Evidence concerning whether Macks sought independent legal advice
26 It can be seen from the preceding summary of the primary judge's reasons that an important consideration was whether Macks had sought independent legal advice concerning the further prosecution of the proceedings and whether he had relied only on advice from Emanuele's solicitors. Before proceeding to consider generally the issues in the appeal it is convenient to deal now with the factual issue of what advice Macks sought. In the appeal, Macks challenged the finding made by the primary judge on the evidence before him that no independent legal advice was sought. In Macks' affidavit of 5 September 1997, filed in the costs application, no reference is made to seeking independent advice about the further prosecution of the proceedings. It might be thought that had independent advice been sought, the fact that it had been sought would have been referred to in this affidavit.
27 At the hearing of the costs application on 12 September 1997 an issue arose about the production of documents by Macks as a result of subpoenas issued on the application of the first defendant. The subpoenas were directed to Emanuele Holdings, Emanuele Management and Macks personally. They were in substantially the same terms and sought:
All or any opinions or advices:
(a) received directly or indirectly prior to 18 December 1996 from Mr Gary B Hevey, Andersons solicitors or other barristers or solicitors whether or not retained by the second plaintiff for that purpose;
(b) in respect of or relating to the prospects of success of the plaintiffs or any of them in proceedings SC 796 of 1991 and SC 994 of 1996.
28 The reference to the "second plaintiff" became the "third plaintiff" and "Peter Ivan Macks" in the subpoena to those parties. At the hearing of the costs application on 12 September 1997, counsel for the first defendant called on the subpoenas. That was met by an oral application by counsel for Macks, Emanuele Holdings and Emanuele Management to set aside the subpoenas. Counsel said:
The subpoena, your Honour, is directed exclusively at documents, the subject of legal professional privilege, on its face. It actually seeks opinions and advices provided to the companies, and seeks nothing else.
We submit, your Honour, respectfully submit that it is an abuse of process, for a party to issue a subpoena solely for documents the subject of legal professional privilege.
29 That submission was met by a submission by counsel for the first defendant:
Your Honour, any privilege which exists has been waived by the liquidator's affidavit. He has said, on oath, that he considered that the various causes of action in various manifestations of the pleadings were arguable. He has said that he indeed thought there were prospects of success. That is the first point.
The second point is that unless my friend can produce a list of the various opinions, it is not at all clear that the opinions in the liquidator's possession were opinions from either barristers or solicitors retained by the liquidator.
30 The submissions concerning this issue continued at a later point. Generally the hearing of the costs application by the primary judge was interrupted from time to time because his Honour had to attend to issues arising in other proceedings in which a jury was deliberating. At the point where further submissions were made, counsel for Macks and the two companies said that the affidavit of Macks did not refer to the existence of legal advice let alone its contents. That was said in the context of making a submission that any legal professional privilege had not been waived. Counsel for the first defendant responded by referring to various parts of Macks' affidavit where reference was made to consultation with the solicitors acting for Emanuele.
31 This led to an intimation by the primary judge that he did not consider there had been disclosure of the type which would have enlivened s 122(4) of the Evidence Act 1995 (Cth). On this question the following appears in transcript:
HIS HONOUR: Yes. Well, it does not say to me that the section 122(4) would apply to enable the disclosure of the document to which reference has been made in those circumstances. I would set aside each of the subpoenas, though that does lead to a difficulty in your case, Mr Blue [counsel for Macks and the two companies in liquidation], does it not?
MR BLUE: Well, it may or may not, your Honour.
HIS HONOUR: Well, it does, not it may or may not; it does lead to a difficulty that I cannot have regard to - I cannot assume that Mr Mack [sic] has done anything but made up his own mind.
MR BLUE: Yes, your Honour. Indeed, of course, we are in the dilemma that …
HIS HONOUR: Yes. I mean, if you are going to make out a case that I had made up my mind on particular advices, obviously you would need to show the advices and say "this is what I relied on". If you will not do that, and you are perfectly entitled not to, then you cannot have that inference drawn in your favour, can you?
MR BLUE: I understand what your Honour is saying.
HIS HONOUR: All right. I am just putting that just so you will be on notice about it.
MR BLUE: Yes, your Honour.
32 It is probable his Honour accepted there were documents that would be produced if the subpoenas were not set aside and accepted Macks and the two companies were entitled to resist their production under compulsion of a subpoena. In his affidavit of 5 September 1997, Macks raised, as an issue, his state of mind during 1996 about the strength or otherwise of the Supreme Court proceedings. Fairly clearly he was raising as an issue the basis upon which he made an assessment of the legal and factual issues likely to arise and how they might be determined in those proceedings. Having raised that issue, the defendants were entitled to test and contradict Macks' evidence. One obvious way of doing so was to obtain from him copies of advices and opinions he had received. They might be used to show, if that was apparent from the advices and opinions, that he could not have had the state of mind he asserted he had in his affidavit. In this sense the documents were relevant. Because they were relevant documents the defendants were probably, on the law as it presently stands (see Telstra v BT Australasia Pty Ltd (1998) 156 ALR 634 at 645 - 646), entitled to have access to them. It must be accepted however that at the time the issue was considered by the primary judge the law was not (or was not as clearly (but see Hongkong Bank v Murphy [1993] 2 VR 419)) that production of the documents might be compelled on the basis that arguably privilege had been impliedly waived by Macks raising, as an issue, his state of mind about the strength of the claims: see also Hammer v Sunman [1998] FCA 1254; Grundy v Lewis [1998] FCA 1537; Hi-Fert Pty Ltd v United Shipping Adriatic Inc [1998] FCA 1672.
