Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 5]
[2016] WASC 263
•30 AUGUST 2016
BELGRAVIA NOMINEES PTY LTD -v- LOWE PTY LTD [No 5] [2016] WASC 263
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 263 | |
| Case No: | CIV:2583/2013 | 11 AUGUST 2016 | |
| Coram: | TOTTLE J | 30/08/16 | |
| 24 | Judgment Part: | 1 of 1 | |
| Result: | Application for injunction granted Application for stay dismissed Application to strike out pleadings dismissed | ||
| B | |||
| PDF Version |
| Parties: | BELGRAVIA NOMINEES PTY LTD JOONDEL DEVELOPMENTS PTY LTD LOWE PTY LTD COLIN REGINALD HEATH PENHURST NOMINEES PTY LTD |
Catchwords: | Practice and procedure Application to restrain solicitors from acting for party Where firm drafted agreement sought to be set aside Where issue as to adequacy of advice given by firm in relation to agreement Turns on own facts Practice and procedure Application to stay proceedings as abuse of process Application to strike out pleadings as abuse of process Where three related proceedings Whether inconsistent facts pleaded Whether companies knew that one set of facts was false Where defences denied or did not admit existence of agreements Where counterclaim pleaded that agreement should be set aside Inconsistency not impermissible No knowledge at time of pleadings that one set of facts false Application dismissed |
Legislation: | Legal Profession Conduct Rules 2010 (WA) Real Estate and Business Agents Act 1979 (WA) Rules of the Supreme Court 1971 (WA) |
Case References: | Commonwealth Bank of Australia v Jackson McDonald (A firm) [2014] WASC 301 Geneva Finance Ltd (Receiver & Manager Appointed) v Boys [2001] WASC 269 Giannarelli v Wraith (1988) 165 CLR 543 Holborow v MacDonald Rudder [2002] WASC 265 Kallinicos v Hunt [2005] NSWSC 1184; (2005) 64 NSWLR 561 Mayfield v P & B Corporation Pty Ltd [No 2] [2015] WASC 356 Northern Territory Housing Commission v Territory Bricks Pty Ltd (1983) 71 FLR 273 Westpac Banking Corporation v Newey [2013] NSWSC 533 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- JOONDEL DEVELOPMENTS PTY LTD
Plaintiffs
AND
LOWE PTY LTD
First Defendant
COLIN REGINALD HEATH
Second Defendant
PENHURST NOMINEES PTY LTD
Third Defendant
- Plaintiff
AND
BELGRAVIA NOMINEES PTY LTD
First Defendant
PENHURST NOMINEES PTY LTD
Second Defendant
- Plaintiff
AND
JOONDEL DEVELOPMENTS PTY LTD
Defendant
Catchwords:
Practice and procedure - Application to restrain solicitors from acting for party - Where firm drafted agreement sought to be set aside - Where issue as to adequacy of advice given by firm in relation to agreement - Turns on own facts
Practice and procedure - Application to stay proceedings as abuse of process - Application to strike out pleadings as abuse of process - Where three related proceedings - Whether inconsistent facts pleaded - Whether companies knew that one set of facts was false - Where defences denied or did not admit existence of agreements - Where counterclaim pleaded that agreement should be set aside - Inconsistency not impermissible - No knowledge at time of pleadings that one set of facts false - Application dismissed
Legislation:
Legal Profession Conduct Rules 2010 (WA)
Real Estate and Business Agents Act 1979 (WA)
Rules of the Supreme Court 1971 (WA)
Result:
Application for injunction granted
Application for stay dismissed
Application to strike out pleadings dismissed
Category: B
Representation:
CIV 2583 of 2013
Counsel:
Plaintiffs : Mr M D Cuerden SC
First Defendant : Mr D H Solomon
Second Defendant : Mr D H Solomon
Third Defendant : Ms L E Pye
Solicitors:
Plaintiffs : Robertson Hayles Lawyers
First Defendant : Solomon Brothers
Second Defendant : Solomon Brothers
Third Defendant : Mills Oakley Lawyers
CIV 2003 of 2015
Counsel:
Plaintiff : Mr D H Solomon
First Defendant : Mr M D Cuerden SC
Second Defendant : Ms L E Pye
Solicitors:
Plaintiff : Solomon Brothers
First Defendant : Robertson Hayles Lawyers
Second Defendant : Mills Oakley Lawyers
CIV 1483 of 2016
Counsel:
Plaintiff : Mr D H Solomon
Defendant : Mr M D Cuerden SC
Solicitors:
Plaintiff : Solomon Brothers
Defendant : Robertson Hayles Lawyers
Case(s) referred to in judgment(s):
Commonwealth Bank of Australia v Jackson McDonald (A firm) [2014] WASC 301
Geneva Finance Ltd (Receiver & Manager Appointed) v Boys [2001] WASC 269
Giannarelli v Wraith (1988) 165 CLR 543
Holborow v MacDonald Rudder [2002] WASC 265
Kallinicos v Hunt [2005] NSWSC 1184; (2005) 64 NSWLR 561
Mayfield v P & B Corporation Pty Ltd [No 2] [2015] WASC 356
Northern Territory Housing Commission v Territory Bricks Pty Ltd (1983) 71 FLR 273
Westpac Banking Corporation v Newey [2013] NSWSC 533
- TOTTLE J:
Introduction
1 These reasons concern interlocutory applications made in three related proceedings, CIV 2583 of 2013, CIV 2003 of 2015 and CIV 1483 of 2016 which are being managed in my Commercial and Managed Cases List. It is common ground that the actions will be heard together with the evidence in each action being received as evidence in each of the other actions. Albeit that pleadings have yet to close and discovery has not been given, the trial is likely to take place in April 2017.
