AMP Capital Investors Limited v Parsons Brinckerhoff Australia Pty Limited

Supreme Court of NSW|2013-11-08|Before: Pembroke J, Giles CJ

2013/252050 R M Smith SC with G Ng - for the plaintiff K C Morgan - for the defendant C Colquhoun - for the first cross defendant N Owen - for the second cross defendant A Shearer - for the third cross defendant K J Williams - for the fourth cross defendant Solicitors: 2009/290489 Baker & McKenzie - for the first and second plaintiffs Johnson Winter & Slattery Lawyers - for the first and second defendants Marque Lawyers - for the third defendant Ashurst Australia - for the fourth defendant

2013/252050 Corrs Chambers Westgarth - for the plaintiff Clayton Utz - for the defendant Johnson Winter & Slattery - for the first cross-defendant Marque Lawyers - for the second cross-defendant Ashurst Australia - for the third cross-defendant Allens - for the fourth cross-defendant File Number(s): 2009/290489 and 2013/252050

History 3The AMP proceedings have had a troubled history. Earlier this year the Chief Judge of the Equity Division of this court was so concerned by their slow and inconclusive progress, that I was assigned to manage the litigation, to fix a hearing date as soon as possible and to conduct the final hearing. Although I sought to persuade the parties to take a hearing date in March 2014, there were difficulties with the availability of counsel and eventually, on 19 July 2013, I fixed the hearing to commence on 11 August 2014. 4Baker & McKenzie have been the solicitors for AMPCI and AMPIS in the AMP proceedings from the outset. For the last twelve months, the Parsons Brinckerhoff defendants have waged a campaign to interdict and disrupt Baker & McKenzie's representation of the plaintiffs. They contend that a conflict of interest exists as a result of AMPCI and AMPIS being represented by the same solicitors; and that AMPCI cannot continue to act as the first plaintiff while it remains trustee of the REST Infrastructure Trust. They rely primarily on the fact that in 1996 AMPCI entered into a management agreement with Retail Employees Superannuation Pty Ltd. They allege that in making its investment decision, AMPCI (in its capacity as trustee of the REST Infrastructure Trust) relied upon the advice, recommendations and instructions of AMPCI (in its capacity as manager of the Retail Employees Superannuation Trust). 5These matters are said to lead eventually to the conclusion that AMPCI is a concurrent wrongdoer for the purposes of Part 4 of the Civil Liability Act 2002 (NSW). Baker & McKenzie has responded, with some justification, by politely suggesting that these contentions have a fatuous legal basis. In addition to denying that any conflict exists, they point out that as a matter of law, AMPCI is incapable of being liable to itself and therefore incapable of being a concurrent wrongdoer in proceedings in which it is one of the plaintiffs. 6Pointedly, the Parsons Brinckerhoff defendants have not made any application to the court to restrain Baker & McKenzie from acting for AMPCI in the AMP proceedings. Instead, their solicitors have stated, somewhat lamely, that 'we will be relying on this letter to claim relief when, in due course, this arises as a procedural difficulty'. If things remained as they are, one might be forgiven for wondering 'what relief' and 'what procedural difficulty'?

The REST Proceedings 7In fact, things have not remained as they were, but for reasons that will become clear, this does not affect the conclusion that I have reached as to the most efficient management of the AMP proceedings. Separate proceedings have now been commenced by Retail Employees Superannuation Pty Ltd (REST). REST is not a party to the AMP proceedings. The REST proceedings were commenced on 19 August 2013, a month after I had fixed the AMP proceedings for hearing in August next year. Curiously, they were preceded by earlier proceedings commenced by REST in September 2009 only days after AMPCI and AMPIS commenced the AMP proceedings. I was told that REST's 2009 proceedings were discontinued, but there was no explanation as to why that had occurred, if it did, or why the proceedings were being 'revived' four years later. Notably, the allegations against AMPCI in REST's 2009 and 2013 proceedings are identical. Not only is the precise language the same but the nominated solicitor for REST (Stanley Lewis from Corrs Chambers Westgarth) is also the same. 8The 2009 REST proceedings involved, and the 2013 REST proceedings involve, a claim by REST against AMPCI to recover as damages the same amount of $25 million that AMPCI seeks to recover on behalf of REST in the AMP proceedings. There was no explanation as to why REST wishes to incur the expense of separate proceedings against AMPCI to recover the same amount that AMPCI is endeavouring to recover on behalf of REST in the AMP proceedings. 9REST's claim against AMPCI in both its 2009 and 2013 proceedings is based on the allegation that AMPCI's recommendations to REST, through JANA Investment Advisers Pty Ltd, were misleading and deceptive, negligent and in breach of its management agreement. These allegations are similar in substance to those advanced by the Parsons Brinckerhoff and Booz defendants in the AMP proceedings. They involve the proposition that AMPCI (in its capacity as trustee of the REST Infrastructure Trust) relied upon the advice and recommendations of AMPCI (in its capacity as manager of the Retail Employees Superannuation Trust).

