Berengo v Berengo
[2014] VSC 667
•19 November 2014 (Ex tempore) (Revised 29 January 2015)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
PRACTICE COURT
SCI 3934 of 2014
| GLORIA BERENGO (as Executor of the Estate of Robert Augustus Berengo) | Plaintiff |
| v | |
| ESTATE OF GIUSEPPE ALDO BERENGO MARK ANTHONY BERENGO | Defendants |
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| JUDGE: | McDONALD, J |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 19 November 2014 |
| DATE OF JUDGMENT: | 19 November 2014 (Ex tempore) (Revised 29 January 2015) |
| CASE MAY BE CITED AS: | Berengo v Berengo & Ors |
| MEDIUM NEUTRAL CITATION: | [2014] VSC 667 |
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LEGAL PRACTITIONERS — Solicitors — Conflict of interest — Application to restrain solicitor from acting in litigation — No danger of disclosure of confidential information — Duty of loyalty — Application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R A Edmunds | Serafini & Hill Solicitors |
| For the Second, Third and Fourth Defendants | Mr M Wise | Dominic Esposito Solicitors & Attorneys |
EX TEMORE (REVISED)
HIS HONOUR:
By a summons dated 9 October 2014, the plaintiff seeks orders:
1.That the defendants need to be restrained from retaining Dominic Esposito to act as their solicitor in this proceeding.
2.That Dominic Esposito be restrained from acting for each of the defendants in this proceeding and that he file and serve a notice of withdrawal of practitioner forthwith.
3.That the second and third and fourth defendants and/or Dominic Esposito, pay the plaintiff's costs of and incidental to this application on an indemnity basis, or alternatively, on any such basis as the court deems proper.
The plaintiff, as executor of the will and the estate of her late husband, Robert Augustus Berengo, the deceased, has brought this proceeding against the defendants seeking:
(a)declarations that the defendants and the deceased held their legal interests in the following commercial properties as equitable tenants in common for themselves and each other as members of the Berkem Properties Partnership, alternatively as equitable tenants in common for themselves and each other:
1. 618‑630 Elizabeth Street, Melbourne.
2. 632 Elizabeth Street, Melbourne.
3.114 Queensberry Street, North Melbourne, (‘the commercial properties’).
(b)orders that:
1.There be a taking of accounts that the Berkem Properties Partnership as at the date of the deceased's death, that is 15 May 2011, and thereafter.
2.The assets of Berkem Properties Partnership be realised and after payment of its proper debts and reliabilities, one‑fifth of the assets and one‑fifth of the net income since 15 May 2011, be paid to the plaintiff as executor of the deceased's estate.
3.The defendants transfer a one‑fifth interest in the commercial properties and one‑fifth of the net income from these properties earned since 15 May 2011 to the plaintiff as executor of the deceased's estate.
4.Vesting orders in favour of the plaintiff as executor of the deceased's estate of one‑fifth interest as tenant in common in the commercial properties plus one‑fifth of any net partnership income since 15 May 2011.
(c)orders that the Berkem Properties Partnership be wound up and one‑fifth of its assets after payment of its proper debts and liabilities be paid to the plaintiff as executor of the deceased's estate.
(d) orders for accounts and inquiries as deemed fit.
(e)a declaration that the defendants and the deceased held their legal interest in the property at 10 Wonderland Terrace, Mt Martha (‘Mt Martha property’), upon a resulting trust as equitable tenants in common for themselves and each other as members of the Berkem Properties Partnership.
(f)orders that the defendants transfer a one‑fifth interest in the Mt Martha property to the plaintiff as executor of the deceased estate.
(g)vesting orders in favour of the plaintiff as executor of the deceased's estate of a one‑fifth interest as tenants in common of the Mt Martha property.
The defendants are immediate family of the deceased.
The plaintiff had initially engaged a firm of solicitors to obtain a grant of probate of the deceased's will on Paul Berengo's recommendation and subsequently engaged Dominic Esposito as the solicitor to obtain a grant of probate, once again on Paul Berengo's recommendation.
The plaintiff met with Mr Esposito and had a telephone discussion with him regarding the grant of probate. The plaintiff was aware from these discussions that it was necessary to identify the deceased’s property holdings.