Injunction application
2 The plaintiffs in CIV 2583 of 2013, Belgravia Nominees Pty Ltd and Joondel Developments Pty Ltd (who are the defendants in CIV 2003 of 2015 and CIV 1483 of 2016), apply for an injunction restraining Solomon Brothers from continuing to act on behalf of Lowe Pty Ltd and Mr Colin Heath.
3 Lowe is one of the defendants in CIV 2583 of 2013 and the plaintiff in CIV 2003 of 2015 and CIV 1483 of 2016. Mr Colin Heath is the second defendant in CIV 2583 of 2013. He is a director of Lowe
4 Penhurst Nominees Pty Ltd is a defendant in CIV 2583 of 2013 and CIV 2003 of 2015. It is represented by separate solicitors and has taken no part in the present applications.
5 The application is brought on the basis that, in the exercise of its supervisory jurisdiction, the court should restrain Solomon Brothers from continuing to act because one of its partners, Mr Gregory Solomon, will be a material witness and the actions involve issues concerning Mr Solomon's conduct.
Stay application
6 In CIV 2583 of 2013, Lowe applies for an order that the action be stayed on the ground that it constitutes an abuse of process. In each of CIV 1483 of 2016 and CIV 2003 of 2015, Lowe applies for orders that the defences be struck out for being an abuse of process. The applications rest on the propositions that there are internal inconsistencies in the defence and counterclaim in each of CIV 2003 of 2015 and CIV 1483 of 2016, and there are inconsistencies between those defences and counterclaims and the amended statement of claim in CIV 2583 of 2013. It is contended that the pleadings offend against the rule prohibiting inconsistent pleadings: O 20 r 11(1) Rules of the Supreme Court 1971 (WA).
An overview of the dispute
7 The dispute between the parties arises from a series of land development projects undertaken by Belgravia, Joondel and Penhurst. Each action involves an issue as to whether Lowe was entitled to receive fees for project management and marketing services allegedly performed by it for the land development projects.
8 Belgravia, Joondel and Penhurst are associated with the late Mr Robert Godecke and his brother Mr William Godecke. Belgravia and Joondel are now controlled by Mr Robert Godecke's children. Penhurst is controlled by Mr William Godecke. Lowe is controlled by Mr Colin Heath.
9 At the centre of the factual matrix is an agreement (the 1999 Agreement) made on 26 August 1999 between Belgravia, Joondel and Penhurst, on the one hand, and Lowe, on the other. The 1999 Agreement provided for Lowe to be appointed to project manage the subdivision, development and sale of lots in the subdivisions on behalf of Belgravia, Joondel and Penhurst in return for payment of fees.
10 The 1999 Agreement was prepared by Mr Gregory Solomon of Solomon Brothers. In preparing the 1999 Agreement, Mr Solomon acted for all of the parties.
11 In CIV 2583 of 2013, Belgravia and Joondel claim that payments totalling $4,560,280.10 were made by them and Penhurst to Lowe over a period beginning in April 2006 and ending in January 2012. They allege on various grounds that Lowe was not entitled to those payments and they sue for the return of the amounts paid to Lowe. Belgravia and Joondel also seek an order setting aside the 1999 Agreement. No claims are made against Penhurst and it has been joined as a defendant because it is a necessary party.
12 In CIV 2003 of 2015, Lowe claims that it is owed $998,133.86 by Belgravia and Penhurst, alternatively by Belgravia, for services performed in relation to seven property developments undertaken either by Belgravia and Penhurst trading in partnership as Godecke Land Trading Partnership or by Belgravia.
13 In CIV 1483 of 2016, Lowe claims it is owed $228,260.73 by Joondel by way of fees due to it for services performed in relation to a development of land described as the Provence Land.
The pleadings
14 To understand the contentions relied upon by the parties in support of their respective applications, it is necessary to outline the relevant parts of the pleaded cases.
CIV 2583 of 2015 - Belgravia and Joondel's claims
15 In their amended statement of claim, after identifying the parties and the relationships between them (including a plea to the effect that Mr Heath was a director of Belgravia and Joondel at the material times), Belgravia and Joondel plead that the 1999 Agreement was a written agreement made on 26 August 1999. The express terms of the 1999 Agreement are then pleaded. These included a term to the effect that Joondel, Belgravia and Penhurst jointly and severally appointed Lowe to be the sole and exclusive manager and selling agent of each of their respective interests in the properties listed in the schedule to the 1999 Agreement and any other properties from time to time acquired by Joondel, Belgravia or Penhurst in Australia and which, by letter or other written agreement between such of Joondel, Belgravia or Penhurst as acquired the property and Lowe, it was agreed would be the subject of the 1999 Agreement. The 1999 Agreement did not contain a schedule listing properties as contemplated by the express term to which I have just referred.
16 Belgravia and Joondel then identify a number of land development projects in which one or more of them or Penhurst participated. They plead that none of these land development projects was made the subject of the 1999 Agreement by letter or by any other written agreement.