33 Part of the case of the defendants ultimately relied on (though it was initially raised by the primary judge in the passage just quoted) was that one feature of the circumstances confronting his Honour justifying a costs order against Macks was that Macks did not take independent legal advice. It was a matter the defendants had to establish. The question then is whether the finding made by the primary judge was open on the evidence. There was no direct evidence that Macks had not sought independent legal advice. It may be accepted that were there some evidence that he had not, then Mack's failure to advert to having received the advice in his affidavit and the failure of his counsel to ask him about it in chief would enable the inference to more readily be drawn that he had not sought independent legal advice: see Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 and White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169 at 226 - 227. However it was necessary for there to be some evidence from which the inference might be drawn: see the discussion by Wilcox J in Lek v Minister for Immigration, Local Government and Ethnic Affairs (1993) 43 FCR 100 at 124.
34 Counsel for the respondents identified the finding of the primary judge that "no competent legal adviser could seriously have offered the plaintiffs anything other than a fanciful prospect for recovery of damages" and that the claims were "both hopeless and unarguable" as providing a foundation for inferring that Macks did not receive independent advice. If he had, it was reasoned, the advice would not have been to continue and could not have led Macks to the belief, as he asserted in his affidavit he believed, that the claims were good. That is one possible inference. Another would be that he had had bad advice. It is enough to say that there is no sufficiently compelling basis for drawing the former inference. Indeed the evidence actually given suggests such an inference should not be drawn.
35 While no evidence was led from Macks in chief about this and that might have led to an inference that Macks was making no such case, or it might provide an acceptable basis, together with the matters just discussed, for an inference that Macks had not had any legal advice, matters did not rest there. The subject was raised by Macks, admittedly unresponsively, in cross-examination. Macks was asked by counsel for the first defendant several questions about his dealing with Andersons who were the solicitors for Emanuele and, before they were placed into liquidation, Emanuele Holdings and Emanuele Management. During that cross examination the following appears:
Were you in discussions with Andersons at any stage than April? … My recollection is this, that in or about December of the previous year, or January '96, I was made aware of the proceedings. After that time, discussions commenced with the solicitors acting for Mr Emanuele and their barristers, and the solicitors acting for me. (emphasis added)
36 A little later in the proceedings Macks was cross examined by counsel for the other defendants about his opinion that the proceedings should continue. The following appears in transcript:
And what factors did you look at in determining whether or not allegations of those kind would be proceeded with? … I had conducted examinations in the Supreme Court in South Australia over two or three months. During those examinations we had uncovered a number of third party records. In particular in those records there were some references to the fact that the secured creditor in the Emanuele group may have changed its view significantly in relation to the Emanuele group because of the proceedings. I had a mind to consider the comments made by his Honour Higgins J in relation to Mr Hedley which weighed on my mind. I also examined the position of the creditors in the Emanuele group and whether or not any of them firstly had the financial clout to support an indemnity of the type that may be required. I had discussions with them and certainly I sought advice.
(emphasis added)
37 This latter reference, in isolation, may arguably be a reference to advice from Andersons. However when taken together with the earlier reference to "solicitors acting for me", the clear import of the evidence of Macks was that he had sought and obtained advice concerning the continuation of the proceedings. That is, he had sought advice apart from advice that had been proffered by the solicitors acting for Emanuele. While, as earlier noted, it may be accepted that no evidence was led from Macks in chief (either in his affidavit or orally) that he sought legal advice, his evidence in cross examination was that he had. It appears that his Honour overlooked that evidence. In any event, the finding of the primary judge that Macks had not done so is erroneous.
38 One matter should be mentioned here but only to indicate it is of no relevance. At the time of the hearing of the costs application on 12 September 1997, the appeal against the judgment of Higgins J summarily dismissing the proceedings was on foot. The appeal had not been argued. The hearing of the appeal took place on 28 October 1997. It might be thought that it would have been unreasonable to require Macks to produce copies of legal advice on 12 September 1997 which might contain a discussion of the strength or otherwise of the Supreme Court proceedings at a time when the parties were on the verge of arguing that issue before a Full Court. That may have been the dilemma Blue was about to identify in the passage in the transcript earlier set out immediately before the primary judge indicated it would be necessary to show what the advices were. Blue did say, however, in his written submissions dated 10 October 1997 that it would be unfair for the defendants to invite the Court, in the absence of evidence about details of the legal advice Macks received, to take this further (presumably whether advice was or was not given) into account against Macks. Blue submitted that this would be unfair when Macks was in a position where to disclose the advice he received might be significantly to the detriment of Emanuele Holdings and Emanuele Management. However what both Blue and Macks knew at the hearing on 12 September 1997, and the defendants and the primary judge did not, was that on 5 September 1997, Mansfield J of this Court had given a direction to Macks under s 479(3) of the Corporations Law 1989 (Cth) (upon application made by Macks by motion on 30 July 1997) that he would act appropriately in the absence of any opportunity in the immediate future to negotiate some other resolution, in discontinuing the proceedings in the Supreme Court which were then alive only through the appeals. Thus, at the time the costs application was being heard by the primary judge, Macks had secured a direction, in effect, permitting (and perhaps even requiring) him to discontinue the appeals. He did discontinue them on 28 October 1997.
39 The erroneous finding of the primary judge earlier referred to is of limited relevance given that fairly extensive documentary evidence has been tendered in this appeal by the respondents with the consent of the appellant. The appellant originally sought to tender the documents but withdrew the tender on the stated basis that their tender would prolong the hearing of the appeal.
40 From this material the following emerges which represents findings of fact made in the appeal. On 8 December 1995 Mr Chris Byrt of Prentice Parbury Barilla, Chartered Accountants ("PPB"), spoke to Mr Peter Norman of Andersons. PPB was the firm in which Macks was a partner. As a result of the conversation, Byrt made a file note that his firm had to make a decision on whether or not the civil proceedings were to continue and the decision had to be made by 16 April 1996. That date was the time to which the writs had then most recently been extended. In a PPB file note dated 15 January 1996 a summary was prepared in point form concerning "bribery trial costs". The note refers at two points to getting an opinion about the civil action though one reference was qualified by indicating that would occur when funds were available. The note mentions that it might be possible to get one more extension of the writ though that might have to be argued before time ran out. In a written proposal which was to be put to a meeting of creditors on 29 March 1996 Macks indicated that he was considering whether action should be brought to recover compensation for the damage suffered by the Emanuele companies by the unsuccessful prosecution. Macks indicated there was a requirement to obtain an indemnity from creditors to obtain an opinion on these matters and if necessary undertake the proceedings. It is not clear why the matter is put this way given that the proceedings were then on foot.