The Applications 10This is the context in which I have been asked to resolve a number of competing interlocutory applications. I will say more about those applications in due course, including the unorthodox nature of one of them. For present purposes however, they may be summarised as follows. Clayton Utz on behalf of AMPCI seeks an order staying the 2013 REST proceedings pending the determination of the AMP proceedings. If there is to be no stay, orders are then sought that the AMP proceedings and the REST proceedings be heard concurrently; and that in the AMP proceedings, AMPCI have leave to be represented by two sets of solicitors and counsel. If I accede to this last application, it will mean that AMPCI will have different representation in the AMP proceedings according to whether the particular forensic question in issue relates to AMPCI in its capacity as trustee or to AMPCI in its capacity as investment manager. This is not an attractive prospect. I will deal first with that application, before turning to the question of whether there should either be a concurrent hearing or a stay of the REST proceedings.

Conflict of Interest 11The basis of the application for the separate representation in the AMP proceedings is the supposed existence of a conflict of interest for AMPCI. Potential conflicts of interest are of course an unavoidable feature of commerce. They arise in myriad, often unexpected, circumstances. Sometimes the supposed conflict is remote and fanciful. Frequently the potential conflict is able to be accommodated in ways that ensure that any actual conflict is avoided or side-stepped. Occasionally the conflict is actual and unavoidable. Often in commercial litigation, third parties intermeddle for their own strategic reasons, asserting the existence of a conflict when, in truth, it has been dealt with, and there is no actual conflict, and in any event, it is none of the third party's business. This is one of those cases. On the facts of this case, AMPCI's supposed conflict in the AMP proceedings is illusory. 12Since the commencement of the AMP proceedings in 2009, Baker & McKenzie, the plaintiffs' solicitor on the record in the AMP proceedings, has adopted a clear position and thereby ensured that there is no actual conflict of interest for AMPCI. There could only be an actual conflict for AMPCI if, because of its competing loyalties, it were required to advance inconsistent positions in the AMP proceedings. However AMPCI has not put itself in the position of being bound to advance inconsistent positions, and has avoided any actual conflict. It has acted with the benefit of full advice, cognisant of the implications and of AMPCI's fiduciary responsibilities as trustee. The result is that AMPCI denies that its conduct as investment manager gives rise to a defence, or amounts to a cause of action against it. That position was informed, I was told, by the conclusion that it is in the interests of both REST and AMPIS that the allegations of concurrent wrongdoing against AMPCI be denied. 13The absence of conflict was explained with admirable clarity by senior counsel who appears on behalf of AMPCI in the AMP proceedings: The position in the 2009 proceedings is that it was clear from an early stage of those proceedings, as your Honour has already apprehended, that there was a potential conflict of interest between AMPCI and its beneficiary REST and indeed between AMPCI and AMPIS, the second plaintiff, because allegations are made, were made from quite early in the proceedings initially in the context of contributory negligence allegations, that AMPCI had, in recommending the investment, not conducted itself with due diligence... That potential conflict of interest, on the part of AMPCI vis-à-vis REST, and vis-à-vis AMPIS, has been the subject of attention from the beginning of the proceedings. Although, as your Honour observed before lunch, potential conflicts do not always mature into actual conflicts and there are several ways that that can be dealt with. One is that fully informed and properly advised, the beneficiaries or beneficiary takes the view that the interest of the trustee and itself, although potentially in conflict, in fact, align... Each of AMPCI, REST and AMPIS are large sophisticated institutions. They have internal and external legal advisors. The issues have been carefully considered between those parties and discussed between them and the outcome remains that AMPCI as trustee does not perceive it has any present conflict of interest in its role in the 2009 proceedings. 