Mitchell v Burrell

LEGISLATION CITED : Law Society of NSW Professional Conduct and Practice Rules, r 19

Afkos Industries Pty Ltd v Pullinger Stewart (a firm) [2001] WASC 69 Bahonko v Nurses Board of Victoria (No 3) [2007] FCA 491 Bowen v Stott [2004] WASC 94 CASES CITED : Chapman v Rogers; ex parte Chapman [1984] 1 Qd R 542 Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561 Kooky Garments Ltd v Charlton [1994] 1 NZLR 587 Scallan v Scallan [2001] NSWSC 1078

Doreen Florence Mitchell (plaintiff/respondent) PARTIES : Gary William Burrell (first defendant/applicant) Maureen Elizabeth Burrell (second defendant/applicant)

COUNSEL : Mr P E Cullen (plaintiff/respondent) Mr A F Fernon (defendants/applicants)

SOLICITORS : Slattery Jurd & Co (plaintiff) Low Doherty & Stratford (defendants/applicants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY LIST

4843/07 Doreen Florence Mitchell v Gary William Burrell & 1 Or JUDGMENT (ex tempore) 1 HIS HONOUR: The plaintiff Doreen Florence Mitchell sues the defendants, her nephew Gary William Burrell and his wife Maureen Elizabeth Burrell, for a declaration that they hold their home at Agnes Banks upon trust for her or, alternatively, subject to an equitable charge in her favour, it having been purchased substantially with funds provided by Mrs Mitchell from the sale of her former home unit at Doll's Point, she says upon a common intention that she would be beneficially entitled to the Agnes Banks property and/or entitled to reside in it indefinitely. As all too commonly happens in this type of arrangement, the relationships have broken down and it appears now to be common ground that it is impracticable for Mrs Mitchell to continue to reside with Mr and Mrs Burrell; but the Burrells' oppose Mrs Mitchell's claim, contending that she provided the purchase money, not on the common intention asserted, but as a gift to them. 2 For present purposes, that is merely background: by Notice of Motion filed on 12 June 2008, the Burrells claim an injunction restraining the solicitors who presently act for Mrs Mitchell - Messrs Slattery Jurd, and in particular their principals, Mr Stuart David Morey and Mr Gregory John Jurd - from continuing to act for her, invoking the inherent jurisdiction of the Court to control its officers, and contending that Mr Morey is likely to be a material witness on a controversial matter whose conduct and credit may be in issue in the proceedings and that Mr Jurd - who since the issue was raised has replaced Mr Morey as the solicitor on the record - is, as Mr Morey's partner, similarly unable to bring a proper professional and objective detachment to the proceedings. 3 The jurisdiction invoked is that discussed in Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561. As was said in that case (at [76]) the Court has always had inherent jurisdiction to restrain solicitors from acting in a particular case as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice. The test to be applied is whether a fair minded, reasonably informed member of the public - a concept substantially equivalent to the reasonably informed lay observer used in the context of applications for disqualification of judicial officers for apprehended bias - would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in order to protect the integrity of the judicial process and the due administration of justice, including the appearance of justice. The jurisdiction is an exceptional one and is to be exercised with caution, and due weight must be given to the public interest in a litigant not being deprived of the lawyer of his or her choice. Particularly in this respect, the timing of the application may be relevant, in that the cost, inconvenience or impracticability of requiring lawyers to cease to act when proceedings are well advanced may provide strong reason for refusing to grant relief. 4 In her Statement of Claim, Mrs Mitchell alleges (paragraph 5) that in about September 2005 she and Mr Burrell agreed that she would sell her Doll's Point unit and use her savings and the proceeds of the unit to purchase another, yet unidentified, residential property (called in the Statement of Claim "the common intention property"), in which all three parties would then reside together indefinitely. In paragraph 6, it is alleged that there were implied terms that the living arrangements would be harmonious, and that Mrs Mitchell would have "an ownership interest" in the common intention property; as I have said, the Burrells dispute that she was to have an ownership interest in the property, and say she provided the purchase moneys as a gift. In paragraph 7, Mrs Mitchell alleges that, in about October 2005, Mr Burrell discouraged her from seeking legal advice with respect to their agreement and, in paragraph 8, that she subsequently did not seek or receive legal advice with respect to the agreement to live together at the common intention property. The Statement of Claim is signed by Mr Morey, verified by Mrs Mitchell, and certified pursuant to (NSW) Legal Professional Act 1987, s 198L, by Mr Morey. 5 The Burrells' solicitors, Low Doherty & Stafford, were provided by their clients with a copy of a letter sent by Slattery Jurd to Mrs Mitchell, dated 22 June 2006, which purported to confirm advice given to Mrs Mitchell in conference that day, in order to assist her in discussing the issues with her family. The immediate problem was that, as a result of the disposition of her assets and the purchase of the Agnes Banks property in the name of the Burrells, her pension entitlements were seriously adversely affected. In respect of this, Mr Morey wrote: This is a disastrous result and one that I specifically advised you in relation to during the course of the your [sic] sale. Despite your indication to me that you would take no such steps without first discussing it with me, or some other local Solicitor, these financial transactions have taken place, in circumstances, where it might be impossible to rectify this result. I gave you specific advice in the past and my secretary re-confirmed this with you as these difficulties were foreseen and discussed with you almost 8 months ago.

