Plaintiff v Defendants

Supreme Court of Victoria|2012-12-12|Before: PAGONE J

LEGAL PRACTITIONERS - Application by defendants to restrain solicitor from continuing to act for plaintiff - Whether solicitor giving evidence in a proceeding should cease to act for the client - Whether solicitor had a "personal interest" in the proceeding - Inherent jurisdiction of the Court over its officers and to control its processes - Ensuring the due administration of justice.

1 The First and Third Defendants seek an order that Mr Andrew Burgess and the firm Henderson & Ball Lawyers be restrained from continuing to act for the Plaintiff in these proceedings. The Second and Fourth Defendants support the application and adopted the submissions made for the First and Third Defendants.

2 The Court's jurisdiction to restrain a solicitor from acting in a particular case is exceptional and must be exercised with caution.[1] The jurisdiction to restrain a practitioner from acting for a client in judicial proceedings is an incident of the Court's inherent jurisdiction over its officers to control its process in aid of the administration of justice.[2] An important consideration against the exercise of the jurisdiction is that a litigant should not be deprived of his or her choice of lawyer without good cause.[3] Applications by opposing parties for the removal of their opponent's lawyers should not be made lightly and need scrutiny. The applicant who has no personal interest to protect (such as in the preservation of confidential information from a previous retainer) needs to show that the removal is necessary. A party seeking the removal of an opponent's legal practitioner is not seeking to exercise a right but moving the Court to exercise its power over its own officers[4] but doing so against the wishes of the opponent in adversarial proceedings and in a context in which a successful application may cause inconvenience to the opponent and a forensic advantage to the moving party. An applicant may have obligations to the Court when making such applications to satisfy the Court that the application is necessary and not made for collateral advantage. Care must be taken to ensure that applications for removal of practitioners do not become a means by which opposing parties obtain forensic advantages which detract from, rather than advance, the policy for which the jurisdiction is properly to be exercised. It is, therefore, essential that an injunction to restrain a practitioner from acting on behalf of a client be firmly based upon the need for that to occur in the administration of justice.[5]

3 The test to be applied in the exercise of this jurisdiction was stated in Grimwade v Meagher[6] as follows:

The objective test to be applied ... is whether a fair-minded reasonably informed member of the public would conclude that the proper administration of justice required that [the lawyer] be [ ... ] prevented from acting, at all times giving due weight to the public interest that a litigant should not be deprived of his or her choice of [lawyer] without good cause.[7]

In application of the test, sight should not be lost of the severity of the consequence of such an order for the client. The conclusion to be reached is that justice "requires" a client to be deprived of his or her choice of lawyer and that has been said by one writer to require the Court's inquiry into whether the fair-minded reasonably informed person "would find it subversive to the administration of justice to allow the representation to continue".[8] The issue to be determined is, in other words, whether a party should be deprived of his or her choice of lawyer. The facts and circumstances of each case will, of course, be crucial to how the issue is determined. Those in Grimwade v Meagher were described as "unique" because of the real risk of lack of objectivity and of conflict of interest and duty.[9]

4 Counsel for the Defendants relied upon a number of passages from the decided cases expressing the relevant principle in broad terms. In Commissioner for Corporate Affairs v Harvey[10] Marks J had said:

What is important, however, is that the Court sets its face against giving audience to legal representatives who are unable to assure the Court of a singular interest. It is the purity of interest in the adversaries before the Court that gives what fundamental utility and credence there is in the system.[11]

In Clay v Karlson[12] Templeman J said:

I emphasise that Seaman refers to the fact that it is generally unwise for a practitioner who is likely to be called as a witness to continue to represent his client in those proceedings. It must follow, I think, that the case is even stronger against the solicitor acting who has a personal interest in the outcome of the action: he is more than simply a witness.[13]

In each of these cases, however, what was significant was the particular circumstances which engaged the principle. It is not sufficient to restrain a solicitor from acting in a proceeding that the solicitor may be a witness in the proceeding nor, in either case, was it sufficient to restrain the solicitor from acting that the solicitor's legal advice on a matter in a dispute was called into question or challenged in the proceeding. In both cases, and in the other cases to which I was referred, it was the particular and specific nature of the solicitor's position which required the conclusion in those cases.

