Simone v Kola [2016] NSWSC 1778

Supreme Court New South Wales

Medium Neutral Citation: Simone v Kola [2016] NSWSC 1778 Hearing dates: 9 December 2016 Date of orders: 09 December 2016 Decision date: 09 December 2016 Jurisdiction: Common Law Before: Schmidt J Decision: Unconditional stay granted. Catchwords: PROCEDURE – notice of motion – order seeking Local Court orders to be stayed – order made Cases Cited: Barwick v Council of the Law Society of New South Wales [2004] NSWCA 32 Woolworths Ltd v Strong (No 2) (2011) 80 NSWLR 445; [2011] NSWCA 72 Category: Procedural and other rulings Parties: Michael Simone trading as Simone Legal (Plaintiff) Mechelle Kola (First Defendant) Corema Pty Limited (Second Defendant) Triple Crowne Investment's Pty Limited (Third Defendant) Kola Investments Pty Limited (Fourth Defendant) Representation: Counsel: Mr G Sirtes SC with Ms K Marinos (Plaintiff) Mr J Dooley (Defendant)

Solicitors: Simone Legal (Plaintiff) Lazarus Legal (Defendants) File Number(s): 2016/344069 Publication restriction: None

Judgment 1. Today I granted an unconditional stay of orders made by Bradd LCM in November 2016, his Honour having concluded in June that Mr Simone had been unjustly enriched, having illegally withdrawn money from the trust account of Konstantin Kola, Mechelle Kola, Corema Pty Ltd, Triple Crowne Investments Pty Ltd and Kola Investments Pty Ltd to pay legal fees owed by Konstantin Kola and Oasis Developments Pty Ltd. 2. Mr Simone has appealed the judgments. The appeal is listed for hearing in March 2017. 3. In issue before this Court was not the applicable principles or whether a stay should be granted, the defendants conceding that they neither had assets exceeding the judgment sum, nor owned any real property. There was also no issue that the sum which Mr Simone has been ordered to pay the defendants is attracting interest and that in the event that the appeal fails, he is in a position to pay the defendants the judgment sum plus interest - both relevant considerations, as discussed in Woolworths Ltd v Strong (No 2) (2011) 80 NSWLR 445; [2011] NSWCA 72 at [68] - [69]. 4. Still the defendants contended that the Court would only grant a stay on condition that 50% of the judgment sum be paid into Court. That would have been of no apparent advantage to the defendants in the admitted circumstances and would have carried with it the obvious disadvantage that the money would not then be attracting interest, notwithstanding that Mr Simone would have to pay the defendants interest, in the event that the appeal failed. 5. Despite the apparent prejudice of this result for Mr Simone, the defendants submitted such terms would be fair as between the parties, because prima facie, they were entitled to the benefit of the judgment; Mr Simone would continue to have the use of 50% of the judgment sum, while they would be entitled to payment of the other 50% forthwith, on dismissal of the appeal; and that it would pay proper regard to the fact that it had been concluded that Mr Simone had withdrawn money from a trust account to pay a bill, contrary to the "sacrosanct nature" of a solicitor's trust account (see Barwick v Council of the Law Society of New South Wales [2004] NSWCA 32 at [117] - [118]). 6. The problem with the latter submission was that in Barwick, the Court was dealing with numerous, serious, admitted transgressions which began with taking trust moneys without authority. By way of contrast, here in the Local Court there was a vehement dispute over whether there had been any such transgression. The judgment delivered by Bradd LCM, even on the defence case, involves errors of fact, which may be critical to the conclusion reached, that there had been a breach of trust and accordingly, to the outcome of the appeal. 7. His Honour concluded at [31] that Mr Simone had illegally withdrawn money from the trust account of Konstantin Kola, Mecchelle Kola, Corema, Triple Crown and Kola Investments, to pay legal fees owed by Konstantin Kola and Oasis. That conclusion was inconsistent with the earlier finding that: "The Legal Profession Act 2004, section 242(a) states that the purpose of the legislation, Part 3.1 is to "ensure trust money is held … in a way that protects the interests of persons for and on whose behalf the trust money is held. In this case the trust money was and is held for Konstantin Kola, Mechelle Kola, and Oasis. Section 255(1) (a) enacted that that the trust money is to be held exclusively for the person on whose behalf it is received. In this case the trust money was received from Konstantin Kola, Mechelle Kola, and Oasis. In accordance with section 255(1) (b) Simone Legal could only disburse the money received in accordance with a direction given by Konstantin Kola, Mechelle Kola, and Oasis. In accordance with section 261(1) (b), Simone Legal could only withdraw money for payment to the practice's account for legal costs owing to the practice if the relevant procedures or requirements prescribed by the Act and the regulations are complied with." 1. In the result, consideration is now being given by the defendants as to whether a notice of contention has to be filed. 2. It was in all of those circumstances that I concluded that a stay on the conditions proposed by the defendants would not be fair as between these parties and that an unconditional stay would. That flowed from what had been in issue in the Local Court; the common ground that there had been at least some error made at first instance; the parties' respective financial circumstances; and that there was no question that if the appeal fails, the defendants will receive interest on the judgment sum, which Mr Simone is in a position to pay them.

Costs 1. The usual order as to costs under the Uniform Civil Procedure Rules 2005 (NSW) is that they follow the event, in this case that is an order in favour of Mr Simone. The defendants urged that in the circumstances the Court would order that costs of the stay application would be costs in the cause. 2. I refused that application, given the evidence that Bradd LCM had made orders in the proceedings below on 8 November 2016; that on 16 November the defendants served a letter of demand, threatening the commencement of bankruptcy proceedings if payment was not made within seven days; the proceedings were then commenced and, on 22 November, the defendants advised that they were not prepared to agree to a stay and that any application would be vigorously opposed, notwithstanding their financial position; and the obvious difficulty with the judgment. 3. On the hearing of the motion, a stay was not opposed by the defendants, but conditions were urged which could not be accepted as fair in all of the circumstances. 4. In the result, I concluded that there could not justly be any departure from the usual costs order and so ordered that the defendants must pay Mr Simone's costs of the motion, as agreed or assessed.

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Amendments 27 March 2017 - [3] typographical error 'owed' changed to 'owned' [9] full stop after 'Local Court' changed to semi colon 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: 27 March 2017