14As that explanation demonstrates, the existence of an actual conflict of interest is an essentially factual matter; it cannot exist at a mere theoretical level: Murray v Macquarie Bank (1991) 105 ALR 612 at 618. If a pragmatic decision has been adopted which effectively removes and avoids the conflict, then that is the end of the matter. There will be no conflict in fact, no matter what those suspicious minds with an interest in establishing the supposed conflict may think. That is what has happened in this case. There is no sound factual basis on which I am justified in ignoring the statement made to me by senior counsel that 'AMPCI does not perceive it has any present conflict of interest in its role in the 2009 proceedings'. 15I should add that although AMPCI may have had several roles in the investment decision relating to the Lane Cove Tunnel Project it does not have a split legal personality, as some of the submissions appeared to assume. AMPCI (as trustee) is not, in a legally material sense, different from AMPCI (as investment manager). The claims against AMPCI by some of the defendants and cross-claimants, such as the Parsons Brinckerhoff and Booz defendants, are made against the single legal entity AMPCI. Whether AMPCI has a conflict of interest is primarily a matter for it, not for those who claim against it in the AMP proceedings. If AMPCI has adopted a position that resolves the conflict, it is no concern of the parties who claim against it. 16It is true that the question of whether a person or entity acts as trustee or in some other capacity is relevant to the internal question, as between trustee and beneficiary, as to whether the trustee has a right of recoupment from the trust fund for any liability it may incur. But that is not an issue in which third parties usually have any legitimate involvement. And it is a mistake, oft repeated, to describe a single legal entity by adding the surplusage 'in its capacity as ..'. Those words tend to add nothing except obscurity. That is the reason why, in Provident Capital Ltd v Zone Developments Pty Ltd [2001] NSWSC 843 at [49], Young CJ in Eq criticised the use of the expression 'Cabe Investments Pty Ltd as trustee of the Zivanovic Family Trust' in connection with dealings relating to an assignment of lease. It is also the reason why, in Australian Securities & Investments Commission v Perpetual Trustee Company (Canberra) Ltd (1999) 41 ATR 401, Lehane J said at [21]: It is, we think, to cloud the issue to speak of the capacity in which Perpetual acted when it obtained the benefit of the promise ... 17To similar effect are the recent statements of Pullin JA at [259] and Murphy JA at [409]-[411] in Yara Australia Pty Ltd v Oswal (No 2) [2013] WASCA 187. An example of such regrettable surplusage is the description of AMPCI adopted by Clayton Utz in its notice of motion seeking separate representation in the AMP proceedings. The relevant 'Person seeking orders' in the notice of motion was AMPCI. However, for understandable but misguided reasons, the drafter of the notice of motion thought it necessary to utilise the following long-winded and superfluous description: AMP CAPITAL INVESTORS LIMITED IN ITS CAPACITY AS INVESTMENT MANAGER OF RETAIL EMPLOYEES SUPERANNUATION PTY LIMITED AS TRUSTEE OF THE RETAIL EMPLOYEES SUPERANNUATION TRUST 18It does happen of course, that parties to litigation, who act in a representative capacity, sometimes have competing and inconsistent allegiances which cannot be reconciled. In such cases, separate representation, tightly controlled, may be allowed. In Everest Capital Limited v Trust Company Limited [2010] NSWSC 231, an order was made that Everest Capital Limited be permitted to appear separately represented in its role as trustee of the relevant fund (the EBI Income Fund) and as the responsible entity for EAIT Direct Investment Fund (a unit holder in the fund). But this is the exception rather than the rule. In most cases, it should not be necessary and will not be appropriate. In the AMP proceedings, for the reasons that I have explained, AMPCI does not in fact have competing and irreconcilable allegiances.