17 Belgravia and Joondel plead that, in the mistaken belief that Lowe was entitled to payments under the terms of the 1999 Agreement in respect of the land development projects identified in the amended statement of claim, Heath caused Belgravia, Penhurst and Joondel to make a number of payments to Lowe. The total amount received by Lowe from Belgravia, Penhurst and Joondel was $4,560,280.10.
18 Belgravia and Joondel plead that they are entitled to the return of the monies received by Lowe on the ground that Lowe has been unjustly enriched by the mistaken payments.
19 In the alternative, Belgravia and Joondel plead that the payments can be recovered from Lowe under s 60(4) of the Real Estate and Business Agents Act 1979 (WA) (the REBA Act) on the grounds that the services provided by Lowe were the services provided by a 'real estate agent' in respect of a 'real estate transaction' under s 4 of the REBA Act and either Lowe held no valid appointment to act as an agent as required by s 60 of the REBA Act or the fees paid for managing the properties and/or for selling and marketing the properties were unjust in the circumstances, contrary to s 61(3c) of the REBA Act.
20 In the further alternative, Belgravia and Joondel plead that Mr Heath caused Belgravia and Joondel to enter the 1999 Agreement and that, in doing so, he acted in breach of the fiduciary and statutory duties he owed to each of them. Belgravia and Joondel allege that they are entitled to have the 1999 Agreement set aside. The facts pleaded by Belgravia and Joondel as the foundation for the pleas of breach of duty and the application for an order setting aside the 1999 Agreement are as follows:
(i) In August 2009, Mr Heath was a director of Belgravia, Joondel, Penhurst and Lowe.
(ii) In August 2009:
(a) the other directors of Belgravia, Mr Robert Godecke and Mrs Delyse Godecke; and
(b) the other directors of Joondel, Mr Robert Godecke, Mrs Delyse Godecke, Mr William Godecke and Mrs June Godecke;
were elderly and relied upon Mr Heath for advice and guidance concerning property development transactions in which Belgravia and Joondel were involved.
(iii) Up to 30 June 2012, Mr Heath had de facto control of the day-to-day business affairs of Belgravia and Joondel.
(iv) Neither Belgravia nor Joondel received independent property development or real estate advice concerning the commercial merits of the transaction before entering the 1999 Agreement.
(v) Mr Heath participated in the decision and encouraged Belgravia and Joondel to enter into the 1999 Agreement.
(vi) Mr Heath did not advise or take steps to ensure that either Belgravia or Joondel received independent legal advice concerning the commercial merits of the transaction before they entered into the 1999 Agreement.
21 In their amended defence, Lowe and Mr Heath admit that the land development projects pleaded in the amended statement of claim were not made the subject of the 1999 Agreement. They plead that the effect of the 1999 Agreement was that it comprised 'a template of terms which would apply to services to be provided by Lowe to any one or more of Joondel, Belgravia and Penhurst concerning any property or properties to be agreed'. Lowe and Heath then plead that Lowe was engaged by Belgravia and Penhurst or Joondel to provide its services in relation to various land development projects on terms 'that included those in the 1999 Agreement, as varied'.
22 In response to the facts pleaded in support of the allegation that Mr Heath acted in breach of his fiduciary and statutory duties in relation to the making of the 1999 Agreement, Lowe and Mr Heath plead, amongst other things, that Messrs Robert and William Godecke met the solicitor who prepared the 1999 Agreement at Mr Robert Godecke's home before it was executed and received an explanation of the terms of the 1999 Agreement. It is pleaded that the terms the subject of the 1999 Agreement were not materially different from the terms that had applied under oral agreements previously made by the parties. Although Mr Gregory Solomon is not named in the defence as the solicitor who provided the explanation, it is accepted that he is the solicitor who provided an explanation of the terms of the 1999 Agreement referred to in the defence.
23 Lowe and Mr Heath also plead that the 1999 Agreement was prepared at the behest of Messrs Robert and William Godecke on the basis of advice received from their accountant and for the purpose of ensuring that a Mr John Markham would not be involved in the provision of project management or marketing services to Belgravia, Joondel or Penhurst.
24 In their reply, Belgravia and Joondel:
(i) do not admit that Messrs Robert and William Godecke received an explanation of the terms of the 1999 Agreement from Mr Gregory Solomon either as alleged in the amended defence or at all;
(ii) say that Solomon Brothers acted on instructions from Mr Heath on behalf of Lowe, or at least acted for Lowe in respect of the preparation of the 1999 Agreement whether or not they also acted for Belgravia and Joondel; and
(iii) say that any explanation provided by Mr Gregory Solomon was not independent and was provided by him in circumstances in which he was in a position of conflict, or where there was a real and sensible possibility of conflict, between Solomon Brothers' duty to Lowe and any duty the firm owed to Belgravia and Joondel.
CIV 2003 of 2015 - Lowe's claim against Belgravia and/or Penhurst
25 Lowe pleads that its entitlement to fees arises from seven agreements (collectively referred to as the Lowe Agreements), each one governing the services to be provided and fees to be paid in respect of a specific land development. Lowe adopts a common approach to the pleading of six of the agreements, that is, it pleads that each of the six agreements was partly oral, partly in writing and partly to be inferred from the manner in which the agreement was performed. The oral part comprised discussions between Mr Heath and Messrs Robert and William Godecke. To the extent to which each agreement was written, it is alleged 'it included terms from the 1999 Agreement as varied orally'. The seventh agreement, referred to as the 'Lowe Preston Beach Settlement Agreement', is alleged to have been made orally by Mr Heath and Mr William Godecke at a meeting held in March 2010.
