Rimac v Costa S186/2002 [2003] HCATrans 814 (20 June 2003)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S186 of 2002

B e t w e e n -

NENAD RIMAC

Applicant

and

PLACIDO COSTA

Respondent

Application for special leave to appeal

GLEESON CJ

KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 20 JUNE 2003, AT 9.56 AM

Copyright in the High Court of Australia

MR M.S. ABDUL-KARIM: Your Honour, I appear for Mr Rimac. (instructed by John McEncroe & Company)

MR B.W. RAYMENT, QC: May it please your Honours, I appear with my learned friend, MS P.A. CONWAY, for the respondent. (instructed by Oliveri Attorneys)

GLEESON CJ: Yes, Mr Abdul-Karim.

MR ABDUL-KARIM: Your Honour, essentially I say at the very outset there is a fundamental error both in the primary judge, Justice Santow's judgment and in the Court of Appeal judgment, and that fundamental error relates to what Justice Santow has referred to in the pleading as paragraph 11(d), that is Mr Costa was to get one-third share, that is his share, if the company made profits, that is Satate Pty Limited made profits. The reality is the company did not make a profit, your Honours.

GLEESON CJ: But what is the error?

MR ABDUL-KARIM: The error is that the judgment is based that Mr Costa is entitled to his one-third share because there was an intention to give him that one-third share based on the - there is residual assets in - - -

GLEESON CJ: What page in the application book do we spot the error?

MR ABDUL-KARIM: Your Honour, in page 28, that is the - - -

GLEESON CJ: In the judgment of Justice Santow you said there is an error.

MR ABDUL-KARIM: Yes, your Honour.

GLEESON CJ: The judgment of Justice Santow is in the application book. Whereabouts in the judgment of Justice Santow can we find the error?

MR ABDUL-KARIM: Your Honour, in Justice Santow's - on page 6, paragraph 9:

I am satisfied on the material before me that there was an express instruction given in terms of paragraph 11(d) earlier quoted. Moreover, in the events that have happened, namely a profitable subdivision and sale of the Bargo land, legal costs were payable. Thus the parties clearly contemplated that remuneration would be paid both by way of legal costs to the Defendant and by the Defendant receiving one-third share of the net profit of the sale of the subdivided lots in the subdivision.

GLEESON CJ: Now, where is the error?

MR ABDUL-KARIM: The error is that, your Honour, there had not been a profit that company had made, and if I take your Honours - - -

GLEESON CJ: So is the error in the use of the words "namely a profitable subdivision and sale"?

MR ABDUL-KARIM: Yes.

GLEESON CJ: That is the error, the finding that in the event that it happened there was a profitable subdivision and sale?

MR ABDUL-KARIM: That is the error.

GLEESON CJ: And that is the error of fact that you want corrected by this Court on appeal?

MR ABDUL-KARIM: That, we say, would be an error, a major error of fact that would be entitled leave but there are other factors we say that - - -

GLEESON CJ: Now, before you pass from that one, can you demonstrate to us that that is an error?

MR ABDUL-KARIM: Your Honour, I gave in the bundle that I handed an affidavit by Maxwell Prentice that was filed on 4 May 1998 and it was sworn - - -

GLEESON CJ: Yes, sworn on 3 April 1998.

MR ABDUL-KARIM: That is correct, your Honour.

GLEESON CJ: Yes.

MR ABDUL-KARIM: There is an annexure to that - first of all, Mr Prentice does make the point that Mr Rimac tried to prove - proof of debt, did send a proof of debt. That was rejected. One of the complaints that has been consistent of Mr Rimac is that there had not been an accounting given to him by Mr Costa, which was the primary reason why he was not able to prove the debt to the satisfaction of the liquidator. That had been one of the persistent complaints, indeed, from day one of the litigation in this matter between Mr Rimac and Mr Costa, the failure to account, and that has been persistently said throughout the affidavits that have been filed, quite a number of them, the failure to account.

GLEESON CJ: Look, Mr Abdul-Karim, you have a limited amount of time. You have made an assertion that the finding of fact on page 6 at paragraph 9 is erroneous and you have an opportunity to demonstrate that proposition.

MR ABDUL-KARIM: Your Honour, the annexure that appears in that affidavit on the - it is an annexure from the National Australia Bank dated 27 May. That is clearly stated to the Directors of Satate and to Mr Rimac care of the address which was Mr Costa's professional address. The second paragraph of that said:

The present debts total say $700,000, with interest accruing at the rate of say $2,500 per week. Indications are that a further $300,000 is needed to complete the subdivision to enable the Linen Plan to issue.

This is a crucial time, your Honours, where the fall out between Mr Costa and Mr Rimac had taken place. Mr Rimac at that stage went to other solicitors, Caldwell, Martin & Cox, and Mr Wayne Barnard had taken over that matter. This is a matter that Mr Rimac had to sell and give additional security to proceed further. The next annexure that appears on the following page, your Honours, is an agreement for the sale of land at Llandilo which Mr Rimac had to sell simply to satisfy the bank and to prevent the foreclosure.