Mr Esposito had received various documents from Paul Berengo in relation to the deceased's assets and copies of various family trust documents. Mr Esposito advised the plaintiff that the documents should be reviewed by a forensic accountant: See paras 8 and 9 of the plaintiff's affidavit sworn 7 October 2014.
The plaintiff felt concerned that Mr Esposito may have been conflicted due to information being provided by Paul Berengo and she engaged her current solicitors.
The plaintiff paid Mr Esposito's account. The second, third and fourth defendants then engaged the firm of Aitken Walker & Strachan.
By letter dated 23 June 2014, Mr Esposito advised that he now acted on behalf of the second, third and fourth defendants.
There were various exchanges of correspondence between the plaintiff's current solicitors and Mr Esposito, insisting that he withdraw from acting due to a conflict. These are set out in Exhibit GB9 to the plaintiff's affidavit of 7 October 2014.
Consideration of whether the plaintiff was entitled to the relief she seeks cannot be taken in isolation from consideration of the claims which are made in the substantive proceeding.
In that proceeding, the plaintiff seeks declarations and consequential relief, as I have set out above. In particular, the plaintiff seeks relief that the second to fourth defendants, together with her late husband, Mr Robert Berengo, held their legal interest in the three commercial properties, together with the Mt Martha property, as equitable tenants in common.
If this declaratory relief is granted, the consequence will be that Mr Robert Berengo's equitable interest will have passed to his estate upon his death.
Counsel for the plaintiff rightly conceded that a necessary consequence of the nature of the claims in the substantive proceeding is that events subsequent to the death of Mr Robert Berengo on 15 May 2011 will be irrelevant to the court's determination of whether Mr Robert Berengo and the second to fourth defendants held their respective interest in the properties as equitable tenants in common.
Counsel for the defendants, citing the judgment of Hargrave J in Sacks v Klein,[1] submitted that the primary focus of the court in the substantive proceeding will be upon evidence of the intention of the parties at the time the relevant properties were acquired. I accept the force of the that submission. However, evidence of conduct of Mr Robert Berengo subsequent to the acquisition of the properties and consistent with the properties being held as tenants in common, is still likely to be relevant and admissible.
[1][2011] VSC 451 at [25].
On 30 January 2012, Mr Esposito, as solicitor for the plaintiff, wrote a letter to Mr Paul Berengo in the terms set out at Exhibit GB3 to the plaintiff’s affidavit of 7 October.
In that correspondence, he stated as follows:
We confirm that we act for [your] sister‑in‑law, Ms Gloria Berengo. Thank you for your assistance to date. We write in relation to the above matters and in your capacity as a director of a number of entities in which Mr Robert Berengo, deceased, may have had an interest. Thank you for your verbal advice about the nature of the family business.
The executrix, Ms Gloria Berengo, ought to be formally informed of the interest that Robert had in any entity as at the date of death. The companies or entities, as we understand them, are:
1. Living Interiors Pty Ltd as trustee for the Living Interiors business.
2.Living Interiors Investments Pty Ltd as a corporate beneficiary of the Living Interiors trust.
3. Berkem Properties as a partnership in which Robert was a member.
The relevant date is 15 May 2011, being the date of death. We suggest that you approach your accountant to assist with this request.
It would be helpful if there was a statement setting out the business structure and related enterprise and investment entities. We understand that there may be balance sheets explanation which will accompany the business structure statement so a clear picture can be achieved.
If you could please provide an indicative time line for completion, it would be much appreciated.
Once the information's at hand, we can relate your response to our client for further instructions. Advise any query. Thank you in anticipation. Yours faithfully, Dominic Esposito, solicitors.
That letter is dated 30 January 2012.
More than 13 months later, on 15 March 2013, Mr Esposito wrote to the plaintiff in the following terms, which are exhibited at GB4 to her affidavit of 7 October 2014:
Re: the will and probate of Mr Robert Augustus Berengo, deceased.
We write in relation to the above matter. Thank you for speaking with our Mr Esposito recently.
We write to advise you that we have received a response from your brother‑in‑law, Mr Paul Berengo, regarding the letter we wrote to him on January 2012. We enclose herewith a copy of that correspondence for your reference.