26 In its defence, Belgravia does not admit the making of six of the agreements pleaded by Lowe in its statement of claim. It denies that the Lowe Preston Beach Settlement Agreement was made. In the alternative, Belgravia pleads that, if the Lowe Agreements were made, Mr Heath caused Lowe to enter into those agreements in breach of the fiduciary and statutory duties owed by him to Belgravia. Belgravia relies upon substantially the same facts as those alleged in support of the plea of breach of duties in CIV 2583 of 2013 and in support of its pleas of breach of duty in CIV 1483 of 2016.
27 In its counterclaim, Belgravia invokes Mr Heath's breaches of duty pleaded in the defence as a basis for seeking orders for rescission ab initio of the Lowe Agreements.
CIV 1483 of 2016 - Lowe's claim against Joondel
28 Lowe pleads an entitlement to fees arising from an agreement between Lowe and Joondel referred to as the Lowe Joondel Agreement. It is sufficient for the purposes of these applications to observe that the pleading of the Lowe Joondel Agreement mirrors the pleading of the six Lowe Agreements in CIV 2003 of 2015 and the pleading of Joondel's defence and counterclaim mirrors its pleading in 2003 of 2015.
29 The land developments for which Lowe provided the services giving rise to its claims in CIV 2003 of 2015 and CIV 1483 of 2016 are a sub-set of the land developments identified in the amended statement of claim in CIV 2583 of 2013.
Injunction applications
The evidence
30 Belgravia and Joondel read and relied upon an affidavit sworn by Ms Karin Natalya Godecke on 24 May 2016. Ms Godecke is the daughter of the late Mr Robert Godecke and one of the directors of Belgravia and Joondel. Ms Godecke annexed to her affidavit a copy of the 1999 Agreement. She also annexed a copy of a letter dated 5 August 1999 from Mr Gregory Solomon to Mr Heath that attached a draft of the 1999 Agreement. It appears that Mr Heath had forwarded this letter to Messrs Robert and William Godecke by facsimile transmission with an endorsement on the copy letter in the following terms: 'Bill/Bob for your approval'. Ms Godecke deposed that her father and uncle had a long professional association with Solomon Brothers and its predecessor firm. She also attached documents evidencing that Solomon Brothers had acted as solicitors for Mr Heath and his interests over a long period. Ms Godecke deposed to various recent events in the proceedings leading up to the present applications. These included a directions hearing held on 27 April 2016 at which the possibility of this injunction application was canvassed and, in the course of which, Mr Douglas Solomon, in his capacity as counsel for Lowe and Mr Heath, made various statements as to the position his firm might adopt in relation to the issue of its continued representation of Lowe and Mr Heath. I will return to these statements later in these reasons.
31 Lowe and Mr Heath read and relied upon an affidavit sworn by Mr Gregory Solomon on 10 June 2016.
32 Mr Solomon deposed that:
(i) He first met Messrs William and Robert Godecke in 1973.
(ii) In late 1998, he was engaged to prepare an agreement for the purpose of appointing Lowe as the project manager for interests held by Belgravia, Joondel and Penhurst in various property projects. He annexed to his affidavit a copy of the 1999 Agreement and identified that as the document prepared by him.
(iii) The process of taking instructions commenced in late 1998 when a meeting was held at Solomon Brothers' office attended by him and Messrs William and Robert Godecke and Mr Heath. Mr Solomon was unable to recall the detail of what was discussed at the meeting other than that the Godeckes required an agreement to be made with a company controlled by Mr Heath in which Mr John Markham would not be involved as they did not wish Mr Markham to be involved in providing services to them.
(iv) To the best of his recollection, Solomon Brothers was engaged to act for all parties. Whilst Mr Solomon does not recall advising the Godeckes to take independent legal advice, it was his standard practice to tell all clients in the circumstances of the Godeckes to do so. Mr Solomon was unable to confirm the giving of any such advice because the firm's file and other contemporaneous records have not been retained.
(v) Although he has no recollection of it, Mr Solomon is satisfied that he sent the letter of 5 August 2009 enclosing a copy of the draft agreement (attached to Ms Godecke's affidavit) to Mr Heath.
(vi) He attended a meeting at the home of Mr William Godecke in the Esplanade, Mount Pleasant, and there met with Mr Robert Godecke and his wife, Mr William Godecke and his wife, and Mr Heath and his wife. Mr Solomon recalls that the purpose of the meeting was to explain the terms of the 1999 Agreement to all present. Mr Solomon's recollection was that the 1999 Agreement was either in draft form or in final form ready for execution.
(vii) Solomon Brothers sent a letter to Lowe on 23 August 1999 enclosing copies of the 1999 Agreement for execution.
(viii) He has been shown a copy of a letter from Mr Heath to Solomon Brothers dated 26 August 1999, the material part of which reads,
Further to your letter of 23 August 1999 and 1999 Agreements (x5) contained therein, we now return same for stamping.
- but was unable to recall whether he was present when the 1999 Agreement was executed or whether the meeting he attended to explain the terms of the 1999 Agreement occurred before or after 23 August 1999. Mr Solomon deposed that it appeared to him that the meeting occurred sometime between 5 and 26 August 1999.
The relevant legal principles
34 The relevant legal principles were not in dispute. The parties agreed that the Court has an inherent jurisdiction to restrain solicitors from acting in a particular case as an incident of its jurisdiction over its officers and to control its process in aid of the administration of justice.
