International Sports Marketing Pty Ltd & anor v Oasis Development Corporation Pty Ltd & ors

International Sports Marketing Pty Ltd & anor v Oasis Development Corporation Pty Ltd & ors - [2006] NSWIRComm 212 - NSWIRComm 2006 case summary — Zoe

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1 These are proceedings brought on behalf of the applicants, International Sports Marketing Pty Ltd and Achilles Constantinidis against five respondents, being Oasis Development Corporation Pty Ltd, Bulldogs Sport and Community Foundation Limited, Gary John McIntyre, Bulldogs Rugby League Club Limited and Bulldogs League Club Limited. They are currently constituted by a further amended summons filed on 1 August 2005, although the proceedings were originally commenced by summons filed on 27 June 2003. 2 The proceedings arise out of a proposal for the development of certain land within an area administered by Liverpool City Council originally known as the Stardome Project but as it evolved became known as the Oasis Development. The applicants allege that there existed a contract or arrangement pursuant to which they performed certain work in connection with the Oasis Development which was to involve the erection of a sporting, residential and commercial complex on the subject land. The first applicant was alleged to have provided consultancy services to or on behalf of or involving the projects and some or all of the respondents. Amongst the complaints of unfairness contained within the further amended summons are allegations relating to the circumstances in which the applicants' involvement in the project came to an end. There is an allegation that the second applicant has been "caused to be involved in public enquiries in relation to the respondents' conduct. As a result of these dealings he had had to incur significant legal expenses to defend his reputation…." 3 The respondents, as originally constituted by the original summons and as now referred to in the further amended summons, have at all relevant times been represented in the proceedings by the law firm Clayton Utz. That firm first filed a notice of appearance in the proceedings on 28 July 2003. 4 In a Reply document filed on 14 July 2004, the respondents asserted that their conduct did not damage the reputation of either applicant in the business and sporting community. There then follows in that document a number of assertions concerning the second applicant, Mr Constantinidis and his reputation. A number of allegations are made reflecting what is described as his "poor reputation" including adverse comments made about him in taxation proceedings, in magistrates' proceedings, that he had been penalised for 13 breaches of the corporations law, that he had been fined for certain breaches of the Corporations Act, that adverse findings as to his credibility had been made in the Industrial Relations Court of Australia, that there were adverse reports about him in the financial press, that adverse comments about him had been made by a prominent former politician, that he had been suspended from membership of the Institute of Chartered Accountants for a period and the like. 5 In evidence given in the course of these interlocutory proceedings, Mr Constantinidis said that he had instructed Mr George Livanes, a partner of the law firm Clayton Utz in around early 1996 to act on his behalf personally with the respect to the Stardome project and that he had continued to instruct Mr Livanes, both in some respects on his own behalf but also on behalf of the respondents with respect to the Stardome project and the Oasis Development. He was also a party to a Heads of Agreement document that involved a number of the respondents with respect to the Oasis Development. Although it was never actually signed, the document was indeed drafted by Mr Livanes. Furthermore, Mr Constantinidis said that he had instructed Mr Cowling, also a partner in Clayton Utz, to act for him in connection with two unrelated matters and in doing so had furnished to Mr Cowling and, presumably, those within Mr Cowling's team of lawyers and paralegals, all his business records and financial details, medical files and related documents, and other material with respect to his personal activities. One of those matters concerned a private criminal prosecution brought against Mr Constantinidis by a Mr Vincent Hatton in about 2001 arising out of a piggery business that he had owned jointly with Mr Hatton, The Honourable Paul Keating and Mr John Brown. The Court was asked by the applicants to draw the inference that much of the material concerning the allegations contained within the Reply document about Mr Constantinidis' reputation had been gained as a result of information and material that he had provided to Mr Cowling and others during the course of those two matters. 6 These interlocutory proceedings arise out of a notice of motion filed in this Court by the applicants on 5 May 2006 seeking orders that Clayton Utz cease acting and be restrained from acting for any of the parties to the proceedings based, in general terms, on a conflict of interest in continuing to represent the respondents. The accompanying affidavit in support, in general terms, narrates the matters to which I have earlier referred involving the retention of Clayton Utz with respect to the Stardome and Oasis projects and their retainer on behalf of Mr Constantinidis with respect to the two unrelated matters to which I have also referred. 7 Although Clayton Utz had been retained to act for the respondents, as I have said, since the 28 July 2003, no question of conflict of interest was raised until 1 April 2004. On that date, the applicants' current solicitors, who, it should be noted, did not initially represent the applicants, wrote to Clayton Utz saying that "there may be a conflict of interest between your firm and the interests of the respective parties. This may result in you not being able to continue to act for any parties in this matter. You may want to consider your firm's position." There was then contained a threat with which I need not deal. 8 Clayton Utz replied by facsimile transmission on 5 April 2004 expressing surprise that the allegation was then being raised, stating that an allegation of a potential conflict of interest was a serious matter and requesting "prompt articulation of the specific concern" so that that concern might be considered. 