Bahonko v Nurses Board of Victoria

Judgment 1By Interlocutory Process dated 2 March 2012, the Defendant in these proceedings, Robert Anthony Keogh, sought orders that Robinson Legal Pty Limited, Mr Andrew Robinson, Ms Dominique Robinson and Ms Julie Briscoe be restrained from acting further on behalf of the Plaintiff, The Consortium Centre Pty Limited ("TCC") in these proceedings ("proceedings"). Mr Keogh's application was subsequently narrowed in submissions to restraining the individual solicitors from acting, and ultimately, to restraining Ms Briscoe from acting when it became clear that there was no suggestion that Mr Robinson or Ms Robinson would take up conduct of the proceedings if Ms Briscoe was not permitted to do so. 2Robinson Legal is an incorporated legal partnership; its shareholders are Ms Robinson and Ms Briscoe and its directors are Ms Robinson, Mr David Rydon and Ms Briscoe. Ms Robinson is the sister of Mr Maurel, who holds shares in TCC through a family company and is one of its directors. Mr Robinson is a consultant to Robinson Legal. Mr Robinson and Ms Robinson do not have carriage of the proceedings or direct involvement in them. Ms Briscoe is the solicitor on the record for TCC in these proceedings. Ms Hudap has the primary carriage of the proceedings. She has been a solicitor with the firm of Robinson Legal for nearly 8 years (Briscoe [162]-[163], T163). It might be added, although it is not necessary for the purposes of this decision, that TCC is also represented by Senior and Junior Counsel in the proceedings and there is no question as to their independence. 3Mr Keogh, Mr Robinson, Ms Robinson and Ms Briscoe each swore affidavits and were cross-examined in the proceedings. It has not been necessary for me to form a view as to the credit of any of the witnesses to determine this application, which can readily be determined by reference to the documentary evidence and the objective facts. In particular, it is not necessary for me to form a view, and I have not formed a view, as to the submission put by Robinson Legal that the present application had been filed by Mr Keogh in an attempt to avoid, or at least delay, filing a Defence and evidence in the proceedings, which have in any event now been filed. The relevant jurisdiction 4In this case, by contrast with, for example, D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118 and Cleveland Investments Global Ltd v Evans [2010] NSWSC 567, there is no suggestion that a solicitor has "change[d] sides"; to the contrary, Robinson Legal has represented TCC in the underlying dispute since it arose and acted for TCC in the proceedings since their commencement. Mr Keogh's criticism of Robinson Legal is not that there is a conflict between its interest and TCC; indeed, Mr Keogh's complaint appears to be that Robinson Legal's interests are too closely aligned with those of TCC, by family and commercial relationships. 5The jurisdiction invoked by Mr Keogh to restrain Ms Briscoe from acting in these proceedings is the Court's inherent power to restrain a legal practitioner from representing a party in a particular case to ensure justice and the appearance of justice. In Mitchell v Pattern Holdings Pty Ltd [2000] NSWSC 1015 at [34], Bergin J referred to the Court's power to restrain a legal practitioner from representing a party in a particular case to ensure justice and the appearance of justice, as an incident of its inherent jurisdiction (at [34]). Common examples include where there is a potential that the legal practitioner might be a witness; where the subject of the litigation involves an evaluation of his or her conduct and where the efficacy of documents he or she prepared is in issue (Holborow v Macdonald Rudder [2002] WASC 265 at [23]); or where the solicitor has a direct pecuniary interest in the outcome of the case (Bowen v Stott [2004] WASC 94). 6In Holborow v Macdonald Rudder above at [30] EM Heenan J noted that: "It seems to me that if it can be demonstrated that there is a risk that a practitioner will disregard his overriding duty to the court that this will usually, if not always, require action by the court to avoid such a risk by preventing the practitioner from acting even if the relief is sought by an opposing party in the litigation. But these principles do not render counsel or solicitors generally examinable at the suit of their client's opponents. The duty of the legal practitioner is not to his client's opponent and he is not answerable to his client's opponent. His duty is to the court and he is certainly answerable to the court and to his or her professional and disciplinary bodies." 