Allison v Tuna Tasmania Pty Ltd
[2011] TASSC 52
•23 September 2011
[2011] TASSC 52
COURT: SUPREME COURT OF TASMANIA
CITATION: Allison v Tuna Tasmania Pty Ltd [2011] TASSC 52
PARTIES: ALLISON, Paul Francis
v
TUNA TASMANIA PTY LTD (ACN 066 778 985)
FARRER, John Frederick
FARRER, Sharon Tina
LAWRENCE MOTORS PTY LTD (ACN 050 492 745) as trustee of the Farrer Superannuation Fund and as trustee for the Farrer Superannuation Fund (No 2)
HAVENFLASH PTY LTD (ACN 065 284 862) as trustee of the Farrer Family Trust
FILE NO/S: 95/2003
DELIVERED ON: 23 September 2011
DELIVERED AT: Hobart
HEARING DATES: 14 & 15 September 2011
JUDGMENT OF: Holt AsJ
CATCHWORDS:
Professions and Trades – Lawyers – Duties and liabilities – Counsel and Client – Other matters – When a barrister may be restrained from continuing to act against a party – Court's inherent jurisdiction.
Kallinicos v Hunt (2005) 64 NSWLR 561 considered.
Aust Dig Professions and Trades [1152]
REPRESENTATION:
Counsel:
Plaintiff and John P Murphy (Barrister): A J H Morris QC
Defendants: D J Gunson SC and T J Williams
Solicitors:
Plaintiff: In person
Defendants: Gunson Williams
Judgment Number: [2011] TASSC 52
Number of paragraphs: 42
Serial No 52/2011
File No 95/2003
PAUL FRANCIS ALLISON v TUNA TASMANIA PTY LTD & ORS
REASONS FOR JUDGMENT HOLT AsJ
23 September 2011
An application to restrain the plaintiff's counsel, Mr Murphy, from providing legal services in connection with the action
A lawyer may be restrained from acting in the following situations:
(1)The lawyer holds a retainer from more than one party where the interests of the parties are in conflict and they have not provided an informed consent to the lawyer acting.
(2)The lawyer acting for a new client against a former client is in possession of confidential information imparted by the former client and a reasonable observer aware of all the facts would think that there is a real possibility that the information might be used by the lawyer to advance the interests of the new client to the detriment of the old client. See Carindale Country Club Estate Pty Ltd v Astill (1993) 115 ALR 112 at 118.
(3)A fair minded reasonably informed member of the public would conclude that the proper administration of justice requires that the lawyer be prevented from acting in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice. See Grimwade v Meagher (1995) 1 VR 446 at 452 and Kallinicos v Hunt (2005) 64 NSWLR 561 at par76.
The jurisdiction is based, in the first case, on fiduciary duty and, in the second case, on the duty to preserve confidences. The position was clearly set out in Prince Jefri Bolkiah v KPMG (1999) 2 AC 222, where Lord Millett said at 234 – 235:
"It is otherwise where the court's intervention is sought by an existing client, for a fiduciary cannot act at the same time both for and against the same client, and his firm is in no better position. A man cannot without the consent of both clients act for one client while his partner is acting for another in the opposite interest. His disqualification has nothing to do with the confidentiality of client information. It is based on the inescapable conflict of interest which is inherent in the situation.
…
Where the court's intervention is sought by a former client, however, the position is entirely different. The court's jurisdiction cannot be based on any conflict of interest, real or perceived, for there is none. The fiduciary relationship which subsists between solicitor and client comes to an end with the termination of the retainer. Thereafter the solicitor has no obligation to defend and advance the interests of his former client. The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality of information imparted during its subsistence."
The jurisdiction, in the third case is part of the inherent jurisdiction of superior courts to control its officers and its process in aid of the administration of justice. It is not referred to in Prince Jefri, but that omission does not provide an indication that the jurisdiction does not exist. Prior to the decision in Prince Jefri the Court's inherent jurisdiction to restrain a lawyer from acting was well established. Prince Jefri concerned accountants. Accountants, unlike lawyers, are not officers of the Court and so not subject to its supervisory jurisdiction. Accordingly, the supervisory jurisdiction was not relevant in that case and so was not referred to. This point of distinction was noted by Brereton J in Kallinicos in concluding that the inherent supervisory jurisdiction survived Prince Jefri. The point of distinction was referred to, without criticism, by Crawford J (as he then was) in Styles v O'Brien [2007] 16 Tas R 268 at par24.
