//
[2020] VSC 296
General information, not legal advice.
Supreme Court of Victoria
2020-05-29
RIORDAN J
Original judgment source is linked above.
LEGAL PRACTITIONERS - Application to restrain former solicitor of a company from acting for majority shareholders in oppression claim - Whether solicitor possessed confidential information - Whether solicitor should be restrained in the interests of the administration of justice - Application refused.
1 By summons filed 16 August 2019, the first to fourth defendants ('the applicants') apply for orders that the plaintiffs be restrained from retaining Leem Lawyers or Chuen Ren Lim to act for them in this proceeding.
2 In support of the application, the applicants relied on the following affidavits:
(a) Affidavits of Alexander Chee Soon Ting ('Mr Alex Ting'):
(i) affirmed 16 August 2019;
(ii) sworn 19 August 2019; and
(iii) sworn 23 September 2019.
(b) Affidavit of Chok Hui Kong ('Mr Kong') affirmed 20 September 2019.
(c) Affidavit of Chong Che Wong ('Mr Steven Wong') affirmed 23 September 2019.
(d) Affidavit of Su King Cheng ('Mrs Cheng') affirmed 20 September 2019.
(e) Affidavit of Tiong Pong Ting ('Mr Tiong Ting') affirmed 20 September 2019.
(f) Affidavit of Yan Hao Ong affirmed 16 October 2019.
3 In opposition to the application, the plaintiffs relied on the following affidavits:
4 By Originating Process filed 4 June 2019, the plaintiffs make an application under ss 233, 461, 467 and 1071F(2) of the Corporations Act 2001 (Cth) ('Corporations Act') and apply for orders for the winding up of Orchid Land No. 2 Pty Ltd ('the Company') or the purchase by the plaintiffs of the applicants' shares in the Company and units held in the Orchid Land No. 2 Trust ('the Unit Trust').
5 By Minority Points of Claim filed 9 December 2019, the applicants apply for orders including the purchase by the applicants of the shares in the Company and the units in the Unit Trust held by the first plaintiff, Makfam Pty Ltd ('Makfam'), and the seventh defendant:
(a) at the net asset value adjusted to reflect the conduct by them and their associates which grounds an order pursuant to s 233 of the Corporations Act; or
(b) at 20% below the net asset value.
6 The Company was registered on 7 May 2014 and is the trustee of the Unit Trust.
7 On 14 May 2014, the Company and the following persons entered into a Share and Unit Holders' Deed ('the Deed'):
Makfam Pty Ltd in its capacity as trustee for the Mak Superannuation Fund (Holder 1);
AJR & HRS Crow Pty Ltd in its capacity as trustee for the AJR Crow Family Trust (Holder 2);
Impetus Ace Pty Ltd in its capacity as trustee tor the Impetus Trust (Holder 3);
CV Australia Pty Ltd its capacity as trustee for the SLK Trust (Holder 6);
Scrays Investments Pty Ltd in its capacity as trustee for the Hanvey Superannuation Fund (Holder 7);
8 The recitals to the Deed explained the structure of the Unit Trust as follows:
9 The unitholders in the Unit Trust were as follows:
880,000 Units, being 32% of the issued Units in the Unit Trust
385,000 Units, being 14% of the issued Units in the Unit Trust
453,750 Units, being 16.5% of the issued Units in the Unit Trust
123,750 Units, being 4.5% of the issued Units in the Unit Trust
123,750 Units, being 4.5% of the issued Units in the Unit Trust
371,250 Units, being 13.5% of the issued Units in the Unit Trust
275,000 Units, being 10% of the issued Units in the Unit Trust
137,500 Units, being 5% of the issued Units in the Unit Trust
10 The parties acknowledged in clause 5.1 that each of the Holders held shares in the Company in the same percentage as their unitholding in the Unit Trust.
11 As noted in Recital C, each holder nominated the principal whose number corresponded with the holder number. For example Holder 1, being Makfam Pty Ltd, nominated Mr Mak, who is recorded as Principal 1.
12 The Deed recorded that the Principals currently contracted and involved in the business, being the property development enterprise to build apartments at 68 Cape Street, Heidelberg, Victoria ('the Property') operated by the Company as trustee for the Unit Trust ('the Business'), were as follows:
(ii) the manager of administrative aspects of the Business.
(b) Archibald John Ross Crow ('Mr Crow') through AJR Crow Pty Ltd, the project manager for the Business.
(d) Mr Tiong Ting (Mrs Cheng's husband), the internal accountant of the Business through his accounting firm KST Partners (of which he is a partner).
13 With respect to decision making, clause 7.1 of the Deed provided that:
(a) Any decisions made by the Holders in their capacity as shareholders of the Unit Trust Trustee shall be made by a Unanimous Resolution of the shareholders;
(b) Any decisions made by the Holders in their capacity as unitholders of the Unit Trust shall be made by a Unanimous Resolution of the unitholders;
(c) Any decision made by the Directors shall be made by a Unanimous Resolution of the Directors; and
(d) Any decision made by the Principals shall be made by a Unanimous Resolution of the Principals.
14 The dispute resolution procedure under the Deed was as follows:
The Parties (whether it be the Holders, Directors or Principals as the case may be) shall endeavour to resolve disputes amicably. If they are unable to do so, the following procedure shall be invoked (and this includes disputes about reliance or purported reliance on subclause 14.4 by one or more of the Parties to this Deed):
(a) A Party may call a meeting to resolve the disagreement by serving a notice in writing detailing the nature of the disagreement to all of the other relevant Parties and specifying a time and a place for the meeting which shall not be more than 7 days after the service of the notice ("the First Meeting");
(b) If the disagreement cannot be resolved at the First Meeting, the Parties shall arrange a second meeting ("the Second Meeting") before the end of the First Meeting which shall be held at a mutually agreed time and place as soon as practicable but not later than 7 days after the First Meeting;
(c) If the disagreement cannot be resolved at the Second Meeting, the Parties shall no more than 7 days after the Second Meeting refer the matter to mediation by a mediator agreed to by a Unanimous Resolution of the Holders, Directors or Principals (as the case may be) party to the dispute or in the absence of agreement then to a mediator nominated by the President of the Law Institute of Victoria for the time being;
(d) Any mediator nominated under this clause shall call a further meeting of the relevant Parties ("the Mediation Meeting") as soon as practicable but no more than 21 days after the mediator's appointment, after which time the appointment will terminate and a new appointment shall be made under the preceding paragraph;
(e) If the disagreement cannot be resolved at the Mediation Meeting, then the disagreement shall be referred to arbitration in accordance with the Commercial Arbitration Act 2011 (Vic), and the President of the Law Institute of Victoria at the request of one of the Parties to the dispute shall appoint an arbitrator within 14 days of the date of the Mediation Meeting.
