Supreme Court New South Wales Medium Neutral Citation: Joseph Gambino v Johansson Services Pty Limited trading as Contested Wills & Probate Lawyers [2016] NSWSC 1582 Hearing dates: Monday, 12 September 2016 Date of orders: 12 September 2016 Decision date: 12 September 2016 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Notice of motion dismissed. Defendant pay plaintiff sum of $113,770. Defendant pay plaintiff's costs of proceedings. Respondents pay one half of defendant's costs of proceedings, including costs of proceedings which defendant must pay plaintiff. Catchwords: PROCEDURE – judgments and orders – Enforcement of judgments and orders – where defendant holds plaintiff's money in trust account – where garnishee order purportedly served on defendant requiring payment of that money to respondents – where garnishee order later set aside – where plaintiff claims payment of remainder of money held in trust – interpleader application requiring payment of claimed amount into court – respondents and defendant do not oppose judgment in favour of plaintiff – interpleader application dismissed COSTS – which of defendant and respondents should bear costs where plaintiff totally succeeds – where respondent contributed to claim for interpleader relief – held, respondents equally responsible with defendant Legislation Cited: (NSW) Civil Procedure Act 2005, s 124 Category: Procedural and other rulings Parties: Joseph Gambino (plaintiff) Johansson Services Pty Limited trading as Contested Wills & Probate Lawyers (defendant) John Bernard Feitelson (first respondent) Twin Properties Pty Limited (second respondent) Representation: Counsel: M P Cleary (plaintiff) S Clemmett (defendant) G W McGrath SC (respondents) Solicitors: Peters Linnette Lawyers (plaintiff) Contested Wills & Probate Lawyers (defendant) Paul Crane Lawyer (respondents) File Number(s): 2016/197062 Judgment (ex tempore) 1. HIS HONOUR: The plaintiff Joseph Gambino retained the defendant Johansson Services Pty Limited trading as Contested Wills & Probate Lawyers, a Victorian firm of solicitors, to act for him in family provision proceedings which resulted in a payment into the defendant's trust account of some $646,168 on 6 August 2015. Meanwhile on 5 August 2015, the defendant was purportedly served with a garnishee order issued out of the Local Court at Coffs Harbour attaching to the extent of about $64,000 principal and interest of about $7,900 "all debts due or accruing from" the defendant to the plaintiff to satisfy a judgment in favour of John Bernard Feitelson and Twin Properties Pty Limited. The garnishee order required the defendant to pay any amount so attached to the judgment creditor, Feitelson and Twin Properties, within 14 days after the order was served on the garnishee in circumstances where the debt had already fallen due. However, on the 19 August before the 14-day period expired, the plaintiff obtained a stay of the judgment that had been issued out of the Local Court. The defendant released $250,000 to Mr Gambino on 26 August and a further $242,000 approximately on 22 September, and paid its own costs of $42,000; but since 29 September, the defendant has retained in its trust account $112,000. 2. On 29 September 2015, the Local Court judgment against Mr Gambino was set aside upon condition that a defence be filed. That defence was filed on 1 October 2015. An order was made setting aside the garnishee order on 16 October 2015. It may be doubted whether in circumstances where the judgment that underlay it had been set aside it was necessary to set aside the garnishee order. But for more abundant caution, when an application to strike out Mr Gambino's defence was withdrawn and dismissed, a further order setting aside the garnishee order was made on 20 November 2015. 3. The defendant has continued to retain the sum to which I have referred on account of an apprehension that it might be sued under (NSW) Civil Procedure Act 2005, s 124, for failure to comply with the garnishee order. Section 124 provides as follows: 124 Procedure where garnishee order not complied with (1) On the application of a judgment creditor who considers that a garnishee order has not been complied with, the court: (a) may hear and determine any question as to the liability of the garnishee to pay the debt, wage or salary sought to be attached by the garnishee order, and (b) if satisfied that the garnishee is so liable, may give judgment in favour of the judgment creditor against the garnishee: (i) for the amount of that debt, wage or salary, or (ii) for the unpaid amount of the judgment debt, whichever is the lesser. (2) The court may refuse to give such a judgment if it is of the opinion that such a judgment should not be given. (3) Without limiting subsection (2), the reasons that may lead the court to form such an opinion may include: (a) the smallness of the amount outstanding under the judgment, and (b) the smallness of the debt, wage or salary to be attached. (4) As between the garnishee and the judgment debtor, an amount paid to the judgment creditor by the garnishee under a judgment given under this section is taken to have been paid to the judgment debtor. 1. After further attempts by Mr Gambino to procure payment to him of the amount standing to his credit in the defendant's trust account, including an order made by an arbitrator in the Local Court proceedings by consent on 20 May 2016 – which required the solicitors for Mr Feitelson and Twin Properties to notify the present defendant that the garnishee order was set aside on 20 November 2015 following the setting aside of the default judgment and is no longer in effect, and that such garnishee order being no longer in effect in no way affects the release to Mr Gambino of any moneys held in trust by the defendant – the plaintiff on 29 June 2016 instituted these proceedings by statement of claim claiming in effect payment to him of the amount standing to his credit in the defendant's trust account. 