Serious new allegations emerged from a defamation case against Russell Keddie, Tony Barakat and Scott Roulstone ... Court of Appeal did not allow trial to accommodate malice claims within time frame ... Buying off conduct complaints underscores failure of the disciplinary system 
Russell Keddie: rolled overAllegations "of the utmost seriousness for the administration of justice in NSW" have emerged in defamation proceedings against the three former partners of the personal injury law shop Keddies.
Our sister publication Gazette of Law & Journalism reported last week (Feb. 15) the settlement of the long-running defamation action brought by Chinese staffers against the three musketeers from Keddies - Russell Keddie, Tony Barakat and Scott Roulstone.
Sui Sheng Lee, Hong Mei Li ("Helena") and Hong Liu sued over a letter sent to Keddies' Mandarin speaking clients in October 2006. The letter was published shortly after the three employees were sacked.
According to the pleadings the letter accused the plaintiffs of being so unfriendly, immoral and unethical that they were unfit to be employed by a law firm.
It was published in the context of a purported explanation by Keddies that allegations of overcharging against the firm were attributable to these disgruntled ex-staffers, who acted as interpreters or intermediaries for Chinese clients.
There was some argument about the Chinese version of the letter and whether it was significantly different from the version instructed by Keddies.
The settlement came close on the heels of a Court of Appeal decision on January 21, upholding Justice Henric Nicholas' orders not to allow an amended reply to a further amended defence.
The plaintiffs wanted to plead further particulars of malice to counter Keddies' defence of qualified privilege, but Allsop and Tobias said they'd left it too late. The trial was set for February 7 and the three plaintiffs sought to have the date vacated so that their additional evidence going to the defendants' malice could be brought.
Keddie and the other defendants successfully opposed the application to vacate, arguing they needed more time to meet the new case.
However, what emerged before Nicholas J in December were the allegations against Keddies in support of the malice reply.
None of the allegations can now be tested at trial.
The particulars were in three main parts, each involving clients of Keddies.
Sissy Chen
It was alleged that David Marocchi, an employed solicitor at Keddies, settled Sissy Chen's case for $150,000 inclusive of costs.
He had not obtained the client's consent or authority to settle on those terms.
It was alleged he created a file note and a letter dated January 16, 2006 in which he falsely said he'd had a conversation with Sissy Chen, interpreted by Hong Liu, in which he had been given instructions to settle on those terms.
Further, it was claimed that Marocchi created a letter dated February 6, 2006 in which he asserted that the second plaintiff, Helena, had met Sissy Chen in China on January 26 and that she had obtained confirmatory instructions to settle for $150,000 inclusive of costs, with Chen to receive $50,000.
The plaintiffs said that the assertions in the file note and the February 6 letter were false. Helena did not meet or speak to Sissy Chen in China on January 26, not had she been asked to, nor had she conveyed any instructions to Marocchi.
Sissy Chen complained that she had not authorised the settlement.
Helena reported this to Keddie and to Barakat.
Barakat allegedly told Helena that she should help Marocchi. If she did not she should not expect to continue to work for Keddies and that she would lose lots of money.
The first plaintiff, Lee, at a meeting at which all three defendants were present, said that the plaintiffs were not prepared to lie about their involvement or non-involvement in the Sissy Chen case.
The third defendant, Roulstone, allegedly threatened Lee by saying if he made trouble for Keddies, then Keddies would make trouble for him.
At another meeting on October 23, 2006, Lee and Helena said that they would not lie for Keddies. Barakat became angry and said: "You and Mr Lee are going to lose a lot of money and you will regret it."
After that meeting the services of the three Chinese plaintiffs were terminated by Keddies and on October 25 the law firm published the letter sued on.
The "Shanghai family"
In late March 2006 Helena (Hong Mei Li) was in Singapore at the request of Keddies to interpret for clients involved in the "Singapore sittings of the NSW District Court", held at the Singapore Hyatt.
These sittings were presided over by the chief judge of the District Court, Justice Reg Blanch, who had flown there specially at Keddies' request.
Among the clients were five members of one family, all related or closely connected to a young woman who had been killed.
Two of the plaintiffs translated conversations involving Keddie and Marocchi and members of the "Shanghai family".
In relation to four members of the "family" documents were produced that set out the amount to be received by the client, but not the total settlement amount.
According to the plaintiffs the position in relation to these clients at the time of the Singapore settlements looked like this:
- Guo Lin Huang (father of deceased): paid $85,000 from a settlement of $300,000 (incl. of costs).