Mr Paul Berengo supplied us with copies of the following information and documentation:
1.Certificate of registration on change of name, dated 1 August 2001 regarding Living Interiors Pty Ltd.
2.Deed for the Berengo family trust dated 24 May 1998.
3.Half page statement regarding the trust by Paul Berengo.
4. 2012 letter and notes to accounts regarding estate, Robert Berengo.
5. 2012 company structure for the Berengo Family Trust.
6. Berkem Properties financial statements as at 30 June 2011.
7. Living Interiors' financial statements as at 30 June 2011.
8. Berengo Family Trust, financial statements as at 30 June 2011.
9. 2011 statement of property owned by Berengo family members.
10.Notes to financial statements, Berengo group of companies and trusts as at 30 June 2011.
11. Land tax assessment 2012, Robert Berengo, dated 3 February 2012.
12.REST, super letters to Paul Berengo dated 10 September 2011 and 10 August 2012.
13.REST, super forms, request for information and statement of dependency death benefit, attachments thereto.
14.Living Interiors account quick report all transaction dated 11 November 2012.
Counsel for the plaintiff conceded that none of the matters listed at 1‑14 could properly be regarded as confidential information.
Ms Berengo has deposed, at para 10 of her affidavit of 7 October 2014:
In response to para 31 of Mr Esposito's affidavit, I disagree with Mr Esposito's assertion that he had not received any confidential information in relation, sic. Apart from my telephone discussion with Esposito referred to in para.8(b) in which I asserted the house and other properties should be part of my late husband's estate, Esposito received very bulky and detailed financial documents from Paul who was, I believed at the time he provided this information, acting on my behalf, relating to the properties and family business which Esposito was to use and advise me in relation to my late husband's business and property interests. It was Esposito's advice that a forensic accountant be engaged.
The matters referred to in para 10, to which I have alluded, are the matters set out in Exhibit GB4 at items 1 to14.
Following the termination of Mr Esposito's retainer, the plaintiff paid Mr Esposito's outstanding fees and the file was transferred to her current solicitors, Serafini & Hill.
It is beyond argument that the court has the power to restrain a solicitor from acting in litigation against a former client.
During a subsisting retainer where an existing client of the solicitor seeks to restrain his or her solicitor from acting for another, the court's power to restrain is founded upon the solicitor's fiduciary obligation: See Lee v Korean Society Victoria.[2]
[2][2014] VSC 316 at para 8.
In the present case the retainer has been terminated by the plaintiff.
In this circumstance, there are three alternative bases that may found the grant of an injunction:
1. To protect the misuse of confidential information.
2. To maintain the proper administration of justice.
3. To enforce the duty of loyalty as between the solicitor and the former client.
As to the second of those matters, to maintain the proper administration of justice, the seminal statement of principle is that of Mandie J in Grimwade v Meagher,[3] where His Honour stated that:
To ensure the administration of justice and to protect the integrity of judicial processes and in order not only that justice be done but be manifestly and undoubtedly seen to be done, a restraining order could be made.
[3][1995] 1 VR 446 at 455.
His Honour considered that a fair‑minded, reasonably informed member of the public would conclude that the proper administration of justice required that the counsel concerned be prevented from appearing in the action because of real risks of lack of objectivity and of conflict of interest and duty.
As to the third ground, that is to enforce a duty of loyalty, the source of the existence of that obligation, the jurisprudential source, is the judgment of Brooking J in Spincode Pty Ltd v Look Software Pty Ltd,[4] particularly at para 58, where His Honour stated:
If I thought that solicitors in this case were subject neither to a negative equitable nor to a negative contractual obligation, I would say that what has been done by them ‑ and I would have regard to the whole of their conduct here ‑ is so offensive to common notions of fairness and justice that they should, as officers of the court, be brought to heel notwithstanding that they have not, on this hypothesis, infringed any legal or equitable right.
[4](2001) 4 VR 501.
As to this ground, the proposition to which I have just referred has been rejected as a source of power to grant an injunction to restrain a practitioner by both the New South Wales Supreme Court, Court of Appeal, and by the Federal Court of Australia: See Kallinicos v Hunt;[5] Shannon v Gadens Lawyers Sydney;[6] and Dealer Support Services Pty Ltd v Motor Trade Association of Australia Limited.[7]
[5](2005) 64 NSWLR 561.