2. By notice of motion filed on 31 August 2016, the defendant seeks by way of interpleader relief an order requiring payment of the claimed amount into Court. Mr Feitelson and Twin Properties are joined as respondents to that motion and are represented at the hearing today. On behalf of those respondents, it was announced that they did not wish to be heard in opposition to judgment being given in favour of Mr Gambino as if on summary judgment for the amount claimed. In those circumstances, the defendant likewise did not oppose judgment being given in favour of Mr Gambino. It follows that the consequence is that there will be judgment that the defendant pay Mr Gambino the sum of $112,442.08 together with interest from the date upon which the proceedings were instituted; I will stand the matter down in due course to enable interest calculation to be performed and the precise amount of the judgment determined. 3. In those circumstances, the interpleader application can also be dismissed, but that leaves for resolution the question of costs. As it seems to me, the practical outcome is that the plaintiff will have totally succeeded against the defendant – being the party, and the only party, which the plaintiff chose to sue, and the only party which the plaintiff needed to sue. There is no apparent reason why the plaintiff, or the fund to which the plaintiff is entitled, should have to bear any of the costs of the plaintiff recovering the amount to which he is entitled. The real issue is which of the defendant and the respondents should bear those costs. 4. It has been said that the test for interpleader relief where the Defendant has not yet been sued is that there is "a real foundation for an expectation that they would be sued". 5. Much attention has been directed to why, if the Defendants were sued under Civil Procedure Act, s 124, that action would fail. Those reasons include that the respondents are no longer, and have not since the default judgment was set aside, been judgment creditors with standing to sue under s 124; secondly and more importantly, that it cannot be said that there was a non-compliance with the garnishee order when it was stayed before time for compliance expired and subsequently set aside; thirdly, that compliance with the order in circumstances where the judgment was one which was subsequently set aside would have resulted in the unjust enrichment of the respondents or at the very least founded a claim for immediate restitution by Mr Gambino. Ultimately, even if – which in those circumstances seems to me doubtful in the extreme – the respondents could have brought themselves within s 124, the Court would have refused to give judgment against the defendant pursuant to s 124(2). 6. However, the test for interpleader relief is that there be a foundation for an expectation that the defendant would be sued by another party, not that the defendant would be held liable to that other party. Therefore, one must focus not so much on the prospects of success of the contemplated proceedings, but on the likelihood of proceedings being brought. 7. In the light of the circumstances to which I have referred, it might be thought that the defendant has taken an exceptionally cautious approach. On the other hand, in doing so, it has sought advice from the Law Society and from counsel and apparently acted in accordance with that advice. It must be said that had it been observed that the garnishee order appears never to have been validly served in the first place, the defendant might have adopted a less cautious approach. 8. While by not adopting a more pragmatic approach, the defendant has contributed to the present situation, it also has to be said that the respondents have contributed in no little way to it. The more significant recent manifestations of this are their solicitor's letter of 25 May 2016 containing the notice of the Local Court arbitrator's order, to which I have referred, but with the caveat, "I am instructed that the content of this order do not reflect my client's instructions and they reserve their rights". While it may not have been so intended, I think that conveys to the reader that, while the respondents' solicitor was doing as he had been ordered to by conveying that notice, the respondents did not agree that the information contained in the notice was in substance correct, and were nonetheless reserving their rights. 9. Further, when the defendant in a letter of 2 June 2016 sought clarification of that caveat, no response was forthcoming; and as recently as 31 August, the respondents offered to expressly waive any claim against the defendant if Mr Gambino delivered the disputed art work – the subject of the Coffs Harbour Local Court proceedings, now removed into this Court – to his solicitor's office and those solicitors confirm that the art work is in good condition and would hold it pending the outcome of the Local Court proceedings. In other words, even as at 31 August, the respondents were seeking to gain some leverage from the absence of an unequivocal or express waiver of any claim against the present defendant. In my view, from the correspondence as a whole, the conclusion is inescapable that the respondents were well and truly aware of the difficulties that the defendant perceived itself to be in, and that that was occasioning vexation to the plaintiff and holding him out of the funds to which he was entitled, and the respondents deliberately permitted that state of affairs to persist. 10. In my view, the respondents should be regarded as equally responsible with the defendant for Mr Gambino having been held out of his funds. The consequence of that is that the defendant should pay the plaintiff's costs of these proceedings and that the respondents should pay half of the defendant's costs, including of the costs which the defendant must pay the plaintiff under the preceding order. 11. Accordingly, in proceedings 2016/197062 Gambino, the Court: 1. Orders that the notice of motion filed on 31 August 2016 be dismissed. 2. Gives judgment that the defendant pay the plaintiff the sum of $113,770. 3. Orders that the defendant pay the plaintiff's costs of the proceedings. 4. Orders that the respondents pay one half of the defendant's costs of the proceedings, including the costs which the defendant must pay the plaintiff under order 3. ********** 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: 08 November 2016