9 The applicants' solicitors did not extend the courtesy of a reply to that letter either by way of acknowledgement or otherwise. The next relevant communication was a facsimile transmission to Clayton Utz from those solicitors dated 23 September 2005 that enclosed correspondence, which they had forwarded to my associate, seeking to have the matter re-listed so that certain orders that had been made for the timetabling of the matter could be vacated. The letter annexed correspondence between those solicitors and Clayton Utz and advised my associate that, upon advice from senior counsel, they had contacted the Law Society to obtain direction as to a complaint that their client wished to make against Clayton Utz "and an ethical question that may arise should they continue to act for the various respondents in this matter." There was then an allegation that Clayton Utz had a conflict of interest in continuing to act, which was amplified in a general manner. 10 I should interpolate at this stage, lest anyone reading this judgment should form the view that this is a usual and appropriate manner for legal practitioners to make contact with a judge through his or her associate, that the conduct of Mr James Jordan in communicating the matters to which I have referred is, in my opinion, improper, inappropriate and reprehensible. There is, of course, nothing wrong with a judge's associate being contacted for the purpose of having a matter listed for mention, directions or even for hearing pursuant to a liberty to apply which has been granted, especially where a Court utilises a case management docket system. However, it is at all times inappropriate to convey information or material that arguably goes to the merits of any application to be made and to any determination to be made by a judge. No such approach should be made in the absence of consent. Unless a matter is, by consent, to be determined in chambers, then all communications between legal practitioners and a judge with respect to the merits of any matter should be made in open court. 11 In any event, a form of complaint to the office of the Legal Services Commissioner was in fact forwarded by the applicants' solicitors on behalf of Mr Constantinidis on 18 November 2005. It referred to the fact that Clayton Utz acted for five respondents in these proceedings and expressed a belief that Clayton Utz had a conflict in continuing to act for them because it had acted for Mr Constantinidis "extensively in the last few years." It referred to the two unrelated matters as well as the Oasis Development. 12 It was the respondents' position that the question of conflict of interest, when raised in September 2005, was part of what was described as a "cynical exercise" designed to delay the proceedings. The background was set out in correspondence between the applicants' solicitors and Clayton Utz. The applicants' solicitors had asked that consent be given to staying these s 106 proceedings until a number of "criminal or quasi criminal investigations and proceedings" had been completed. There was a reference to investigations by ASIC and the submission of statements and the provision of documents to that organisation. The correspondence culminated in a letter from Clayton Utz dated 14 September 2005 to the applicants' solicitors declining to consent to a stay of the proceedings and inviting the filing of a notice of motion if the applicants wished to pursue this course. By letter dated 22 September 2005 addressed to the applicants' solicitors, Clayton Utz noted that there had been no response to their previous letter and advising that unless the applicants complied with the Court Orders concerning the preparation of proceedings, they would re-list the matter for further directions. It was said that it was this letter that evoked the letter to my associate from the applicants' solicitors dated 23 September 2005 to which I have referred. 13 Following this correspondence, Clayton Utz again wrote to the applicants' solicitors on 28 September 2005 seeking details of the alleged conflict of interest. 14 On the basis of the evidence which was provided during the course of these interlocutory proceedings it would seem that the applicants' solicitors did not seek to clarify the nature and extent of the alleged conflict of interest until the filing of an affidavit in support by Mr Constantinidis on 2 May 2006 followed by the notice of motion which was supported by that affidavit filed on 5 May 2006. 15 I have not referred in detail to all of the correspondence between the applicants' solicitors and Clayton Utz. I infer, however, from that correspondence and its contents that a motivating factor for the filing of the notice of motion alleging conflict of interest was a desire on the part of the applicants to secure a delay in the prosecution of these proceedings for reasons about which I make no determination as to their veracity but which are referred to in my interlocutory judgment, International Sports Marketing Pty Ltd v Oasis Development Corporation Pty Ltd [2006] NSWIRComm 186, where I declined to strike the proceedings out for want of prosecution pursuant to a motion filed by the respondents. 16 For reasons, which I shall shortly develop, and independently of any assessment of improper motive on the part of the applicants in bringing the notice of motion, the subject of this interlocutory judgment, I have reached the conclusion that the motion should be dismissed. Essentially, this is because even though the question of conflict of interest was tentatively broached by the applicants' solicitors by letter dated 1 April 2004, the applicants have taken no steps to advise Clayton Utz of the nature and extent of any alleged conflict or furnished any information which would allow that firm to examine whether such a conflict of interest existed. Furthermore, the applicants have taken no steps to pursue the matter within the court proceedings for a very long time in circumstances where Clayton Utz has continued to represent the respondents, has undertaken a great deal of work in connection with the proceedings and the respondents would, as is obvious, be put to trouble and expense in having to retain alternative solicitors. 