KIRBY J: You start behind the eight ball because the Court of Appeal simply said this did not raise any question of general principle and therefore in a sense you are inviting this Court to go back to become an appellate court over Justice Santow's reasoning. You seem to want us to do a job of reviewing all the facts which the Court of Appeal said did not raise any issue of general principle.

MR ABDUL-KARIM: Your Honour, that is so. It is a matter - - -

KIRBY J: That can be our role, but you have clearly got to show something terribly wrong has happened, because it has already gone through the primary filter. Really you would have to show a miscarriage and that some error occurred, preferably one or more, or a very serious error of fact.

MR ABDUL-KARIM: Your Honour, when you look at the totality of the facts together, even what was before Justice Santow as to the inconsistencies - and, indeed, that is adverted to in the respondent's submission, and that is the inconsistency in what Mr Rimac complains as to - - -

KIRBY J: What is the important point of principle now? Just tell us in your own words what you say is the - - -

MR ABDUL-KARIM: The important point of principle, as I submit, your Honours, is simply, first of all, there is a fundamental error.

GLEESON CJ: Error of fact.

MR ABDUL-KARIM: Error of fact.

GLEESON CJ: The one you have mentioned.

MR ABDUL-KARIM: The one I mentioned.

GLEESON CJ: Where do we find it referred to in the grounds of appeal on pages 10 and 11 that were put before the Court of Appeal? Where is the reference to this error?

MR ABDUL-KARIM: Your Honour, that is sort of globally covered in - - -

GLEESON CJ: Do not bother telling us about the totality. You have said that there is an important error of fact in the finding made on page 6 in paragraph 9 of the Justice Santow's judgment. I now direct your attention to the grounds of appeal from Justice Santow's judgment to the Court of Appeal and I ask you to tell me where those grounds of appeal make any complaint about that alleged error of fact, which you say is fundamental.

MR ABDUL-KARIM: Your Honours, the specific ground of appeal was not a ground as such, but one of the grounds was that there were two proceedings and the two files were in court before Justice Santow, and this substantial number of affidavits were in the earlier of the winding-up proceeding that clearly had the material in it that shows precisely the status of the development and also the losses that this development had incurred during the various subdivision.

GLEESON CJ: Was the Court of Appeal invited to find that Justice Santow had made this so-called fundamental error of fact?

MR ABDUL-KARIM: Your Honour, at some stage I believe it was, because there was reference made to the totality of the evidence.

GLEESON CJ: So that is enough, is it? You just refer to the totality of the evidence and then if you can find in there somewhere some ground for saying that something is wrong, that is good enough.

MR ABDUL-KARIM: Your Honour, no, but there were specific references made in the pleadings, that is the third further amended statement of claim, in which there were other matters relating to whether constructive trusts could be held in the circumstances. Indeed, it is a matter that is raised at page 31 of my learned friend's submission at paragraph 14, and that is:

Upon the rejection by the primary judge of the evidence of the applicant, the only factual issue in dispute is whether the respondent is disentitled, by the mere fact that he was the applicant's solicitor, to hold beneficially, his share in the company Satate Pty Ltd.

KIRBY J: So it is a point of fact, which is itself rather unpromising - it is a point of fact that was not identified in a ground of appeal to the Court of Appeal. Insofar as it was touched on in the Court of Appeal, it was touched on by words of great generality. The Court of Appeal quite naturally did not deal with the matter at any length and simply dismissed it in its generality, and you want to get into the High Court of Australia. It seems one of the most unpromising applications I have heard in my eight years here.

MR ABDUL-KARIM: Your Honours, it is such a fundamental point that it would fit - - -

KIRBY J: If it was so fundamental, it should have been in the grounds of appeal to the Court of Appeal. You know the pleading rules. It ought to have been specifically addressed so that it could be dealt with by the Court of Appeal, not effectively for the first time by the High Court of Australia. I just think this is trifling with the Court.

MR ABDUL-KARIM: Your Honour, it was in the pleadings and it was in the pleadings before - - -

KIRBY J: I am talking about the appellate process.

MR ABDUL-KARIM: I am fully aware, your Honour, but it was a matter that would not have been a surprise to either Justice Santow or to the Court of Appeal because simply the affidavit evidence was there that raises that point fairly squarely. It is a matter, in my submission, your Honour, that this Court can take into consideration. It is such a fundamental matter that certainly the interests of the administration of justice would require that this Court take - - -

KIRBY J: In fairness to you, I see you were not counsel before the primary judge.

MR ABDUL-KARIM: No, I was not, your Honour, although I have been involved in the pleading of this matter on a number of occasions at appeal. At the last minute I was not retained, your Honour.

KIRBY J: You are digging yourself a deeper grave.

MR ABDUL-KARIM: Then I was retained to come back to it.

KIRBY J: Well, that is a correct statement for you to make.