41 In a letter dated 2 April 1996, Mr James Marsh (partner in Fisher Jeffries, solicitors), wrote to Macks. The letter included:
In his discussion with Malcolm Blue, Peter Norman stated that he proposes to:
1. Amend the names of the plaintiff companies to show that they are in liquidation.
2. Amend to join the Commonwealth of Australia as a defendant.
…
4. Seek to make the amendments prior to the expiry of the writ or if that is not possible, seek one further extension of time for service of the writ.
On the face of it, we can see no reason why you should not agree to those steps. Please may I have your instructions as to whether you agree to Peter Norman taking those steps.
From other parts of this letter, it appears it was written shortly after Fisher Jeffries were retained by Macks to advise in relation to the Supreme Court proceedings.
42 On 9 April 1996, the writ in SC 796 of 1991 was renewed and amended. That was done on the application of Blake Dawson Waldron. The amendment involved, amongst other things, the identification of the second and third defendants as companies in liquidation and their address for service as the offices of PPB in Adelaide. It appears from a letter dated 27 August 1996 from Fisher Jeffries to Andersons (which is referred to again shortly) that Blake Dawson Waldron sought and was given instructions directly from PPB to take this step. Thus Macks was committing, at least for the time being, the companies in liquidation to the proceedings which had hitherto been maintained by the companies themselves with Emanuele. However he was doing so in the context of the advice he received from Marsh in the letter of 2 April 1996.
43 A meeting took place on 15 April 1996 attended by Macks, Mr Hugh Martin (an employee of PPB), Marsh, Mr Malcolm Blue (counsel ultimately retained by Macks), Emanuele, Norman, Mr Gary Hevey (barrister retained by Emanuele), Mr Jonathan Clarke (solicitor from Andersons), Mr Kevin Borrich (counsel) and one other. At this meeting there was a lengthy discussion about the causes of action raised in the proceedings.
44 A further meeting took place on 23 April 1996 attended by Macks, Martin, Marsh, Blue, Emanuele, Norman, Hevey and Clarke. Notes from that meeting suggest there was an agreement reached that the two companies in liquidation and Emanuele would pursue the claims in the Supreme Court and an agreement was reached about the manner in which damages would be apportioned between those companies and Emanuele. However, later correspondence indicates that Macks did not, at that stage, unreservedly agree that the companies would continue to pursue the claims.
45 A further meeting took place on 16 May 1996 when there was discussion about Macks (presumably someone acting on his behalf) and Norman developing the statement of claim. Who attended this second meeting is not clear. Both at this second meeting and the earlier meeting it had been noted that an opinion sought from Hevey had not yet been completed and produced. It was completed on 21 May 1996 and was entitled "Preliminary Opinion - No 2" which was said to supplement an opinion of 15 April 1996. That latter opinion is not in evidence but the former is. The opinion of Hevey was said to be in response to a request by Macks in relation to the law applicable to the Canberra proceedings. The advice canvassed, in a summary form, the causes of action founding the proceedings and, to the limited extent it canvassed prospects of success, it was positive. However the advice concluded:
This opinion is prepared solely as a discussion paper between the representative of Emanuele and Holdings and Management. The opinion has been prepared in some haste and without full research. It is prepared for the limited circulation and should not form the basis of any party deciding to take any action or continue in any action without a further detailed opinion being sought.
46 In a letter from Andersons to Fisher Jeffries dated 14 June 1996, it is suggested that at about the time this opinion was produced and probably shortly before it, Macks was asked by Andersons whether he wanted to participate in the proceedings commenced in the name of Emanuele and that Macks indicated that he wished to get advice from counsel. That this was the position is consistent with steps taken on Macks' behalf by Marsh who, on 29 May 1996, sent a brief to Blue. In the letter the scope of Blue's retainer was identified:
You are retained by this firm on behalf of Peter Macks, as liquidator of 64 companies in the Emanuele group to advise generally in relation to:
1. Negotiations with Guieseppe Emanuele and his solicitors in relation to the recovery of costs and the companies' compensation claim for damages suffered as a result of the unsuccessful prosecution;
2. To advise on Mr Macks and/or the companies' ability to recover from Guiessepe Emanuele amounts paid by the companies by way of costs; and
3. To advise generally on any claim by the companies for compensation as a result of the unsuccessful bribery prosecution.
…
In relation to 3, the substantive work to be undertaken in the short term is preparation of the parts of the statement of claim relating to the companies' claim and providing Mr Hevey with any comments on the statement of claim generally. Mr Hevey's draft statement of claim is included in the brief. Perhaps you could read that draft with a view to conferring with me in the next day or two. I will, in the meantime, rough out the paragraphs I consider need to be inserted.
47 The letter of instructions set out the agreement concerning Blue's fees and noted that Blue agreed not to have recourse to Fisher Jeffries or Macks for his fees. To that extent Blue was being retained on a speculative basis. That is, it is probable his fees would be paid only if the Supreme Court proceedings succeeded. It is clear that at this stage, Macks had, through his solicitors, further committed himself to the Canberra proceedings at least to the extent of having his counsel collaborate (with counsel retained by Andersons) to draft the statement of claim.