6 The letter proceeded to advise a course of action involving, in consultation with the Department of Veterans Affairs, the creation of appropriate paperwork "to evidence what is no doubt the reality in relation to your relationship with Gary and Maureen", so that the Department would not treat the transaction as a notional gift for the purpose of pension entitlements "although it's [sic] legal effect is completely otherwise for all other purposes". Mr Morey advised Mrs Mitchell to discuss the matter immediately with the Burrells. At first sight, there is an apparent tension between the contents of that letter and the allegations in the Statement of Claim that Mrs Mitchell sought no legal advice about the proposed transaction with the Burrells. 7 On 21 November 2007, Low Doherty & Stafford sought particulars of various of the allegations in the Statement of Claim, including (in respect of paragraph 8 of the Statement of Claim): 12. Does the Plaintiff deny receiving legal advice at any time in relation to the agreement detailed in this paragraph? 8 The request was answered by a facsimile, apparently transmitted on 16 January 2008, relevantly as follows: The plaintiff did not receive legal advice in respect of the agreement to live together at the common intention property from about October 2005, when she was discouraged by the first defendant from doing so, until on or about 22 June 2006. 9 Again, there appears to be, at least potentially, some tension between that answer and the contents of Mr Morey's letter of 22 June 2006. 10 On 12 March 2008, Low Doherty & Stafford wrote to Slattery Jurd, drawing attention to the matters to which I have adverted as potential "tensions" - which they called "anomalies", for which they sought an explanation - and suggested that it was inappropriate for Mr Morey or his firm to continue to act, since it would appear that he would be a material witness. On 19 March 2008, Mr Morey replied, to the effect that whether he or any other member of his firm would be a material witness would become apparent when the pleadings were closed and the defined issues addressed by evidence, and that if at that time it was not appropriate for him or his firm to continue to act, an appropriate decision would then be made; but otherwise he did not see it as inappropriate to continue acting at that time, and intended to do so until persuaded otherwise.

11 Low Doherty & Stafford responded on 9 April 2008, summarising the applicable law and facts, again pointing out the "anomalies" to which reference has been made, seeking an undertaking that Slattery Jurd would cease to act, and otherwise foreshadowing instructions to make the present application. Mr Morey replied on 11 April 2008, repeating that he had indicated that it was his intention to consider the issue at the close of the pleadings, and raising what can only be said otherwise to be apparently irrelevant matters in response. Nonetheless, on 15 April 2008, Low Doherty & Stafford responded to the apparently irrelevant matter.