17 The question of delay was considered by Rolfe J in the Supreme Court of New South Wales in Colonial Portfolio Services Ltd v Nissen [2000] NSWSC 1047. Those proceedings also involved an application for an order that a firm of solicitors should be precluded from representing one of the parties. Those proceedings also involved a delay on the part of the defendants in raising the conflict issue. Rolfe J first tested the matter by considering whether the defendants had waived their rights to have the firm of solicitors not act for the plaintiffs and secondly by reference to whether there had been a deemed election not to object to them so acting. These matters were considered in the context of the discretionary nature of the relief. His Honour considered both matters by reference to well established, equitable principles. For my part, I do not find it necessary to examine either the doctrine of waiver or the principles pertinent to election to determine these proceedings because of the overall discretion that resides in the Court to grant the relief sought. Obviously, waiver focuses on a failure to seek to enforce some entitlement whether by act or omission, whereas election focuses more on positive conduct. Whichever of the approaches is taken, and Rolfe J considered both, there is nevertheless recourse to the particular circumstances applying to the particular proceedings and an overall assessment of the conduct of the party seeking the exercise of the discretion. 18 The approach that I favour was one taken by the Full Court of the Family Court of Australia In the Marriage of B.J. McGillivray and Mitchell (1998) 23 FamLR 238. In those proceedings, the Full Court considered both the passage of time that elapsed between a party becoming aware of the possibility of a conflict by reference to legal representation as well as acquiescence in the involvement of the solicitors in the proceedings. Both of those matters were considered as being relevant. At paragraph [36] of that Judgment, the Full Court said: "It is our opinion that if a family law litigant has a genuine concern about a former legal adviser acting against him or her in later family law litigation, the litigant must take the point at least in correspondence with the other side at the earliest possible opportunity. If he or she does not do so, then he or she is possessed of a weapon that can later be used as a delaying tactic at some point in the proceedings convenient to his or her position. Furthermore, a failure to take the point initially must also cast doubt on the bona fides of any later complaint concerning the existence of confidential information in the practitioner in question, and on the bona fides of any alleged apprehension regarding the possible misuse of such confidential information."

[18]

19 Whatever the merits of the complaint made by the applicants concerning the retainer by the respondents of Clayton Utz, the applicants have, in reality, done too little too late. Although the possibility of a conflict was raised initially by the applicants' solicitor and responded to promptly by Clayton Utz, no particulars were forthcoming for some considerable time and arguably were not made available to the respondents until 2 May 2006. Clayton Utz has undertaken a good deal of work with respect to the proceedings since that time. In all the circumstances it would be inappropriate for the Court to exercise any discretion in favour of the applicants to preclude Clayton Utz from further representing the respondents. Independently of this conclusion, I agree with the submissions made on behalf of the respondents that the filing of the applicants' motion may be seen as representing a cynical device in which to have the proceedings delayed in circumstances where the respondents had indicated immediately before the filing of the applicants' notice of motion that they would not accede to the applicants' request. That request had been made in circumstances involving considerable delay on the part of the applicants in the prosecution of these proceedings as detailed in my earlier judgment in International Sports Marketing Pty Ltd v Oasis Development Corporation Pty Ltd [2006] NSWIRComm 186. 20 For completeness, I should make some brief reference to the relevant principles and their application to the factual circumstances in these proceedings concerning the general question whether the applicants were entitled to maintain that there was a conflict of interest in Clayton Utz continuing to represent the respondents. 21 The relevant principles have been the subject of discussion in a number of judgments, the most recent of which appears to be that of Bergin J in the Supreme Court of New South Wales in Asia Pacific Telecommunications Limited v Optus Networks Pty Ltd [2005] NSWSC 550. Many of the more recent judgments are referred to in Her Honour's judgment. I refer also to the judgment of Drummond J in the Federal Court of Australia in Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307. 22 Much of the debate centres around whether or not there exists independently and generally a duty of loyalty which would preclude a solicitor from representing a client in circumstances which were against the interests of a former client. It is not necessary for me to deal with this matter specifically, other than to observe that the weight of authority is to the effect that any such independent principle is rejected absent any consideration of the requisite possibility that confidential information given to the solicitor by the former client is relevant to the retainer of the new client and might operate in circumstances adverse to the interests of the former client. 