48 It is to be recalled that on 7 June 1996 the writ was served informally on the Australian Government Solicitor. As earlier noted on 14 June 1996 Andersons wrote to Fisher Jeffries. The letter stated, amongst other things, that Andersons were awaiting the Commonwealth's response whether service would be accepted by it on behalf of the various defendants. Andersons canvassed in its letter what might happen if the Commonwealth did not accept service. If that happened they would either delete the companies as plaintiffs and proceed on behalf of Emanuele or seek the permission of the Supreme Court to proceed on behalf of the two companies in liquidation. The terms of the letter suggest that Macks had given no express instructions for the service of the amended writ on the Commonwealth even though, on its face, it involved proceedings brought by not only Emanuele but the two companies in liquidation as well. In his affidavit of 5 September 1997 Macks said that Andersons sought his instructions whether they were authorized to serve "the action" on behalf of the companies. However the terms of the affidavit suggest that instructions were sought after a copy of the writ had been sent to the Australian Government Solicitor with a view to it accepting service on behalf of the defendants. While not said directly, it can be inferred that Macks accepted that whatever service had been effected could be treated as service on behalf of the companies. There is no evidence to suggest he took steps to disabuse Andersons, Blake Dawson Waldron (who actually effected service) or the Australian Government Solicitor that service of the writ, apparently on behalf of all plaintiffs, was not authorized by each of them. Marsh conferred with Blue on 17 June 1996 and discussed the matter. During the course of that conference Blue expressed the opinion there were "massive problems" with causation though the precise context in which that statement was made is not entirely clear.
49 On 9 August 1996 Mr Wayne Arthur of Blake Dawson Waldron wrote to Norman seeking instructions about a notice of motion that had been filed on behalf of the second to twenty-third defendants seeking summary judgment in relation to all the causes of action pleaded in the writ. Arthur wrote to Norman again on 12 August 1996 outlining what had happened at court that day. Norman reported to Marsh what had occurred both orally and in writing on 15 August 1996. Arthur corresponded with Norman again on 18 and 27 August 1996. On 27 August 1996 Marsh wrote to Norman setting out, in some detail, the position of Macks and his understanding of the position that had, by then, been reached. The letter concerns the status of Blake Dawson Waldron as solicitors acting on behalf of the companies. In the letter Walsh said:
To date, there has still been no agreement as to the disposal of the proceeds of the action and no agreement as to the funding of the action. Accordingly, neither the liquidator nor the companies have any liability to pay for your firm or Blake Dawson Waldron's costs in respect of this action.
The liquidator is still considering whether it is in the interest of the companies for this action to continue or for them to contribute to the funding of the action. On the basis of the comments made by his Honour Justice Higgins in his decision handed down on 1 August 1996, the liquidator is leaning towards the view that the action should not be pursued. His Honour Justice Higgins made it quite clear that he considered that Guiessepe Emanuele had committed the offence alleged against him but was, for other reasons, entitled to be paid his costs of the action. In a nutshell, it appears to the liquidator that Giuessepe Emanuele is seeking to obtain damages as a result of a crime which his Honour Justice Higgins found he had committed.
50 The reference to the judgment of Higgins J of 1 August 1996 was to the judgment ordering the Commonwealth to pay Emanuele's costs in the criminal proceedings in the sum of $600,000. The letter goes on to complain about Andersons' refusal to provide Fisher Jeffries with a copy of the statement of claim that had been served on Hedley notwithstanding that counsel and solicitors retained by the companies in liquidation had contributed to the formulation of the pleading.
51 Andersons provided Fisher Jeffries with a copy of the statement of claim by letter dated 2 September 1996. On 4 September 1996 a date was fixed (16 October 1996) for the hearing of the notices of motion of the defendants (other than the first defendant) for security for costs and summary judgment. On 25 September 1996 the Australian Government Solicitor wrote two letters to Arthur. One concerned the application for security for costs which was to be heard on 16 October 1996. The letter seeks a response from the plaintiffs about the application and whether they would volunteer security. The other letter concerns the application for summary judgment. It was a lengthy letter comprising over four pages and involved a detailed critique of the writ and statement of claim. On 4 October 1996 Marsh wrote to Macks (but to the attention of Martin) seeking instructions and proffering certain advice. After summarizing the nature of the attacks the Australian Government Solicitor proposed to make on the originating process Fisher Jeffries said:
We are unable to advise you on the prospects of success of the Commonwealth's attack on the writ of summons and the statement of claim as to date we have been provided with inadequate information and no funding has been provided for that work. It is however unlikely that the Court would dismiss all the claims against both Hedley and the Commonwealth entirely if the notice of motion is defended. If it is not defended all claims are likely to be struck out. If the notice of motion is properly defended Mr Emanuele and the companies may be given leave to amend their pleadings to satisfy the Commonwealth's complaints.
It is a matter for you to decide whether to take any action to preserve the companies' claims in this action. Mr Emanuele's solicitors have requested that we contact them to discuss the notice of motion however we have not yet discussed it with them.
We recommend that you either:
1. instruct us urgently to obtain counsel's advice as set out below. If that advice is for the companies to abandon the compensation claim, then no further action need be taken in relation to the notice of motion. If counsel's advice is that the compensation claim has merit and reasonable prospects of success, then you can consider your options to provide funding in order to be represented at the hearing of the notice of motion before Justice Higgins on 16 October 1996; or
2. try to obtain the agreement of the Commonwealth's solicitor, Ms Zeeta Rowling to put off the Commonwealth's notice of motion as against the companies, pending the outcome of the hearing of their notice of motion against Mr Emanuele. The factors against that course of action are that:
2.1 Ms Rowling is unlikely to agree to that proposal.
2.2 If Mr Emanuele's solicitors are not given access to funding to defend the notice of motion they may not attend the hearing on 16 October 1996. The companies will then be no better off as the Commonwealth's notice of motion will be granted unopposed.
52 As to the application for security of costs the advice proffered by Fisher Jeffries was:
On the information available to us including the Commonwealth's proposed grounds for seeking security we do not consider that an application for security for costs would be successful, but it is a matter in the discretion of the court. Again, if the application is not opposed it may succeed.