5 In Commissioner for Corporate Affairs v Harvey[14] the issue concerning the appropriateness of a solicitor continuing to act for a client arose in the context of a conflict which the solicitor had by virtue of his acting for a client who had a conflict of interest. The practitioner, Mr Kiddle, was found to be affected by the conflict of interest of the liquidator for whom he acted. The liquidator was found to have placed himself in a position where his duties as liquidator conflicted with his personal interest, and the legal practitioner, Mr Kiddle, was handicapped by that conflict. Marks J said:

Kiddle was examined for some three days during which he was still the solicitor on the record for the liquidator and instructor of the liquidator's counsel Mr Strahan. He then obtained separate representation for himself and Mr Hooper of counsel appeared for him. At the same time he ceased to act as solicitor for the liquidator. This occurred because Kiddle perceived, after pressing examination on the point, that he had a conflict of interest in representing the liquidator in his personal and liquidator capacity. Shortly after, Mr Strahan also withdrew as he saw in Mr Meagher's line of examination implications that could have involved him beyond his role as counsel.[15]

The relevant conflict of interest that caused the problem for the solicitor was the conflict of interest which his client, the liquidator, had. As his Honour said:

When Kiddle was retained by the liquidator it was to assist him in that capacity. As such the liquidator was agent of the company and any remuneration of Kiddle was payable out of the assets of the company. The liquidator was not personally liable for it ... Once the liquidator was called upon to defend his conduct the retainer was automatically caught between representation of personal conduct and representation of the interests of the liquidation. [16]

The problem for Mr Kiddle was that he could not continue to represent the liquidator in both capacities. It was the conflict of interest of the liquidator which occasioned the conflict of interest for Mr Kiddle which in turn constrained Mr Kiddle in the evidence he was giving to the Court. As his Honour observed:

In evidence, Kiddle maintained that he did no more than represent "his client" and that he would not be prevailed on to criticise "his client". If by that, Kiddle meant that his client was the liquidator in his personal capacity then it must have been apparent that his representation had changed since his engagement in September 1975. After three days of examination Kiddle took advice of senior counsel and since then he has not been constrained by himself or his counsel to contend otherwise than that he did have the conflict to which I have averted. I think it is apparent that he did. It was after that he objected to be examined further and claimed privilege against self-incrimination.[17]

His Honour did not conclude that a solicitor should cease to act for a client whenever called upon to give evidence on behalf of a client. Nor did his Honour conclude that a solicitor is unable to assure the Court of "a singular interest" whenever the solicitor is called upon to give evidence in court proceedings. Indeed, it will often be the case that the solicitor's evidence for a client will be in the singular interest of the client.

6 The case of Clay v Karlson[18] was similarly not a case which decided that a solicitor giving evidence in a proceeding on behalf of a client should always be removed from the record. What was critical in that case was the particular personal interest of the solicitor in the outcome of the action. The issue of the solicitor's position arose in the context of an action in which a codicil to a testator's will had been challenged on grounds which included: that the testator on executing the codicil was not of sound mind, memory and understanding; that no medical practitioner was present when the codicil was executed; and that the testator had received no independent legal or financial advice in relation to the codicil.

7 The solicitors in Clay v Karlson, Gibson & Gibson, were acting in the proceeding for the Second Defendant and had also prepared the codicil. The Statement of Claim had alleged that the codicil was prepared by Gibson & Gibson "as solicitors acting for and on the instructions of the second defendant" and that it had been prepared without contact with the testator prior to its execution.[19] In those circumstances Templeman J concluded that Gibson & Gibson had "an interest in the outcome of the action" because "their professional conduct in the preparation and execution of the codicil [was] the subject of serious criticism".[20] The solicitors were not parties to the proceeding but the proprietary of their conduct, in the context of an allegation that they had acted in the preparation of the codicil contrary to their duty was the subject matter of the dispute and that circumstance caused them to have an interest (a personal interest) in the outcome of the action. The interest may have been in common with the client (in the sense that both had an interest in upholding the impugned codicil)[21] but the interest of the solicitors were personal to them (in the sense that the allegation in the proceeding was that they had acted contrary to their duty) and it was that circumstance which created "the conflict between the firm's interests and the duty to the court"[22] (which the practitioner appearing for the solicitors seemed to accept).