35 There was also agreement that the test to be applied is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should 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: Kallinicos v Hunt [2005] NSWSC 1184; (2005) 64 NSWLR 561 [76].
36 Whilst there is agreement between the parties as to the relevant principles, in considering an application such as this, it is helpful to be reminded of the rationale for the exercise by the court of this aspect of its inherent supervisory jurisdiction. In Holborow v MacDonald Rudder [2002] WASC 265, EM Heenan J at [27] referred to the observations of Mason J (as his Honour then was) in Giannarelli v Wraith (1988) 165 CLR 543, 555 - 556 on the paramountcy of the duty owed by counsel to the court and the incidents of that duty, and at [28] and [29] stated:
If there are circumstances which are likely to imperil the discharge of these duties to a court by a legal practitioner acting in a cause, whether because of some prior association with one or more of the parties against whom the practitioner is then to act, or because of some conduct by the practitioner, whether arising from associations with the client or a close interest which gives rise to the fair and reasonable perception that the practitioner may not exercise the necessary independent judgment, a court may conclude that the lawyer should be restrained from acting, even for a client who desires to continue his service - Clay v Karlson (supra); Wan v McDonald (1992) 33 FCR 491; National Mutual Holdings Pty Ltd v Sentry Corp (1989) 22 FCR 209 and Afkos Industries Pty Ltd v Pullinger Stewart [2001] WASCA 372.
From the wider viewpoint, including the perspective of the legal practitioner's duty to the court, it can readily be perceived that this situation justifies intervention by the court because of an actual or sufficiently material threatened conflict of interest by the practitioner, as an officer bearing fiduciary obligations, between his obligations to the court, and his obligations to the client or to some other interest. So it has long been accepted that a legal practitioner, who is likely to be a witness in a case should not act as counsel, or continue to act as counsel if a situation arises where he is unexpectedly required to give evidence. The reason being is that the personal integrity of the practitioner may be put in issue if his credibility is at stake as a witness, and that this will, or may, constitute a personal interest inconsistent with the practitioner's duty to the court or to the client. Other similar conflicts of interest can arise if, for example, the counsel or solicitor had a substantial personal stake in the litigation such as, for example, if he or she were to be a partner in a firm which was a party to the litigation, or a substantial shareholder in a corporation which was a party.
37 At [30] and [31], his Honour stressed that whilst the court will act to ensure that the duty owed by practitioners to the court is not imperilled by a want of independence on the part of a practitioner, a clear case is required before a solicitor will be restrained from acting. In this respect, his Honour said:
It seems to me that if it can be demonstrated that there is a risk that a practitioner will disregard his overriding duty to the court that this will usually, if not always, require action by the court to avoid such a risk by preventing the practitioner from acting even if the relief is sought by an opposing party in the litigation. But these principles do not render counsel or solicitors generally examinable at the suit of their client's opponents. The duty of the legal practitioner is not to his client's opponent and he is not answerable to his client's opponent. His duty is to the court and he is certainly answerable to the court and to his or her professional and disciplinary bodies.
Consequently, if an opposing party asserts that a legal practitioner should be restrained from acting for his opponent it is necessary for a clear case to be made that the practitioner concerned is in a position where he is fixed with an interest which conflicts with his duty to the court and that that interest is one of such a nature that the solicitor or counsel may fail in his overriding duty to the court. Animosity between the lawyers on opposing sides of the litigation, even animosity which may cause a practitioner in an unguarded moment to commit some act of professional misconduct, will not, of necessity, require such an intervention. There is ample jurisdiction within the contempt power and in the disciplinary jurisdictions exercised by the court or to which it might refer such a matter, to deal with such indiscretions or misconduct. However, the insidious threat imposed by a practitioner who, wittingly or unwittingly, does have a conflict between his personal interests and the duties which he owes to the court is another matter. As the passage cited from Giannarelli v Wraith (supra) reveals, it is inevitable that a practitioner in a cause will be obliged to advance his client's interest but he must only do so while simultaneously observing his duties to the court and preferring that overriding duty to any other. That this is, and for ages has been, done regularly by counsel and solicitors in litigious proceedings is testimony to the professional traditions which should be the mantle of all practitioners. Consequently, although a court will always be alert to consider whether or not these are in jeopardy, in my view it would usually take an unequivocal situation to justify restraining a practitioner from acting on these grounds.
38 Those principles are reflected in r 42 of the Legal Profession Conduct Rules 2010 (WA), which is in the following terms:
42. Practitioner as material witness in client's case
(1) A practitioner must not act for a client in the hearing of a case in which it is known, or becomes apparent, that the practitioner will be required to give evidence centrally material to the determination of contested issues before the court.
(2) In the circumstances provided for in subrule (1) an associate of the practitioner's law practice may act for the client if -
(a) in the practitioner's reasonable opinion there are exceptional circumstances that justify the associate acting; and
(b) the client, having been given an opportunity to obtain independent legal advice concerning the issue, consents to the associate acting.