53 Fisher Jeffries then went on to deal with the question of obtaining independent advice. The letter said:
Independent Opinion
We and counsel, Malcolm Blue have previously given you informal advice that the compensation claim may be weak because:
1. In the comments made by his Honour Justice Higgins in his costs decision handed down on 1 August 1996 it is clear that he considered that Mr Emanuele had committed the offence alleged against him but he was, for other reasons, entitled to be paid his costs of the action. In the compensation claim Mr Emanuele and the companies are seeking to obtain damages as a result of crime which his Honour Justice Higgins found Mr Emanuele committed.
2. Your instructions are that your investigations have not disclosed any loss suffered by either companies as a result of Mr Emanuele's prosecution.
Before reaching a decision to pursue or abandon the compensation claim, you may consider that as a matter of prudence you should seek independent advice as to the prospects of success of the compensation claim because:
1. The compensation claim is potentially a multi-million dollar claim on behalf of the companies. You may consider it appropriate to obtain formal written advice from independent counsel before a decision is made by you either to abandon or to pursue the claim.
2. Mr Jonathan Clark as solicitor for Mr Emanuele has previously suggested that an independent opinion as to the merits of the compensation claim be obtained. Mr Clark suggested that it may not be appropriate for Fisher Jeffries or counsel, Mr Blue, to provide that opinion because of the level of outstanding fees owed to them. We consider Mr Clark's suggestion is of little weight. However, it would assist in defeating any criticism if an independent opinion were obtained.
An independent written opinion would also be relevant to:
1. settlement discussions with Mr Emanuele;
2. your decision with respect to the Commonwealth's notice of motion.
54 There was then a discussion in the letter about who might be briefed and the source of funds that might be available for the advice. Those were Macks' own resources, whatever funds may exist in bank accounts of the two companies in liquidation or thirdly the $600,000 currently held by Scales & Partners. There is no document in evidence indicating that this letter was responded to at least promptly. On 14 October 1996 a meeting was held between Norman and Mr Robert Sallis (who, it appears was a solicitor working for Norman), and Blue and Mr Andrew Chung, solicitor from Fisher Jeffries. During the course of their discussions Sallis proffered the view that it was in Macks' best interest to be involved in the proceedings at least until he knew whether there would be separate trials to determine the questions of liability and quantum, whether the rules permitted an amendment to the endorsement of the writ of summons to allow the companies to claim against each of the defendants and whether Higgins J made orders for security for costs. Blue agreed with this and was thereby signifying at least his agreement that it was in Macks' best interest to be involved in the proceedings for the time being.
55 By letter dated 14 October 1996 Chung wrote to Macks seeking instructions about writing to Andersons authorizing Sallis and Mr Kevin Borrick (senior counsel) to appear on behalf of Emanuele Holdings and Emanuele Management on 16 October 1996. A draft letter to Andersons was enclosed. In that letter of 14 October 1996 Chung made only bare reference to the earlier letter of 4 October 1996. There was no complaint about instructions not having been received as earlier requested. The draft letter was, in final form, actually sent to Andersons and it can be inferred that was done on instructions arising from the letter of 14 October 1996.
56 For whatever reason the position of Fisher Jeffries had altered. It had been suggested by its letter of 4 September 1996 that certain steps should be taken but by its letter of 14 September 1996 it impliedly suggested that some less demanding course might be taken by Macks. The service of the writ on the defendants (other than Hedley) put in train a process involving the Australian Government Solicitor moving the Supreme Court for orders for security for costs or summary judgment. While Macks was advised by Fisher Jeffries to seek independent advice, that firm appears to have later adopted an approach implying that it was unnecessary to get that advice before counsel appeared at the hearing on 16 October 1996 representing the two companies in liquidation. They did appear and on 25 October 1996 Macks wrote to Fisher Jeffries asking them what had transpired at the hearing. This followed an earlier telephone discussion on 18 October 1996 between Martin (of PPB) and Marsh about this matter. No written reply is in evidence. However by 29 October 1996 a decision had been made by Macks to brief counsel (apart from Blue) to advise him on the proceedings in the Supreme Court.
57 By letter of that date Fisher Jeffries sent a brief to advise Mr Mark Rice of counsel indicating that Macks had agreed to pay him $3,000 to prepare his opinion. The brief contained, amongst other documents, the letter of 4 October 1996 from Fisher Jeffries to Macks. The instructions indicated that Rice was being asked to advise on the merits of the claims that had been brought by Emanuele Holdings and Emanuele Management. The brief to Rice did not include details of what had occurred at the hearing on 16 October 1996 nor were the written submissions filed by the defendants for that hearing provided to Rice. Specifically Rice was asked to advise on whether Emanuele Holdings and Emanuele Management had a sustainable cause of action even assuming loss could be shown. Rice was asked to assume that the Emanuele group of companies were in severe financial difficulties during the period of Emanuele's prosecution and that Emanuele had been unable to identify any development opportunities that the companies had lost as a direct result of his prosecution.
58 On 28 November 1996 Fisher Jeffries wrote to Andersons asking for an outline of submissions that had been made at the hearing on 16 October 1996 and details of orders made or undertakings given. This information was sought so as to be able "to advise (their) clients", presumably Macks. The letter noted that a facsimile had been received the day before from Andersons which indicated an amended statement of claim had to be filed by 5 December 1996. This letter was written by Chung who appears, at this point, to have assumed responsibility for the file at Fisher Jeffries.
59 On 29 November 1996 Blue wrote to Chung. He referred to a meeting that had occurred on 13 November 1996 between Norman, Sallis and Blue. At that meeting there had been discussion about what occurred on 16 October 1996 and what had to be done including amending the statement of claim. Chung had missed this meeting which is why, notwithstanding the matters discussed on 13 November 1996, Chung wrote on 28 November 1996 asking for essentially the same information. Blue, in his letter of 29 November 1996 to Chung, proffered the following advice:
I further confirm that Peter Norman and Roger Sallis invited the liquidator to make no final decision on whether to remain as a plaintiff in the proceedings until the amended documents are filed, and a final determination is made by Justice Higgins on the strike out application. I confirm my recommendation that the liquidator agrees to that course. I also confirm that we made it clear to Peter Norman and Roger Sallis that, in the meantime, the liquidator had not accepted on behalf of the companies any responsibility to pay the costs of the solicitors or counsel for the plaintiffs. Peter Norman accepted that this was the position.