(f) The appointed arbitrator shall arrange the date of the arbitration ("the Arbitration Meeting") as soon as practicable but not later than 30 days after the arbitrator's appointment, after which time the appointment will terminate and a new appointment shall be made under the preceding paragraph;
(g) If the disagreement cannot be resolved at the Arbitration Meeting the arbitrator shall make a decision in writing and such decision shall be binding on all of the relevant Parties to the dispute and the arbitrator shall not be required to disclose the reasons for any such decision unless compelled to by law;
(h) If the relevant Parties to the dispute reach agreement at any stage whether before, during or after any meeting scheduled under this clause, they shall record such agreement in writing signed by each of them;
(i) If at any stage and for any reason one of the Parties to the dispute cannot be present at a meeting held in accordance with this clause then that Party may by writing served on the other Parties to the dispute before the meeting nominate a representative to attend that meeting in their stead and that representative may take part in the meeting and make decisions as if they were the Party that they represent;
(j) If a Party or their duly nominated representative does not attend a meeting held in accordance with this clause then the remaining Parties or any duly appointed arbitrator may make a determination in writing which shall be binding on all Parties to the dispute whether or not they were present at the relevant meeting; and
(k) The costs of any mediation or arbitration will be borne equally by the Parties to the dispute and each Party must bear their own legal costs.
15 By contract of sale dated 14 May 2014, the Company agreed to purchase the Property from Decorayte Pty Ltd for the price of $2,750,000.
16 The Property was purchased for the purpose of developing it into 23 apartments plus a commercial unit ('the Development').
17 The Development was completed in two stages with occupancy permits issued in September 2018 and December 2018. All but two of the apartments have now been sold and after payment of the loans, the Company holds cash in excess of $6,000,000.
18 By building contract entered into in or around November 2014, Leda Constructions Pty Ltd ('Leda Constructions') agreed to design and construct the Development for the Company. Leda Constructions was a company associated with Lyle Hanvey (Principal 7) ('Mr Hanvey').
19 Leem Lawyers was instructed by Mr Mak to act on behalf of the Company with respect to the contract to purchase the Property and Leem Lawyers have acted on behalf of the Company on the sale of each of the apartments on completion of the Development.
(a) loans from the National Australia Bank ('the NAB'), being a construction loan of $10,978,650 together with an overdraft facility of $250,000 on 15 December 2016; and
(b) an advance under a loan agreement with Amanda Judy Lai ('Ms Lai') dated 19 November 2016 for $1.8 million at an interest rate of 13% per annum repayable on 30 June 2018 ('the Lai Loan').
21 These financing arrangements were entered into after a meeting of 'syndicate members/representatives' at the RACV Club on 16 September 2016. In attendance were Mr Tiong Ting, Mr Mak, Mr Steven Wong, Mr and Mrs Kong and Mr Crow. With respect to the review of the financing situation, the minutes of the meeting record as follows:
22 By memorandum of understanding dated 18 December 2018, the Company advanced $300,000 interest free to Mr Tiong Ting and CV Australia Pty Ltd ('CV Australia'). The terms of the memorandum included as follows:
Tiong Ting requests that $300,000 is borrowed from Orchid Land No 2 Pty Ltd (as trustee of The Orchid Land No 2 Trust) as an early advance on monies that will be paid to the SLK Trust by Orchid Land No 2 as the project is wound up and funds distributed to Unitholders.
This loan is to be repaid by allocating funds due to CV Australia Pty Ltd from the Orchid Land No 2 trust, in order, until the loan is fully repaid from
• Return of Unit Holder funds
• Profit share distribution from the Cape Vue Development
No interest is payable on the loan.
By signing this document all parties agree to the above arrangement.
23 By emails of 24 and 29 December 2018, it was further agreed that CV Australia would be entitled to retain the first $300,000 from the distribution set out in the memorandum and to repay the loan from subsequent distributions.
(a) the NAB loans had been fully repaid; and
(b) the sum of $1,000,000 had been repaid to Ms Lai with the balance of the Lai Loan of approximately $81,000 being repaid in February 2019.
25 On 2 January 2019, Mr Crow proposed a distribution of profits of $1.75 million to the unitholders.
26 By email of 2 January 2019 to Mr Crow, Mr Alex Ting requested, on behalf of himself and Mrs Cheng as directors of the Company, that no distributions or payments to any unitholder or related party be made, stating: 'We request to seek advice on the compliance of Orchid Land 2 Pty Ltd before any distribution is made and will do so as soon as practicable.'
27 On 19 January 2019, Mr Alex Ting replaced his mother, Mrs Cheng, as a director of the Company.
28 On 28 February 2019, Mr Mak called for an ordinary meeting of shareholders and unitholders for 13 March 2019 to discuss the distribution of profits to unitholders and other matters.
29 After an initial meeting on 9 April 2019, there was a further meeting on 16 April 2019 at which Mr Alex Ting presented a letter addressed to Mr Mak dated 15 April 2019. The letter identified a number of issues under the following headings:
(a) Disagreement relating to apparent breaches by you of your obligations pursuant to:
(i) clause 4.5(c) of the [Deed] by your failure to provide full and truthful information on matters relating to the affairs of Orchid Land and its business;
(ii) clause 6.6 of the [Deed], by you purporting to manage the affairs of Orchid Land and trustee notwithstanding that the directors are responsible for management, control and operations;
(iii) clause 8 in relation to capital contributions.
(b) Disagreement regarding your assertion of management control of Orchid Land and decisions made by you on behalf of Orchid Land.
(c) Disagreement regarding access to documents of Orchid Land to establish whether proper books and records have been maintained.
(d) Disagreement in relation to your conduct as a member, director and secretary of Orchid Land.
(e) Consequence of you being considered a 'Defaulting Holder' under clause 14.4 of the [Deed].
The letter was signed by Mr Alex Ting, Mr Kong and Mr Steven Wong.
30 There was an attempt to resume the meeting on 15 May 2019, but Mr Alex Ting, Mr Steven Wong and Mr and Mrs Kong did not attend.
31 On or about 6 May 2019, CV Australia engaged Lincolns Lawyers with respect to the dispute.
32 By email of 27 May 2019 to Lincolns Lawyers, Leem Lawyers stated that they had been consulted by Mr Mak in relation to the dispute with CV Australia.
33 By letter dated 31 May 2019 to Leem Lawyers, Lincolns Lawyers advised that they were instructed that Leem Lawyers had undertaken work, including the following:
(a) advising on the construction financing with NAB, including subsequent extension of the facility;
(b) drafting agreements for Orchid Land, including the Loan Agreement between Orchid Land and Amanda Judy Lai. This loan is one of the matters the subject of the present dispute;
(c) advising Orchid Land regarding the issue of the delay in settlement and the failure to collect the deposit for Unit [7.02];
(d) advising Orchid Land regarding distribution of funds to unitholders (see for example your March 2019 invoice to Orchid Land);
(e) advising on payment authorities and management control; and
(f) advising regarding the maintenance of records by Orchid Land and Mak, and Mak's record keeping, and supply of supporting documents.
They concluded that Leem Lawyers had a conflict of interest and demanded that they cease acting on behalf of Mr Mak.
34 By letter dated 4 June 2019 to Lincolns Lawyers, Leem Lawyers disputed that there was a conflict of interest in acting for Mr Mak or Makfam.
35 On 4 June 2019, Leem Lawyers filed this proceeding on behalf of the plaintiffs.
36 By Minority Points of Claim filed 9 December 2019, the applicants seek relief against the plaintiffs on the following grounds:
(d) refusal to co-operate with the agreed dispute resolution process;
(e) unauthorised conduct by Mr Mak and Makfam in relation to Leda Constructions;
(f) failure to make proper disclosure in respect of the Lai Loan;
(g) no deposit paid and no default notice served regarding unit 7.02;
(h) changes to unit 7.02 after entry into contract of sale; and
(i) assertion of management control and exclusion of minority from the affairs of the Company.