40 It was accepted by Mr Douglas Solomon, who appeared for Lowe, Mr Heath and Solomon Brothers, that if I formed the view that Mr Gregory Solomon was likely to be a material witness, then the court's supervisory jurisdiction would be engaged and Solomon Brothers should be restrained from acting ([17] of written submissions and ts 225). The fact that a lawyer from a firm may be required to give evidence in a matter does not compel the conclusion that the firm cannot act in the matter. There must be some realistic sense of impropriety about the circumstances which justifies the conclusion that unless an injunction is granted, the integrity of the judicial process would be impaired: Westpac Banking Corporation v Newey[2013] NSWSC 533 [22] (Pembroke J). If a lawyer who is to be a witness will be giving evidence of a formal nature or about a minor matter, then, ordinarily, there will be no impediment to his or her firm continuing to act.
Submissions in support of the injunction application
41 Belgravia and Joondel's submissions are as follows:
(i) There are two reasons why Solomon Brothers should be restrained from continuing to act. First, Mr Gregory Solomon will be a witness; and he is a partner in the firm and the brother of counsel for Lowe and Mr Heath. Secondly, the conduct of Mr Gregory Solomon and the efficacy of the steps taken by him in respect of the preparation, execution, and explanation of the agreement prepared by his firm are squarely in issue in the proceedings.
(ii) Taking Mr Gregory Solomon's evidence at face value, Solomon Brothers acted for all parties to the 1999 Agreement while in a position of conflict. Inherent in the scope of Mr Solomon's duty to Belgravia and Joondel was the need to advise them, independently of Mr Heath, of the desirability of entering into an agreement in accordance with the terms of the 1999 Agreement and, assuming they wished to do so, the negotiation and drafting of the terms to ensure their interests were protected.
(iii) Solomon Brothers were in a position of conflict in respect of the question of whether Belgravia and Joondel should enter into an agreement with Lowe. The reason pleaded in the amended defence for entering into the 1999 Agreement, namely to ensure Mr Markham would not be involved in the provision of services to Belgravia and Joondel, does not justify the entry into the 1999 Agreement. It is contended that, in order to ensure Mr Markham was not involved in the provision of future services, it was not necessary to enter into an additional agreement with Lowe, all that was required was to terminate the arrangements with Mr Markham.
(iv) The 1999 Agreement was a 'bespoke' agreement and the terms necessarily involved a compromise between the competing commercial interests of Belgravia, Joondel and Penhurst, on the one hand, and Lowe, on the other. This, it is submitted, highlighted Solomon Brothers' conflict.
(v) There were a number of significant issues that arose in relation to Mr Gregory Solomon's evidence such as:
(a) Whether Mr Heath was the person giving instructions to Mr Solomon and the driving force behind the entry into and the terms of the 1999 Agreement. It was contended that this was an issue that had the capacity to bear on the overall impression formed of Mr Solomon's evidence and Solomon Brothers' role in the transaction.
(b) Whether Mr Solomon advised Belgravia, Joondel and Penhurst that it was unnecessary to enter the 1999 Agreement to achieve the stated purpose of ensuring that Mr Markham would not be involved in the provision of services to them in the future.
(c) Whether advice should have been given to Messrs Robert and William Godecke in the presence of Mr Heath and Mr Heath's wife.
(vi) As Lowe alleges that the terms of the 1999 Agreement were incorporated into each of the separate agreements in its actions, CIV 2003 of 2015 and 1483 of 2016, the same issue as to the validity of the 1999 Agreement arises in those actions.
(vii) There has been no delay in bringing the application.
Submissions in opposition to the injunction application
42 The submissions made on behalf of Lowe and Mr Heath and Solomon Brothers are as follows:
(i) The Court's jurisdiction to restrain a solicitor from acting for a client for the purposes of controlling its process in aid of the administration of justice is an exceptional one to be exercised with circumspection and caution and should only be exercised where there is a real need for an order preventing a solicitor or counsel from acting to imperil the due administration of justice, in order to protect the integrity of the judicial process.
(ii) A significant aspect of that caution flows from the consideration that due weight must be given to the public interest in a litigant not being deprived of its lawyer of choice without due cause. This is a complicated matter in which Solomon Brothers have been acting for Lowe and Mr Heath since its inception. If Lowe and Mr Heath are required to instruct new lawyers, this will cause inconvenience and expense.
(iii) Mr Gregory Solomon will not be a material witness. His recollection of his involvement in the preparation of the 1999 Agreement is limited to what is set out in his affidavit. There is no suggestion that Belgravia and Joondel will call evidence that will contradict Mr Solomon's evidence. There is little scope for cross-examination. The issues identified by Belgravia and Joondel about Mr Solomon's conduct are likely to be developed by submission rather than cross-examination.
(iv) The Lowe claims are not claims to enforce the 1999 Agreement and thus the contention that Mr Gregory Solomon will be a material witness in the Lowe claims is even weaker than it is with respect to Belgravia and Joondel's action.
(v) The application is an opportunistic attempt by Belgravia and Joondel to achieve a forensic advantage over Lowe and Mr Heath.
(vi) If the Court is not minded to dismiss the application, then a determination of the application should be deferred until Mr William Godecke's evidence has been taken, at which point when the issues raised by the application can be evaluated against the background of Mr Godecke's evidence.
43 It was submitted in forceful terms by Mr Douglas Solomon, on behalf of Lowe, Mr Heath and Solomon Brothers, that the allegation of conflict was not of any concern to him, Mr Gregory Solomon or to the firm and that there was nothing wrong with Mr Gregory Solomon or the firm acting on both sides of the transaction constituted by the 1999 Agreement.