60 On 11 December 1996 Chung wrote to Macks outlining what had happened on 16 October 1996. In that letter, after noting that counsel instructed by Andersons had been authorized to appear on behalf of Emanuele Management and Emanuele Holdings, Chung complained that Andersons had not provided information as to what had happened at the hearing despite requests that they do so. Chung noted that he had received from Blue a copy of the outline of submissions and the orders that had been made. Chung noted that the application for security for costs and the hearing of any objections to the amended endorsement and statement had been adjourned until 19 and 20 December 1996. Chung repeated the advice Blue had given in the letter of 29 November 1996 and proffered his own advice in these terms:
On the basis of the above reservations as to your commitment in these proceedings, we recommend that the companies remain parties to these proceedings, at least until after the hearing of the defendants' objections to the amended writ of summons and statement of claim. Once Justice Higgins has ruled on those objections, we will be in a better position to advise you of your commercial options.
61 A further meeting took place on 12 December 1996 between Chung, Blue, Norman and Sallis. By then an amended writ and an amended statement of claim had been filed and served in SC 996 of 1991 and proceedings SC 994 of 1996 had been commenced. At that meeting Sallis provided Blue with an index of the amended statement of claim and the statement of claim in the malicious prosecution proceedings (SC 994 of 1996) and, it appears, explained to Blue the structure of each of those statements of claim. Apart from the discussions which Blue had with Norman and Sallis at the meeting on 13 November 1996 there appears, from the documents, to have been no involvement in the formulation of the amended pleadings and their service on the part of those representing Macks. That is so, notwithstanding that Blue's note made at the meeting of 13 November 1996 indicates Sallis and Norman said they would provide those representing Macks and the company with the proposed amendments for comment and instructions prior to issue.
62 At the meeting on 12 December 1996 Sallis expressed concern about the possibility of Macks withdrawing from the proceedings and sought to persuade Blue and Chung that Macks should not make a decision to withdraw from the proceedings at this stage. One point relied upon by Sallis was information he had concerning the involvement of a senior Commonwealth figure in the entrapment of Emanuele. Sallis also addressed, at that meeting, problems in the proceedings that Blue had earlier identified. There was then discussion about how access might be gained to the funds resulting from the payment of the $600,000 costs by the Commonwealth to Emanuele to fund the Supreme Court proceedings. Sallis said it would be necessary for him to "fly around the country" to obtain witness statements to support this new allegation concerning the senior Commonwealth figure. The meeting concluded on the basis that Blue would give Sallis an answer before the next hearing in Canberra.
63 On 13 December 1996 Chung met with Rice though what occurred does not emerge from the documents. The application for summary judgment was heard on 19 and 20 December 1996. On 23 December 1996 Macks met with Blue and Chung. Blue informed Macks of what had been discussed at the meeting on 12 December 1996. At that meeting Macks said he remained unconvinced that the proceedings in the Supreme Court had any merit and that if it was pursued he did not want Cowell Clarke involved and he wanted to ensure that Andersons did not increase their claim on the $600,000 paid to Emanuele as costs. Blue assured Macks that neither would happen. Blue told Macks that he was now of the opinion that the proceedings in the Supreme Court may have some merit and that he had been persuaded by Sallis that many of the problems that he, Blue, had foreseen were not real problems. Macks indicated that he thought it would be difficult to prove Emanuele Holdings and Emanuele Management had suffered loss as a result of the persecution of Emanuele. Macks also said that he did not see any problem with deferring any action until the end of February provided that by then Andersons had established that there was a strong case and Emanuele had agreed to a basis for dividing the proceeds of the action.
64 On 9 January 1997 Chung sent a facsimile message to Blue. He was seeking Blue's views about a draft letter he proposed to send to Macks. The letter was sent on 16 January 1997. In his facsimile message Chung noted that Rice had not started to prepare the advice earlier requested and canvassed with Blue whether it would be inappropriate for him to undertake the task.
65 Several days later there was a discussion between Byrt of PPB and Mr Switajewski of Fisher Jeffries about whether the Rice advice should proceed. While telephone records of those discussions indicate a decision was made to defer the Rice advice pending an advice being prepared by Sallis, a letter to Macks dated 16 January 1997 from Chung suggested no steps had been taken to ask Rice not to proceed to prepare his opinion. However by 20 January 1997 it was clear that those instructions had been given. On that day Switajewski wrote to Rice informing him that the liquidator's instructions were for Rice to "put your work in relation to that opinion on hold". This was to be pending the receipt of an opinion and information from Sallis.
66 On 21 January 1997 Sallis, Newman, Blue and Chung met. They discussed at length the merits of the case and possible deficiencies in it. The discussion was generally an optimistic one. They also discussed the involvement of the senior Commonwealth figure that Sallis had referred to late the previous year. Chung wrote to Macks on 31 January 1997 setting out what had been discussed at the meeting on 21 January 1997. The letter had been settled by Blue. It repeated opinions Sallis had expressed including that three principal causes of action would survive the strike out application namely the malicious prosecution claim, the claim in negligence and the claim of misfeasance in public office. The letter recorded that Sallis had endeavoured to persuade Blue and Chung that the causes of action were properly founded on the facts. The letter also recorded that Blue was concerned about some of the legal elements but that Sallis would provide him with references to satisfy him that Sallis's views were correct. Chung then wrote:
On the basis of Mr Sallis's presentation, and assuming that his representations as to the law prove to be correct, Mr Blue formed the preliminary opinion that each of the main causes of action had some merit in terms of establishing liability on the part of the defendants.
