First Plaintiff v Defendant

Supreme Court of Victoria|2009-07-13|Before: BYRNE J

LEGAL PRACTITIONERS - solicitor acting for client on purchase of land - whether solicitor should act for plaintiff against client in proceeding involving the source of the funds for the purchase - confidential information given to solicitor - solicitor's duty of loyalty to ex-client.

1 By way of preliminary explanation, I announced at the conclusion of the hearing of this application on Friday last that I would make an order restraining the solicitor from acting in this matter. In the course of giving my reasons for this, my attention was drawn to a fundamental misapprehension on my part with respect to one aspect of the evidence. I have therefore reconsidered the case and now give fresh reasons.

2 Agostino Pistorino died on 5 January 1999 leaving a substantial estate. Its value in the probate inventory is about $23 million. He left a will in which he appointed as executors his son, Antonio Pistorino, his daughter, Giovanna Connell, and his family accountant, Bradford John Baker. The executors were granted probate on 15 January 2001. Antonio was discharged from the office of executor and trustee on 18 December 2008.

3 Under the will his widow receives a life interest in the whole of the estate.

4 Since the 1980s the solicitors for the deceased and his family have been John Perillo, of Professional Alliance Legal Services Pty Ltd.

5 The deceased had, from the 1960s, conducted his successful travel agency business which he sold some time before his death. As a consequence of his business activities, and the sale, he acquired a portfolio of assets which were held by certain companies in property trust and a cash fund in the name of Piston Holdings Pty Ltd.

6 During the life-time of the deceased, Mr Perillo acted for the companies and the family. It seems that these were essentially conveyancing matters concerning sale or purchase of properties and the preparation of leases.

For as long as I can remember on behalf of my late husband and the Pistorino family and various companies and trusts controlled by the Pistorino family in providing legal advice and assistance whenever necessary.

He did not, however, act on the sale of the travel agency business nor on the preparation of the will nor on the probate application.

8 The involvement of Mr Perillo as solicitor for the estate since 1999 is a little uncertain. I had previously the impression that he continued to act for the estate as he had previously for the late Mr Pistorino during his lifetime. This is certainly how it is described in Antonio's affidavit of 30 June 2009.[1] My attention, however, has now been drawn to Mr Perillo's assertion that he had nothing to do with the estate or its administration until he was consulted by Ms Connell and Mr Baker in November 2008.

9 In paragraphs 4 and 7 of his letter of 22 June 2009, however, Mr Perillo seems to say that he has had an involvement in leasing and re-leasing matters since 2000. This is apparently not correct. I have been told that it is common ground that he has not acted for the estate since 1999 prior to the present litigation. It would not then be correct for me to infer that, when Antonio managed the estate property portfolio until "a few years ago", as attested by Ms Connell and Mr Baker[2], he had dealings with Mr Perillo as the estate solicitor with respect to these matters.

10 Since the death of the deceased, the members of his family have fallen into dispute. On 8 December 2008 two of the executors, Ms Connell and Mr Baker commenced this proceeding seeking to remove Antonio from the office of executor and trustee of the estate and inquiries to be conducted as to whether any income or property of the estate had been misappropriated by him and for consequential orders. On 18 December 2008 Mr Justice Bongiorno made consent orders discharging Antonio from the office of trustee and executor and that he, by 23 January 2009, file an affidavit of account for his administration of the estate. No such affidavit has yet been provided.

11 On 7 April 2009 Mrs Pistorino commenced proceeding number 5816 of 2009 against the two remaining executors and trustees seeking their removal and the taking of accounts.

12 Before me is an application brought by Antonio in this proceeding, number 10160 of 2008, seeking orders to the effect that Mr Perillo cease to act for the plaintiffs. This is based upon his having received confidential information from Antonio and also on the basis that, in the circumstances, his continuing to act would be in breach of his duty of loyalty to his client Antonio.