44 It was put against Solomon Brothers, however, that whilst they were free to reconsider their position, these submissions reflect a change in their attitude to the application from that foreshadowed by Mr Douglas Solomon at the directions hearing on 27 April 2016. At that hearing, Mr Solomon outlined his firm's attitude to the foreshadowed application as follows:
SOLOMON, MR: … Let me say that if Mr Cuerden is happy to sign a pleading, having regard to rule 36 of the Legal Profession Conduct Rules 2010, based on admissible fact, it gives rise to matters concerning conduct of a partner of my firm and we won't be contesting an application for us to cease being involved. That's not my practice …
Because if there is a pleading that actually seriously raises conduct against the partner of that firm, signed by senior counsel in accordance with the obligation to have before him proper evidence in admissible form about it, we won't be contesting the application. (ts 27 April 2016 at 167.4)
45 And:
SOLOMON, MR: … on an application for Solomon Brothers to - or our clients to be restrained from continuing to engage us to the extent that seven days after the pleading of a reply to our defence, and if it - as I say, if it raises material facts that give rise to an issue like that, I'm not going to be here contesting such an application.
TOTTLE J: No.
SOLOMON, MR: I have told my clients that. I said, "I don't do things like that". If - and as I didn't contest it through to conference, the lawyer mentioned in the pleading is my partner, my brother, Gregory Solomon, and if he's a material witness for what happened in 1999 so be it, we're out of here and I won't be coming here to try and contest otherwise. (ts 27 April 2016 at 168.9)
Disposition of application for an injunction to restrain Solomon Brothers from acting
46 With respect to the forceful submissions made on behalf of Lowe, Mr Heath and Solomon Brothers to the effect that the court should 'see the motivation of those who make applications like this' (ts 221.6 - 222.1), I am satisfied that the application is properly brought and raises genuine issues. I consider that the position that Mr Solomon foreshadowed at the directions hearing on 27 April 2016 that Solomon Brothers would take, namely that the firm would cease to act, is the correct position for the firm to adopt.
47 In response to the alleged breach of statutory and fiduciary duties by Mr Heath, Lowe and Mr Heath have pleaded that Messrs Robert and William Godecke received legal advice about the 1999 Agreement. In their pleading in reply, Belgravia and Joondel have joined issue with the defence in a way that has two relevant consequences: first, Mr Gregory Solomon will be required to give evidence and be cross-examined about the circumstances in which he came to give advice; and, secondly, the propriety of Solomon Brothers acting on both sides of the transaction will be considered.
48 Whilst it is correct that neither the money claims of Belgravia and Joondel nor the Lowe claims are claims made under the 1999 Agreement, I have formed the impression that the 1999 Agreement and the circumstances in which it was made are likely to be a major focus of the evidence that may be given at the trial. As I have noted, the relief sought by Belgravia and Joondel includes an order that the 1999 Agreement be set aside. The Lowe Agreements on which Lowe bases its claims are alleged to include the terms of the 1999 Agreement 'as varied orally'.
49 The evaluation of whether Mr Gregory Solomon will be a material witness is necessarily one based on based on impressions of how the litigation will develop and how the parties' cases will unfold. In making this evaluation, I take into account that it is not unusual for issues which loom large in advance of a trial to fade away once the trial starts and that may be what occurs in relation to the issues about the circumstances in which the 1999 Agreement was made.
50 On the basis of my assessment of the actions, I have concluded that Mr Gregory Solomon will be a material witness at trial and that the trial will involve an examination of the propriety of Solomon Brothers' conduct in relation to the preparation of and advice upon the 1999 Agreement.
51 Mr Solomon's evidence will not be of a formal nature and will not be about minor matters. On the basis of the reply filed by Belgravia and Joondel in CIV 2583 of 2013, it seems likely that Mr Solomon will be cross-examined about matters that go to the adequacy of his advice to Messrs Robert and William Godecke, the propriety of his conduct in acting for both sides to the transaction and about the manner in which his advice was provided. For the avoidance of any doubt or misunderstanding, nothing I say in these reasons should be taken as any indicating that I have formed any views about those matters.
52 It is undoubtedly desirable for Lowe and Mr Heath to be able to retain the lawyers of their choice to represent them in these actions, but, in my opinion, a fair minded, reasonably informed member of the public would conclude that the independence and objectivity of Solomon Brothers, and Mr Douglas Solomon, would be compromised by the fact that Mr Gregory Solomon will be a material witness and that the propriety of Solomon Brothers' conduct will be in issue in the proceedings and I therefore consider that an injunction should be granted restraining Solomon Brothers from continuing to act on behalf of Lowe and Mr Heath in each of the three actions.
Stay applications by Lowe and Heath
Relevant principle as to inconsistent pleadings
53 In Mayfield v P & B Corporation Pty Ltd [No 2] [2015] WASC 356 [84], Allanson J summarised the relevant principle and referred to the leading authorities as follows:
There is a general pleading rule that prohibits a party from pleading an inconsistent set of facts in the alternative where one of those sets of facts must be known to the party to be false: see CGU Insurance Ltd v Lawless [2008] VSCA 38; Issitch v Worrell [2000] FCA 477. In CGU Insurance, Redlich JA (Maxwell P and Neave JA agreeing) said:
Such a pleading is embarrassing and will be struck out. The rationale for this pleading principle is that it would be an abuse of the Court's process to permit facts to be pleaded which deliberately place on the record positive statements of fact, one or other of which must be known by the pleading party to be untruthful [27].