12 On 16 April 2008, Mr Morey sent a letter setting out his position in greater detail. In particular, as to paragraph 8 of the Statement of Claim, he wrote: 2. Paragraph 8 of the Statement of Claim alleges that the Plaintiff did not seek or receive legal advice in respect of the agreement to live together at the Agnes Banks property. These are our instructions from the Plaintiff. Once again it will be for the Plaintiff to give evidence as to whether or not she received such advice. In their Defence the Defendants do not admit this allegation. 3. In accordance with your request I provide you with the following response to your contention of inconsistency between the Statement of Claim, your letter requesting further and better particulars, our reply to that request and the letter written by me to the Plaintiff dated the 22 June 2006:- (a) I confirm that at no time did I give the Plaintiff specific advice in relation to the Agnes Banks property until she saw me in conference on the 22 June 2006 which was sometime after completion of the purchase of that property which you say was effected on the 20 April, 2006. (b) In about October/November 2005 which was during the time that the Dolls Point property was being sold the Plaintiff informed me that she was discussing with the Defendants a general arrangement to purchase an alternative property together on terms which were yet to be determined. (c) At that time the Plaintiff informed me that no such property had been identified and no agreement made between the Plaintiff and the Defendants; (d) At that time I advised the Plaintiff that when agreement had been reached she should then seek advice to ensure that written documentation was put in place to confirm the extent of her financial contribution so that her pension entitlements would be maximised; (e) In effect, my advice was for the Plaintiff to seek advice at the appropriate time in the future; (f) Therefore, I do not consider that I gave the Plaintiff specific advice in relation to the Agnes Banks purchase. (g) Our reply to your request for further and better particulars addresses only the extent to which the Plaintiff received advice specifically in relation to the Agnes Banks property. I consider that I did not do so and upon the Plaintiff's instructions that she received no advice from any other Solicitor in relation to the purchase of the Agnes Banks property your request was answered in the way it was. (h) I do not consider that the letter from Slattery Jurd & Company to the Plaintiff of the 22 June 2006 is inconsistent with this position. (i) During the time that the Dolls Point property was being sold, the Plaintiff informed me, I may not necessarily be involved in giving her further advice or acting on any alternative property conveyance and that the care and conduct of the matter might be in the hands of other Solicitors. She informed me that she would seek advice from me or those other alternative Solicitors at a future time depending upon the outcome of discussions with the Defendant. My evidence, in my view, is not material in the sense that you assert it to be. It may be material for other purposes and the preparation of the Plaintiff's case. In these circumstances I have determined to transfer the care and conduct of the matter to my partner Gregory John Jurd who will hereafter appear as solicitor on the record in these proceedings on behalf of the Plaintiff. Mr. Jurd conducts his practise from the Bexley Office of this firm and has no knowledge of or contact with the Plaintiff to date either in relation to the sale of the Dolls Point unit or in respect of any other aspect of the matter. He is otherwise unaware of the matter or the day to day activities of any other Ramsgate matters. 13 It might be suggested that the assertion in paragraph 3(g) of that letter - that the reply addressed only advice in respect of the Agnes Banks property specifically - is open to dispute.

14 A Notice of Change of Solicitor, by which Mr Jurd replaced Mr Morey as the solicitor on the record, was filed on 6 May 2008.

15 In my view, there is a real and substantial risk that Mr Morey may be a material witness. That risk arises in at least two ways. First, there is an issue in the proceedings as to whether an agreement was made - and more particularly as to the terms of any such agreement - in or about September 2005 between Mrs Mitchell and the Burrells. In referring to an agreement, I appreciate that the case is not based on contract but on a common intention trust; nonetheless, it is the "agreement" of September 2005 which, according to the Statement of Claim, founds the alleged common intention trust. 16 It is apparent, from at least Mr Morey's letter of 16 April 2008 (set out above), that in about October or November 2005, Mrs Mitchell informed him that she was discussing with the Burrells a general arrangement to purchase an alternative property together, on terms yet to be finalised. What Mrs Mitchell told Mr Morey on that occasion is plainly capable of either corroborating (as a statement made when fresh in Mrs Mitchell's memory admissible pursuant to (NSW) Evidence Act 1995, s 64(3)) or, alternatively rebutting (as a prior inconsistent statement) the version of her conversations with Mr Burrell that Mrs Mitchell will give. In that way, Mr Morey's evidence potentially goes to the central issue in the case, namely, what if any arrangements were agreed between the parties in September 2005.