There is divergent opinion as to whether a fourth ground of intervention exists based upon a duty of loyalty to former clients existing independently of whether there is a risk of misuse of confidential information imparted by the former client. The cases in support of the existence of a duty of loyalty include Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501 per Brooking JA and Sent v John Fairfax Publications Pty Ltd (2002) VSC 429. Cases against include Prince Jefri, Belan v Casey (2002) NSWSC 58 at pars18 and 21 and Kallinicos at par76. The existence of an enforceable duty of loyalty has not been accepted in this State. See A v Law Society of Tasmania [2001] 10 Tas R 152 at par45 and Styles v O'Brien at par19.
Here the defendants want the plaintiff's counsel, Mr John Murphy of the Queensland Bar, restrained from taking any further part in the proceeding. The application is based, not on any claim of actual or possible breach of fiduciary duty or confidence, but on the ground that intervention is required for the protection of the integrity of the judicial process in the litigation.
Counsel for the plaintiff conceded (undoubtedly correctly) the existence of the inherent power to intervene to protect the integrity of the judicial process.
The factual basis for the application
The circumstances giving rise to the application, so far as are conceded by the plaintiff and Mr Murphy, are as follows:
●On 22 July this year Mr Murphy attended a pre-arranged luncheon meeting with one of the defendants, John Farrer, at the Southern Cross Motel in Brisbane.
●The plaintiff's claim in the action is based on conversations which he alleges he had with Mr Farrer and so Mr Farrer is likely to be an important witness in the case.
●The meeting had been arranged and conducted without the consent of the defendants' lawyer.
●Mr Murphy and Mr Farrer were the only persons present at the meeting.
●The meeting lasted for about 20 minutes.
●Early in the conversation Mr Murphy gave an example of a case in which, as counsel, he had exposed a police officer for lying under oath.
●Mr Murphy said that he had a particular interest in and was a teacher of the area of law the subject of the litigation.
●Mr Murphy referred to related litigation in which he had been successful in maintaining a caveat over one of the assets in dispute in the action.
●Mr Murphy said that he estimated that the plaintiff might recover as much as $25m in the litigation and that Mr Farrer, his wife and the trustees of their superannuation funds would be liable to pay.
●Mr Murphy said that the plaintiff had two very reputable and independent witnesses.
●Mr Murphy said that the defendants were extremely likely to be held liable.
●Mr Murphy said that he could persuade the plaintiff to settle for $2m inclusive of costs, which settlement would be achieved by exchanging a notice of discontinuance with payment of that sum.
●Mr Farrer asked Mr Murphy to put the proposal in writing to his lawyer.
There is evidence from Mr Farrer that further things were said by Mr Murphy. For example, that he said that he wanted $1m each for himself and the plaintiff. Mr Murphy disputes this and gave evidence that his fee arrangement with the plaintiff entitled him to about $70,000 to $80,000 for his work to date. There is evidence from Mr Farrer that Mr Murphy told him that the defendants' lawyer was wasting time. If this was said, it indicates that Mr Murphy was attempting to drive a wedge between the defendants and their lawyer. However, the detail of what was said at the meeting is only relevant to the question of whether the meeting has caused prejudice to the defendants. Other than this, it is the fact that the meeting occurred which is important. There is no need for me to resolve these and other conflicts as to what was said at the meeting.
Under cross-examination Mr Murphy gave evidence of his financial circumstances at the time of the meeting. He had a mortgage with the National Australia Bank securing an indebtedness of about $850,000 and was in default in his repayment obligations. The arrears were about $20,000. He had $40,000 in credit card debts. He was indebted to his brother and to his son in a sum of about $100,000. He owed a company about $250,000 secured by a second mortgage over his house at Coolum which he estimated to be worth about $1,800,000. He said that his taxable income in the immediately preceding financial year was about $120,000, but some of this income was yet to be collected by him.
Mr Murphy, who was admitted to the Queensland Bar in 1997, said in a letter to the defendants' lawyer dated 31 July 2011 that he had given some thought as to whether he should attend the meeting. He said:
"I thought it was blindingly obvious that Mr Farrer would report our meeting to you, if he had not already alerted you in advance, which I thought he very likely had."
The propriety of attending the meeting required more detailed consideration. If such consideration had been given, Mr Murphy would have ascertained that his attendance at the meeting would be in breach of professional standards absent the consent of the defendants' lawyer.