67 Chung then turned to the question of causation and damage. The letter recorded the discussion that had occurred between Sallis and Blue though Chung did not express an opinion on his own behalf or on Blue's behalf about those matters. Chung then addressed the question of terms upon which an agreement might be reached between Macks and Emanuele about the apportionment of any damages recovered. Chung also addressed the question of the future of the action and indicated that because Sallis appeared reluctant to gather new evidence (as suggested at the meeting on 12 December 1996), there was no longer any need for Rice to delay the preparation of his opinion. Chung indicated that a position had now been reached where Blue and Rice could give an advice jointly though Chung suggested a further $1,000 might be required in addition to the $3,000 to which Macks had already committed himself. Chung indicated that it was preferable that Macks have the formal opinion before he decided whether to proceed with the action. Chung invited Macks to give him instructions. On 17 February 1997 Ms Mariana Tuccia of Fisher Jeffries wrote to Blue formally instructing him to provide a joint opinion with Rice. On the same day Tuccia wrote to Rice asking him whether the $3,000 earlier discussed would be sufficient. The documents in evidence do not disclose whether agreement was reached about fees.
68 On 7 March 1997 Higgins J gave judgment summarily dismissing the proceedings. On 11 March 1997 Blue spoke with Switajewski and proffered the view that having seen, but not read, the judgment of Higgins J, the opinion should be abandoned. He said he had not done any work on it as he had been awaiting authorities from Sallis. Switajewski spoke again with Blue on 17 March 1997. Blue indicated that the liquidator should settle the case now. On 24 March 1997 Rice wrote to Marsh of Fisher Jeffries. Rice commenced by saying that it was not an opinion. He also noted that he was not aware of the application for summary dismissal nor of the fact that it had been argued. Rice then set out a number of points which he described as points which "might help the liquidator come to the view independently of my own opinion that the plaintiffs have no claim".
The challenge to the approach of the trial judge to award costs against Macks personally
69 Counsel for Macks challenged the approach of the primary judge in several respects. Each is addressed shortly. However a consideration of his Honour's approach is of limited assistance in disposing of the appeal since it is an approach founded on a premise that is wrong, namely that Macks had not sought independent legal advice.
70 One ground of challenge concerned the primary judge's consideration of whether Macks had been an active party and had caused the incurring of costs for which he should be responsible. It was a consideration that had been discussed by Gobbo J in Bishof v Adams [1992] 2 VR 198. The primary judge characterized Macks' role as an active one. It is not entirely clear why his role was characterized this way but it is probably because, or principally because, Macks failed to decline to support the proceedings. That is, he failed to discontinue the proceedings in the name of the two companies. Implicit in the primary judge's approach is that Macks should have declined to support the proceedings, because the proceedings were entirely unmeritorious and Macks would have known that had he taken advice. For reasons discussed shortly Macks' approach to his continued involvement in the proceedings was not so unreasonable as to warrant the order for costs against him personally.
71 Another ground of challenge was the consideration by the primary judge of the special position of liquidators discussed in Bent v Gough (supra). That authority was referred to by the primary judge and there is nothing apparent in his Honour's reasons to suggest he was not alive to the special position of liquidators. Indeed much of the primary judge's reasons was a discussion of the competing factors likely to have been influencing Macks, as liquidator, in electing to follow the course he did. In the discussion his Honour identified factors, most notably the abject weakness of the claims, which should have influenced Macks, but did not because he had not taken independent advice. Any error of the primary judge does not derive from any failure to take into account the special position of Macks as a liquidator. Rather it flows from the balancing of considerations to ascertain whether, given Macks' special position, an order against him should be made in circumstances where the balance is distorted by the erroneous finding that Macks had not taken independent advice.
72 The next ground of challenge concerned the primary judge's consideration of the role an application for security for costs should play in considering the liability of a liquidator for costs in proceedings he has maintained or brought. For the reasons already summarized, his Honour concluded that the election made by the defendants to seek to have the proceedings summarily dismissed rather than seeking security did not tell against ordering Macks to pay the costs. Making an application for security would, in many instances, be the appropriate way for a party to guard against incurring costs that might not be recovered in proceedings brought or maintained by a company in liquidation, rather than later seeking to obtain a costs order against the liquidator: see Metalloy Supplies Ltd (In Liq) v MA (UK) Ltd [1997] 1 All ER 418 and Knights Case (supra). However there is no inflexible rule that this be done. Indeed this case, for the reasons given by the primary judge, illustrates a situation where the course taken by the defendants was an appropriate one.
73 The last ground of challenge that can be disposed of briefly is the question of notice to Macks. It was not until after Higgins J gave judgment summarily dismissing the proceedings that Macks was put on notice that he might personally be liable for the costs of the proceedings. It was ultimately common ground in the appeal that Macks was first given notice informally at a meeting on 7 April 1997. It was noted by the primary judge that Macks was not given notice till after summary judgment. His findings that Macks was broadly aware of the possibility of costs being awarded against him was open. However, as with a number of what have become subsidiary issues, the primary judge's consideration of this issue was linked to his view that Macks had not taken independent legal advice which is discussed shortly. The failure to give a third party, and particularly a liquidator, express and early notice that costs will be sought against them personally will often be a factor militating against making such an order. All the more so if the conduct of the third party during the currency of the proceedings is relied on in support of the order. However, whether notice is given is only one consideration. In the present case, its consideration by the primary judge against what he understood the position to have been was unexceptionable. However given what in fact was the position, early notice to Macks (for example at the time of service of the writs) might have prompted Macks to follow a different course. He may, for example, have informed the defendants that he was not committed to the proceedings and wished to get advice. He may have sought advice more promptly and insisted on the early production of the advice. In those circumstances the defendants may have agreed to defer pursuing the interlocutory application for summary dismissal until that advice had been received. Thus, the failure to give early notice is a factor that, on the facts as they are now known, would militate against ordering Macks to pay the costs personally.
74 It now is necessary to return to what has become the central issue in this appeal, the conduct of Macks in the context of the legal advice he was given and, in certain respects, was not getting.
75 Much, but not all, of the material tendered in the appeal relates to the period between the time Macks was appointed liquidator of Emanuele Holdings and Emanuele Management and the time Higgins J gave judgment summarily dismissing the proceedings. It is in this period that the conduct of Macks must be scrutinized and an assessment made concerning the extent to which he acted on the advice of others. There were, in this period, six events of significance concerning the prosecution of the proceedings in the Supreme Court in which Macks was involved. Before considering each it is desirable to say something about the state of the evidence. The fresh evidence before this Court is documentary evidence only. The primary judge had the benefit of hearing evidence from Macks. Nonetheless this documentary evidence paints a far more complete picture than that emerging from the evidence before the primary judge of what occurred in late 1995, during 1996 and in early 1997. However some aspects of the chain of events revealed in the documents remain obscure and there is no oral evidence to explain them. Some of the affidavit and oral evidence of Macks before the primary judge is very difficult to reconcile with some of the documents. A stark example is the note of the meeting of 23 December 1996 which records that Macks then said that he remained unconvinced that the Supreme Court proceedings had any merit. That is to be contrasted with Macks' statement in his affidavit that at that stage he thought the claims were good. An inconsistency such as this raises a real question about whether Macks' account in his evidence before the primary judge can be relied on at least as it concerns his views from time to time about the prospects of the proceedings succeeding. It perhaps even raises a question about whether he was a truthful witness. However matters such as this have not been put to Macks for him to explain and it is inappropriate to express a concluded view about them. The task of this Court is to distil, as far as possible, what occurred in relation to these six events and assess their relevance to the issue of whether Macks should be required to pay the costs personally and on an indemnity basis.
76 The following is, in summary form, how Macks reacted to or was involved in, each of the six events. The first was the amendments of the writ in SC 796 of 1991 on 9 April 1996. By that stage Macks was conscious of the need to obtain independent legal advice about the proceedings. Several days after the writs were amended Macks conferred with lawyers advising Emanuele and lawyers he had retained himself. While the instructions to renew and amend the writ were given directly to Blake Dawson Waldron by PPB that occurred when lawyers had been retained by Macks who, in substance, advised him to agree to this course. The second event in which Macks was involved was the finalization of the statement of claim in the proceedings. His involvement was through counsel (Blue) he had retained to advise him.
77 The third event was the service of the writ on the defendants (other than Hedley). That process began by the writ being sent to the Australian Government Solicitor either directly by Andersons or through Blake Dawson Waldron. It appears from the documents tendered in the appeal and the evidence of Macks before the primary judge that this step was taken without the express instructions of Macks. However, he plainly acquiesced in the service when he became aware that it had taken place in the sense that a request had been made of the Australian Government Solicitor to accept formal service. This event is probably the most significant. That is because by serving the defendants, the plaintiffs effectively lost control over the course the proceedings would take. They did so in the sense that from that point the events which resulted in the application for summary dismissal were substantially influenced by the attitude taken by the defendants in the proceedings.
78 The fourth event was the initiation by the Australian Government Solicitor of the interlocutory application seeking summary judgment and the hearing on 16 October 1996. It was plainly a matter Macks discussed with Fisher Jeffries as is apparent in the letter from Marsh to Norman of 27 August 1996 in which Marsh sets out the attitude of the liquidator. After the date was fixed for the hearing of that application, Macks was given advice by both Blue and Fisher Jeffries that he ought to remain in the proceedings and that it was unlikely security would be ordered or that summary judgment would be given at least without a further opportunity being provided to amend the pleadings. It must be accepted that at this stage advice was given to Macks by Fisher Jeffries to obtain legal advice from other counsel. While Macks did not act on this advice until after the hearing on 16 October 1996, the advice he received shortly before the hearing was not that he should not be involved in that hearing without the advice of other counsel, but rather that he could instruct counsel to appear on his behalf which he did. The advice from Fisher Jeffries concerning a course involving contacting the Australian Government Solicitor and seeking the deferral of the hearing of the interlocutory application was, in substance, that it was unlikely to bear fruit.
79 The fifth event was the amendment of the statement of claim following the hearing on 16 October 1996 and the filing of the writ in SC 994 of 1996. It appears those representing Macks had no substantial involvement in the reformulation of the amended statement of claim and the institution of the fresh proceedings.
80 The sixth event was the hearing of the application for summary judgment on 19 and 20 December 1996. The plain advice of both Blue and Chung from Fisher Jeffries was that Macks should maintain the companies' involvement in the proceeding until Higgins J dealt with the application for summary judgment. As earlier discussed, in December 1996 Macks was expressing his reservations about the causes of action and it can be inferred that he had had them for some time. However the advice he was getting and in particular the advice given on 23 December 1996 was that the claims had some merit. There is nothing to suggest there was a material change in this position before Higgins J gave judgment on 7 March 1997 summarily dismissing the proceedings.
81 It cannot be said that Macks did not retain independent legal advice in the sense that he relied only on the advice of lawyers advising Emanuele. He plainly did not. However Macks was slow to seek independent advice in the sense of briefing counsel, whose fees Macks would pay, to advise him of the two companies prospects in the proceedings. Further he did not seek independent advice of the latter type before he acquiesced in the service of the writs on the defendants and did not obtain it before agreeing to the course that was adopted on behalf of all plaintiffs in the hearings in October and December 1996. However at all material times Macks was acting through lawyers he had retained. At no stage, apart from the letter of 4 October 1996 advising that independent counsel should be briefed, did Macks receive advice from them that greater caution should be exercised than he had been exercising to that point. Even then, within two weeks the firm who had sent the letter of 4 October 1996 was suggesting Macks be further involved in the proceedings without that advice being sought let alone received. Apart from that letter, the lawyers acting for him either did not advise him to refrain from taking the steps that were taken or advised him to take them.