17 Secondly, although it was argued by Mr P E Cullen, for Mrs Mitchell, that it was not really a substantive issue in the proceeding but at best a marginal one, it remains the fact that the pleading alleges that Mrs Mitchell did not obtain legal advice about the proposed arrangements. On the material so far before the Court, there is at least a basis for supposing that Mr Morey may be in a position to give evidence contrary to that allegation. Again, I appreciate that it is at least arguable that Mr Morey's advice was limited to the potential impact of the proposed arrangements on Mrs Mitchell's pension entitlements; on the other hand, the frequency with which arrangements of this kind collapse is so notorious amongst legal practitioners that it might reasonably be suggested that a prudent practitioner in Mr Morey's position would have adverted to the importance of documenting the arrangements not only because of their potential impact on pension entitlements, but also for the protection of Mrs Mitchell in the event of their ultimate break down. The nature and content of Mr Morey's advice might well bear on whether it is accepted that Mrs Mitchell had, as the defendants contend, an intention to make a gift, as distinct from an intention to retain an interest for herself. 18 Mr Morey's evidence may be controversial, because at least on one view of the presently available material it could contradict allegations made by Mrs Mitchell. One does not know in any detail what will be his version of what Mrs Mitchell related to him of the September 2005 conversations, but there has to be some potential that it will not coincide with her version, or with the version that would be most favourable for her. As to the advice she sought and was given, I appreciate that their versions may coincide, but the material presently available suggests that the contrary is distinctly possible. 19 Accordingly, I am quite satisfied that Mr Morey may be a witness on a material matter, and that his evidence may be controversial. 20 That said, I do not accept that the mere circumstance that a solicitor will be a material witness, even on a controversial matter, of itself justifies restraining the solicitor from continuing to act. As Windeyer J pointed out in Scallan v Scallan [2001] NSWSC 1078, it is, for example, not unusual for instructing solicitors in contested probate proceedings to give evidence of facts relevant to instructions for and execution of a Will. Similarly, in contested conveyancing proceedings, it is not unusual for solicitors who have acted on the conveyance to continue to act in the proceedings for specific performance or rescission and to give evidence in those proceedings. Accordingly, despite Rule 19 of The Law Society of New South Wales Professional Conduct and Practice Rules, which imposes a professional obligation (as distinct from a private right), I do not accept that in every case where a solicitor acting for a party is a material witness even on a controversial matter, the Court will restrain the solicitor from continuing to act. Although some observations of Campbell CJ in Chapman v Rogers; ex parte Chapman [1984] 1 Qd R 542, 545, may go somewhat further, the cases indicate - as Campbell CJ did in that case itself - that the line is crossed only when the solicitor has a personal stake in the outcome of the proceedings or in their conduct, beyond the recovery of proper fees for acting, albeit that the relevant stake may not necessarily be financial, but involves the personal or reputational interest of the solicitor, as will be the case if his or her conduct and integrity come under attack and review in the proceedings. The presence of such circumstances will be a strong indication that the interests of justice - which in this field involve clients being represented by independent and objective lawyers unfettered by concerns about their own interests - require the lawyer to be restrained from continuing to act. 21 The point is illustrated, in Windeyer J's judgment in Scallan (at [10]), by his Honour's reference to the difference between the case where the (mere) interest of a solicitor is one that arises simply in supporting the success of his or her client (for example, in connection with advice about discovery or the commencement or continuation or abandonment of proceedings), and the case where the solicitor has an interest in the result of an action "additional to his interest in doing his best for a client to have success in an action". Similarly, in Kooky Garments Ltd v Charlton [1994] 1 NZLR 587, Thomas J recognised the distinction between the situation where solicitors were, in effect, called on to defend their own actions or advice on the one hand - in which case it was inappropriate that they act - and other cases (at 589-590): What I have said, of course, does not apply where the advice given is unrelated to liability or the question in dispute. Advising a client to prosecute or defend a claim does not attract these observations. They are restricted to the situation where the acts or omissions of the solicitors are an integral part of the other party's complaint or the client has been sued in circumstances where he or she was acting on the advice of their solicitors and it is effectively that advice which is in issue. In such cases, apart altogether from the position of the client, the Court is not receiving the assistance of counsel who are observably independent. Independence is a function of counsel. The Court is entitled to assume that solicitors and counsel appearing before it possess that independence. 22 In the present case, there is reason to suppose that Mr Morey's conduct may come under attack and review. This is because of the potential anomalies, to which reference has been made, between the version pleaded and certified by him in the Statement of Claim on the one hand, and his 22 June 2006 letter on the other; the manner in which he responded to requests that he explain those apparent anomalies; and the rather fine distinctions drawn in his ultimate explanation of those anomalies. I wish to be quite clear that it may well turn out to be that there is a perfectly good explanation for all these matters, and it may well be that Mr Morey's conduct will prove to be entirely beyond reproach in every way. But the material that is presently available suggests that, whatever the outcome may be, there is likely - indeed very likely - to be a robust attack on his credit if he enters the witness box.