7In Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561 at [76], Brereton J noted that: "The court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice [Everingham v Ontario; Black v Taylor; Grimwade v Meagher; Newman v Phillips Fox; Mitchell v Pattern Holdings; Spincode; Holborow; Williamson v Nilant; Bowen v Stott; Law Society v Holt]. Prince Jefri does not address this jurisdiction at all. Belan v Casey and British American Tobacco are not to be read as supposing that Prince Jefri excludes it. Asia Pacific Telecommunications appears to acknowledge its continued existence. The test to be applied in this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice [Everingham v Ontario; Black v Taylor; Grimwade v Meagher; Holborow; Bowen v Stott; Asia Pacific Telecommunications]. The jurisdiction is to be regarded as exceptional and is to be exercised with caution [Black v Taylor; Grimwade v Meagher; Bowen v Stott]. Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause [Black v Taylor; Grimwade v Meagher; Williamson v Nilant; Bowen v Stott]. The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief [Black v Taylor ; Bowen v Stott]." 8In Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404 at [26], Young J also referred to the Court's inherent power to restrain solicitors from acting in a particular case having regard to the interests of the administration of justice and emphasised that the Court's jurisdiction was exceptional and was to be exercised with appropriate caution and due weight should be given to the public interest in a litigant not being deprived of the solicitor of its choice without due cause. 9In Mitchell v Burell [2008] NSWSC 772 at [3], Brereton J summarised the principles applicable to this jurisdiction as follows: "The jurisdiction invoked is that discussed in Kallinicos v Hunt [above]. As was said in that case (at [76]) the Court has always had inherent jurisdiction to restrain solicitors from acting in a particular case as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice. The test to be applied is whether a fair minded, reasonably informed member of the public - a concept substantially equivalent to the reasonably informed lay observer used in the context of applications for disqualification of judicial officers for apprehended bias - would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in order to protect the integrity of the judicial process and the due administration of justice, including the appearance of justice. The jurisdiction is an exceptional one and is to be exercised with caution, and due weight must be given to the public interest in a litigant not being deprived of the lawyer of his or her choice. Particularly in this respect, the timing of the application may be relevant, in that the cost, inconvenience or impracticability of requiring lawyers to cease to act when proceedings are well advanced may provide strong reason for refusing to grant relief." 10Brereton J also noted at [20] that: "[The] line is crossed only when the solicitor has a personal stake in the outcome of the proceedings or in their conduct, beyond the recovery of proper fees for acting, albeit that the relevant stake may not necessarily be financial, but involves the personal or reputational interest of the solicitor, as will be the case if his or her conduct and integrity come under attack and review in the proceedings. The presence of such circumstances will be a strong indication that the interests of justice - which in this field involve clients being represented by independent and objective lawyers unfettered by concerns about their own interests - require the lawyer to be restrained from continuing to act." 11The principles set out by Brereton J in Kallinicos were in turn followed by Ward J in Cleveland Investments Global Ltd v Evans above. Several decisions emphasise the "extraordinary" and "exceptional" nature of the jurisdiction to restrain a solicitor from acting: Woodgate v Leonard [2007] NSWSC 495 at [37]; UTi (Aust) Pty Ltd v Partners of Piper Alderman [2008] NSWSC 219 at [52]; TJ Board & Sons Pty Ltd v Castello [2008] VSC 91 at [30]. 12I accept Mr Keogh's submission that these principles are not confined to the obvious cases where a solicitor should not continue to act, such as a case where the solicitor will be a contentious witness or has a direct financial stake in the outcome of the litigation. However, the principle would not be applied to exclude a solicitor from acting unless a fair-minded, reasonably informed member of the public would in fact conclude that there was reason to restrain the practitioner from acting, or need to do so in the interests of the protection of the integrity of the judicial process or the due administration of justice. The exceptional character of the jurisdiction means, in my view, that it is unlikely to be exercised where a solicitor's interest in the subject matter of the litigation is