MR ABDUL-KARIM: But, your Honour, there is a question, in my submission, of public interest also in this matter, and that is the boundaries as to what a solicitor/client relationship or a clerk/client relationship - - -

KIRBY J: We would not build a stack of cards on a matter of principle, if there is one, on a factual foundation which is so flimsily based in the appellate process. If we are going to deal with such a matter, we would deal with it on the basis of factual findings, challenges, determinations in the intermediate court, holdings by that court and determination by the High Court. You know that. That is just logic.

MR ABDUL-KARIM: Your Honours, the Court of Appeal made an extempore judgment on the spot without much, saying, "We reject that" or "We reject that". It just said it did not see merit in the appeal.

KIRBY J: No, they did not say no merit; they said there is no point of principle:

The Court is of the unanimous opinion the appeal does not raise any question of general principle.

MR ABDUL-KARIM: Your Honour, it was put before the Court of Appeal that the sale when it took place, that is after the liquidation of the company and, more importantly, at the time when the application in April 1993 was made for the winding up, it was made with the clear understanding that there is residual land left and with a clear understanding there is a one-third share holding and an entitlement in a company that does not owe any debt to anyone. Other than the rates and what have you, there was none whatsoever. The intention that we have drawn from that is that why is one-third shareholder using this shareholding as the legal right to bring a winding-up application with the full knowledge that it is going to benefit from that and in a situation where there is a solicitor/client relationship that started with a clerk/client relationship. Your Honour, one would have to raise the question of whether a constructive trust would apply in such a situation. Indeed, that is a question that is left open and sort of had not been looked at.

As far as the actual relationship between the parties, there was a misconception that the National Australia Bank had provided the funds for the purchase of the land, and that is not the case. It is Mr Rimac who had provided the funds. The National Australia Bank was only to provide the funds for the subdivision and the development, and it was Mr Rimac who left to carry the burden when the first lot of subdivision was grossly undersold and did not make any profit and the bank had threatened to foreclose on the second lot of subdivision.

GLEESON CJ: The question of profitability, as I understand it, was related to the entitlement to legal costs of the solicitor.

MR ABDUL-KARIM: There was, your Honour - - -

GLEESON CJ: But the essence of the claim that was being made was a complaint about the fact that he had a third of the shares in the company.

MR ABDUL-KARIM: That is correct, your Honour.

GLEESON CJ: And your client was saying that it was as a result of some fraudulent act on the part of the solicitor that a third of the shares were issued to him, whereas your client had previously, in a complaint to the Law Society about the solicitor, asserted that he, your client, had given instructions for the issue of one third of the shares to the solicitor.

MR ABDUL-KARIM: That is one of the things that he asserts, your Honour, that is quite correct, but also, your Honour, he has contradicted himself so often in that very same complaint that in the respondent's summary of argument, your Honour, if I can take you to page 29, paragraph 4 of that, and if I can read it very quickly:

The complaint to the Law Society did "show some confusion" (as Santow J said) and also contained remarks to the effect that "I and my son Mirko are the major shareholders in Satate Pty Limited" -

that is one of the confusions -

(suggesting that they were not the sole shareholders) and another remark to the effect that Mr Rimac "spoke to Mr Costa and suggested that if he wanted to, he could join my son and myself in the purchase of this adjoining land. Mr Costa said that he knew it was a goldmine but he did not have any money."

GLEESON CJ: Just to satisfy my curiosity, can you tell me if Satate Pty Limited is an insolvent company what does it matter who owns any shares in it?

MR ABDUL-KARIM: Your Honour, Satate still owned a very valuable parcel of land.

GLEESON CJ: Quite, otherwise it would not matter who owned the shares.

MR ABDUL-KARIM: Well, as far as who, at the end of the day, can be pursued as a director by creditors, in that respect it does. Your Honour, in the very last part of that paragraph:

"I was to hold two shares, and my son one".

There were three shares issued. There was a fall out and he only discovered that one-third share, your Honour, at the time when there was a major fall out between them, when the fall out actually took effect. Your Honour, the question of constructive trust was pleaded and on the facts it is squarely raised, particularly in the light of the relationship of the parties. It is not disputed that the National Australia Bank lent for the subdivision.

GLEESON CJ: Thank you. Mr Rayment, the only matter we want to hear you on is this costs order that you - - -

MR RAYMENT: No, it is not - all we seek is the usual - - -

GLEESON CJ: All right. Thank you.

No error has been shown in the decision or order of the Court of Appeal. Insofar as what is said to have been a fundamental error is now alleged in the reasons of the primary judge, that error is said to be one of fact, but it was not raised in a ground of appeal before the Court of Appeal and it was natural that the Court of Appeal would not make it the subject of specific analysis.

In the circumstances, we find no proper basis for this Court to examine any consequential error alleged to have occurred at trial, and we are not persuaded that the matter is one in which special leave to appeal should be granted. Special leave to appeal is refused with costs.

AT 10.17 AM THE MATTER WAS CONCLUDED