37 On 16 August 2019, the applicants filed this summons.
38 There are three bases on which a court may restrain a solicitor from continuing to act for a party, being:
(a) to prevent the misuse of confidential information;
(b) to ensure the proper administration of justice; and
(c) to enforce a solicitor's equitable duty of loyalty.
39 It is uncontroversial that a court will restrain a solicitor from acting against a former client if:
(a) a reasonable person informed of the facts might reasonably anticipate a danger of misuse of confidential information of a former client; and
(b) there is a real and sensible possibility that the interest of the practitioner in advancing the case in litigation might conflict with the practitioner's duty to keep the information confidential and to refrain from using that information to the detriment of the former client;[1]
('Confidentiality Ground').
40 The court has inherent jurisdiction to restrain solicitors from acting in a particular case as an incident of its inherent jurisdiction over officers of the court and to control its process in aid of the administration of justice ('Administration of Justice Ground').[2] The juridical basis of this ground is not inter-partes fiduciary or contractual obligations, or punishment for misconduct. It is rather the administration of justice, the public interest and the appearance of propriety of officers of the court.[3]
41 The jurisdiction is enlivened if a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a solicitor be prevented from acting against a former client in the interests of the protection of the integrity of the judicial process and appearance of justice.[4]
42 In determining whether it is necessary to restrain a solicitor from acting against a former client in the interests of justice and to preserve the integrity of the judicial process, the court will have regard to the following considerations:
(a) The general right of a party to be represented by its choice of lawyer is balanced against the overriding principle of protecting the integrity of the judicial process.[5]
(b) It need not be established that the restraint is necessary to ensure the protection of confidential information. The Administration of Justice Ground is independent to the Confidentiality Ground.[6] As Black J said in Re IPM Group Pty Ltd:
The Court's power to restrain a solicitor from acting on this basis has independent scope and may be established, notwithstanding that a risk of misuse of confidential information is not established, since it is directed to preserving the administration of justice, the public interest and the appearance of propriety of officers of the Court.[7]
43 It is controversial whether there is a third ground for restraining a solicitor from acting for a former client based on a duty of loyalty which survives termination of the retainer, but as I opined in ACN 092 675 164 Pty Ltd v Suckling, in Victoria the duty of loyalty is a separate ground for restraining a solicitor from acting ('Duty of Loyalty Ground').[10]
44 In Spincode Pty Ltd v Look Software Pty Ltd,[11] Brooking JA held that the duty of loyalty, which survived termination of a retainer, was an independent ground for restraining a lawyer from acting. The source of duty he preferred was an equitable obligation of loyalty, which imposed 'an abiding negative obligation not to act against the former client in the same [or closely related] matter'.[12] Brooking JA's formulation of the duty has been endorsed by numerous decisions in Victoria.[13]
45 The applicants contend that Leem Lawyers and Mr Lim should be prevented from acting for the plaintiffs in this proceeding:
(a) to prevent the misuse of confidential information;
(b) to ensure the proper administration of justice; and
(c) to enforce a solicitor's equitable duty of loyalty.
Prevention of the misuse of confidential information
46 On this application, the applicants contend that a risk of the misuse of confidential information arises from Mr Lim's involvement in the following matters, which are the subject of the dispute between the plaintiffs and the applicants:
(a) The non-payment of the deposit on the Sale of Unit 7.02 to Mr Hanvey.
(b) The failure to serve a notice of default on Mr Hanvey.
(c) Changes to Unit 7.02 after entry into the contract of sale.
(d) Failure to make proper disclosure in respect of the Lai Loan.
(e) Assertion of management control and exclusion of minority from the affairs of the Company by Mr Mak not permitting Mr Lim to accept instructions from Mr Alex Ting.
(f) Assertion of management control and exclusion of minority from the affairs of the Company by Mr Mak not agreeing to a change of signatory to the Company bank account.
47 For the reasons set out below, I do not consider with respect to any of these matters:
(a) that a reasonable person informed of the facts might reasonably anticipate a danger of misuse of confidential information of the Company; or
(b) that there is a real and sensible possibility that the interest of Leem Lawyers and Mr Lim in advancing this proceeding might conflict with their duty to keep the information confidential, and to refrain from using that information to the detriment of the Company.[14]
The non-payment of the deposit on the Sale of Unit 7.02 to Mr Hanvey
48 The applicants contend that, in breach of his duties to the Company and the unitholders, Mr Mak agreed, on behalf of the Company, for Mr Hanvey not to pay the deposit on its due date and to pay interest at a reduced rate on the unpaid deposit.
(a) Mr Hanvey was a unitholder and, through his company, Leda Constructions, the builder of the Development.
(b) By Contract of Sale dated 22 December 2014, Mr Hanvey agreed to purchase Unit 7.02 for $1,350,000 with the deposit of $135,000 payable on 15 January 2015 and the balance due 14 days after the vendor gave notice of the registration of a plan of subdivision.
(c) The Contract of Sale was prepared by John Perillo, the then solicitor for Decorayte Pty Ltd (the original vendor of the Property) on behalf of Mr Hanvey and the signed contract was then provided to Mr Mak. Leem Lawyers subsequently acted for the Company on the settlement of the sale to Mr Hanvey.
(d) The deposit was not paid prior to the settlement of Unit 7.02 on 27 February 2019, at which time Mr Hanvey paid interest on the deposit as follows:
Interest on deposit of $135,000 at 3% p.a. from 22 December 2014 to 31 December 2018 (1,469 days)
Penalty interest per Special Condition 18.2(d) on $1,350,000 at 14% from 31 December 2018 to 26 February 2019 (157 days)
(e) The reduced interest chargeable on the deposit was in accordance with the instructions of Mr Mak.
(f) By email of 8 February 2019, the quantity surveyor stated:
It should be noted that the builder has not claimed for the delay costs for his site overheads while the project was unexpectedly delayed until NAB finally confirmed their approval of the construction final and hence the agreed start date was able to be confirmed.
(g) By email of 15 February 2019 to Mr Alex Ting, Mr Hanvey explained the circumstances with respect to the non-payment of the deposit as follows:
You have asked why there was no Deposit payed on 7.02.
Had you been involved with this project at the very beginning, you would be aware that obtaining bank finance took an exceptionally long time from application.
Firstly the bank was to loan on the property, so the project could make a start, "to encourage the presales" so satisfying the bank requirements. OL2 instructed Leda Constructions to start the project Relying on the NAB proposal, Initially the consultants ($275,000) for permits, and then the excavation and other works, due to bank policy from above, the Business bank at the NAB declined their support in funding the two parts of finance, 1. Early works, 2. balance of works, to one loan for the entire project. This left OL 2 in a vulnerable position as their funds at the time dried up. They owed Leda Constructions a balance of $153,000, from invoices totalling $504,000 as at February 16. It was decided to use my $135,000 cash deposit for 7.02 to pay Leda and we would wait until finances became available to OL to replace the deposit and pay the balance. We received funds November 16, 2017. Leda stopped work in February and restarted onsite in November. Under the contract, delay costs, were $1,150.00 per day, of which I decided not to make a claim as it would have been detrimental to the shareholders due to a banks reversal of a promise. That alone was almost 9 months, worth in excess of $100K.