8 A practitioner was not restrained from acting on behalf of a client in Bufalo Corporation Pty Ltd (rec & mngr apptd) (in liq) v Lendlease Primelife Limited (formerly Primelife Corporation Limited).[23] In that case Judd J said:

Of more importance is the evidence to be given by Mr Warren in connection with allegations that Primelife, through him, unlawfully interfered in the receivership by directing or persuading Mr Rathner not to sell shares held by the plaintiff in Primelife, the value of which shares exceeded an amount advanced by Primelife to assist in the purchase of shares in Confalo Pty Ltd and Newpark Pty Ltd, and by directing or persuading Mr Rathner to accept and assert that the scope of the debenture extended to secure counterclaims by Primelife against the plaintiff in respect of joint venture projects.

The significance of the allegations in the case and to Mr Warren should not be underestimated. They are an important part of the plaintiff's case. When coupled with Mr Warren's involvement in the issues relating to the plaintiff's challenge to the validity of the security documents, Mr Warren finds himself as a central witness with the real likelihood, if not inevitability, that he will be subjected to serious allegations about the propriety of his conduct and challenges to his credit.

In the circumstances, it is surprising that Mr Warren did not himself conclude that he should not continue to act as a solicitor for the Primelife. He must have known that his conduct would be the subject of a challenge by the plaintiff. The allegations against Mr Warren are serious and, if made out, will reflect adversely upon his professional reputation.[24]

In that case his Honour observed that there were "strong grounds to support an injunction restraining Mr Warren from continuing to act on behalf of the Primelife defendants in [the] proceeding",[25] but refused the application for an injunction because of the public interest in having the trial proceed to conclusion without interruption.[26]

9 The issue of the position of the solicitors in this case relates to a Put and Call Option Agreement relied upon by the Plaintiff. Paragraph 7 of the Amended Statement of Claim alleges that the Fourth Defendant, Grochowski, or alternatively the Second Defendant, Sovereign, acted as agent for the First Defendant, Sandhurst, in respect of the marketing and sale of certain parcels of land. The Plaintiff's particulars to that paragraph refer to the negotiations for the terms of the Put and Call Agreement which are particularized as being constituted, in part, in the writing "comprised of written communications passing between Grochowski and Leonard Legal for and on behalf of Sandhurst and Leung and Henderson & Ball for and on behalf of Premier Capital". Another particular relies upon permission given "by Elpida Kotsiras of Leonard Legal in a telephone conversation with Andrew Burgess of Henderson & Ball on 25 January 2010". The Second and Fourth Defendants deny the allegations pleaded in para 7 and otherwise do "not plead further in relation to [the] allegations, including those as may be deemed to constitute a pleading of material facts rather than Particulars". The First and Third Defendants plead that the allegations in para 7 are "embarrassing and ought to be struck out" but, under cover of that general objection, plead matters without specific reference to the conduct of Henderson & Ball. The Defendants plead in their counterclaims that the Put and Call Option Agreement is void for uncertainty for grounds other than impropriety (professional or otherwise) or conflict of interest on the part of Mr Burgess or the firm Henderson & Ball.

10 On 2 March 2012 the solicitors for the First and Third Defendant wrote to Mr Burgess of the Plaintiff's solicitor saying:

With reference to the above matter and recent review of the current pleadings:

We note that your firm, and you in particular, drafted and negotiated the Put and Call Option Agreement to which this proceeding relates with Leonard Legal. As the terms of the agreement are in dispute and important elements of it are incomplete, you will be a necessary and critical witness in this proceeding.
Further it is our opinion, based on material available to us at this time, that your client may have actions against your firm for negligence or breach of contract.
Further to paragraph 2), it is our view that your client may be Anshun estopped were your firm not to be added as a party to these proceedings. We think that places a high responsibility on your firm to advise your client on this point. Such advice should in our view come from an independent legal advisor.
We give you notice that we intend to subpoena your file into Court for delivery to the Registrar insofar as it relates to matters prior to litigation and your firm's advice to your client in respect to the initiation of litigation.