remote and a fair-minded, reasonably informed member of the public would not in fact perceive any threat to the administration of justice arising from that interest. Factual background 13TCC undertakes work for clients in respect of promotional offers for products and services and operates its business from a property at Silverwater leased from another entity, MKG Holdings Pty Limited ("MKG") as trustee for the MKG Unit Trust. Mr Keogh was appointed as "managing director" of TCC in 2000 and an entity associated with him, Promotion Marketing Pty Limited ("Promotion Marketing"), as trustee for the Keogh Family Trust, acquired 30% of the issued shares in TCC on 1 July 2003. Interests associated with Mr Bruno Maurel and Mr Ross Gage hold 45% and 25% of the issued shares in TCC respectively. Mr Keogh contends that, between 2003 and November 2010, Promotion Marketing loaned substantial funds to TCC to support its business which have not been repaid. 14MKG acquired the Silverwater property in late 2003 and leased that property to TCC. The shareholders in MKG are Promotion Marketing (associated with Mr Keogh) (30 shares), Solion Pty Limited (associated with Mr Gage) (25 shares); TD Projects (associated with Ms Robinson and Mr Maurel) (30 shares) and Wernant Pty Limited (associated with Mr Maurel) (15 shares). Ms Robinson in turn holds 5,100 fully paid ordinary shares in TD Projects, Mr Maurel holds 5,000 ordinary shares and Tiger Sports International Pty Limited (associated with a third party, Mr Stewart) holds 100 shares. It follows that, adopting a tracing approach, Ms Robinson has a 15% interest in MKG and in the Silverwater property. Ms Robinson, Mr Maurel, Mr Keogh and Mr Gage are directors of MKG. 15Allegations relating to Mr Keogh's conduct as managing director of TCC, which relate to the matters in issue in these proceedings, were made at a directors meeting held on 15 November 2010. Mr Robinson advised TCC as to the relevant matters and attended that meeting as its solicitor. Mr Keogh first objected to Robinson Legal's acting for TCC in respect of these matters by letter dated 30 November 2010 from his solicitors to Robinson Legal. 16Robinson Legal, through Mr Robinson, subsequently acted for TCC in proceedings between TCC and Promotion Marketing, in which TCC applied to set aside a statutory demand served by Promotion Marketing in respect of a debt that Promotion Marketing claimed was owed to it by TCC. Counsel for Mr Keogh again foreshadowed an objection to the retainer of Robinson Legal when those proceedings were before the Court in January 2011 (T31), but Mr Keogh then took no further steps to pursue that objection. TCC relied on allegations of fraud, breach of fiduciary duty and breach of contract against Mr Keogh to establish an offsetting claim in those proceedings, which significantly overlap with the matters in issue in these proceedings. TCC sought security for costs against Promotion Marketing in those proceedings, that security was not provided and the statutory demand was set aside. Mr Robinson was cross-examined in respect of the security for costs application in those proceedings. 17Mr Keogh again objected to Robinson Legal's acting for another client in proceedings against him in August 2011 and again took no steps to pursue that objection. 18These proceedings were commenced by Originating Process served in August 2011 and Robinson Legal has acted for TCC in the proceedings since that date. The proceedings involve allegations concerning transactions between TCC and other entities controlled by Mr Keogh, which TCC contends breached Mr Keogh's duties as a director of TCC. The nature of those allegations has been apparent at least since Mr Maurel's affidavit was filed when the proceedings were commenced. 19Mr Keogh again objected to Robinson Legal acting in these proceedings by letter dated 18 November 2011. Robinson Legal again declined to withdraw from the proceedings by letter dated 13 December 2011. The Interlocutory Process seeking to restrain Robinson Legal and the individual practitioners from acting was filed some three months later, on 5 March 2012. Mr Keogh's contentions 20Mr Keogh contends that Mr and Ms Robinson are: "too closely connected both in terms of their personal relationship with Mr Maurel and their indirect economic interests in the subject matter of this litigation to escape the critical attention of the fair-minded observer". That contention was developed by reference to a number of involvements of Robinson Legal and its partners in the matter. I have had regard to whether those matters separately, or cumulatively, warrant the grant of that relief. 