- Xue Fen Chi (mother): paid $90,000 from a settlement of $320,000 (incl. of costs).
- Chun Liang Chi (uncle): nothing from a total settlement of $50,000 (incl. of costs).
- Heng Huang (boyfriend): $50,000 from a total settlement of $200,000 (incl. of costs).
- Yi Mei Lin (boyfriend's mother): $20,000 from a total settlement of $80,000 (incl. of costs).
In relation to Heng Huang and Yi Mei Lin, the plaintiffs said that the settlement sums were written into documents by Marocchi after they had been signed by those two clients.
After further discussions with this clients in the hotel reception area Marocchi increased their original proposed payouts from $20,000 to $50,000 and from $5,000 to $20,000 respectively.
When Helana asked what was going on Maroochi said Heng Huang and Yi Mei Lin wanted more money.
Various of the clients from the "Shanghai family" complained to the Chinese interpreters about their treatment.
According to the further particulars of malice, Lee and Helena had a meeting with Barakat in June 2006 to complain about the conduct of Keddie and Marocchi.
Allegedly, Barakat said that if the Office of the Legal Service Commission heard about what had happened, Keddie and Marocchi would be in jeopardy.
Barakat asked Lee to go China to negotiate how much money Keddies would have to pay for the clients to keep quiet.
Through a third person the clients were approached in China. They said they would accept an apology and repayment of money for the wrong done to them.
Barakat is said to have responded that Keddies would pay them some more money, but that he would make big trouble for them in China.
In June 2006 Heng Huang lodged a complaint with the OLSC about Marocchi's conduct.
In June 2007 Guo Ling Huang and Xue Fen Chi also complained to the OLSC about the conduct of Marocchi and Keddie.
The complaints concerned them signing authorities to settle that had been handwritten by Keddie in March 2006, without being told the total settlement amount.
In October 2006 Lee told Barakat he would not travel to China to meet with the Shanghai family because he was concerned about fraud on the part of Keddies and did not want to be involved in covering it up.
Immediately after that meeting the three Chinese employees were sacked by the law firm.
In October 2006, the firm arranged for a further $100,000 to be paid to Xue Fen Chi.
Xi Laung Gu
Marocchi and barrister Tim Meakes had a meeting with this client in an hotel room in Singapore on March 26, 2006. Helena was the interpreter.
Meakes allegedly explained to Gu there were problems with his case, but he would negotiate with the insurer's lawyers.
Marocchi hand-wrote an authority for Gu to sign. The spaces for the amount to be received by the client were blank. Gu signed the document after he was allegedly told by Meakes that the figure would be known after speaking to the insurer's lawyers.
Once out of the room and in the absence of the client Marocchi allegedly wrote the figures $10,000 to $20,000 in the blank space on the document.
At the Singapore Hyatt the next day Helena interpreted a series of conversations between Keddie, Meakes and Gu. The Keddies team was back and forth to the insurer's lawyers. Starting at $10,000 the settlement was gradually upped to $40,000.
Gu said he did not want to settle. Marocchi was also present.
It was alleged that Keddie said he would add another $10,000 to Gu's payment from the firm's own funds.
Gu then agreed to settle for $50,000.
Allegedly, he was not told, nor was he shown any other document in Singapore revealing that the total settlement amount was $300,000.
There also purports to be the signature of Helena on the document signed by Gu, but she claims she did not sign it.
Gu later complained to the OLSC about the conduct of Keddie and Maroochi.
Justice Allsop, president of the Court of Appeal, in rejecting the plaintiff's application, said:
"What is plain is that if the matters which are the subject of the amended reply are true, these are matters of the utmost seriousness for the administration of justice in the state, and the Legal Services Commissioner should be apprised of them."
* * *
Keddies: waiting for a green light
The solicitor for the defendants, Robert Tassell from Verekers, swore an affidavit for the hearing before Nicholas on December 17 last year.
Sissy Chen
Tassell said her file had been transferred to Stacks Goudkamp and Keddies does not have a copy of it.
In May 2006 Chen complained to the Office of the Legal Services Commissioner concerning Keddies' employed solicitors John Purkiss and David Marocchi.
Three-and-a-half years later, in December 2009, the complaints were dismissed by the Legal Services Commissioner, Steve Mark.
In February 2009 Chen commenced a professional negligence case against Keddies. The firm made an application for security for costs, which was granted by Justice Davies. She was ordered to pay $40,000.