Prior to bank contracts signing, the NAB insisted on BG's, in the OL2 documents, where as our contract (Leda) with OL2 was either BG's or cash options (attached), Leda wanted cash as increments payments per progress claim would take at least 6 months to reach $520,000. So not to delay the project any longer and maybe force OL2 to go elsewhere if Leda did not supply a BG, we accepted the NAB conditions and put forward $524,000 BG, of which was mainly cash. This put a terrible strain on Leda's cash flow as we already had over $500K BG's issued to other clients. I spoke to Mak and John, that I would put together the cash over the next couple of months for the deposit, to fulfil my obligation. We struggled with gathering the cash, I needed to go to the bank for a BG, although I had sufficient equity in my property portfolio, the bank insisted that I supply my 2018 financials. To complete my set of accounts, to obtain this BG I needed OL2 to issue me their 2018 set of accounts, so to complete mine. I am still waiting on these returns some 8 months on. The issuing of these accounts has delayed my company severely on many fronts including my obligation to the syndicate.
(a) construction work stopped in February 2016 and only restarted in November 2016 when the Lai Loan and the NAB construction loan were obtained;
(b) the building contract delay costs payable to Leda Constructions were $1,150 per day; and
(c) the reason for not demanding payment of the deposit and the acceptance of the reduced penalty interest was to partly offset the claim by Leda Constructions for the delays in the commencement of construction of the Development.
51 The applicants contend that Mr Lim may have confidential information about the circumstances in which Mr Mak agreed not to demand the deposit and accepted reduced interest on settlement of the sale of the unit. As a result of Mr Lim acting for the plaintiffs, they have lost an opportunity to interview Mr Lim as part of their investigation about these matters.
52 I am not satisfied that a reasonable person informed of the facts might anticipate a danger of misuse of confidential information with respect to this issue for the following reasons:
(a) Mr Mak does not contend that he obtained or relied on any advice from Mr Lim with respect to the decision not to demand the deposit or to accept reduced interest for late payment of the deposit.
(b) The issue for trial is, in substance, whether the conduct of Mr Mak was made in the commercial interests of the Company and its unitholders.
(c) Mr Lim deposes to the fact that he had no involvement with these issues and only acted on the instructions of Mr Mak in accepting the interest paid by Mr Hanvey on the settlement of the sale by the Company.
53 For these reasons, in my opinion, there is no real prospect of Mr Lim being a witness with respect to these issues.
54 The applicants' concern with respect to this and the following issues, are not about the disclosure of confidential information. Rather, it is about the prospect that there is information which will not be disclosed to them. The applicants will have the opportunity of inspecting all relevant files and records of Mr Lim with respect to the relevant transactions and therefore even this risk appears to be remote.
The failure to serve a notice of default on Mr Hanvey
55 The applicants contend that, in breach of his duties to the Company and the unitholders, Mr Mak refused to serve a rescission notice on Mr Hanvey for default under the contract of sale of Unit 7.02.
(a) By email of 15 January 2019 at 11:33 am to Mr Lim, copied to Mr Mak, Mr Kong and Mr Crow, Mr Alex Ting stated:
I understand that you're the solicitor acting for settlements for Orchid Land No 2 Pty Ltd ("Developer").
In respect of those units, is the Developer in a position to issue notices of Default/Rescission and if so, is there any reason for the Developer not to do so?
(b) On the same day at 7:01 pm, Mr Lim replied to all stating:
There is no problem for us to issue a rescission notice if it is the instruction of Orchid Land No. 2 Pty Ltd.
As indicated to you, the instruction regarding settlement has so far come from Shoei Mak & John Crow. You should liaise with them and confirm that this is the instruction of the company. Otherwise you are going to end up with various instructions from various directors.
As you are aware, the only unit which is not settled after the 14 days is Unit 7.02 (Lot 23) sold to Lyle Hanvey. Lyle was required to buy Unit 7.02 for the price when he sold the development land to Orchid Land.
The company will have to decide if it is in the interest of the company to rescind the contract of sale. If the company wants to go ahead and rescind, then let me know.
(c) On the same day at 10:09 pm, Mr Alex Ting replied to all stating:
Would you please draft the notice and provide me with a copy along with the contract for a quick once over before its sent?
I cannot see how this might not be in the best interest of the Orchid Land No. 2 Pty Ltd and I am happy to be corrected if otherwise.
(d) On the same day at 10:52 pm, Mr Lim replied to all stating:
You need to liaise with Shoei Mak & John because they were the ones who have been instructing me re sale & settlement. Get Orchid Land's agreement on the rescission notice for Lot 23 if that is what the company wants.
It is for Orchid Land to determine what is in their interest. What you individually has [sic] considered to be Orchid Land best interest is fine by me. However I cannot be taking instructions from a director; otherwise there will be conflicting instructions. If you are to be the source of instructions from now on (instead of Mak & John), then this has to be confirmed by Orchid Land.
Although you refer to 'Notices' there is only one lot involved - Lot 23 (Lyle Hanvey) which has passed the settlement period. I presume you are referring to this lot. For clarity, can you confirm that this is the apartment that you are referring to? I am happy to draw a draft rescission notice in anticipation of the confirmation of instructions from Orchild [sic] Land but this will involve Orchid Land incurring expenses.
All contracts of sale are with the company secretary, which I believe is Mak. I suggest that you get whatever document you require from him. I want to avoid the situation where I am having to respond to requests from every director of the company. But if this is what Orchid Land determines, I am quite prepared to respond to any director's requests. Again this will involve legal expenses. In fact I have already spent much time on non sale and settlement issues.
(e) On the same day at 11:24 pm, Mr Alex Ting replied to all stating:
Apologies ... the plural in the subject (now corrected) was a carry over from the earlier email... as Lot 23 is the only one in default, this is the only one I'm referring to.
Hi Mak and John
Would you please advise by end-tomorrow if you have any objections to the proposed course of action and if so, your reasons?
My only thought is that we will also concurrently and shortly be claiming for delay in the building contract. Though I see both these matters as independent issues.
With respect of costs, I understand this may be recovered from the defaulting party under General Condition 27 (assuming standard REIV contracts were used). Please advise immediately if otherwise.
And Mak, I'm awaiting your responses for my various previous requests for access to company documents, including sale contracts.
(f) On 16 January 2019 at 1:22 pm, Mr Crow replied to all stating:
Could you please explain what benefit serving a recision [sic] notice will have for Orchid Land. The contract allows for penalty interest to be charged from 14 days after notice of Certificate of Occupancy or Title being available. This notice was served and so the delay in settling is covered by penalty interest.
(g) On the same day at 1:55 pm, Mr Alex Ting replied to all stating:
I'm unaware of any downside for Orchid Land to serving the notice.
Serving the notice:
For reason 3 above, I've requested numerous times a copy of the S&P agreement for Lot 23 which to-date has not been provided. Do we have a copy of this?
(h) On 17 January 2019 at 6:35 pm, Mr Crow replied to all stating:
Please elaborate on your statement that it provides more options, what options does it offer?
(i) On the same day at 6:59 pm, Mr Alex Ting replied to all stating:
Its offers Orchid Land No. 2 Pty ltd the option, upon lapse of the notice period, to sell the unit in default to an interested buyer.
After being provided days to consider this matter, I note that you have not put forward any reasons why such a notice should not be issued. If you have any good reason to not issue the notice, please say so clearly.