21Mr Keogh initially contended that Robinson Legal acted on the incorporation of MKG, the establishment of the MKG Unit Trust, the purchase of the Silverwater property occupied by TCC and the lease between TCC and MKG. In his affidavit in support of the application, Mr Keogh referred to advice given by Robinson Legal, and by Mr Robinson, Ms Robinson and Ms Briscoe to Mr Keogh and his related companies. 22The affidavit evidence of the solicitors, supported by searches of Robinson Legal's client file management system, is that the firm only dealt with Mr Keogh or his associated entities in connection with matters in which it acted for MKG and TCC, in his capacity as a director of MKG or the former managing director of TCC, and did not act for him personally. In particular, MKG rather than Mr Keogh retained Robinson Legal in respect of the Silverwater property and Robinson Legal invoiced MKG for professional costs and disbursements in respect of the purchase of the Silverwater property and the relevant lease. 23Mr Keogh acknowledged in closing submissions that "technically" Robinson Legal had not acted for Mr Keogh or Promotion Marketing. He qualifies that concession by noting that the firm has prepared the shareholders and unitholders agreements that regulate the conduct of the affairs of TCC and MKG to which Mr Keogh is a party. I do not consider that Robinson Legal's involvement, in preparing documents on behalf of TCC and MKG to which Mr Keogh is party, in itself gives rise to any risk of prejudice to the administration of justice in these proceedings. Those documents are not in issue in the proceedings and there is no suggestion that there is any inadequacy in them. Ms Robinson's position 24Ms Robinson was admitted as a solicitor in July 1980 and is not acting for TCC in the proceedings. Mr Keogh contends that Ms Robinson is in a position of "conflict and compromise" in connection with the proceedings, since she owes family loyalty to Mr Maurel, TCC is under financial pressure and Robinson Legal is disposed to subsidise its legal costs in connection with the proceedings for the benefit of TCC's shareholders and TCC owes financial obligations in respect of the Silverwater property to MKG. I address these matters below. 25Mr Keogh contends that, at the time the Silverwater property was acquired in December 2003, he provided financial information to Ms Robinson. In particular, Mr Keogh contends that Ms Robinson became generally aware of the financial resources of Mr Keogh and his family through this transaction. Mr Keogh relies on a document prepared in December 2003 headed "Building Purchase and Development Proposal", which related to the Silverwater property and was provided (at least in large part) to Ms Robinson. That document provides details as to TCC's business, the Silverwater property, the amount of finance required and, in three pages, the assets and liabilities for Messrs Maurel, Keogh and Gage, then the directors of TCC. There is a dispute as to whether those three pages were provided to Ms Robinson, but it is not necessary for me to resolve that dispute. The financial information relating to Mr Keogh contained in the one page relating to him set out, relevantly, the value of his home in 2003, the amount of the mortgage on his home in 2003, the amount of his overdraft facility in 2003 and the value of his motor vehicles and superannuation in 2003. There is no reason to think that any of that information, as at 2003, would have any relevance to the position in 2012; to the contrary, there is every reason to think that, for example, real property values have changed substantially since 2003. 26In cross-examination, Ms Robinson denied that she received personal financial information from Mr Keogh at the time of entry into the Silverwater transaction (T134). Ms Robinson accepted that she was aware that Mr Keogh was seeking to refinance his existing financial arrangements with St George in connection with borrowings by the investors in MKG from the Commonwealth Bank of Australia in respect of the Silverwater property but did not accept that she was aware of further information as to Mr Keogh's borrowings in that regard (T141, T143-T144). Even if Mr Keogh had provided some information as to the level of his assets and his financial position to Ms Robinson in late 2003 and early 2004, I do not consider that her access to information of the kind to which I have referred above, nearly ten years ago, would provide any useful information as to Mr Keogh's current financial position which could be of advantage to Robinson Legal or TCC in the proceedings. 27As noted above, Ms Robinson has a family relationship with Mr Maurel. However, the existence of a family connection between Mr Maurel and Ms Robinson would not have prevented her acting in the proceedings: Re Wombat Securities Pty Ltd [2011] NSWSC 194 at [11] per Barrett J. 28Mr Keogh also contends that: