G.E. Shaw & Associates (ACT) Pty Ltd v Narayan [2014] FCA 435 | Case summary

REASONS FOR JUDGMENT 1 On 22 November 2013, I made the following orders and notations in this matter: THE COURT NOTES THAT: 1. All of the claims made by the applicant against the fifth and sixth respondents in the proceeding have been settled. 2. Orders made by Foster J on 15 October 2012 as varied from time to time thereafter remain in full force and effect according to their terms. BY CONSENT (AS BETWEEN THE APPLICANT AND THE FIFTH RESPONDENT), THE COURT ORDERS THAT: 3. There be judgment in favour of the applicant against the fifth respondent (Pinakin Rambhai Patel) in the amount of $485,713.14 (the fifth respondent's judgment sum) (which amount includes pre-judgment interest in the sum of $91,201.52). 4. The fifth respondent pay the applicant's costs of and incidental to this proceeding to the extent that those costs relate to the claims made herein by the applicant against the fifth respondent, such costs to be taxed if not agreed by 30 November 2013. BY CONSENT (AS BETWEEN THE APPLICANT AND THE SIXTH RESPONDENT), THE COURT ORDERS THAT: 5. There be judgment in favour of the applicant against the sixth respondent (Sangita Bahen Patel) in the amount of $23,047.78 (the sixth respondent's judgment sum) (which amount includes pre-judgment interest in the sum of $2,983.45). 6. The sixth respondent pay the applicant's costs of and incidental to this proceeding to the extent that those costs relate to the claims made herein by the applicant against the sixth respondent, such costs to be taxed if not agreed by 30 November 2013. BY CONSENT (AS BETWEEN THE APPLICANT AND THE FIFTH AND SIXTH RESPONDENTS), THE COURT ORDERS THAT: 7. The hearing of the applicant's claims against the fifth and sixth respondents fixed to commence on 16 December 2013 (with an estimate of two days) be vacated. 8. Orders 6 to 11 inclusive made by Foster J on 18 October 2013 be vacated. 9. Liberty be granted to the parties to apply on three (3) days' notice or on such shorter notice as a Judge might allow to seek such further orders as may be necessary to satisfy payment of the judgment sums. 10. The listing of the proceedings in the directions list of the A.C.T. List Judge at 9.15 am on 6 December 2013 be confirmed. 2 As is clear from the terms of the orders and notes themselves, the judgments ordered in paragraphs 3 and 5 and the costs orders made in paragraphs 4 and 6 of those orders and notes were ordered by consent as between the applicant, on the one hand, and the fifth and sixth respondents, respectively, on the other hand. By order 7, which was also made by consent, I vacated the hearing of the applicant's claims against the fifth and sixth respondents which had previously (on 7 August 2013) been provisionally fixed to commence on 16 December 2013. That hearing date had been subsequently confirmed. 3 On 18 October 2013, I made detailed pre-trial directions and orders in Chambers in order to ensure that the matter was ready for the upcoming hearing on 16 December 2013. By order 8 made on 22 November 2013, I vacated orders 6 to 11 which I had made on 18 October 2013. Orders 6, 7 and 8 had required the fifth and sixth respondents to take a number of substantial steps in preparation for the hearing by 15 November 2013. As at 22 November 2013, none of those steps had been taken and none of orders 6, 7 and 8 had been complied with. 4 On 12 December 2013, the fifth and sixth respondents, Pinakin Rambhai Patel and Sangita Bahen Patel, filed an Interlocutory Application. Pinakin Patel and Sangita Patel are husband and wife. By that Application, Mr and Mrs Patel sought an order allowing them to "… withdraw the Consent Orders dated 13 November 2013 …" between the applicant and them. There are no Consent Orders bearing the date "13 November 2013". 