Submissions in support of the application
55 First, Lowe submits that the pleas made by Joondel and Belgravia in the defences in CIV 2003 of 2015 and CIV 1483 of 2016 - by which they deny the Lowe Preston Beach Settlement Agreement and do not admit the Lowe Joondel Agreement and the other Lowe Agreements - are inconsistent with the claims articulated in the counterclaims - that those agreements be rescinded ab initio - which implicitly assert the existence of such agreements. Lowe contends that such relief could only be sought if Joondel and Belgravia admitted that the Lowe Joondel Agreement and the Lowe Agreements respectively had been made.
56 Secondly, Lowe and Heath submit that the plea by Joondel and Belgravia in the amended statement of claim in CIV 2583 of 2013 that none of the land development projects identified as projects with which Lowe was involved and for which Lowe received the alleged mistaken payments for its services were the subject of the 1999 Agreement is directly inconsistent with the Joondel and Belgravia counterclaims, which allege the existence of separate agreements for each project which each incorporated the terms of the 1999 Agreement as varied orally.
Submissions in opposition to the application
57 In answer to the attack on their pleadings, Belgravia and Joondel develop two main submissions.
58 First, the current directors of Belgravia and Joondel do not have direct knowledge of the relevant events as they were not directors of the companies at the material times. Thus, it cannot be said that the companies, through their directors, have knowledge of the true facts such that it could be said that one of the allegedly inconsistent pleaded versions must be known to them to be a lie or to be untruthful. In support of this submission, Belgravia and Joondel draw attention to the fact the Lowe Joondel Agreement and the Lowe Agreements are alleged to have been made partly orally, that is, between Mr Heath on behalf of Lowe and Mr Robert Godecke on behalf of Belgravia and Joondel, partly in writing by incorporating the terms of the 1999 Agreement, and partly by conduct. It is contended that it cannot be said that Belgravia and Joondel must know Lowe's allegations to be correct and that Belgravia and Joondel are 'lying' when they do not admit them.
59 Secondly, Belgravia and Joondel submit that the rule against the inconsistent pleadings does not prevent a party from setting up an alternative pleading and pleading in a counterclaim something inconsistent with what has been pleaded in its defence, including seeking relief in a counterclaim that is premised upon the existence of an agreement the party has denied in the defence.
60 Further, and as a separate submission, Belgravia and Joondel contend that there is no inconsistency between their plea that the land developments identified in paras 10B to 10I of the amended statement of claim were not land development projects that were made the subject of the 1999 Agreement, on the one hand, and the non-admission/denial by Belgravia and Joondel of the pleas by Lowe of the Lowe Joondel Agreement and the Lowe Agreements, on the other. Belgravia and Joondel point out that the pleaded fact, that none of the land development projects was made the subject of the 1999 Agreement, does not compel the conclusion that Belgravia and Joondel entered into separate agreements with Lowe with respect to each land development project either on the terms pleaded by Lowe or at all. Finally, it is submitted that the alternative claim articulated in the counterclaims in CIV 2003 of 2015 and CIV 1483 of 2016 - that if there were separate agreements made with Lowe as Lowe alleges in its claims, those agreements are liable to be set aside - is inconsistent in an impermissible way with the pleading in the amended statement of claim in CIV 2583 of 2013.
Disposition of stay application
CIV 2003 of 2015 and CIV 1483 of 2016
61 In their defences, Belgravia and Joondel plead, in the alternative to the denial of the Lowe Preston Beach Settlement Agreement and non-admission of the other Lowe Agreements and the Lowe Joondel Agreement, that if the agreements pleaded by Lowe were made, Mr Heath caused them to be made in breach of the fiduciary and statutory duties owed by him to Belgravia and Joondel respectively, and that the agreements are liable to be set aside. The paragraphs in which these pleas are made are incorporated by reference in the counterclaims and are the basis for the relief that is claimed, namely orders setting aside the various agreements.
62 In my view, the alternative pleas so incorporated in the counterclaims are permissible alternative pleas. In the particular circumstances of this case, I do not consider that it can be said that Belgravia and Joondel must know that either their denial or non-admissions of the Lowe Agreements and the Lowe Joondel Agreement or their alternative admission must be false and constitute a lie. For the purposes of establishing whether a company's pleading constitutes an abuse of process on the grounds of impermissible inconsistency, it is the state of mind of the directors at the time of the pleading that must be considered to determine whether one of the sets of facts pleaded must be known to be false. The current directors of Belgravia and Joondel were not directors at the time of the transactions and no basis was advanced on which it could be said that they had direct, actual knowledge of the events in question.
CIV 2583 of 2013
63 In my view, there is no inconsistency between the pleading in the amended statement of claim in CIV 2583 of 2013 that the property developments identified in the pleading did not fall within the ambit of the 1999 Agreement and the denial/non-admission of the agreements pleaded by Lowe in its statements of claim in CIV 2003 of 2015 and CIV 1483 of 2016.
64 I do not consider that the alternative plea by Belgravia and Joondel, to the effect that if the Lowe Agreements/Lowe Joondel Agreement were made, they are liable to be set aside, is inconsistent in an impermissible way (to the extent to which any inconsistency may be inferred) with anything pleaded in the amended statement of claim in CIV 2583 of 2013 for the reason canvassed above, namely that it cannot be said that Belgravia or Joondel must know that the alternative plea is false and constitutes a lie.
65 For those reasons, I dismiss the applications for a stay in each of the actions.
8
14
3