[6][2013] NSWSC 417.
[7][2014] FCA 1065.
I will return to this controversy later in this judgment.
As to the court's power to grant an injunction to restrain a solicitor from misusing confidential information, in Sent v John Fairfax Publications Pty Ltd,[8] Nettle J, as his Honour then was, stated:
If a reasonable person informed of the facts might reasonably anticipate a danger of misuse of confidential information of a former client and that there is a real and sensible possibility that the interests of the practitioner in advancing the case in the litigation might conflict with the practitioner's duty to keep the information confidential and to refrain from using that information to the detriment of the client, an injunction can be granted.
[8][2002] VSC 429 at para 35 (‘Sent’).
Before the jurisdiction is enlivened, it must be shown that the information concerned was truly confidential and it must be identified with some precision: Sent at para 66.
See also Prince Jefri Bolkiah v KPMG[9] and Farrow Mortgage Services v Mendall Properties Pty Ltd[10] per Hayne J.
[9](1999) 2 AC 222.
[10][1995] 1 VR 1.
The first matter to be addressed is whether the plaintiff has established that she imparted confidential information to Mr Esposito. The second matter is whether there is a real risk of misuse of the information conveyed to Mr Esposito in the substantive proceedings.
I am not satisfied that the evidence establishes that any information of a confidential nature has been conveyed by the plaintiff to Mr Esposito at any time prior to the termination of his retainer in 2013.
A notable feature of the evidence in this case is that it discloses that there was very little contact between the plaintiff and Mr Esposito prior to the termination of his retainer.
I was informed from the Bar table that at no stage did they have a face to face meeting. The only substantive item of correspondence passing between Mr Esposito and the plaintiff appears to be the letter of 15 March 2013, Exhibit GB4 to the plaintiff's affidavit of 7 October 2014, to which I have already referred.
In an affidavit in reply of 11 November 2014, the plaintiff deposes to a telephone conference call in respect of which there were three participants: herself, Mr Esposito and Mr Paul Berengo; see para 8 of this affidavit. This evidence is to the effect that during the course of that conference call, Mr Esposito advised the plaintiff that the only asset of her late husband, Mr Robert Berengo, was a one‑third interest in a property situated at 1168 Burke Road, Balwyn North.
In response to a query from the plaintiff regarding her husband's interests in the three commercial properties and the Mt Martha property, Mr Esposito stated that the properties were in a discretionary trust and that Robert ‘got wiped out’ and had no interest in the properties.
Counsel for the plaintiff initially submitted, in reference to this exchange, that Mr Esposito may be required to give evidence in the substantive proceedings in relation to it. However, he subsequently conceded, correctly, that whatever might be said as to the quality of the advice which was provided to the plaintiff by Mr Esposito — a matter about which I express no view — it is difficult, if not impossible, to see how evidence of this conversation could be of any probative value in respect of the issues to be determined in the substantive proceeding, that is the issue of whether Robert Berengo, together with the defendants, held an interest in the properties as an equitable tenant in common.
At para 10 of her affidavit in reply, I have referred to the plaintiff's evidence in response to para 31 of Mr Esposito's affidavit, where the plaintiff deposes that the 14 items of correspondence referred to in Exhibit GB4 were financial information.
In the course of submissions today, the plaintiff's counsel properly conceded that those documents could not properly be characterised as being confidential.
Had it been necessary to do so — that is, had I concluded that contrary to the matters set out above the information conveyed was confidential — I would nonetheless have concluded, for reasons which I will deal with subsequently in this judgment, that there is no real risk of misuse of that information to the plaintiff's prejudice in the substantive proceedings.
Turning to the second basis upon which the plaintiff contends that an injunction should be granted, ie, pursuant to the principle articulated by Mandie J in Grimwade v Meagher that the court must ensure due administration of the justice and protect the integrity of the judicial processes, the following matters are to be noted.
First, it must be borne in mind that it was the plaintiff who terminated Mr Esposito's retainer.
Second, on the material before me, there is no basis upon which any finding of impropriety could be made in respect of Mr Esposito prior to the termination of his retainer. His letter of 13 March 2013 to the plaintiff contains advice that the plaintiff should engage a forensic accountant to inform her of her late husband's assets, liabilities and legal entitlements. Plainly that was appropriate advice.