In these circumstances, it is not appropriate that your firm continue to act in this litigation. We refer you specifically to rules 9.1, 9.2 and 13.4 of the Professional Conduct and Practice Rules 2005. We advise that if we do not receive a Notice of Ceasing to Act or Notice of Change of Practitioner by the close of business next Thursday, 8 February 2012, we shall seek instructions to apply for orders restraining your firm from continuing to act for the plaintiff in this proceeding.

This letter was exhibited to an affidavit sworn 12 September 2012 of Mr Wantrup, solicitor, on behalf of the First and Third Defendants. The many exhibits to that affidavit, and the one exhibit to a supplementary affidavit sworn 20 November 2012, exhibit much of the background material to the proceedings including the Court record and, importantly, the correspondence concerning the Defendant's attempts to prevent Mr Burgess and Henderson & Ball from continuing to act for the Plaintiff. That correspondence includes a request by the Defendants to the Ethics Committee of the Law Institute of Victoria for a ruling on whether Henderson & Ball should continue to act for the Plaintiff and whether Henderson & Ball should ensure that the Plaintiff receives independent legal advice generally, and in particular, in relation to its relationship with and rights against Henderson & Ball in relation to the subject matter of the proceeding.

11 The request to the Law Institute of Victoria on behalf of the Defendants for a ruling that the Plaintiff's solicitor should cease to act for the Plaintiff included detailed submissions and led to a request by the Law Institute Ethics Committee seeking, and obtaining, responses from Mr Burgess of Henderson & Ball. Amongst the material before the Ethics Committee, and tendered in evidence before me, is a clear difference of view about whether Mr Burgess, or anyone else at Henderson & Ball, will be required to give evidence. I need not resolve that dispute for present purposes although the pleadings as they currently stand would seem to indicate that the only oral testimony Mr Burgess might need to give is that concerning the fact of permission said to have been received by him in a telephone conversation on 25 January 2010.

12 The Ethics Department Manager of the Law Institute of Victoria, Ms Donna Cooper, wrote to Wantrup & Associates asking specifically for confirmation about whether their clients actually intended to call Mr Burgess as a witness in the proceeding. The response (perhaps understandably) was non-committal. In any event, the opinion of the Ethics Committee on the information presented was not favourable to the Defendants. The opinion of the committee was:

It may be prudent that Henderson and Ball Lawyers cease acting because there is some prospect that Mr Burgess may be called as a witness. In our view, rule 13.4 does not require that Henderson and Ball Lawyers cease to act until it becomes known or is apparent that Mr Burgess will be required to give evidence in relation to contested issues.

That opinion was communicated to Wantrup & Associates by letter dated 24 May 2012 but did not bring an end to the efforts by the Defendants to have Henderson & Ball cease to act for the Plaintiff. On 6 June 2012 and 13 June 2012, and subsequently, Wantrup & Associates wrote to Mr Burgess continuing to press that a Notice of Ceasing to Act should be filed in the proceeding.

13 Two reasons were pressed by the Defendants to justify the Court's grant of an injunction to come between a party and its chosen practitioner. The first is that Mr Burgess is said to be a witness to a material contested issue of fact. The only matter about which the Plaintiff might need to call Mr Burgess to give evidence is that concerning the telephone conversation on 25 January 2010 by which Elpida Kotsiras was said to have given permission to send all future Contracts of Sale directly to the Fourth Defendant. Assuming for present purposes (although it is by no means certain or inevitable) that this fact will not be proven if the Plaintiff does not call Mr Burgess to establish it, it is not a contested fact of a kind that warrants the conclusion that Mr Burgess or Henderson & Ball "will be the subject of adverse criticism concerning their professional conduct in the preparation and execution of the Put and Call Agreement". Nor does it give them a personal interest which conflicts with the interest of the Plaintiff. It might cause a fair-minded reasonably informed member of the public to conclude that it would be prudent that Mr Burgess not act in the proceeding but not that the proper administration of justice required the Plaintiff's lawyers to be prevented from continuing to act for the Plaintiff.