23 In that lies the heart of the problem. Mr Morey may be called as a witness in the plaintiff's case, to corroborate her version of the September 2005 arrangements and/or to corroborate her allegation that she had not received legal advice. At first sight, though I appreciate that further evidence may change this, that would be prima facie inconsistent with what has been said in some of his correspondence, and would leave more than a little room for the suggestion that such evidence was at least "tailored", out of loyalty to his client. In other words, he would be subject to robust cross-examination. It is unlikely that he would be called in Mrs Mitchell's case if he were going to contradict her version; but if he were not called, there would undoubtedly be a strong submission made that an adverse Jones v Dunkel inference should be drawn from the failure to call him. It is also possible that, based on what is known from the correspondence so far available, he might be called by the Burrells in their case, in the expectation that he might contradict Mrs Mitchell's version and case. If so, and he did not give evidence consistent with what is in the 22 June 2006 letter, the defendants might well be granted leave to cross-examine him as adverse. In any event, if he were called in the defendant's case and gave evidence adverse to Mrs Mitchell, he would then be liable to be cross-examined by counsel for the plaintiff, on the instructions of himself or Mr Jurd. 24 In my view, in those circumstances, a fair minded, reasonably informed member of the public would entertain serious reservation as to whether decisions about the conduct of the plaintiff's case would be made exclusively in the interests of the plaintiff, or to a greater or lesser extent having regard to the interests of Mr Morey. In particular, there would be reservations as to whether decisions to call him or not to call him in the plaintiff's case were influenced by his own interests as well as or in place of Mrs Mitchell's, and there would be concerns if he were called in the defendants' case as to whether the vigour of any cross-examination of him was influenced by concern for his interests as distinct from those of Mrs Mitchell. The point is perhaps highlighted by asking the rhetorical question that was raised in the course of argument: if Mr Morey's evidence of what he was told by Mrs Mitchell about the September 2005 conversations did not coincide with Mrs Mitchell's own evidence, who would Mr Morey instruct counsel to submit should be believed - himself or his client? It seems to me that there is a substantial risk that a situation of embarrassment could arise and a reasonably informed lay observer would think it contrary to the interests of justice that Mr Morey act in those circumstances. 25 As to Mr Jurd, there is no suggestion that he would himself be a witness. The case against him is put on the basis that he is Mr Morey's partner. There are suggestions in some of the cases that where one solicitor in a firm is disqualified from acting, it need not invariably follow that the others are also disqualified. In Bahonko v Nurses Board of Victoria (No 3) [2007] FCA 491, Middleton J restrained an employed solicitor from continuing to act in a matter, but held that the firm by which she was employed was still at liberty to act. In Scallan, the solicitor who was a potential witness was a consultant to the firm (although he had been before then the firm's longstanding senior partner), but that does not advance the matter very far, because no injunction was granted in any event. It is notable that, in both of those cases, it was an employed solicitor whose conduct was in question, albeit in Scallan one who had been recently a senior partner. Against that, most cases point to the view that, in this respect, the law treats a firm of solicitors as a single entity, so that if one partner is disqualified, the firm should not act [Chapman v Rogers; ex parte Chapman, 545; Bowen v Stott [2004] WASC 94, [66] (firm restrained from acting where one partner was likely to be a material witness); Kooky Garments Ltd v Charlton, 590 (cited with approval in Afkos Industries Pty Ltd v Pullinger Stewart (a firm) [2001] WASC 69, [15])]. In principle, given the incidents of the relationship of partnership (involving utmost good faith and loyalty between the partners), and those of solicitor and client (requiring any partner in a firm to do all in his or her power and use all knowledge and information available to them, including to their partners, to assist the cause of the client), it is difficult to see how, where one partner is disqualified, it could be acceptable for another partner in the same firm to continue to act. 26 In any event, on the facts of this case I am satisfied that the replacement of Mr Morey by Mr Jurd does not alleviate the concerns which the reasonable lay observer would entertain, and that such observer would remain concerned that decisions whether or not to call Mr Morey, and if he were called by the defendants as to how to cross-examine him, might be influenced by Mr Jurd's obligations to his partner, as well as or in preference to his obligations to his client. Once again, the problem can be highlighted in this way: if the versions of Mr Morey and Mrs Mitchell did not coincide, who would Mr Jurd instruct counsel to submit should be believed, his client or his partner? Accordingly, the reasonable lay observer would continue to entertain reservations that decisions might not be made exclusively in Mrs Mitchell's interests but might be influenced by the interests of the firm and Mr Morey. An independent solicitor would remove the concern that interests other than Mrs Mitchell's might influence important decisions in the conduct of her case. 27 Relief in this jurisdiction is discretionary. Relevant discretionary considerations here include that the proceedings are still at a relatively early stage, that the objection was notified and agitated at the earliest reasonably possible time, and that as a result additional costs and the loss involved in having to instruct new solicitors will, although not negligible, be relatively slight. 28 Submissions were advanced that Mrs Mitchell's financial position was such that she would have great difficulty in obtaining other solicitors to act for her. I do not consider that I can act on those submissions in the absence of the slightest evidence to support them, bearing in mind that allegations in a Statement of Claim - which, in any event, do not go so far as making good that submission - even if verified, are not admissible evidence of the matters they assert. 29 I have considered carefully whether the circumstance that the only person who would apparently be prejudiced by Slattery Jurd continuing to act would be Mrs Mitchell. However, it is not correct that only she would be prejudiced. The Court would suffer the disadvantage of itself having to entertain the reservations that I have mentioned the reasonable lay observer would entertain. And those reservations would impact adversely on the appearance of justice. Moreover, there is not the slightest evidence that Mrs Mitchell has been apprised of all these matters and of the risks to which I have adverted, yet wishes the solicitors to continue to act for her, and I cannot even draw the comfort that might otherwise be available had she been in Court, because she was not present during the hearing of the application. In those circumstances - even if, which I doubt, it were otherwise appropriate for the Court to conclude that the only potential prejudice was to Mrs Mitchell, and that if she wanted to take her chances in that respect, she could - the basis for such a conclusion in this case has not been established. 30 Accordingly, my conclusions are:

· first, that the reasonably informed lay observer would think that there was an appreciable risk of judgments in the conduct of Mrs Mitchell's case not being made in her interest, or being adversely affected by the interests of Mr Morey and his firm, such as to make it inappropriate in the interests of justice that he and his firm continue to act; · secondly, discretionary considerations do not tell against making orders to give effect to the interests of justice in this case. 31 It follows that the firm ought to be restrained from continuing to act for Mrs Mitchell.

32 My orders are: (1) Orders 1 and 2 in the Notice of Motion filed 12 June 2008;

(2) Adjourn the proceeding to 9.30am on Tuesday 1 July 2008 for argument as to costs. **********

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