Your drib and drab questioning appears to be a tactic to stall the process to the detriment of Orchid Land No. 2 Pty Ltd.
(j) On 18 January 2019 at 5:00 pm, Mr Crow replied to all stating:
Have you a buyer ready to buy the unit and sign up?
You and Ting both know that KST has not produced Orchid Land No 2 financials for year ended 30th June 2018 which Lyle needs to finalise his accounts and loan with the nab. Further you have halted a distribution to unit holders which would have given Lyle funds.
If Lyle chose to fight a recision [sic] notice do you really think Orchid Land would win in court in light of the above.
I cannot support a recision [sic] notice being issued at this stage and cannot see not issuing one is detrimental to Orchid Land's interests.
(k) On 21 January 2019 at 12:26 am, Mr Ting replied to all stating:
Furthermore, if we consider that Lyle is unable to settle, considering the declining residential real estate market, it is more pertinently in the interest of both Orchid Land and Lyle that we resell the unit ASAP to mitigate the liabilities on both parties.
I am, for the final time, requesting if you would please confirm if you have the requested contract of sale with any side agreements/amendments (which will be reviewed for its compliance). If you do, I request that you send me a copy by midday Monday.
Failing which, I will note your intentional failure to do so, and explore claiming from you and Mak costs for obtaining this from Mr Lim.
I have also noted that Mak is uncharacteristically quiet and that he has breached his duties as director and secretary in that:
(l) On the same day at 11:32 pm, Mr Crow replied to all stating:
Alex, I do not have the sales contract for 7.02, only a scanned copy of the signing pages.
(m) By email on 21 January 2019 at 5:01 pm to Mr Alex Ting, copied to Mr Mak and Mr Crow, Mr Lim stated:
As discussed there is nothing unusual about the contract of sale with Lyle for Lot 24.
If it helps to put an end to the ongoing email correspondence, attached is the contract of sale.
As I understand it, Mak & John are agreeable to distributing some money back to the unit holders which will then enable Lyle to use the money towards settlement of his purchase. Leave aside for the moment the issue of the completion of the accounts etc to enable him to apply for a loan.
You may have a differenct (sic) advice but In my view, the court is not going to allow Orchid Land to proceed with the rescission notice if Lye [sic] is not able to settle because he cannot have access to the funds simply because some directors object to the payment. As I understand it the NAB loan is paid off and the company is not in financial jeorpardy [sic] by virtue of the distribution of the funds to the unit holders. Careful thought needs to be given before a rescission notice is issued.
As I said this is my view and you may have legal advice to the contrary. I am happy to talk to your lawyers.
(n) By email of 30 January 2019 at 12:24 am to Mr Steven Wong and Mr Kong, copied to Mr Crow, Mr Mak, Mrs Kong, Mrs Cheng and Mr Tiong Ting, Mr Alex Ting stated:
As an update, I spoke to Arthur Chong, Partner from DLA Piper, who is the property lawyer for SP Setia's properties outside Malaysia and briefed him on the matter, including context of Lyle awaiting the accounts and return of funds in order to settle.
His preliminary view is that there is no issue with issuing a rescission notice. Will explore further and update.
(o) By letter dated 31 January 2019 to Mr Mak, Mr Alex Ting, Mr Kong and Mr Steven Wong stated:
We re-iterate that we have proposed for Orchid Land to seek independent legal advice on the issuance of a rescission notice which we consider needs to be done as soon as possible.
(p) By email of 6 February 2019 to Mr Lim, copied to Mr Mak and Mr Crow, Mr Alex Ting stated:
As discussed, with respect to the sale contract for Lot 7.02, may I clarify if we can issue a "notice of default" without the need to terminate the contract?
My reading on this matter suggests that we can (see attached, relevant excerpt below):
"General condition 27.1 requires a written default notice be given before a party is entitled to exercise any rights arising from the other party's default. The default notice must specify the particulars of the default and give the offending party 14 days to remedy the default.
The default notice may also state that unless the default is remedied within the time specified and reasonable costs and interest are paid the contract is at an end in accordance with general condition 28. If it does include this statement it is commonly called a rescission notice."
(q) By tax invoice dated 18 March 2019, Leem Lawyers included in their description of services provided:
... communication with Shoei Mak & John Crow re delay in settlement; communication & correspondence from Alex re request for documents & issuing default notice; provide documents to Alex Ting ... telephone discussions re whether entitled to issue; Alex Ting email re advice from another lawyer who acts for Setia Melbourne; further telephone discussion re different circumstances, Alex Ting raised issue re deposit; default for failure to pay deposit; discussions with Shoei Mak & John re default notice & deposit; purchaser advising he is settling the purchase; consider email from Lyle Hanvey re deposit; advice re deposit; instruction from client to charge 3% interest per annum on deposit ...
57 The applicants contend that Mr Lim may have confidential information with respect to the failure to serve the default notice on Mr Hanvey and that, by reason of him acting for the plaintiffs, they are deprived of an opportunity to interview Mr Lim as part of their investigations into this issue.
58 I am not satisfied that a reasonable person informed of the facts might anticipate a danger of misuse of confidential information with respect to the default notice issue for the following reasons:
(a) The fact that Mr Mak did not give instructions for the service of the default notice despite the request of Mr Alex Ting is undisputed.
(b) The issue is whether Mr Mak's decision was in the best interests of the Company and the unitholders. Mr Mak relies on the commercial factors. He does not contend that he obtained or relied on any advice from Mr Lim with respect to this question.
(c) Mr Lim deposes that he did not give any advice to Mr Mak or the Company on this question. The fact that Mr Lim expressed an opinion in his email of 21 January 2019 as to the prospects of a court enforcing the rescission notice is not controversial.
59 For the same reasons as set out above, in my opinion, it is unlikely that Mr Lim could give relevant evidence on this question.
60 Further, it is relevant that the applicants do not particularise any damage caused to the Company by the failure to serve the default notice.
Changes to Unit 7.02 after entry into the contract of sale
61 The applicants allege that Mr Mak acted to the detriment of the Company and the unitholders in agreeing to an amendment to the Unit 7.02 contract of sale to include a part of the rooftop of the Development.
(a) In consideration of Leda Constructions making no claim against the Company for penalties arising from delays in the construction associated with the delays in the Company obtaining finance, they agreed to allow Mr Hanvey, at his cost, to:
(i) liaise with surveyors and architects of the Development;
(ii) move equipment from a platform on the roof above Unit 7.02 to another part of the rooftop; and
(iii) amend the Development plans and lodge plans of subdivision to permit part of the rooftop to form part of Unit 7.02.
(b) This agreement was in the interests of the Company because the rooftop area was of limited use and value because access to the rooftop was only through the seventh floor by way of a locked stairway, and there were no facilities or toilet on the rooftop. Accordingly, the part of the rooftop assigned to Unit 7.02 was of less value than relief from the Company's exposure to liability associated with the delays.
(c) The necessary approvals by the relevant authorities to enable certification of the amended plan by the Banyule City Council were arranged by Peter Richards, a land surveyor based in Watsonia.
63 Mr Lim deposes that Leem Lawyers were only instructed to lodge the amended plan for registration at the Land Titles Office and arrange for the NAB to make the title available after certification by the Banyule City Council.