If it be the case that his subsequent advice that Mr Robert Berengo's interest in the properties expired upon his death by virtue of the operation of the discretionary trust, if that is shown to be incorrect, it does not follow that it is necessary to restrain him from acting for the defendants in order to ensure the due administration of justice and to protect the integrity of the judicial process.
The facts of the current case stand in stark contrast to those which were considered by Mandie J in Grimwade v Meagher. In this case, his Honour considered there to be a real risk of lack of objectivity and of conflict and interest and duty if the practitioner was not restrained.
I turn now to the third limb.
The plaintiff submits that Mr Esposito is bound to a duty of loyalty. She submits that the subject matter of the legal work which Mr Esposito was retained to undertake on her behalf, was to identify the assets of her husband for the purposes of obtaining a grant of probate. She submits that there is a direct overlap between that subject matter and the subject matter of the extant litigation.
As noted earlier in this judgment, there is some controversy as to the status of the duty of loyalty owed by a solicitor to a client as being a foundation for the court to grant an injunction to restrain a solicitor from acting against a former client. I am not aware of any judgment of the Victorian Supreme Court which has held that the judgment of Brooking J in Spincode is plainly wrong and should not be followed.
In Kyriacou v Commonwealth Bank of Australia,[11] the Court of Appeal applied Brooking J's formulation of a duty of loyalty.
[11][2009] VSCA 241 at para 51.
In Watson v Ebsworth & Ebsworth,[12] the Court of Appeal noted that the New South Wales Supreme Court and the Federal Court of Australia had not approved of Brooking J's formulation of a duty of loyalty. The court stated that it did not need to resolve this divergence of judicial opinion because it was not satisfied on any view that the duty had been breached.
[12](2010) 31 VR 123 at paras 149 to 150.
I note that as recently as July this year, Brooking J's formulation of the duty of loyalty was applied with apparent approval by Dixon J in Lee v Korean Society Victoria.[13]
[13][2014] VSC 316 at para 23.
I therefore proceed on the basis that if the conduct of Mr Esposito in acting for the second and fourth defendants is so offensive to common notions of fairness and justice, that he should be restrained from doing so, then I have power to do so.
I have come to a clear view that the conduct of Mr Esposito in acting for the second to fourth defendants does not involve such unfairness or injustice to the plaintiff as to warrant the grant of the injunctive relief sought.
Whilst in a broad sense there is on overlap between the subject matter of the work Mr Esposito was retained to undertake for the plaintiff and the extant litigation, this does not give rise to unfairness or injustice.
If Mr Esposito had sought and obtained instructions from the plaintiff in respect of matters relevant to the question of whether Mr Robert Berengo held an interest in the commercial properties and the Mt Martha property as an equitable tenant in common with the second to fourth defendants, I would almost certainly have concluded that he should be restrained from acting for the defendants because he would have been armed with information which could be deployed to the defendants' advantage in that litigation. This, however, is not what occurred. There is no evidence before me that at any point in time, prior to the termination of his retainer, Mr Esposito took instructions from the plaintiff in respect of matters which might evidence the existence of an equitable tenancy in common between Mr Robert Berengo and the defendants.
Rightly or wrongly, Mr Esposito appears to have been of the opinion that under the terms of the relevant discretionary trust, Mr Robert Berengo's interest in the properties was extinguished upon his death.
Whether he was correct in forming that view will be determined in due course in the substantive proceedings in this court. However, it is by reason of him having formed that view and never seeking or obtaining any instructions from the plaintiff supportive of the existence of the equitable tenancy in common, for which the plaintiff contends in the substantive proceedings, that there is no injustice or unfairness to the plaintiff from Mr Esposito continuing to act for the defendants in the substantive litigation.
In the circumstances, the relief sought by the plaintiff, that is at paras 1, 2 and 5, those being the matters which were referred by order of Digby J to be determined by the Practice Court today, the plaintiff's application by her summons of 9 October 2014, must be dismissed.
(Discussion ensued.)
The orders of the court will be:
1.The plaintiff's application in respect of paras 1, 2 and 5 of her summons dated 9 October 2014 be dismissed.
2.The plaintiff pay the second to fourth defendants' costs.
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