Other Discretionary Reasons 19For that fundamental reason, the application for separate representation of AMPCI in the AMP proceedings should be dismissed. In addition however, there are a number of discretionary reasons why I am not prepared to exercise my power to allow AMPCI to be separately represented. Those discretionary reasons include the following: (a)The evidence provided in support of the application is inadequate. The affidavit of Mr Mavrakis from Clayton Utz offers nothing more than a recitation of the pleadings in both proceedings. It does not provide any substantive explanation of the underlying facts and circumstances in a way that exposes the supposed conflict and necessitates the orders sought. The failure to elucidate in a frank way the factual circumstances underlying an alleged conflict led to the refusal to permit dual representation in Wilkins v Kingsley-Strack (Supreme Court of New South Wales, Giles CJ Comm. D, 12 December 1996, unreported); (b)Related to that point, is the question why the application for separate representation was made by Clayton Utz for AMPCI rather than by Baker & McKenzie, the existing solicitors on the record for AMPCI in the AMP proceedings. This is highly irregular. Clayton Utz has no current formal role in the AMP proceedings (and may not have any). It cannot purport to file and move on an application in the AMP proceedings, as if it did have such a role. This unorthodox position is made worse because senior counsel for AMPCI, instructed by Baker & McKenzie, has informed me that AMPCI has resolved any potential conflict and ensured that there is no actual conflict for it in the AMP proceedings; (c)In any event, the supposed conflict has existed for a long time. The allegations about AMPCI in its role as investment manager have been alive since 2009. The original REST proceedings were commenced in 2009. The fifth cross-claim brought by the Parsons Brinckerhoff defendants based on the conduct of AMPCI in the performance of its duties as investment manager for REST, was filed on 19 September 2012. No explanation for the delay in bringing the application for separate representation has been offered; (d)It goes without saying that separate representation will give rise to significant procedural difficulties of the kind described in Carter v Marine Helicopters Ltd (1996) 9 ANZ Ins Cas 76,343 at 76.347 and Konneh v State of New South Wales (No 2) [2013] NSWSC 390 at [85]. Those difficulties may be capable of being managed but the preferable course is to avoid them if possible. How, for example, is an offer of compromise to be dealt with where both Baker & McKenzie and Clayton Utz act for AMPCI in the same proceedings? (e)Further, the interests of justice weigh against separate representation bearing in mind the very substantial increase in cost and time that will be involved in having both Baker & McKenzie and Clayton Utz act for AMPCI in the AMP proceedings. The defendants in those proceedings should not be exposed lightly to substantially increased cost liabilities in the event that the plaintiffs succeed. And the complication, confusion and inefficiency that are likely to result from having an additional set of lawyers involved in the conduct of the AMP proceedings and any settlement negotiations, is not consistent with the overriding statutory purpose of facilitating the just, quick and cheap resolution of the real issues in dispute between the parties: Section 56 of the Civil Procedure Act 2005 (NSW). Nor have I overlooked the statutory mandate to seek to ensure the proportionality of costs: Section 60. None of these matters was addressed in the submissions put forward by Clayton Utz on AMPCI's behalf. 20In reality, Clayton Utz has sought to intervene in the AMP proceedings on behalf of AMPCI because it has assumed that there must necessarily be a concurrent hearing; and if there must be a concurrent hearing, there must also be separate representation of AMPCI in its different roles. However, the circumstances of this unique litigation, the unexplained commencement of the 2013 REST proceedings two months ago, the absence of explanation concerning the discontinuation of the 2009 REST proceedings, the unpalatable prospect of increased costs, increased numbers of lawyers and increased confusion, together with the probability that the hearing date in August 2014 will not be maintained, all point to a different solution.