64 In the invoice of Leem Lawyers dated 21 August 2018, the description included the following:
To our costs re drawing application & OC1 for registration of plan. peruse documents on SPEAR, correspondence with surveyor & OC manager, lodge application to register the plan of subdivision, instructions & advice
65 The applicants contend that Mr Lim may have confidential information about this issue and that, by Mr Lim acting for the plaintiffs, they are deprived of the opportunity to interview him in investigating the issue.
66 I am not satisfied that a reasonable person informed of the facts might anticipate a danger of misuse of confidential information with respect to the amendment to the Unit 7.02 contract issue for the following reasons:
(a) The fact that Mr Mak agreed to the amendment to the Unit 7.02 contract is not in dispute.
(b) The issue is whether Mr Mak's decision to agree to the amendment to the Unit 7.02 contract was in the best interests of the Company and the unitholders. Mr Mak relies on the commercial factors. He does not contend that he obtained or relied on any advice from Mr Lim with respect to this question.
(c) Mr Lim deposes that he did not give any advice to Mr Mak or the Company on this question and that his involvement was limited to effecting the transaction in accordance with Mr Mak's instructions.
67 For the same reasons as set out above, in my opinion, it is unlikely that Mr Lim could give relevant evidence on this question.
68 Further, the applicants do not lead any evidence to support a contention that the agreement to amend was uncommercial.
Failure to make proper disclosure in respect of the Lai Loan
69 The applicants contend that Mr Mak caused the Company to enter into the Lai Loan in breach of his duties to the Company and unitholders because he had conflict of interest arising from the fact that Ms Lai is Mr Mak's daughter-in-law.
(a) In September 2016, the plaintiffs contend that there was a shortfall between the cost of the Development and the amount available under the construction loan from the NAB.
(b) On 16 September 2016, there was a meeting attended by Mr Tiong Ting, Mr Mak, Mr Steven Wong, Mr and Mrs Kong and Mr Crow at the RACV Club in order to authorise negotiations for the securing of funding for the Company in the sum of the shortfall without requiring security in the form of a second mortgage, to which the NAB would not consent. The minutes of that meeting included:
Mak was authorised to proceed with negotiation and secure the unsecured loan for the shortfall, possibly for circa $1.3m at hopefully circa 10% with his contact.
(i) in September and October 2016 Mr Mak sought the assistance of the interested parties in the Development to obtain additional finance without success;
(ii) Mr Tiong Ting advised that he was able to source finance at a rate of between 15 to 20% for land purchase only and not for construction; and
(iii) other non-bank lenders had offered the Company finance at a rate of 20%, subject to satisfactory financials from the unitholders.
(d) In November 2016, Mr Mak secured a loan offer from Ms Lai in the sum of $1.8 million at 13% subject to personal guarantees provided by each of the Principals.
(e) In or about October or November 2016, Mr Mak instructed Mr Lim to draft a loan agreement in accordance with the terms he had negotiated with Ms Lai.
(f) On 16 November 2016, Mr Lim emailed a draft loan agreement to Mr Mak.
(g) Mr Mak provided the draft loan agreement to Mr Alex Ting who, by email of 21 November 2016 at 12:10 am to Mr Mak, Mr Tiong Ting and Mr Crow, made the following comments:
Pls. see my comments on the loan:
Clause 5.1: Clarification needed about when the interest is compounded (e.g. should this be calculated on the last day of each month?).
Clause 7: Can early repayment only happen after 12 months?
Clause 9: Was it intentional that the land and building be charged as part of the loan?
Clause 10.1: Allow 14 business days remedy for any event of default (this is referenced in Clause 19 but not crystal clear).
Clause 15: Was it intentional that each of the Shareholders (both husband and wife) personally and jointly and severally guarantee the loan?
(h) By email of 21 November 2016 at 9:33 am, after speaking to Mr Crow and Mr Lim, Mr Mak replied to all stating:
Have spoken with John and then our solicitor with comments highlighted as below.
- Clause 5.1: Clarification needed about when the interest is compounded (e.g. should this be calculated on the last day of each month?).
Interest will be based on loan capital only on a daily basis (@ 13% per annum rate) eg if loan amount is $500,000 at beginning of month with another $100,000 drawn on 16th of month in July, the interest will be $500,000 x 13%/365 x 15 + $600,000 x 13%/365 x 16 for the 31 days of July.
Clause 5.2 already state payment in arrears in monthly instalments calculated on final Business Day of each month.
Consideration on "compound interest" on interest will only happen, and only at option of Lender, if there's default on interest due at end of month which I expect shouldn't happen as we plan to pay on time.
Clause 7: Can early repayment only happen after 12 months? This will be deleted. It's based on a standard loan agreement but wasn't important as don't expect syndicate to repay within 12 months anyway, only at end of project after settlement of units sold and funds are available.
Clause 9: Was it intentional that the land and building be charged as part of the loan? This will not happen as Lender agree there is no security for the loan and the NAB would not allow a second mortgage charge on Cape Street anyway.
Clause 10.1: Allow 14 business days remedy for any event of default (this is referenced in Clause 19 but not crystal clear). Our solicitor insist the Clause should remain as is as it applies to serious defaults and with potential 3rd parties involved it should be resolved asap rather than wait for another 14 days.
Clause 15: Was it intentional that each of the Shareholders (both husband and wife) personally and jointly and severally guarantee the loan? The solicitor now realises your dad is not a Director of CV Australia and will delete his name off the agreement and signature page. Otherwise all shareholders are part of the guarantee especially when there's no security over the loan and at lower interest rate than what 's available in the marketplace for such loans.
Our solicitor will amend the agreement based on the above comments to Clauses 7 and 15, upon which I'll then forward to you & John and at the same time print hard copies to walk through signatures by Mei Lai & me, Chung Low, Lyle & Sue plus your mum before passing over to John to complete after which I'll get the Lender to sign.
(i) Mr Lim was instructed by Mr Mak to amend the draft loan agreement in accordance with Mr Mak's email of 21 November 2016. The finalised agreement was forwarded to Mr Mak who arranged for the final document to be signed by his Company and each of the guarantors.
(j) By email of 24 December 2016 at 11:41 am to all unitholders, Mr Crow stated as follows:
71 Mr Mak contends that the Lai Loan was in the best interests of the Company because it had been unable to obtain a loan to cover the shortfall through its broker, Knightsbridge, or through Mr Tiong Ting. Further, he contends that the fact that Ms Lai was his daughter-in-law was known to the Principals. In particular, Mrs Cheng, Mr Tiong Ting, Mr and Mrs Kong and Mr Steven Wong attended his son's wedding to Ms Lai on 2 November 2014.
72 The applicants contend that Mr Lim may have confidential information about the circumstances surrounding the loan and the fact that Mr Lim is acting for the plaintiffs deprives them of the opportunity to interview him and carry out further investigations with respect to Mr Mak's conflict of interest.
73 I am not satisfied that a reasonable person informed of the facts might anticipate a danger of misuse of confidential information relevant to the issues raised by the Lai Loan for the following reasons:
(a) The facts relied on by the applicants in alleging the conflict of interest, being the loan from Ms Lai to the Company, are not controversial.
(b) There is no allegation that Mr Lim was engaged to negotiate the loan or advise the Company with respect to the loan, and Mr Lim denies such a retainer.
(c) Mr Mak does not allege that he obtained or relied on the advice from Mr Lim with respect to the loan.