14 The second reason relied upon is said to be that Mr Burgess and Henderson & Ball "simply cannot assure the court of a singular interest - i.e. that they act in the interest of the client and the client alone, because they both have a personal interest in the outcome of the dispute". The written submissions elaborated upon this as follows:

The personal interest of Mr Burgess and his firm is that they lack a singular interest because they are likely to be or may be the subject of future criticism arising from a document central to the resolution of the dispute. In this regard, the plaintiff avers in paragraph 7(ii) of the amended statement of claim that Henderson & Ball played a part in negotiating the terms of the Put and Call Agreement. In fact, Henderson & Ball have stated in correspondence that they prepared the Put and Call Agreement ... It is the defendant's alternative contention by its counterclaim [paragraph 121 of its amended defence] that the Put and Call Agreement is void for uncertainty [for the reasons pleaded in paragraphs 111-120 therein]. If there is a declaration to this effect, as is sought in the relief, then Henderson & Ball's professional conduct in the preparation and execution of the Put and Call Agreement will likely be the subject of serious criticism by the plaintiff in the future. Templeman J regarded this factor as decisive reasoning that the solicitor who has a personal interest in the outcome of the action is "more than simply a witness".

I do not accept the submission. A contention that an agreement is void for uncertainty for the reasons pleaded in the Counterclaims does not create a separate interest comparable to that considered in Clay v Karlson[27] or Commissioner for Corporate Affairs v Harvey.[28] Templeman J appeared to accept, and I respectfully agree, that there may be situations in which a solicitor's involvement in giving evidence cannot reasonably be avoided.[29] The matters pleaded in paras 111 to 120 of the Counterclaim of the First and Third Defendants (and in the comparable Counterclaim of the Second and Fourth Defendants) do not make allegations of a kind comparable to those in Clay v Karlson in which the propriety of the conduct of the practitioners was in issue. A reasonably informed fair-minded member of the public might consider it prudent for Henderson & Ball not to act in the proceeding for the Plaintiff but would not conclude that the administration of justice required that they should be prevented from continuing to act for the Plaintiff.

[1] Grimwade v Meagher & Ors [1995] VicRp 28; [1995] 1 VR 446, 450, 452 (Mandie J); Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561, 582 (Brereton J); Bowen v Stott [2004] WASC 94, [54] (Hasluck J).

[2] Grimwade v Meagher & Ors [1995] VicRp 28; [1995] 1 VR 446, 455-6 (Mandie J); Garde-Wilson v Corrs Chambers Westgarth [2007] VSC 235; (2007) 27 VAR 271, 277-8 (Bell J); Bowen v Stott [2004] WASC 94, [47] (Hasluck J); Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561, 582 (Brereton J); Clay v Karlson (1997) 17 WAR 493, 497 (Templeman J); Newman v Phillips Fox (1999) 21 WAR 309, 315 (Steytler J).

[3] Bowen v Stott [2004] WASC 94, [51] (Hasluck J); Garde-Wilson v Corrs Chambers Westgarth [2007] VSC 235; (2007) 27 VAR 271, 278 (Bell J); Grimwade v Meagher & Ors [1995] VicRp 28; [1995] 1 VR 446, 452 (Mandie J).

[4] Compare Michael v Freehill Hollingdale & Page (1990) 3 WAR 223, 233 (Seaman J).

[5] Grimwade v Meagher & Ors [1995] VicRp 28; [1995] 1 VR 446, 455 (Mandie J).

[7] Ibid 452 (Mandie J); Garde-Wilson v Corrs Chambers Westgarth [2007] VSC 235; (2007) 27 VAR 271, 278 (Bell J); Bufalo Corporation Pty Ltd (rec & mngr apptd) (in liq) v Lendlease Primelife Limited (formerly Primelife Corporation Limited) [2010] VSC 672, [6]-[7] (Judd J).

[8] GE Dal Pont, Lawyers' Professional Responsibility (Thomson Reuters, 5th ed, 2012), [17.20].

[16] Ibid (citations omitted) (Marks J).

[29] Clay v Karlson (1997) 17 WAR 493, 497-498 (citing Chapman v Rogers; Ex parte Chapman [1984] 1 Qd R 542).

Conduct and Practice Rules 2005

At a glance

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Judgment (56 paragraphs)

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Cases Cited (4)