The constraints on a lawyer having direct dealings with an opposing party who is represented are reflected in barristers' rules. For example, the Queensland 2011 Barristers' Rules, which came into effect on 1 July 2011 provide in r51:
"A barrister must not deal directly with a party other than his or her client who is legally represented unless:
(a)the substance of the dealing is solely to enquire whether the person is represented and, if so, by whom;
(b)the legal practitioner representing the party has previously consented; or
(c)the barrister believes on reasonable grounds that -
(i)the circumstances are so urgent as to require the barrister to do so; and
(ii)the dealing would not be unfair to the party."
By r9 of the 2011 rules the rules apply to local barristers practising in another State or Territory except to the extent that they are inconsistent with barristers' rules for that State or Territory. There are no inconsistent rules in Tasmania.
Mr Murphy's lack of objectivity and independence
Counsel for the plaintiff referred to the fact that it was not specifically put to Mr Murphy in cross-examination that he lacked objectivity. The propositions, which I have relied upon to reach the conclusion which I have, however, were all canvassed with Mr Murphy in cross-examination. In any event, Mr Murphy was represented by senior counsel at the hearing and it was obvious from the nature of the application that his objectivity was in question. He had ample opportunity to put facts before the Court showing that his ability to conduct the case complying with his duties to the Court was not at risk due to any lack of objectivity or independence. It is difficult to envisage any useful purpose which could have been served by asking Mr Murphy for his opinion of his own objectivity and independence. In any event, it is the appearance of lack of objectivity which is just as important as the fact of it.
Mr Murphy's fees were only recoverable in the event that the plaintiff was successful in the litigation. He was in personal financial difficulty. He had a social relationship with his client in that he was given hospitality in the form of overnight accommodation on several occasions whilst visiting Hobart.
Mr Murphy attended a meeting with an opposing party without the consent of that party's lawyer in order to attempt to secure a settlement of the action. He should have known that the meeting was inappropriate. It had been arranged several days earlier by a mutual acquaintance of the plaintiff, Mr Murphy and Mr Farrer. Mr Murphy did not use the time available to properly investigate and consider the propriety of the proposed meeting. He needed to look no further than the barristers' rules of his own State. He did not do so. He now acknowledges that his conduct was "egregious".
The facts that a lawyer will not recover fees unless the client is successful, that the lawyer is in financial difficulty and that the lawyer has a social relationship with the client would not, in isolation or cumulatively, be sufficient to justify a conclusion that the lawyer might lack the necessary objectivity and independence to fulfil his or her obligations to the Court. However, here, these features are combined with actual misconduct. The misconduct was a result of Mr Murphy failing to give due attention to the ascertainment of appropriate professional standards. He gave no explanation for this lack of attention. The most likely reason lies in a lack of objectivity and independence and I so find.
There is another matter which reinforces this finding. Mr Murphy said that he did not communicate the settlement offer through the defendants' lawyer because he did not trust him. No rational basis for distrusting the lawyer was given and in any event the communication of the offer did not involve any question of trust. Later Mr Murphy said that the explanation was that he let his emotions get the better of him. Assuming that this latter answer was honest, it serves to illustrate how professional judgments are clouded by lack of objectivity and independence.
The exercise of the discretion
This is not a case where the Court is considering a risk of lack of objectivity and independence, such as where the lawyer is a witness, has a personal interest in the proceeding or has a close personal relationship with a client. It is a case where there was in fact a lack of objectivity and independence which resulted in a serious breach of professional standards.
The position, where lawyers are found to in fact lack objectivity and independence, was referred to in Kooky Garments Limited v Charlton (1994) 1 NZLR 587 where Thomas J said at 590:
"I am primarily concerned in this case with the principle of protecting the integrity of the judicial process. That integrity is undermined if solicitors or counsel do not possess the objectivity and independence which their professional responsibilities and obligations to the Court require of them. (See also Rules of Professional Conduct r8.10.)
If, therefore, the solicitors or counsel are in default in this regard, the Courts not only may intervene but, in all probability, should intervene. I do not overlook the general right of a party to be represented by the solicitor or counsel of their choice. (See Equiticorp Holdings Ltd v Hawkins [1993] 2 NZLR 737, 739.) But that right is not directly in issue in this case, and must, in any event, give way to the overriding principle which I have enunciated."
This statement was adopted by Mandie J in Grimwade v Meagher at 452 – 453.