5 However, on 20 November 2013, the solicitors for the applicant delivered to the Registry of the Court in Canberra the original of a document entitled "Consent Orders between the Applicant and the Fifth and Sixth Respondent [sic]" dated 19 November 2013 (Consent Orders). That document bore the signatures of Cameron Spence, the solicitor for the applicant, and Adrian McKenna, the solicitor for the fifth and sixth respondents. A scanned copy of that document had been emailed to my Associate at 5.41 pm on 19 November 2013. The orders which I made on 22 November 2013 were intended to give effect to the parties' agreement set out in the Consent Orders. I have attached to these Reasons for Judgment as Attachment "A" a reproduction of the original Consent Orders. 6 The parties and I have proceeded upon the basis that the Patels' Interlocutory Application filed on 12 December 2013 relates to the Consent Orders and to the orders which I made on 22 November 2013. The parties and I have also proceeded upon the basis that the Patels are seeking an order setting aside the parties' agreement that there should be judgments and orders in favour of the applicant in the terms of pars 1 to 4 of the Consent Orders and, as a consequence, an order setting aside pars 1, 3, 4, 5 and 6 of the orders and notations which I made on 22 November 2013. 7 On 12 December 2013, the Patels filed in support of their Interlocutory Application two affidavits: One affirmed by Mr Patel on 10 December 2013; and one affirmed by Mrs Patel on the same day. The substantive paragraphs of each of those affidavits are in identical terms. I set out below the text of pars 3 and 4 of Mr Patel's affidavit (which is relevantly the same as the text of pars 2 and 3 of Mrs Patel's affidavit): 3. I provide this information in order to withdraw the CONSENT ORDERS between the Applicant and Fifth Respondent dated 13 November 2013 4. As informed to the honourable Justice Foster on 6 December 2013 for the above mentioned case, I wish to reiterate that I want to withdraw the CONSENT ORDERS (between the Applicant and Fifth Respondent) that were scheduled to be finalized on 6 December 2013. Due to some confusion, miscommunication and stress, I had previously given my consent to these orders; however after understanding the full importance and meaning, I have now decided to withdraw the same. 8 By the time of the hearing of the Patels' Interlocutory Application, it had become clear that, in addition to the grounds stated in the Patels' affidavits affirmed on 10 December 2013 which I have set out at [7] above, they wished to argue that, on and from 13 November 2013, they had been subjected to undue pressure and duress by their own lawyers and that this was the only reason that they had given instructions to those lawyers to settle the matter upon the basis upon which it was settled. At times, it also seemed to me that the Patels also wished to attack the Consent Orders upon the basis that, when they gave instructions to their lawyers to settle the matter, they did not understand that that is what they had done nor did they understand the terms upon which they had instructed that the matter could be settled. 9 On 6 December 2013, I granted leave to Adrian John McKenna, of Ben Aulich & Associates, to file in Court a Notice of Intention to Cease to Act in respect of Mr and Mrs Patel dated that day. On 14 January 2014, Mr McKenna filed a Notice of Ceasing to Act for Mr and Mrs Patel dated 13 January 2014. 10 It appears that, by 6 December 2013, Mr and Mrs Patel had indicated to the solicitors for the applicant that they wished to move to set aside the Consent Orders. On 6 December 2013, when the matter was before the Court, I was told that, by letter dated 28 November 2013 which was sent on the same day, Mr McKenna had informed Mr and Mrs Patel that he no longer wished to act for them and that he intended to take the necessary formal steps to bring about that result. Nonetheless, he remained on the record as the solicitor for Mr and Mrs Patel until 14 January 2014. 11 On 7 February 2014 and on 6 March 2014, when the matter was again before the Court, I granted to Mr Gaurav Sharma, who is a friend of Mr and Mrs Patel, leave to appear for Mr and Mrs Patel. I understand that Mr Sharma is not a lawyer. I also granted to Mr Sharma leave to appear for the Patels at the hearing of their application. 12 By these Reasons for Judgment, I determine the Interlocutory Application filed by the Patels on 12 December 2013.

The Relevant Facts 13 Shaw Building Group Pty Ltd (formerly called "G.E. Shaw & Associates (ACT) Pty Ltd"), the applicant in this proceeding, is a construction company operating in the Australian Capital Territory and surrounding regions. 14 In about May 2012, executives of the applicant discovered that the first respondent, Adi Narayan, had misappropriated funds which were the property of the applicant. Mr Narayan had been employed by the applicant as its Financial Controller since May 2006. 15 Between May and October 2012, as a result of investigations carried out by it in that period, the applicant uncovered most of the first respondent's frauds. By mid-October 2012, the applicant believed that the total amount misappropriated by the first respondent was $987,005.08. 16 By that time, the applicant also believed that the first respondent had paid across to friends and associates of him a significant part of the funds which he had misappropriated. 17 Armed with a substantial body of evidence, on 15 October 2012, the applicant approached the Court ex parte. It sought freezing orders against Mr Narayan and against eight other persons. All of those persons were associates of Mr Narayan who, according to the applicant, had received some of the funds which he had misappropriated from the applicant. On 15 October 2012, I made freezing orders substantially in the terms sought against all respondents. Mr and Mrs Patel were named as the fifth and sixth respondents in the Originating Application filed by the applicant on 15 October 2012 and were made subject to the freezing orders which I made on 15 October 2012. Those freezing orders were subsequently extended against Mr and Mrs Patel (as well as against other respondents) from time to time. They remain in force post-judgment in modified form as against Mr and Mrs Patel. 18 The applicant has alleged at all times since at least 15 October 2012 that Mr Patel received at least $390,387.28 in total and that Mrs Patel received $20,064.33 in total from the funds misappropriated by Mr Narayan from the applicant. The applicant originally claimed $390,387.28 from Mr Patel and $20,064.33 from Mrs Patel. In its Statement of Claim filed on 23 November 2012, the applicant increased its claim against Mr Patel to $394,511.62. The applicant's case was that the fifth and sixth respondents had knowingly participated and assisted in Mr Narayan's breaches of fiduciary and statutory duties owed to the applicant and had knowingly received some of the proceeds of those breaches. The claims against the fifth and sixth respondents were founded on general equitable principles and on the Corporations Act 2001 (Cth). 19 By early August 2013, the applicant's claims against all respondents other than Mr Narayan and the Patels had been resolved. As a result, the applicant has recouped a substantial part of its losses. 20 The applicant's claim against Mr Narayan remains unresolved. He is presently incarcerated, having been convicted of and sentenced for the misappropriation of funds which is at the heart of the present proceeding. 21 The Patels also have a Cross-Claim against Mr Narayan which is yet to be dealt with. 22 As I have already mentioned, Adrian John McKenna was the solicitor on the record representing the fifth and sixth respondents throughout the period from 18 October 2012 until 14 January 2014. In practical terms, however, he stopped actively representing Mr and Mrs Patel from 28 November 2013. 23 It is against the above background and in the context which I have endeavoured to describe that the events of November 2013 unfolded. 24 Prior to the end of October 2013, a number of settlement discussions had taken place between the lawyers for Mr and Mrs Patel and the lawyers representing the applicant. Those discussions had not produced a settlement. 25 According to Mr Patel, towards the end of October 2013, on the advice of his solicitors, he decided to instruct them to re-open negotiations in a fresh endeavour to bring about a settlement. 26 By letter dated 5 November 2013, Mr McKenna reopened settlement negotiations by offering to settle the applicant's claims against the Patels for $124,366.03 plus interest and costs (as agreed or taxed). That offer was expressed to be open for acceptance until 5.00 pm on 15 November 2013. 27 On 12 November 2013, Mr Patel sent an email to Mr McKenna in which he set out a number of detailed points in respect of the affidavit evidence which, by then, the applicant had indicated it would read at the upcoming hearing. The email was written in English. 28 On the same day, 12 November 2013, Mr Patel was contacted by telephone by Mr McKenna who asked him to come to Mr McKenna's office the next day (13 November 2013) for a meeting. Mr Sharma, who participated in this telephone call on 12 November 2013, asked Mr McKenna if he (Sharma) was required at the meeting as he had previously acted as an interpreter on behalf of Mr and Mrs Patel at conferences between them and their lawyers. When Mr Sharma asked Mr McKenna if he was required at the meeting, Mr McKenna replied that it was optional. Mr McKenna informed both Mr Patel and Mr Sharma that he had arranged for an independent interpreter to assist at the conference which was to take place on 13 November 2013. 29 A conference took place on 13 November 2013, as planned. That conference was attended by Mr and Mrs Patel, Mr Aulich, Mr McKenna and Ms Katavic, who had been retained as Counsel for the fifth and sixth respondents. An independent interpreter participated in the conference by telephone. 30 In his affidavits affirmed on 5 February 2014 (at par 5) and on 25 February 2014 (at par 12), Mr Patel gave evidence of his reaction to the advice which was given to him at this conference. He did not give an account of what he was told or what he told his lawyers. Rather, he summarised the impact of what he was told upon him. He said that: • … heavy terms such as 'LOSE MY HOUSE', 'BANKRUPTCY', 'POLICE CASE', 'DEPORTATION' were thrown around repeatedly. • … I felt as if someone was taking my life away and in my desperation to end that unbearable & stifling situation, my mind just shut down and I said YES to whatever my lawyer was telling me. 31 Mr Patel testified that, at the conference held on 13 November 2013, Mr Aulich prepared a handwritten note or memorandum which he and his wife then signed. He said that he signed that document without truly understanding the import of its contents. He said that he signed that document because of the stress and pressure that he felt as a result of the advice which he received at the conference and his reaction to that advice. 32 The handwritten instructions procured by Mr Aulich at the conference held on 13 November 2013 were tendered in evidence before me. That document is in the following terms: As the 5th and 6th Respondents we instruct our solicitors Ben Aulich & Associates to consent to final judgment in favour of the applicant in the sum of $20,064.33 (for 6th Respondent) and $394,511.62 (for 5th Respondent) plus costs, plus interest. We also instruct our solicitors to request that we control the sale of our property. We have been advised by our solicitors that the case against us is very strong and on that basis we provide these instructions. We understand that we may be charged with criminal offences as a result of the allegations claimed in statement and the application filed by the applicant. This settlement may not effect [sic] that prosecution, but may be of assistance with dealing with the Australian Federal Police and may be of advantage if we are charged. We sign these instructions on our own free will. 33 The document is signed on each page by both Mr and Mrs Patel. 34 There was also tendered in evidence before me two file notes apparently prepared by persons who attended the conference held on 13 November 2013. 35 The first of those notes is on printed file note paper of Ben Aulich & Associates. I infer that that file note was written on 13 November 2013 during the conference by Mr McKenna. I draw that inference because, when due regard is paid to the form and content of the document, much of it appears to have been written progressively during the conference. All of the note is in handwriting which is different from the handwriting which comprised the formal instructions given by Mr and Mrs Patel at the conference. As Mr Patel testified that Mr Aulich wrote out the latter document, and as the former document appears to have been written by a person associated with Ben Aulich & Associates, I infer that it was written by Mr McKenna. That file note is in the following terms: 36 In addition to preparing the formal instructions given on 13 November 2013, Mr Aulich made a two page file note on that day. The contents of that file note do not appear to have any relevance to the Patels' allegation that they were unduly pressured into providing instructions to settle. 37 In his evidence, Mr Patel went on to assert that he did not understand that he had provided instructions, then and there, on 13 November 2013, for his lawyers to settle the matter upon the terms encompassed within those instructions. He asserted that he thought that, given his previous consistent stance that he wished to defend the case, he was merely authorising a negotiation to proceed and reserving to some point in the future a final decision as to whether he would settle or not and, if so, on what terms. 38 On 14 November 2013, Mr McKenna wrote to Mr Spence. Omitting formal parts, that letter was in the following terms: "WITHOUT PREJUDICE SAVE AS TO COSTS" Dear Cameron, GE Shaw and Associates v Adi Narayan and Others The above matter is listed for Hearing in the Federal Court of Australia on 16 and 17 December 2013. We have had lengthy discussions with our clients on numerous occasions, in relation to the hearing. After much deliberation I am writing to advise my clients will consent to judgment being entered against them, in favour of your client, for the amounts sought in your client's claim. I understand that to be $20,064.33 against the Sixth Respondent and $394,511.62 against the Fifth Respondent, plus interest and costs (to be agreed or assessed). Please confirm these amounts acre correct. Please also forward a draft consent judgment for review. The entering of judgment against my clients will inevitably necessitate my clients selling their property at Block 8, Section 119, Bonner in the Australian Capital Territory ("Bonner Property") to repay monies owing to your client. It is likely my clients will be able to obtain a purchaser of the Bonner Property. I presume that your client would not object, in the circumstances, to allow my client to sell his property independently as long as the proceeds of the sale are controlled by you and there are conditions on the sale to properly protect your client. This may alleviate the need for payment of the commission of an agent and maximise the amount your client will receive. Please confirm. There seems to be a number of ways that the sale could proceed. A suggested approach is to allow your client to approve the purchase price (so that your client is satisfied the sale is for market value) and have your office acting as the stakeholder for the purchase. My client would have no difficulty with your office affecting the conveyance. Your client would then have control of the funds and be able to approve the purchase price, which should alleviate any concerns your client may have. Please provide your office's position. 39 There was no evidence before me that Mr McKenna sent a copy of his letter dated 14 November 2013 to the Patels. 40 In an email sent to my Associate at 12.28 pm on 15 November 2013, which was a Friday, a copy of which was sent to Mr Spence, Mr McKenna said: I have recently obtained instructions from the Fifth and Sixth Respondents to consent to judgment in the amounts sought by the Applicant plus interest and costs. I do not wish to be disrespectful by not complying with His Honour's Orders (6, 7, and 8 dated 18 October 2013) but in the circumstances, to avoid incurring unnecessary expense for both parties, we do not intend to file further evidence in this matter. I expect a Consent Judgment will be filed shortly. I have notified the Applicant of our clients' position and included its solicitors in this correspondence. 41 Later the same day, Mr Spence sent an email to my Associate with a copy to Mr McKenna. In that email, Mr Spence said: I can confirm receiving my friend's correspondence in the terms he has outlined below. We are drafting a response along with consent orders we hope to forward to you in the very near future. 42 On 15 November 2013, Mr Spence wrote to Mr McKenna in the following terms (omitting formal parts): RE: G.E. Shaw and Associates v Adi Narayan and Others Federal Court Proceedings ACD 75 of 2012 Refer to your without prejudice letter of 14 November 2013. We thank your clients for coming to this position. We confirm that the judgment amounts you mentioned are correct. Please find attached to this letter draft consent orders we will seek from Foster J in chambers next week. We ask your client to enter into a finding deed incorporating at least the following terms; i. Your clients acknowledge that they hold their home at Block 8 Section 119 Bonner in the ACT (the Bonner Property) on trust for G.E. Shaw & Associates (ACT) Pty Ltd (GE Shaw) and agree to the sale of the Property in partial satisfaction of the monies owed to our client. In this context, by net proceeds we mean the sale price less current mortgage costs including any discharge costs, agents and or auctioneers fees, legal fees on the sale and regular statutory outgoings. ii. GE Shaw to approve the sale price of the Bonner Property prior to sale, and to retain the power to veto the sale. iii. Your clients acknowledge that henceforth ownership of the property is as trustee for GE Shaw and that they acknowledge that this gives GE Shaw an interest in the Property that can be protected by caveat lodged over the title. iv. Your clients may remain in physical possession of the property (i.e. live in it) until such time as either the sale is completed or GE Shaw gives them 28 days notice to vacate the Property. Their occupation of the Property is on condition that they pay the regular outgoings during that period as well as any other costs associated with their occupation and maintain the Property to the satisfaction of GE Shaw. v. That they allow GE Shaw or a Real Estate agent appointed by GE Shaw access to the property at reasonable times and upon 72 hours notice to inspect it and for the purposes of sale of the property. That they co-operate with the GE Shaw and or the Real Estate agent in respect of the sale of the property. vi. The arrangements for the house sale would remain confidential so as not to impact upon the sale process. vii. G.E. Shaw & Associates (ACT) Pty Ltd is to choose the Real Estate agent. viii. That the solicitors firm of Hill and Rummery, are to act on the sale of the property subject to the payment of their nominated Conveyancing costs. 43 There was attached to Mr Spence's letter draft Consent Orders which were in the same terms as the Consent Orders ultimately forwarded to the Court on 19 November 2013. 44 As I have already mentioned at [4] and [5] above, a scanned copy of the Consent Orders was forwarded to my Associate on 19 November 2013 and the original of those Consent Orders was delivered to the Court the next day (20 November 2013). I note that the parties had agreed that the Court should make orders in accordance with the Consent Orders on 22 November 2013 since interest had been calculated up to and including that day. As is apparent from what I have already said, I made orders on 22 November 2013 in accordance with the Consent Orders. 45 In the meantime, on 20 November 2013, Mr Patel sent an email to Mr McKenna. In that email, Mr Patel said: We are in NEGOTIATION with GE SHAW and it looks like that we are just meekly agreeing to all their conditions. What can be worse than losing one's house and savings. But to put an end to anguish & suffering that I and my family has undergone in the last few months, I have decided to give away my house and whatever little savings I have. GE shaw is getting what they always wanted. Now as my lawyer I want you guys to at least WIN SOMETHING for me. Negotiate hard to get them to agree to the following REASONABLE conditions :- … 46 Mr Patel went on to make a number of important points as to the conditions upon which he was prepared to co-operate in the sale of his home. He also displayed considerable anxiety at the prospect that he may be charged with a crime and stressed to Mr McKenna that he should do all that he could to persuade the applicant to "let go of this". 47 The email is significant because it reveals that Mr Patel well understood the true import of the instructions which he and his wife had given to Mr Aulich and to Mr McKenna on 13 November 2013 which were embodied in the instructions letter of the same date. In addition, the email of 20 November 2013 did not contain any assertion to the effect that those instructions had been procured as a result of the application of duress or undue pressure upon Mr and Mrs Patel by their own lawyers. The tone and contents of the email suggest the contrary. 48 Mr Aulich responded to Mr Patel's email by letter dated 22 November 2013. That letter was in the following terms (omitting formal parts): Federal Court Matter (AD 75/2012) I refer to your email of 20 November 2013 addressed to Mr McKenna of my office. It is clear by the comments in, and the tone of your letter that you are critical of Mr McKenna, Ms Katavic and/or my firm in the way that we have represented you. Any criticism levelled at Mr McKenna, Ms Katavic or my firm is without foundation and insulting. It is unacceptable and offensive to suggest that we have not represented you properly and that your lawyers now need to "WIN SOMETHING" for you. You will no doubt be aware we have met with you on numerous occasions at different stages of the proceedings. All of our conferences have involved an interpreter. Both Counsel and I have been present for many conferences. We have carefully outlined the proceedings in your matter, advised you of the evidence filed by the Applicant at different stages of the proceedings, and have given you our honest appraisal of the prospects of success of defending your matter. Those appraisals were provided to you at a very early stage of the proceedings. We have followed your instructions at every step of your matter. I refer to our conference on 13 November 2013. At that conference Ms Katavic, Mr McKenna and I were present. After lengthy discussions you provided written instructions to accept Judgment for the full amount claimed against the fifth and sixth Respondents plus interest and costs. An interpreter was used for that conference. Your instructions were clear. You provided those instructions after we outlined the evidence filed by the Applicant. That evidence consisted of numerous affidavits, including one deposed by Mr Adi Narayan. We advised you that the evidence filed by the Applicant largely did not support your defence. We also advised of the very pointed comments made by the Judge presiding over the matter about the strength of the evidence against you, and his comments that it was unlikely in the circumstances, that your defence would be successful. We followed your written instructions to accept Judgment against the fifth and sixth Respondents. To now suggest we have somehow not represented you properly or are to blame for the result is offensive. From the comments made in your letter it appears you have lost confidence in Mr McKenna and my firm's representation. As for the points raised in your email 1-4, we are not in a position to negotiate as you suggest. I am however confident that we will be able to negotiate a position that allows you and your wife to remain living in the premises for some time. Please note however that will be at the discretion of the Applicant. For your information, please find enclosed a copy of a draft letter to the Applicant. If you are not content with the position taken by us and wish to negotiate a different position, I invite you to obtain other legal representatives to finalise your matter. I refer to your final paragraph of your email in relation to our legal fees. We have charged you hourly rates for work completed on your matter throughout your proceedings. Those hourly rates have been outlined to you in our fees disclosure forwarded to you on 18 October 2012. We have provided to you interim invoices, clearly outlining what time has been spent on your matter and the fees have been incurred. At no stage have you suggested we have not charged you in a proper manner. We intend to continue to charge you in that fashion. If you are not content to continue to pay our fees in the terms outlined in our costs disclosure please advise. I would appreciate receiving your response in writing by 5:00pm on Friday 22 November 2013, so we can ascertain whether we are in a position where we are able to continue to act for you. 49 Attached to Mr Aulich's letter to Mr Patel of 22 November 2013 was a draft letter which he suggested Mr Patel authorise him to send to Mr Spence. That letter addressed the conditions upon which the Patels' home would be sold, at least from the Patels' point of view. 50 On 25 November 2013, Mr Patel sent an email to Mr McKenna. That email was in the following terms: Hi Adrian After reading letter from Ben Aulich following is my response and queries :- 1. NEGOTIATION to me means a discussion to agree upon a common ground which benefits both parties, albeit to varying degree. But in this case it looks like I am agreeing to all that GE SHAW is demanding i.e house, my savings etc without them agreeing to any of my reasonable conditions. This is not NEGOTIATION per se, this is taking orders from the other party and obliging accordingly. 2. If we are indeed doing NEGOTIATION then let's bargain and give it an almighty crack. This is what I meant by "WINNING SOMETHING" for me. Ben mentions that you are not in a position to negotiate conditions 1-4, may I ask the reasons for so. Also in the same letter I e-mailed you on 20/11/2013, I also mentioned conditions 5-7. There is no reference to these. Can you please advise your position on these? 3. I want to reiterate that if by giving away my house and savings, this case is resolved in its entirety i.e. GE SHAW will not chase me for the balance amount and will not pursue CRIMINAL ACTION against me, only then I want to negotiate otherwise not. 4. Lastly, I am willing to give away my house & savings, not because that I agree to GE SHAW's allegations, but solely because I can't stand the stress & anguish that my family has experienced anymore. I want this to be over as I have had enough. 5. In light of the above, please advise your position so as to give me clarity for further action in the matter. 51 Mr Patel did not allege in his email of 25 November 2013 that, on 13 November 2013, he and his wife had been pressured into providing instructions to his lawyers to settle the proceeding upon terms embodied in the Consent Orders. In his email of 25 November 2013, Mr Patel again focussed on the conditions upon which he was prepared to co-operate in the sale of his home. He did not mention the judgments or orders for costs which, by the date of the email (25 November 2013), had already been acted upon by the Court. 52 On 28 November 2013, Mr Aulich sent a further letter to Mr Patel. That letter was in the following terms (omitting formal parts): Federal Court Matter (AD 75/2012) I refer to your email of 25 November 2013. In reference to paragraphs 1 and 2 of your email, it is clear we have different views of your matter. There is no requirement for the Applicant to agree to any of our requests. The Applicant can adopt a position to force you into bankruptcy and give you no control over the sale of the property. In other words, we have very little bargaining power to "NEGOTIATE". In response to paragraph 3 of your email, please note we have always said there is no guarantee that consenting to judgment will mean the Applicant will "not chase you for the balance". In our conference on 13 November 2013 we explained it is highly likely the Applicant will pursue you for the remaining amount. We also advised you that there is no guarantee that you will not face criminal charges, even if this matter settles and does not proceed to a defended hearing Your comments at paragraph 3 are not consistent with your written instructions to consent to judgment against the Fifth and Sixth Respondents, despite being told that will not guarantee the Applicant will not chase you further for the full judgment amount or ensure you will not be charged criminally. I am again concerned with the comments in your email. They do not address my previous concerns raised that you have lost confidence in my firm representing you; your legal fees; or the criticism you appear to make of Mr McKenna, my firm and/or Ms Katavic. In the circumstances, we are no longer prepared to continue to act for you. We proposed to appear on 6 December 2013 to finalise the Consent Orders. At that time we will also seek leave to withdraw from representing you. You may attend Court at that time to be heard on such an application. 53 On 4 December 2013, Mr McKenna wrote to Mr Patel. That letter was in the following terms (omitting formal parts): Federal Court Matter (AD 75/2012) I refer to your email of 29 November 2013. You will recall in our conference on 13 November 2013 you instructed us to file Consent Orders for the full amounts claimed by the Applicant against you as the Fifth and Sixth Respondents respectively. In that conference we arranged for an interpreter to assist you. You signed written instructions which were interpreted verbatim. Those Consent Orders were signed and filed on your behalf on 19 November 2013, in accordance with your instructions. As explained in our letters to you dated 22 November 2013 and 28 November 2013 we expressed our concern by your recent comments as it appeared you no longer had confidence in our representation or the advice both my firm and Ms Katavic have provided you. Your email of 29 November 2013 has placed us in an untenable position and we are simply unable to continue to act for you. Your instructions in your email of 29 November 2013 are not only contrary to your written instructions provided to us on 13 November 2013, they simply ignore the overwhelming evidence in support of the applicant's Application; and our previous advice to you, which we have provided in numerous letters and conferences. I confirm we will seek leave to withdraw our representation from your matter on 6 December 2013. You should attend the Federal Court of Australia on 6 December 2013 at 9.15am and you may be heard in relation to that application to withdraw. The Court may also expect you to advise of your position in relation to the Consent Orders. You will need to arrange for a Hindi interpreter to be present at that time. 54 Thereafter, Mr and Mrs Patel have endeavoured to extricate themselves from the settlement which had, by then, been agreed and put into effect. 55 The applicant led evidence from Mr Roger Poels, who is, and was in November 2013, the General Manager of the applicant, and from Mr Valdis Luks, who is, and was in November 2013, the Managing Director of the applicant. The evidence established that Mr Poels and Mr Luks were the only persons within the applicant's organisational structure charged with the responsibility of instructing the applicant's lawyers in relation to this proceeding. Each of those gentlemen testified that he had read the affidavits affirmed by Mr Patel on 10 December 2013, 5 February 2014 and 25 February 2014 and the affidavit affirmed by Mrs Patel on 10 December 2013. 56 Mr Poels said that he was not aware at any time prior to 7 February 2014 of the circumstances outlined in those affidavits that, according to Mr and Mrs Patel, caused them to instruct their former solicitors, Ben Aulich & Associates, to agree to the Consent Orders. Mr Luks said that, at the time when the Consent Orders were agreed and subsequently reflected in orders made by the Court, he was unaware that Mr and Mrs Patel felt that they had been unduly pressured into agreeing to those orders by their own lawyers. Mr Luks said that the first time that he heard of any such suggestion was on 7 February 2014 when Mr Poels reported to him what had occurred at the Directions Hearing held that day. 57 In his evidence, Mr Spence said that, at the time when the Consent Orders were agreed and subsequently reflected in orders made by the Court, he was unaware that the Patels felt that they had been unduly pressured into agreeing to those orders by their own lawyers. 58 Mr Spence said that it was not until 7 February 2014 that he became aware of the allegation now being made by the Patels to the effect that they were unduly pressured by their own lawyers into agreeing to the Consent Orders. 59 It is perfectly clear, and I therefore find, that nobody on the applicant's side of the record (neither Mr Spence nor either of the senior executives of the applicant who had carriage of providing instructions to the applicant's lawyers in connection with this proceeding on behalf of the applicant - Messrs Poels and Luks - or indeed anyone else in the applicant's camp) had any knowledge of the confidential communications which took place between the Patels, on the one hand, and their lawyers, Mr McKenna, Mr Aulich and Ms Katavic, on the other hand, during the period from late 2012 and throughout 2013 up to late November 2013 when Mr McKenna signed the Consent Orders. In particular, I find that nobody on the applicant's side of the record had any knowledge of what occurred at the conference involving the Patels and their lawyers on 13 November 2013 or of the confidential communications which passed between the Patels and their lawyers in the period thereafter up to and including 22 November 2013. Further, based upon these findings, I also find that nobody on the applicant's side of the record knew, believed or had any reason to suspect that, Mr McKenna's authority to bind the Patels to a settlement of the applicant's claims against them had been withdrawn or had become circumscribed or qualified in some way. To all outward appearances, Mr McKenna's status as the Patels' solicitor remained in full force and effect throughout November 2013. The exchanges between Mr Spence and Mr McKenna concerning settlement in the period from late October 2013 up to and including 22 November 2013 were typical of exchanges that commonly take place when solicitors are endeavouring to resolve litigation. In this period, there was no indication whatsoever to the outside world (and, in particular, not to the applicant and its lawyer) that the Patels apparently felt that they had been unduly pressured into settling. 60 Mr Sharma did not make any submission to the effect that the applicant or its lawyers had any knowledge or inkling of the matters about which the Patels now complain concerning their dealings with their own lawyers in November 2013. The Patels' case before me was that it is a sufficient basis for setting aside the Consent Orders and the relevant orders made by me on 22 November 2013 if I were to be satisfied that they had been unduly pressured by their own lawyers into authorising settlement of the applicant's claims against them upon the terms embodied in the Consent Orders even though nobody on the applicant's side of the record had any knowledge or even suspicion that this is what had occurred (if, in truth, such pressure was applied). I do not agree with this submission and I will explain why shortly.

G.E. Shaw & Associates (ACT) Pty Ltd v Narayan

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Judgment (9 paragraphs)

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