(d) Mr Mak does not contend that he expressly disclosed the fact that the lender was his daughter-in-law, but contends that it was not necessary to do so because the Principals were well aware of this fact.
(e) There does not appear to be any real prospect of Mr Lim being in a position to give any evidence with respect to this issue.
Assertion of management control and exclusion of minority from the affairs of the Company by Mr Mak not permitting Mr Lim to accept instructions from Mr Alex Ting
74 The applicants contend that Mr Mak improperly assumed control of the Company in excess of the authority conferred on him under the Deed and by the board of directors. Relevantly, it is alleged as follows:
[Mak] usurped for himself and Crow the role of instructing and dealing with Lim (in his capacity as the Company's solicitor) to the extent that in 2019 Lim (as the Company's solicitor) declined to act on the instructions of representatives of the Company other than Mak and Crow unless authorised by the Company to do so, notwithstanding that:
75 The applicants rely upon Mr Lim's refusal in his email of 15 January 2019 to accept instructions from Mr Alex Ting to issue a rescission notice.
76 For the purpose of this application it was not in dispute that Mr Mak and Mr Crow had been authorised to give instructions to Leem Lawyers with respect to conveyancing transactions arising out of the Development. Further, Mr Alex Ting had not been authorised by the board of directors to issue the rescission notice to Mr Hanvey or to otherwise give instructions to Leem Lawyers on behalf of the Company. Furthermore, the board of directors had not countermanded the authority granted to Mr Mak and Mr Crow.
77 I am not satisfied that a reasonable person informed of the facts might anticipate a danger of misuse of confidential information relevant to this issue for the following reasons:
(a) Mr Lim has deposed as to his reason for not accepting instructions from directors, who were not authorised by the board of directors to give instructions.
(b) There was no submission as to the information that Mr Lim could have relevant to this issue.
(c) There is no allegation that Mr Lim gave any advice to Mr Mak on this issue.
(d) Mr Mak does not say that he relied on this advice in undertaking any matter which is the subject of this proceeding.
Assertion of management control and exclusion of minority from the affairs of the Company by Mr Mak not agreeing to a change of signatory to the Company bank account
78 The applicants contend that another instance of improper assertion of control of the Company by Mr Mak is his refusal to agree to proposed changes to signatories to the Company bank account.
(a) Mr Mak is the sole signatory to the Company bank account.
(b) By letter of 15 April 2019 to Mr Mak, Mr Alex Ting, Mr Kong and Mr Steven Wong stated that, on the basis of payments totalling $1,709,610.48 to Ms Lai contrary to an express request, it was in the best interests of the Company that he be removed as a signatory to the bank account.
(c) At the meeting on 16 April 2019, Mei Lai Mak ('Mrs Mak'), the wife of Mr Mak, telephoned Mr Lim and inquired if Mr Mak was required to change his position as the sole signatory of the Company bank account. Mr Lim said that any change to the arrangement required the approval of the board of directors of the Company. Mr Lim stated that was the entirety of the conversation. Mrs Mak made this telephone call during the course of the meeting on 16 April 2019 and 'then conveyed to the meeting what she said was Mr Lim's advice on this topic'.
80 The applicants contend that Mr Lim may have confidential information about Mr Mak's assertion of control by his refusal to change arrangements with respect to the signatories to the bank account and by reason of him acting for the plaintiffs, they are deprived of the opportunity to interview him as part of their investigation of this issue.
81 I am not satisfied a reasonable person informed of the facts might anticipate a danger of misuse of confidential information relevant to this issue for the following reasons:
(a) Mr Lim has deposed as to the advice he gave with respect to the changing of the arrangements for the signatories to the Company bank account.
(b) The advice was given to Mrs Mak during the course of a meeting of unitholders and was communicated to the meeting. There does not appear to be any issue about the advice that was given and neither it is contended that the advice was incorrect.
(c) Mr Mak does not say that he relied on this advice in undertaking any matter which is the subject of this proceeding.
82 With respect to the Administration of Justice Ground, the applicants relied on the following matters in addition to those referred to above.
83 With respect to the relationship between the Ting family and Mr Lim:
(a) Mr Tiong Ting has known Mr Lim for more than 20 years and they share common friends.
(b) Mr Alex Ting and Mr Lim had known each other for more than 22 years and Mr Alex Ting is a close friend of Mr Lim's son.
(c) Mr Tiong Ting, as a partner in a firm of accountants, has had common clients with Mr Lim over decades and they have referred clients to each other. Mr Tiong Ting most recently referred a client to Mr Lim in July 2017.
(d) In 2017, Mr Lim acted on behalf of YTL Investments Australia Pty Ltd ('YTL') in drawing an agreement for lease and lease in respect of Lot 1 of the Development to Kieser Training Pty Ltd. YTL was the purchaser of Lot 1 and Mr Alex Ting was YTL's representative.
(e) Between October 2017 and about March 2018, Mr Alex Ting alleges that he worked closely with Mr Lim in relation to a common client 'to assist with a significant commercial matter involving the restructuring of the ownership of a property'. The initial fee estimate provided by Mr Lim describes the retainer as: 'For the contract of sale, transfer, agreement re partnership the total costs & expenses is approx. $2,800 plus GST.'
(f) It is alleged that the advice given by Mr Lim by telephone on 6 February 2019 was advice provided by Mr Lim with respect to 'the brewing Orchid Land shareholder dispute'.
84 The applicants also rely upon a personal professional relationship between Mr Lim and Mr and Mrs Kong arising from the following allegations:
(b) Mr Kong's family have engaged Mr Lim to undertake most of the legal work they have required, including the transfer of properties, the purchase of a property and the renewal of a lease. The following invoices from Leem Lawyers to the Kong family were produced:
(i) 18 June 2007 - transfer of properties to a superannuation fund;
(ii) 16 February 2016 - a purchase of a car space lot and a storage lot in Kew; and
(iii) 22 February 2017 - drawing of a renewal of a lease.
(c) Mr Lim explained to Mr and Mrs Kong the effect of the guarantee provided with respect to the construction loan from the NAB.
(d) Mr and Mrs Kong and Mr Lim have visited each other's homes on numerous occasions.
85 In the circumstances, I consider that a fair-minded, reasonably informed member of the public would not conclude that the proper administration of justice requires that Leem Lawyers or Mr Lim should be prevented from acting for the plaintiffs in the interests of the protection of the integrity of the judicial process and the appearance of justice for the following reasons:
(a) There is no allegation that Mr Lim received any confidential information relevant to the issues in this proceeding in the course of any of the retainers by the applicants.
(b) I am not satisfied that there is any real risk that Mr Lim will disclose any confidential information held by the Company. In fact, as noted above, the applicants' submission was based on a concern that there would be information, which would not be disclosed to them and would be withheld from this proceeding.
(c) I do not consider there is significant risk of unfairness by reason of information being withheld from the applicants. The applicants are to receive all relevant files and records of Leem Lawyers with respect to Company transactions. For the reasons set out above, I consider that there is no significant prospect of Mr Lim having any other information relevant to the issues in this proceeding.