Undoubtedly, in both Kooky Garments and Grimwade the judge had in mind that the efficient administration of justice in an adversarial system is largely dependent on adherence to professional standards. Confidence that such standards are being maintained is underpinned by confidence that lawyers have the necessary objectivity and independence. As much is apparent from the judgment of Mason CJ in Giannarelli v Wraith (1988) 165 CLR 543 where the Chief Justice said at 556 – 557:
"The duty to the court is paramount and must be performed, even if the client gives instructions to the contrary. Rather it is that a barrister's duty to the court epitomizes the fact that the course of litigation depends on the exercise by counsel of an independent discretion or judgment in the conduct and management of a case in which he has an eye, not only to his client's success, but also to the speedy and efficient administration of justice. In selecting and limiting the number of witnesses to be called, in deciding what questions will be asked in cross-examination, what topics will be covered in address and what points of law will be raised, counsel exercises an independent judgment so that the time of the court is not taken up unnecessarily, notwithstanding that the client may wish to chase every rabbit down its burrow. The administration of justice in our adversarial system depends in very large measure on the faithful exercise by barristers of this independent judgment in the conduct and management of the case. In such an adversarial system the mode of presentation of each party's case rests with counsel. The judge is in no position to rule in advance on what witnesses will be called, what evidence should be led, what questions should be asked in cross-examination. Decisions on matters such as these, which necessarily influence the course of a trial and its duration, are made by counsel, not by the judge. This is why our system of justice as administered by the courts has proceeded on the footing that, in general, the litigant will be represented by a lawyer who, not being a mere agent for the litigant, exercises an independent judgment in the interests of the court."
Notwithstanding my finding that Mr Murphy, by his conduct, has demonstrated that he lacks the necessary objectivity, the ground of relief is discretionary and the discretion must be exercised with caution and with due weight being given to the public interest in a litigant not being deprived of the services of the lawyer of his or her choice and other factors such as consequential delay, inconvenience and expense to the litigant.
The factors in favour of imposing a restraint in the present circumstances are:
●The integrity of the judicial process and the due administration of justice is largely dependent upon lawyers observing professional standards and duties to the Court.
●Confidence that these standards and duties will be observed is dependent upon the lawyer not participating in proceedings where he or she lacks the necessary objectivity and independence and in some cases where that objectivity and independence, although in fact there, might be doubted.
●Mr Murphy, in the present proceedings, has demonstrated that he lacks the objectivity required for there to be confidence that standards and duties will be complied with in future.
●Accordingly, allowing Mr Murphy to continue to act in the proceedings undermines the integrity of the judicial process and the due administration of justice, including the appearance of justice.
●The application to have Mr Murphy restrained was made promptly following the breach coming to the attention of the defendants' lawyers.
●The action is yet to be set down for hearing.
Counsel for the plaintiff submitted that Mr Murphy need not be restrained. Mr Murphy now acknowledges that his behaviour was wrong and such an acknowledgment provides an indication that he will be especially vigilant in future not to breach standards or duties.
It was common ground that nothing was said at the meeting by Mr Farrer contrary to the interests of the defendants. There was no suggestion that Mr Farrer was overborne or intimidated by Mr Murphy such as to give Mr Murphy an advantage in cross-examination. There was no suggestion that Mr Farrer said or did anything at the meeting which he later might find to be personally embarrassing.
Due weight must be given to the fact that Mr Murphy is the plaintiff's lawyer of choice.
Counsel for the plaintiff informed me that the plaintiff had received independent advice and had expressed a fully informed desire to continue with Mr Murphy's services.
There is the following evidence in Mr Murphy's affidavit:
"Paul Allison had no money, …
…
Paul Allison has a criminal record from a long time ago, … he can be difficult at times because his bad health affects his moods;
…
From my observations of Paul Allison personally and my dealings with him and the two solicitors who have acted for him, I can say that I am very sure that if I were to cease acting for him, he would not be able to find another lawyer who would act."