13 It is at this point necessary to consider the relationship between Mr Perillo and this client. There was evidence from Antonio to the effect that in his father's life-time, he provided instructions to Mr Perillo and had disclosed to him information which he, Antonio, described as confidential. Mr Perillo's evidence challenged this. He said that his contact with Antonio was simply to receive information from him and was limited to the exchange of pleasantries. I do not resolve this conflict. I will proceed on the base of Antonio's evidence.

14 It is clear from this that these communications with Mr Perillo were not with Antonio in his personal capacity but on behalf of his father or one or other of the family companies. The present litigation is not concerned with events during the life-time of the father nor with the occasions of which Antonio speaks.

15 Mr Perillo says in his letter of 22 June that he acted for Antonio personally in only four matters since 2000. He verified the contents of this letter in his affidavit of 9 July 2009[3]. One of these matters, a response to a letter of demand that went no further, can be put to one side. The three remaining matters were apparently conveyancing transactions, in each of which Mr Perillo performed conveyancing work to give effect to a transaction which had already been entered into. These transactions are not identified on the material other than the sale in April 2004 of a property at 357 Flemington Road, North Melbourne, and the purchase, at about the same time, of a property at 7 Tucker Place, North Fitzroy.

16 Before me, reliance was placed on the purchase of the Tucker Place property. On 15 June 2009 Mr Perillo, on behalf of the estate, lodged a caveat on the title of the property at Tucker Place for serving an equitable estate in fee simple on the following ground:

A breach by Antonio Frank Pistorino of his fiduciary duty entitling the deceased estate represented by the caveators to a declaration of the existence of constructive trust over the land acquired with moneys taken in breach of trust.

There is no evidence from the executors as to the specific moneys which were said to have been taken or how they were taken in breach of trust.

17 Antonio's position, also, is not clear. He says that the sale of Flemington Road netted $400,000 which was applied towards the purchase. In his pre-settlement letter, Mr Perillo advised his client, Antonio, that $832,731.51 was required to settle the purchase. Whether this includes the $400,000 or is in addition is of no present moment.

18 Mr Perillo says the cheques were delivered, he was told nothing, and knew nothing of the source of the funds. Antonio, on the other hand, says in his first affidavit:

Throughout my dealings with Perillo I entrusted him with full details of the source of the funds to purchase the Fitzroy property.

I gave Perillo instructions as my solicitor on all aspects of the funding of that property.

19 Antonio does not condescend to any detail as to what was the source of the funds or as to what he told his solicitor about this. Nevertheless, on an application of this kind I will again proceed on the basis of Antonio's evidence.

20 There are a couple of disquieting matters which I now mention. First, counsel for Antonio spoke from time to time of his client asserting privilege against self incrimination with respect to the content of his affidavit of account which his client agreed, in December 2008, to provide. But this has not yet occurred. If it should be the case that the privilege is asserted, it may be that this has some bearing upon the legal professional privilege as might attach to the communications in question.

21 Second, in their affidavit of 8 December 2008, the executors allege that they can trace sums totalling at least $3,212,182.87 as having been inappropriately removed from the estate accounts or misappropriated via the account of Mrs Pistorino.

22 By letter dated 10 December 2008, Antonio's then solicitors wrote a letter to Mr Perillo, the estate solicitor, containing a number of proposals which were expressed to be without any admission of liability. The first of these proposals is that the amount of $3,212,182.87 be offset against his future entitlements in the trust. It is not clear whether this amount includes a sum said to have been applied for the purchase of Tucker Place. If so, it may be that the funding of this purchase and Antonio's liability for it will not be a significant issue in the litigation.

23 The third is Antonio's statement in his first affidavit that, if so advised, he may join Mr Perillo as a party to the proceeding. Two causes of action are suggested. First appears to be that Mr Perillo has accessorial liability for Antonio's breach of trust. The second is that Mr Perillo failed to warn Antonio or to provide him with any advice about the breach of the law involved in the funding of the purchase. I express no views about these causes of action. It is sufficient that I observe that the claims have not been brought and they may never be brought.