(d) There is no real prejudice to the applicants in permitting Leem Lawyers to continue to act for the plaintiffs. Counsel for the applicants submitted that there was prejudice in that they would not have the opportunity to interview Mr Lim to investigate relevant matters. I consider any value in this opportunity was more apparent than real. The evidence is that Mr Mak has been a client of Mr Lim's for a very substantial period and therefore I am not prepared to infer that there was any real possibility that he would be prepared to assist the applicants in their claim against Mr Mak, even if he was no longer acting for the plaintiffs.
(e) With respect to the personal interactions between Mr Lim and the applicants over the years, counsel was unable to direct me to any authority in which a court had prevented a solicitor from acting on the basis of such non-professional relationships. Certainly, the vague evidence of the personal interactions in this case would not justify intervention by the Court to prevent Mr Lim from acting in this matter.
(f) It is not contended that Mr Lim has ever acted for the applicants in any litigation matter. In my opinion, the fact that a solicitor may have acted in transactional matters in the past for a person does not preclude the solicitor from subsequently acting against that person in litigation.
86 On the evidence, for the reasons previously stated, I do not consider that there is a real prospect that Mr Lim would be called to give evidence on any controversial issue in this proceeding. Further, the mere fact that a solicitor may be a material witness does not necessarily lead to the Court restraining an ongoing engagement.[15]
87 The applicants relied on the facts relevant to the Confidentiality Ground and the Administration of Justice Ground to support the Duty of Loyalty Ground.
88 The claim based on the Duty of Loyalty Ground must fail for the same reasons as the Confidentiality Ground and Administration of Justice Ground.
89 Further, it could not be said that Leem Lawyers are purporting to act against a former client in the same or closely related matter. It was not contended that Leem Lawyers had acted for any of the applicants in the same or closely related matter. With respect to the Company, as submitted by the plaintiffs, it is a nominal defendant and Leem Lawyers could not be said to be acting against it.
90 As I observed in ACN 092 675 164 Pty Ltd (in liq) v Suckling:
Although the juridical basis of the Duty of Loyalty Ground is undoubtedly different to the Administration of Justice Ground, I am unable to find any case which identifies a fact that would be relevant to one ground but not the other; or any circumstance in which an injunction restraining a solicitor from acting against a former client would be granted on one ground but not the other.[16]
91 I will dismiss the applicants' summons filed 16 August 2019 and I will hear the parties on the question of costs.
[1] Sent v John Fairfax Publication Pty Ltd [2002] VSC 429, [33] (Nettle J) ('Sent v Fairfax'). See also Prince Jefri Bolkiah v KPMG [1998] UKHL 52; [1999] 2 AC 222, 236-7 (Lord Millett); Re a Firm of Solicitors [1992] QB 959, 969 (Parker LJ); Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357, 362-3 (Ipp J); Farrow Mortgage Services Pty Ltd (in liq) v Mendall Properties Pty Ltd [1995] VicRp 1; [1995] 1 VR 1, 5 (Hayne J); Newman v Phillips Fox (1999) 21 WAR 309, 322-3 [63] (Steytler J); Break Fast Investments Pty Ltd v Rigby Cooke Lawyers [2015] VSC 305, [3] (Bell J); and the discussion in Babcock & Brown DIF III Global v Babcock & Brown International Pty Ltd [2015] VSC 453, [61]-[70] (Riordan J). This formulation is reflected in the Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 r 10.2.
[2] Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561, 582 [76] (Brereton J) ('Kallinicos'), adopted most recently in Técnicas Reunidas SA v Andrew [2018] NSWCA 192, [71] (Leeming JA with whom Bathurst CJ and White JA agreed).
[3] Dealer Support Services Pty Ltd v Motor Trades Association of Australia Ltd [2014] FCA 1065; (2014) 228 FCR 252, 276 [96] (Beach J) ('Dealer Support Services'); Black v Taylor [1993] 3 NZLR 403, 412 (Richardson J) cited with approval in Kallinicos [2005] NSWSC 1181; (2005) 64 NSWLR 561, 572-3 [44].
[4] Kallinicos [2005] NSWSC 1181; (2005) 64 NSWLR 561, 582 [76]; Dealer Support Services [2014] FCA 1065; (2014) 228 FCR 252, 276 [94].
[5] Western Australia v Ward [1997] FCA 585; (1997) 76 FCR 492, 498 (Hill and Sundberg JJ); Kallinicos [2005] NSWSC 1181; (2005) 64 NSWLR 561, 582 [76]; Dealer Support Services [2014] FCA 1065; (2014) 228 FCR 252, 276 [95].
[6] Dealer Support Services [2014] FCA 1065; (2014) 228 FCR 252, 276 [96]; cf PhotoCure ASA v Queen's University at Kingston [2002] FCA 905; (2002) 56 IPR 86, 98 [56], 99 [60] (Goldberg J).
[7] [2015] NSWSC 240, [54].
[8] Kallinicos [2005] NSWSC 1181; (2005) 64 NSWLR 561, 582-3 [76]; Bowen v Stott [2004] WASC 94, [58] (Hasluck J); Black v Taylor [1993] 3 NZLR 403, 412 (Richardson J); Sent v Fairfax [2002] VSC 429, [60]-[64].
[9] Kallinicos [2005] NSWSC 1181; (2005) 64 NSWLR 561, 582 [76]; Dealer Support Services [2014] FCA 1065; (2014) 228 FCR 252, 276 [97].
[10] (2018) 56 VR 448, 460-3 [56]-[66]
[13] Sent v Fairfax [2002] VSC 429, [103]-[104] (Nettle J); Australian Liquor Marketers Pty Ltd v Tasman Liquor Traders Pty Ltd [2002] VSC 324, [14] (Habersberger J); Village Roadshow Ltd v Blake Dawson Waldron [2003] VSC 505, [41] (Byrne J); Wagdy Hanna & Associates Pty Ltd v National Library of Australia [2004] ACTSC 75; (2004) 155 ACTR 39, 43-5 [31]-[42] (Higgins CJ); Adam 12 Holdings Pty Ltd v Eat & Drink Holdings Pty Ltd [2006] VSC 152, [40] (Whelan J); Pinnacle Living Pty Ltd v Elusive Image Pty Ltd [2006] VSC 202, [13] (Whelan J); Commonwealth Bank of Australia v Kyriackou [2008] VSC 146, affirmed in Kyriackou v Commonwealth Bank of Australia [2009] VSCA 241, [22]-[23]; Connell v Pistorino [2009] VSC 289, [25]-[29] (Byrne J); Dale v Clayton Utz (No 2) [2013] VSC 54, [125] (Hollingworth J); Lee v Korean Society of Victoria [2014] VSC 316, [8]-[10] (Dixon J); Break Fast Investments Pty Ltd v Rigby Cooke Lawyers [2015] VSC 305, [2] (Bell J).
[14] See the authorities cited in footnote 1 above.
[15] Incentive Dynamics Pty Ltd (in liq) v Robins (Federal Court of Australia, North J, 25 July 1997); Yamaji v Westpac Banking Corporation (No 1) [1993] FCA 253; (1993) 42 FCR 431, 432 (Drummond J).
[16] (2018) 56 VR 448, 470 [87].
Makfam Pty Ltd
CV Australia Pty Ltd [2020] VSC 296
(1990) 4 WAR 357
(1999) 21 WAR 309
(2005) 64 NSWLR 561
(2014) 228 FCR 252
(1997) 76 FCR 492
(2002) 56 IPR 86
(2018) 56 VR 448
(2001) 4 VR 501
(1993) 42 FCR 431