Stay of REST Proceedings 21I have formed the view that the interests of justice favour a stay of the REST proceedings pending the determination of the AMP proceedings. The issue is fundamentally one of case management having regard to the statutory objectives set out in the Civil Procedure Act. I adopt the following statement by Austin J in Ghose v CX Reinsurance Co Limited [2010] NSWSC 110 at [27], (cited with approval by Gilmour J in Australian Building and Constructions Commissioners v Construction, Forestry, Mining & Energy Union [2011] FCA 1040 at [9]): the court's essential task is to work out pragmatically whether the most efficient course consistent with the requirements of fairness would be consolidation, a joint hearing, immediately sequential hearings, entirely separate hearings, or something else (such as determination of separate questions prior to or after the hearing of the remainder of the proceedings). A pragmatic approach requires close attention to the nature of the claims in each set of proceedings and the likely course of the litigation if the proceedings are consolidated or jointly heard, compared with the course of litigation if the proceedings remain separate. A pragmatic approach involves the Court bringing to bear its experience in the conduct of hearings and case management, taking into account such matters as the potential savings of time and expense of one outcome compared with the other, and also the basic imperative that every litigant is entitled to a fair opportunity to present his or her case to the Court. 22Notwithstanding the possibility of delay, further cost and unfairness to REST, all of which are contingent, uncertain and unquantifiable, a stay of the REST proceedings represents the most efficient solution in my view. Several factors have informed the exercise of my discretion. I should note however, that as far as any possible unfairness to REST is concerned, it is, in a very real sense, the author of its own misfortune. The late commencement of its 2013 proceedings and the unexplained discontinuance of its 2009 proceedings do not engender any sympathy. And in answer to my rhetorical question during the hearing - 'Why is REST doing this?' - the court room echoed with the sotto voce response (not particularly directed at me) that it was 'none of your business'. And my question remained unanswered. 23The most obvious advantage of staying the REST proceedings is that, if AMPCI is successful in the AMP proceedings, the REST proceedings will be unnecessary. There will be no need for REST to engage in its own separate recovery action. As far as REST is concerned, there is and should be only one commercial objective, namely the recovery of the sum of $25 million. If that is achieved by AMPCI on its behalf in the AMP proceedings, any further action would be utterly wasteful and of benefit only to lawyers. 24Additionally, in the AMP proceedings, I will determine whether the traffic flow forecasts and related reports were good, bad or indifferent and whether someone is liable for any inaccuracy in them, if at all. As part of that process, I will resolve the responsibility, if any, of the Parsons Brinckerhoff and Booz defendants, and whether there was any contributory negligence or other legally recognisable fault for which AMPCI is responsible. No doubt there will also be questions of reliance and causation on which I will be required to make findings. That will effectively mean, with only limited possible exceptions, that there is unlikely to be any substantial re-litigation of those issues in the REST proceedings. Practically speaking, the scope for further litigation in the REST proceedings of the traffic flow and related issues will be narrowly confined. 25That is not to say that, if necessary at a future date, and depending on my findings of fact, I will be unwilling to entertain an appropriate application in the REST proceedings - if they go ahead - to 're-open' an issue. But I was unimpressed by the submissions of REST in opposition to the stay application, which attempted to explain in labyrinthine detail the combinations and permutations of findings that I may make at a future date, which may or may not give rise to an issue estoppel. Those hypothetical submissions bore the hallmark of a text book, rather than the reality of commercial litigation and the policy of the Civil Procedure Act. I reiterate that I intend to manage and hear both proceedings with a view to minimising any duplication, alleviating any risk of inconsistent findings and eliminating any unfairness. 26I have no doubt the AMP proceedings will be prosecuted with the highest levels of professionalism and expertise by the solicitors and counsel whom the parties have retained. I also have no doubt that the forensic examination at the hearing of the traffic flow forecasts and related reports, the culpability, if any, of the Parsons Brinckerhoff and Booz defendants, the role of the Royal Bank of Scotland, and the responsibility, if any, of AMPCI in its conduct as investment manager, will be undertaken with painstaking thoroughness and attention to detail. The result will be that I will be in an optimum position to reach conclusions and make reasoned findings, especially of fact, supported by the evidence. It is true of course that, as a matter of law, REST will not be bound by any of those findings. But as a matter of commonsense, and having regard to the exigencies of commercial life, those conclusions and findings will, or should be, persuasive in any consideration that REST's directors and managers may subsequently give to its commercial and legal options. 27I have therefore reached the conclusion that the significant utility of proceeding to hear and resolve, as soon as possible, the issues which I have described in the preceding paragraph, and of delivering reasons which explain the evidentiary basis for my findings, is the paramount consideration. The unwanted involvement of REST is not necessary for that purpose. The risks to which it points are debating points, which have a theoretical validity, but they are insufficient to outweigh the overwhelming commercial and practical utility of proceeding to hear and determine the AMP proceedings in August 2014, as planned. 28I have not overlooked the fact that JANA is also not a party to the AMP proceedings. But given its primary position that (1) it does not oppose the stay and (2) that, in any event, there is no case for it to answer in the REST proceedings, the issues it raises about potential cross-claims it may have against the Parsons Brinckerhoff, Booz and Royal Bank of Scotland defendants, or the theoretical possibility of any inconsistency arising from its defence (which is still to come), are not sufficiently persuasive to cause me to alter course.