24 What then is left is shortly this. Antonio says that he disclosed to Mr Perillo the source of the funds and that this information should be protected. Second, what is raised is the unseemly spectacle of a lawyer retained by a client in respect of a transaction acting against the client in litigation in which an aspect of the transaction is said to amount to improper conduct in the client.

25 The principles which I must apply are not in doubt. They are those set out in the judgment of the Court of Appeal in Spincode Pty Ltd v Look Software Pty Ltd.[4]

26 The first factor which might bear upon the question is that Mr Perillo, as the recipient of confidential information from his client, ought not be permitted to use this information to his client's disadvantage. In the present case the event does not warrant an injunction on this basis. I start from the position that a client ought not to be prevented from retaining a lawyer of his or her choice unless there be good reasons shown. The burden of establishing this lies on the applicant. Accepting Antonio's evidence for the present purposes, I cannot be satisfied that such information as he says was given to Mr Perillo could or would be used to his disadvantage. The fundamental difficulty is I do not know what is his position as to the source of the funds or as to what precisely he said to this lawyer.

27 The second ground is based on the duty of loyalty owed by a lawyer to former client, a duty which is discussed in the judgment of Brooking JA in the Spincode case, and by Justice Nettle in Sent v John Fairfax Publication Pty Ltd.[5] I would respectfully adopt the following views expressed by His Honour in the Sent case and I quote:

[107] The trust which a party to litigation reposes in their counsel[6] is more often than not complete. It is and must remain beyond question that the trust is never abused, and accordingly the trust must not only be preserved but must be seen to be preserved. To sanction the prospect of counsel acting against a former client in a matter upon which there is a commonality of issue or inquiry, would not be preservative of either.

[108] Questions of "the same matter" and "closely related matter" may sometimes be problematic but in the end they are questions of fact and degree. In litigation, at least, there can be no doubt about what constitutes the same matter, and I do not think there should be very much doubt about what constitutes a closely related matter. If there are significant issues in one matter that arise in another, or factors which are significant to one matter which will be significant to another, the matters are likely to be closely related.

[112] In Grimwade v Meagher[7], Mandie J held the court has inherent jurisdiction to ensure the due administration of justice and to protect the integrity of the judicial process and, as part of that jurisdiction, to prevent a member of counsel appearing for a particular party in order that the jurisdiction should not only be done but seen to be done.

[113] The objective test to be applied, his Honour held, is whether a fair minded reasonably informed member of the public would conclude that the proper administration of justice requires that counsel be prevented from acting, giving due weight to the public interest that litigants should not be deprived of their choice counsel without good cause.

29 In the present case, as things stand, it seems that the source of the funding of the Tucker Place property will be an issue. There may also be an issue as to Antonio's state of mind as to this matter. In these circumstances, given his evidence of his instructions to Mr Perillo, there is to my mind a commonality of issue which makes it undesirable that Mr Perillo should act against him. The injunction will therefore go.

30 I reach this conclusion with some reluctance. I am mindful of the fact that the estate has incurred costs instructing Mr Perillo over the past ten months. I am sensitive, too, to the fact that Antonio's position lacks candour and appears to be concerned to conceal matters which may well amount to wrongdoing. Even so, the duty of loyalty is owed to every client and it is an important one in order to preserve in the public eye confidence in the profession.

31 Before I leave this matter I wish to emphasise that I express no view as to whether any communication between Mr Perillo and his client may be privileged.

a. the plaintiffs be restrained from continuing to retain John Perillo of Professional Alliance Legal Services Pty Ltd in or in relation to this proceeding.

b. the costs of the defendant of the application be paid by the plaintiffs.

[2] Affidavit sworn 8 December 2008 para 15.

[6] I interpolate that this is equally applicable to a solicitor.

At a glance

Court

Decision date

Before

Source

Judgment (46 paragraphs)

Parties

Cases Cited (1)