She did not pay that amount and the proceedings ultimately were dismissed.
Chen now lives in Canada.
Tassell outlined extensive work that he would need to undertake to defend the malice case. He would have to locate Chen and her partner and interview them, make contact with Stacks Goudkamp, obtain access to the files in respect of the professional negligence proceedings and interview Purkiss and Marocchi, who no longer work at Keddies.
The defendants would also need Chen to waive privilege on the contents of her file.
The Shanghai Family
In 2006 two of the five members of the Shanghai family, Heng Huang and Yi Mei Lin, made claims of overcharging against Keddies and they were settled in May that year.
Again, to meet the case would involve locating these former clients in China, gaining access to their files, and interviewing the relevant solicitors.
Zi Liang Gu
Gu's file was transferred to Chows Litigation Lawyers and subsequently stolen from that office.
Commencing in late 2006 Gu made multiple complaints to the OLSC concerning Keddies' conduct.
Three years later, in December 2009, the complaints were dismissed by Steve Mark's office.
To meet the case would require extensive inquiries, according to Tassell.
David Marocchi
Marocchi left Keddies in January 2009.
That month the firm commenced proceedings in the Supreme Court against him seeking to restrain an alleged breach of confidence.
That was later settled.
Marocchi has said he would not be prepared to voluntarily assist Keddie, Barakat and Roulstone in the defamation proceedings.
Tassell estimated that the plaintiffs' proposed reply would cause a substantial increase in the scope of the defamation proceedings.
At least a further 14 witnesses would be needed and the trial would go well beyond the nominated three weeks.
* * *
Solicitor Stephen Firth now has nearly 40 civil cases against Keddies in the NSW District Court.
The first one, Shuetrim v Keddie, is due to be tried early in April. This is a "results form" case, where the firm's documentation allegedly shows the amount charged to the client is higher than the value of the work done.
There are so many cases against Keddie, Barakat and Roulstone in the District Court that the court now has a special Keddies List, presided over by Judge Di Truss.
The former Keddies' partners have also taken Supreme Court equity proceedings against Stephen Firth and the former defamation plaintiffs alleging breach of confidence.
* * *
Legal Services Commissioner Steve Mark is struggling with the one disciplinary case he's managed to scrape together against Keddies for hearing by the Administrative Decisions Tribunal.
In concerns overcharging in the Meng matter.
It was in for mention before the tribunal earlier this month. The consequences for Barakat and Roulstone as a result of Russell Keddie "rolling over" and admitting liability for gross overcharging in Meng's case are still to be sorted out.
Each of the parties have their own lawyers and they are fighting tooth and nail on every point. The case was commenced a year after The Sydney Morning Herald published stories in 2008 about Keddies' overcharging.
Nearly two years later it is still mired in argument about client privilege, expert witnesses, and getting an agreed statement of facts.
Mrs Meng became a paraplegic after a bus crash in South Australia.
Her claim was relatively straight forward and there seemed to be no issues as to liability. It was settled without going to trial.
She did not receive a bill from Keddies, but Mrs Meng later discovered she had been charged $800,000 in fees, which represented nearly a quarter of the total settlement of $3.5 million.
A costing expert told The Sydney Morning Herald that a proper bill in this case should have been between $80,000 and $120,000.
A senior solicitor would have had to work on the case alone, full-time, for a year to justify the fees charged.
The disciplinary hearing grinds back before the ADT on May 16.
* * *
The allegations against Keddies are an unsightly blemish on the legal profession for the simple reason that the system appears incapable of cleansing these rorts and the people who practice them.
Partners of the state's biggest personal injury law shop have been permitted to buy off misconduct complaints without serious professional consequences.
The case law and the legislation make a strong argument that misconduct arises as soon as the inflated charge is made, i.e. when the bill is sent out or, in the instance of Keddies, when the excessive fees are stripped from the settlement.
The current disciplinary arrangements simply do not adequately protect consumers.
In important misconduct cases that are going nowhere fast one would have hoped the Supreme Court would step-in and exercise its jurisdiction over officers of the court.
Last month Slater & Gordon completed the terms of its purchase of Keddies for $35 million.
The payments involved $3.7 million in S & G shares, the take-up of $11 million of Keddies' debt and the remainder in cash, payable over 30 months.
Barakat and Roulston are now with Slater & Gordon.
The firm said Keddies staff would be expected to operate in accordance with its "rigorous national practice standards".