23 I proceed on the basis that, for the applicants to have succeeded in these interlocutory proceedings, it was necessary for them to prove that Clayton Utz had in its possession information that was confidential to them and to the disclosure of which they had not consented and that that information was or might be thought to be relevant to the retainer by the respondents in these proceedings. 24 In his evidence, Mr Constantinidis said that he had instructed Mr Livanes in connection with the preparation of a development control plan for the Stardome project which ultimately became the Oasis Project and that Mr Livanes was instructed to review both that plan and the development application to ensure compliance with the requirements of Liverpool City Council and with any conditions relating to finance and builder's guarantees. Mr Livanes also attended a number of meetings. Furthermore, Mr Livanes prepared a basic construction contract, which was used in connection with the advancement of the project. During the course of 1999, Mr Livanes was instructed by Mr Constantinidis to act on behalf of the then consortium of participants in the projects, of which Mr Constantinidis was a member. However, from late 2000, Mr Livanes began to act primarily on instructions furnished by Mr McIntyre, although those instructions were communicated predominantly by Mr Constantinidis on behalf of Mr McIntyre. Even so, Mr Constantinidis said that he was at that stage still seeking legal advice from Mr Livanes in relation to project development fees and engagement contracts for himself and the first applicant. 25 It was the position of the applicants that the information furnished by them or on their behalf to Mr Livanes was confidential in nature and thus was adverse to their interests in connection with the s 106 proceedings. I agree with submissions made on behalf of the respondents that there is no evidence in sufficiently precise terms that would enable the Court to identify what was the information which was said to be confidential that was furnished by Mr Constantinidis to Mr Livanes, nor is there any evidence which would allow the Court to conclude in any way that that evidence was adverse to the applicants' interests in the s 106 proceedings. As the authorities make it clear, these are matters about which a court needs to be satisfied before taking any steps to preclude a solicitor from acting for a party to proceedings. 26 The same situation applies with respect to the information and instructions that Mr Constantinidis said he gave to Mr David Cowling with respect to the two unrelated matters to which I have previously referred. There is no evidence that any such information as was conveyed by Mr Constantinidis to Mr Cowling was used or was capable of being used by or on behalf of the respondents in the s 106 proceedings. Evidence was given by Michael John Byrnes, who was responsible for drafting the Reply document, to the effect that neither he nor, to his knowledge, anyone else associated with the creation of that document had access to any internal Clayton Utz files in collating any of the factual material which was said to relate to Mr Constantinidis' reputation. That information, it was said, was obtained through access to the media and articles available through the internet. I accept the evidence of Mr Byrnes to this effect. 27 Accordingly, with respect to these matters also, the applicants have failed to satisfy the tests, which are necessary before consideration will be given to restraining a solicitor from continuing to act in proceedings. 28 It follows that even if I had not been persuaded that the applicants were disentitled from seeking an order with respect to the continued involvement of Clayton Utz in the proceedings by reason of delay and acquiescence, I would not have granted the relief sought. 29 For completeness, I refer also to evidence given by Mr John Meggitt, general counsel for Clayton Utz. Mr Meggitt was appointed a probity manager to deal with the conflicts of interest which have arisen in these proceedings and has established "physical and electronic separation arrangements" in order to quarantine information with respect to any alleged conflict of interest and, in particular, has established those protocols and procedures with respect to these proceedings. Unfortunately, these protocols and procedures have only been put in place since February 2006. However, because of the conclusions, which I have already expressed, it is not necessary that I make any further comment with respect to those protocols and procedures other than to express the firm opinion that those protocols and procedures should remain in place throughout the course of this litigation. 30 It follows, from the conclusions that I have reached, that the applicants' notice of motion should be dismissed. 31 The interests of the respondents were represented by Clayton Utz which, independently of the respondents, briefed counsel who had the carriage of the proceedings. Clayton Utz has sought a costs order, which, in my opinion, should be granted in its favour. The respondents were separately represented by counsel, who was also instructed by Clayton Utz. Counsel for the respondents sought a costs order in their favour. Counsel for the respondents did not participate in the proceedings in any way other than to formally support the submissions of counsel retained by Clayton Utz, although he remained in the Court during the course of the hearing. Given that by arrangement with the respondents that their interests were represented separately by their solicitors, I can see no justification for the respondents having incurred additional costs in retaining counsel on their behalf instructed by the same firm. To this extent, therefore, I am of the opinion that the applicants should not be required to pay the costs of the respondents for separate representation in the proceedings. 32 I make the following orders: (1) The applicants' notice of motion is dismissed. (2) The applicants are to pay the costs of Clayton Utz incurred in the proceedings in an amount as assessed in default of agreement. (3) No order for costs of the respondents in the proceedings.

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