Experts Reports 29Finally, at the end of the hearing on 18 October, certain submissions were made about the need for additional time to prepare experts' reports. Some of these submissions seem to have been misconceived. I emphasise that I will carefully oversee the use of experts' reports in this case. I may even consider the use of a court-appointed expert or a single expert jointly engaged by the parties. I may require the concurrent evidence of experts. The parties should recognise that the deployment of expert evidence is now very much in the gift of the court. Litigants do not have a free rein to utilise whatever expert evidence, at whatever cost, they alone consider appropriate: Uniform Civil Procedure Rules 2005 (NSW) 31.17-31.20. A tangle of competing experts engaged on behalf of individual parties in orchestrated adversarial combat is frequently an unsatisfactory means of assisting the court to arrive at an appropriate outcome. There is often a better way. I will review the position in relation to expert evidence later this month. 30To that end, the following observations are intended to ensure that such legitimate experts' reports as are permitted to be utilised, are appropriately limited in their scope and do not unnecessarily lengthen the hearing: (a)First, it is not the role of an expert witness to form a judgment about factual matters. The expert has no role to play in the fact-finding exercise. The expert should be instructed as to the assumed facts which he is requested to take into account. He should then express his opinion and explain his reasoning by reference to those assumed facts. The persuasiveness of the opinion will depend on the quality of the reasoning and the proof, if it can be achieved, of the assumed facts. If the assumed facts are not proved, or not proved in their entirety, the probity of the opinion may be diminished or destroyed. However, it is not the role of the expert to venture an opinion as to what those facts are or should be; (b)Secondly, the only useful and admissible expert opinion is that which is derived from some recognised area of expertise; one where the judge does not have sufficient knowledge of the subject matter so as to be able to make an informed judgment on the issue himself, without technical assistance. Anything else will be of no use. All too often, supposed experts are put forward to advance a party's case in ways that could just as easily have been done by competent, properly instructed, counsel. Such an 'expert' may well provide invaluable backroom assistance in instructing and informing counsel, but it is not necessarily always appropriate that he be put forward as an expert witness; (c)Thirdly, it is all too often the case that the clarity of an expert's opinion is rendered opaque and unhelpful, sometimes incomprehensible, by the expert's unchecked enthusiasm to express views on issues which do not matter, or on which he is not qualified. There are too many instances in this court of professionals, frequently accountants, who do not understand the limited role of an expert. They sometimes produce, out of ignorance or self-interest, or both, vastly expensive reports of doubtful utility. If necessary, I will not hesitate to exercise my powers pursuant to the Civil Procedure Act to disallow the whole or part of the cost of any expert report, if I am satisfied that the report has served only to waste the court's time and incur unwarranted expense. I have done so before. Ireland v Retallack (No 2) [2011] NSWSC 1096 is one example.

Conclusion & Orders 31For those reasons, I make the following orders: (a)I order that proceedings 2013/252050 be stayed pending the determination of proceedings 2009/290489; (b)I dismiss both notices of motion filed on 6 September 2013 seeking a concurrent hearing; (c)I dismiss the notice of motion filed on 6 September 2013 seeking leave for AMPCI to be represented by two sets of solicitors and counsel; (d)I list proceedings 2013/252050 before me on 11 August 2014 for mention only; (e)I list proceedings 2009/290489 before me on 22 November 2013 for directions as to experts' reports and other ancillary evidentiary and time-tabling issues; (f)I order all parties to pay their own costs of and incidental to the hearings before me on 18 October and 8 November 2013.

Amendments 13 November 2013 - Amendment to representation of first and fourth cross defendants Amended paragraphs: Cover sheet page 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: 12 November 2013

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