However, there is no evidence that any attempt has been made to find another lawyer willing to act for the plaintiff. Mr Murphy said in his letter to the defendants' lawyer of 31 July 2011 that he had told Mr Farrer:
"Mr Allison had 2 very reputable and independent witnesses who would testify as to the formation of the relationship between Mr Allison and Mr Farrer;
I told Mr Farrer that in my opinion, the defendants were extremely likely to be held liable and after that it was only a matter of counting the money (or some words to that effect);
I told him that the amount would be very high, with interest and costs perhaps as much as perhaps $25 million, and that Mr Allison was 'into' the superannuation funds as well as Mr Farrer and the company;"
As to the strength of the case Mr Murphy said in his affidavit:
"When Paul Allison first instructed me, I wrote a fairly long opinion on prospects for him;
As a result of that work, I formed a particular view of the relevant legal principles;
…
One of the assets of Tuna Tasmania was (and is) a fishing boat named Cape Cleveland;
Without going into the facts I reasoned that, if I was correct generally, Tuna Tasmania would be holding the Cape Cleveland on trust as to 50% for Paul Allison;
I decided to see in as cheap and rapid a way as possible if the court would agree with my view of the applicable law;
I asked Paul Allison to lodge a caveat on the title of the Cape Cleveland, anticipating that Tuna Tasmania would commence proceedings to have it removed, which the company did.
His Honour Chief Justice Cox refused to order the removal of the caveat and his judgment was, with respect, consistent with my view of the law;
I was therefore fortified to advise Paul Allison to commence the substantive litigation."
If it is true that the plaintiff is likely to succeed, that he has reputable and independent witnesses and that the judgment might be for an amount as high as $25m there should be good prospects of the plaintiff obtaining other representation.
I am not persuaded that it is likely that disqualifying Mr Murphy will leave the plaintiff without a lawyer.
Regarding financial pressures which may have contributed to Mr Murphy's lack of objectivity and the breach of professional standards, there was evidence from Mr Murphy that he expected to receive a gift of $600,000 from his son. Such a gift would reduce financial pressure, but the possibility of it being received is not sufficient to support a conclusion that in future financial considerations will not come into play. As counsel for the defendants pointed out, if the gift eventuates, Mr Murphy may be keen to repay his son from the fruits, if any, of this litigation.
Counsel for the plaintiff referred to Nauru Phosphate Royalties Trust v Business Australia Capital Mortgage (2008) NSWSC 833 as having a factual basis closest to the present case. There a lawyer for some of the defendants had bypassed the plaintiffs' lawyers and engaged in conduct intended to persuade the plaintiffs to abandon the proceedings. The lawyer was not restrained from continuing to act as the defendants' lawyer. It was determined that he should be restrained from communicating directly or indirectly with the plaintiffs other than through the plaintiffs' lawyers. The case, however, does not support the proposition that this is the extent of the type of relief which should be granted. It appears that the restraint sought by the plaintiffs did not include restraining the lawyer from representing the defendants. All that was sought was an order restraining repeat of the impugned dealings. I do not find the case to be persuasive authority for the proposition that any restraint imposed upon Mr Murphy should be confined to preventing him from having direct dealings with the defendants in future.
Applying appropriate caution and giving due weight to the public interest in a litigant not being deprived of the lawyer of choice without due cause and the other discretionary considerations which count against intervention, I am nonetheless persuaded that the interests of the protection of the judicial process and due administration of justice outweigh the factors against imposing a restraint. I have come to this conclusion because there has already been a breach by Mr Murphy and further participation in the action by Mr Murphy will or may lack objectivity and so the integrity of the judicial process is genuinely, rather than merely possibly, under threat. This, in the present circumstances, is the matter of paramount importance.
Conclusion
I am satisfied that a fair minded reasonably informed member of the public would conclude that the proper administration of justice requires that Mr Murphy be prevented from acting in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice.
I am also satisfied that the defendants should have a favourable exercise of the discretion to restrain him.
Orders
The defendants' application is in the following terms:
"1That John Murphy be restrained from continuing to appear as counsel for the Plaintiff in this action.
2That John Murphy be restrained from providing any form of legal advice to the Plaintiff with respect to the matter in issue between the parties in this litigation.
3That the Plaintiff be restrained from making any use at the trial of this action of any information obtained from the Second Named Defendant by the said John Murphy on the 22nd day of July 2011.
4That John Murphy (or alternatively the Plaintiff) pay the costs of this application."
The first and second orders sought can be satisfactorily accommodated by the form of order which I propose to make. The third order sought is unnecessary because Mr Farrer did not impart any useful information at the meeting. In addition, the meeting was concerned solely with settlement negotiations. The Evidence Act 2001, s131(1)(a) precludes evidence being adduced of communications made at the meeting. Subsection (2) sets out a number of exceptions, but no realistic possibility exists of any of the exceptions applying.
The application for costs can be dealt with at another time.
These are the orders:
(1)John Murphy is to provide no further legal services, paid or unpaid, direct or indirect, in connection with the action.
(2)The defendants' application for costs is to be listed for hearing on a date to be notified.
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