the Clients since that forms part of Paramount's damages claim against Mr Di Michiel. If the Client proceedings and the Deed proceedings are heard together Mr Di Michiel will be bound by the finding, if made, that Paramount did overcharge the clients or some of them, both as to the fact and as to the amount. 2. That Paramount will wish to ask questions of the Clients to establish that Mr Di Michiel contacted them and suggested they commence proceedings against Paramount. 3. That there was a sufficient connection between the Client cases on the one hand and the Deed case or that it would be an efficient use of the court time and resources that all matters be heard together. 4. That Paramount could not raise all the matters pertinent to the Deed proceedings because of restrictions in the jurisdiction of the District Court. 1. Mr McLure in answer to these points made the following submissions: 1. That there is an insufficient connection between the Client cases and the Deed case. Any dispute between Mr Marocchi and Mr Di Michiel is entirely irrelevant to his client's claims. Even if Mr Di Michiel encouraged in some fashion his clients to commence proceedings or that those clients were informed by Mr Di Michiel and that led to them investigating whether a claim could be brought (of which there is no evidence) that fact could have no bearing on the outcome of the Client cases. Either Paramount overcharged the relevant Clients or it did not. How the Clients came to commence proceedings has no bearing on the outcome of each of those cases. 2. The claim against Mr Di Michiel is that as a result of his alleged breach of the Deed, the proceedings have been commenced by the Clients. If Paramount in fact overcharged the Clients it cannot be said that Mr Di Michiel has caused the outcome that those Clients are entitled to the return of their money to the extent of the overpayment. If contrary to that argument a causative connection can be established and the consequence is that the Clients obtain a judgment (or obtain the return of their money by settlement - a possibility advanced by Mr Parker) Mr Di Michiel will not be able to challenge the fact that judgment was entered or monies paid under a settlement. 3. The dispute between Paramount and Mr Di Michiel as identified by the Statement of Claim and Mr Parker's submissions is much wider than the seven clients in the District Court. It would be quite unreasonable to force those clients to take part in the extensive litigation as between effectively Mr Marocchi and Mr Di Michiel. The Clients have no interest at all in the outcome of that litigation. They would also have to sit through all other Client cases (and quite possibly additional Client cases not yet launched). The Clients are all individuals who have suffered personal injuries and it would impose an unfair financial burden of costs on them to be embroiled in the Deed litigation. 4. To deprive Mr Murphy whose case has been fixed to commence next week and the other Clients who have obtained their hearing dates with the consent of Paramount would be unfair, they having done all that is required of them to have their matters heard. Mr McLure submitted that it would be inconsistent with the dictates of ss56-59 of the Civil Procedure Act to which the Court is required to have regard, to now force the Clients to give up their position in the District Court list. 1. In my view the former Clients should not be forced to become involved in a tussle between Mr Marocchi and/or Paramount on the one hand and Mr Di Michiel on the other. They have conducted their litigation in the District Court efficiently and should not be penalised because Paramount has been dilatory in considering whether to file a cross claim or bring fresh proceedings in the Supreme Court against Mr Di Michiel. There may be an 'overlap' between the Client cases and the Deed case but it is a one-way overlap because the Clients have no interest whatsoever in the Deed case and the relevance of the Clients' case is that it will determine what amount Paramount will have to repay (if any). 2. If Paramount wishes to adduce evidence in the Deed case from the Clients concerning the allegations against Mr Di Michiel they will not be precluded from so doing whether by agreement or under the compulsion of subpoenas. Quite apart from the significant delay on the part of Paramount which, in my view, is not adequately explained to justify an order detrimental to the interest of the Clients, I do not think that the Clients should be forced to take part in a case in which they have no interest that is likely to take many more days than the one or two days for which their cases have been or are likely to be fixed in the District Court, and that is even without having regard to the fact that they be forced to be involved in cases of other former clients of Paramount rather than being able to have separate cases heard. No application was ever made in the District Court by Paramount to have all the cases consolidated, and indeed there would be reasons why it would have been difficult to obtain such an order. 3. I have referred to Mr McLure's contention that Mr Di Michiel does not have to be joined in the Client cases in order for him to be bound by a determination that Paramount has engaged in overcharging. 4. Mr Parker points out that a person who is not a party to litigation is not bound by a determination of the Court. Whilst that as a general rule is correct, it is important to note that Paramount's claim as articulated in its Statement of Claim is not that Mr Di Michiel had any involvement in the invoicing of accounts to clients managed by Mr Marocchi but that he contacted former clients of Paramount and told them that they have been or may have been overcharged thus encouraging action by them against Paramount. If Mr Di Michiel did engage in such conduct and if that did lead those former clients to bring proceedings, Paramount claims that any expense incurred by reason of the Clients' litigation is an expense for which Mr Di Michiel must indemnify Paramount-i.e. costs incurred by Paramount in defending itself and any judgment entered against Paramount and any costs order made against Paramount for the Clients' costs. 5. The Deed case is not dependent on a judgment being entered against Paramount in favour of the Clients and Paramount will be claiming against Mr Di Michiel whether or not Paramount is found liable to repay monies to the Clients. 6. This rather suggests to me that this is not a case in which, assuming breach of the Deed and a causative connection is established, Mr Di Michiel could be heard to assert that Paramount, if it does suffer a judgment in the District Court, must prove that it did in fact overcharge the Clients. If Mr Di Michiel encouraged former clients of Paramount to take proceedings against Paramount it must have been in his contemplation that they would or might do so and the outcome i.e. judgment against Paramount (whether currently imposed or not) must have been foreseen as something which: "may fairly and reasonably be considered either arising naturally, i.e. according to the usual course of things, from such a breach of contract itself…. or as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it." :Hadley v Baxendale (1854) 9 Ex 341, which was cited and applied in Hammond v Bussey (1887) 20 QBD 79 per Lord Esher M.R. Hammond is a case in which the Plaintiff, a purchaser of coal, recovered from the supplier of that coal costs incurred in defending a case brought by a sub- purchaser. The supplier had accepted liability for the amount of the judgement against the purchaser and was only disputing liability for the cost of the purchaser in defending the sub- purchaser's case. See also McGregor on Damages 20-037-038, 20-047-049, 20-054. and the cases there cited particularly Pinnock v Lewis [1923] 1 KB 690. Hammond v Bussey has been cited with approval in subsequent Australian cases dealing with litigation expenses see McCourt v Cranston [WASC] 56 per Templeman J. 1. Nevertheless although I have strong doubts that it would be open to Mr Di Michiel to challenge the fact of overcharging if the District Court case holds that there has been, I think in considering this application I must proceed on the assumption that there is a risk that he might be able to do so. That risk to Paramount is insufficient in my view having regard to all the other factors to support the conclusion that the Client cases should be transferred, because at worst from Paramount's point of view it will, if Mr Di Michiel is able to contend otherwise, have to establish that it did engage in overcharging. 2. In my view the interests of justice and the efficient utilisation of Court resources lead to the conclusion that the District Court cases should proceed to finality in the District Court, and that they should not be transferred to this Court to the disadvantage of the Clients. 3. For these reasons the transfer and ancillary orders sought by Paramount should be refused and the motion dismissed. 4. I will hear the parties on the issue of costs ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 July 2016