Lockwood v Olver [2003] VSC 436

2 At the conclusion of argument, I announced that I would dismiss the application and give my reasons later. These are my reasons.

3 In order to understand this application it is necessary to look at the underlying disputes which raise these matters.

4 On 4 June 1998, the yacht "Mariah" sank off Queensland. A claim was made by the owner, Anthony Craig Olver, on an insurance policy granted by the predecessor of Allianz and, on 10 November 1998, the insurer paid him $324,000 in satisfaction of his claim. A substantial proportion of this money was paid to Wonderfield, a company controlled by Mr Olver.

5 In proceeding No 2096 of 1998 ("the 1998 proceeding"), the insurer sued Mr Olver seeking the return of the amount paid to him on the basis that the yacht was deliberately sunk and the claim was fraudulent. Brand Partners acted for the insurer in the proceeding. The claim was successful and judgment was given against Mr Olver on 3 April 2003 for damages in the sum of about $435,000 including interest.

6 Wonderfield was also a defendant to the 1998 proceeding. It was joined on the basis that, on 23 November 1998, it knowingly received part of the proceeds of this fraud. This claim, too, was successful and judgment was entered against Wonderfield in the sum of $275,654.99 and interest. Allianz also obtained a declaratory order that the assets of Wonderfield were charged with the repayment of this sum, but not of the interest. These assets included certain land at Portland being the land more particularly described in certificate of title volume 10099 folio 937.

7 Meantime, on 10 December 2002, during the pendency of the 1998 proceeding, Kenneth John Stout was appointed receiver and manager of the assets of Wonderfield. This appointment was made by two companies associated with Mr Olver.

8 On 18 December 2002, Mr Lockwood was appointed by the Court to be liquidator of Wonderfield upon the application of Allianz; Brand Partners again acted for the applicant.

9 Following its receipt of the tainted money from Mr Olver, it is alleged that Wonderfield made substantial payments to Mrs Olver, who is the wife of Mr Olver. In paragraph 15 of the statement of claim in the Liquidator's proceeding it is said that these payments totalled approximately $1.6M. It seems that those payments came to light in the course of the trial of the 1998 proceeding.

10 Consequently, this, the Liquidator's proceeding, was commenced against Mrs Olver on 22 August 2003 and the Allianz proceeding against her was commenced on the same day. In each case Brand Partners acted for the plaintiffs.

11 In the Allianz proceeding the insurer seeks to trace into the hands of Mrs Olver the amount of $275,654.99 being the amount of its charge over the assets of Wonderfield.

12 In the Liquidator's proceeding, the Liquidator, on behalf of the creditors of Wonderfield, seeks to recover as the fruits of an uncommercial transaction, the $1.6M which she received from Wonderfield. These creditors include Allianz which is both a secured creditor of Wonderfield to the extent of the sum charged and an unsecured creditor for the interest payable on that sum and costs.

13 It appears in the affidavit of Mr Stout sworn 7 November 2003 that Wonderfield's property in Portland is to be put to public auction on 22 November and that the selling agent expects that it will realise sufficient to pay out a secured creditor and Allianz. I do not know the result of this auction. If the expectations of the selling agent have been fulfilled, the Allianz proceeding may be terminated.

14 I turn now to the submissions put on behalf of the parties. First, it was put that Brand Partners placed themselves in a position of conflict in acting in both the Liquidator's proceeding and the Allianz proceeding. This is because Mrs Olver has insufficient funds to satisfy both claims, assuming them to be successful. The argument concludes that Allianz, claiming a priority interest in the sum of $276,000 or thereabouts, will have to compete with the Liquidator who would be obliged to resist this claim so that Allianz would rank as an unsecured creditor and to maximise the distribution to those creditors.

15 I see no conflict. It seems that the Liquidator has taken the view that Allianz does have a priority interest as equitable chargee to secure the principal recoverable from Wonderfield pursuant to the judgment in the 1998 proceeding. Once this and the other secured creditor have been satisfied, the liquidator and Allianz share the common cause of maximising the recovery from Mrs Olver for the benefit of the unsecured creditors.

16 The second basis was that Brand Partners were putting themselves in a position of breaching an implied undertaking to the Court. I accept that documents and information of a party to litigation which come into the hands of a solicitor for another party as a result of the Court's coercive process are received by the solicitor pursuant to an implied undertaking that they will not be used for an extraneous purpose.

17 In this case, however, there are two important factors which dictate the rejection of this second ground. First, the evidence shows that it is likely that the Allianz proceeding will be terminated following the auction. Second, it has not been demonstrated that the solicitor for the plaintiff in the Allianz proceeding has or is likely to come into possession from Mrs Olver of documents or information which are different from those which he will obtain in the Liquidator's proceeding. An examination of the statement of claim in the two proceedings shows that, although the causes of action are different in each, the factual substratum is very similar. Moreover, the proceedings have been conducted together in their interlocutory stages to date and it may well be that they would be tried together.

18 Accordingly, the application was refused and the summons dismissed with costs including, lest there be doubt about this, the costs of 7 November 2003.