BQC23 v BQS23
[2023] FCA 889
•28 June 2023
FEDERAL COURT OF AUSTRALIA
BQC23 v BQS23 [2023] FCA 889
File number: VID 314 of 2023 Judgment of: RARES J Date of judgment: 28 June 2023 Catchwords: PRACTICE AND PROCEDURE – application for leave to appeal from refusal to grant injunction restraining solicitors and counsel from continuing to act in main proceeding for remaining clients after applicant terminated joint retainer – where primary judge’s reasons not published to prevent disclosure of information subject to legal professional privilege – where applicant sought to raise new argument not put to primary judge – whether decision of primary judge attended by sufficient doubt to warrant grant of leave – whether substantial injustice would result if leave to appeal refused – held: application dismissed. Cases cited: Bienstein v Bienstein (2003) 195 ALR 225
Coulton v Holcombe (1986) 162 CLR 1
Maguire v Makaronis (1997) 188 CLR 449
Pilmer v The Duke Group Limited (in liquidation) (2001) 207 CLR 165
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 43 Date of hearing: 28 June 2023 Counsel for the applicant: Mr J Levine Solicitor for the applicant: Matrix Legal Counsel for the respondents: Mr A Kirby Solicitor for the respondents: DW Fox Tucker Lawyers ORDERS
VID 314 of 2023 BETWEEN: BQC23
Applicant
AND: BQS23
Respondent
BQR23
Respondent
BQQ23
Respondent
ORDER MADE BY:
RARES J
DATE OF ORDER:
28 JUNE 2023
THE COURT ORDERS THAT:
1.The application for leave to appeal be dismissed.
2.The applicant pay the respondents’ costs.
3.Until further order by the docket judge in the principal proceeding or another judge:
(a)each of the parties to this proceeding be identified by a pseudonym; and
(b)the names of each party, evidence, submissions and transcript in the application for leave to appeal be suppressed and not published other than to the parties to this proceeding or their lawyers,
on the ground that this order is necessary to prevent prejudice to the proper administration of justice.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Revised from the transcript)RARES J:
INTRODUCTION
BQC23, one of the applicants in the main proceeding, seeks leave to appeal from a decision of a judge of the Court refusing to grant an injunction restraining the solicitors and counsel (the lawyers) who previously acted for all of the applicants below (collectively, the clients) against a number of separately represented respondents (the promoters) over an investment proposition that appears to have failed. Mr R was the principal of BQC23.
The original draft notice of appeal contained 37 grounds, but after a case management hearing, the revised draft has now reduced to 25 grounds. Those grounds are still vague and general, but raise three separate substantive bases on which BQC23 asserts that his Honour erred in not enjoining the lawyers from continuing to act for all the other applicants (collectively, the investors) in the proceeding namely because:
(a)the lawyers had confidential information about BQC23 which put them into a position where there was a real and sensible (not theoretical) possibility of a conflict of interest and or duty;
(b)the lawyers owed BQC23 a duty of loyalty; and
(c)the due administration of justice required the lawyers to be restrained from acting for the investors.
His Honour analysed the evidence and BQC23’s submissions before rejecting all three grounds in his reasons. Those reasons have not been published because they disclose information that is subject to the legal professional privilege of all the clients. The primary judge’s reasons are comprehensive and summarise a deal of BQC23’s highly diffusive submissions which have been repeated in argument to me in a more truncated form.
FACTUAL BACKGROUND
His Honour found that:
·in 2021, Mr R applied to enjoin the lawyers from acting only after a fee dispute arose;
·until Mr R’s affidavits in support of the injunction application, there was no evidence [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]; and
·in 2016, Mr R had had a meeting with the solicitors that, according to their file note, had lasted for one and a half hours [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].
The 2017 email
On a number of occasions during the years between 2016 and 2018, the solicitors communicated with Mr R and the other clients. One such communication was an email in 2017 from the solicitors (the 2017 email), in which they referred to a recently made allegation by a promoter that BQQ23 was a concurrent wrongdoer. That promoter said that he would rely on BQQ23’s involvement to support a proportionate liability defence that would reduce the potential exposure of the promoters to all the clients, including BQC23. The solicitors informed their clients that whether BQQ23:
[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
[REDACTED]
The next paragraph of the 2017 email repeated [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. The email referred to the fact that BQC23 and BQQ23 would each receive an equal interest in the proposed investment vehicle. The solicitors continued:
[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
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[REDACTED]
The 2017 email next discussed [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. The solicitors noted that if they became aware of any facts that might give rise to an actual conflict, they would advise the clients immediately. They also referred the clients to the possibility of their choosing to seek their own advice.
The 2017 email then referred to a telephone conversation late in 2016 that the solicitors had had with all the clients where, again, they reiterated that they (the solicitors) did not perceive any conflict at that stage, but noted that one might arise later. They referred to the allegations that the promoters had recently raised that BQQ23 had made representations on which all the other clients had relied when deciding to invest. The solicitors wrote:
[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
[REDACTED]
The solicitors then discussed the possibility of the promoters pleading a proportionate liability defence and said that if they did, it would be necessary to consider whether the solicitors could continue to act for all of the clients. The 2017 email said that, at that time, even if such a defence were pleaded in respect of BQQ23, they were of the view that they could continue to act for all the clients. They welcomed the clients obtaining their own independent advice as to whether they perceived there to be a conflict and the solicitors also said that they would advise the clients if they saw one.
BQC23’s decision to plead the reply
Subsequently, two of the promoters pleaded proportionate liability defences in the main proceeding that alleged that BQQ23 had made representations to the clients on which they relied inducing their entry into the investment. In an email sent in 2018 (the reply email), the solicitors wrote to all of the clients to get approval to file replies to those two defences. The solicitors noted that the proportionate liability allegations were un-particularised. After discussing the deficiencies in those defences, the solicitors wrote:
[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
[REDACTED]
They went on to say that, previously, in the 2017 email and in two other emails, they had adverted to the possibility of a proportionate liability defence being raised in respect of the role of BQQ23 before saying:
[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
You have previously provided your informed consent for us to continue acting for you all, despite a proportionate liability claim being made against [BQQ23]. If that position has changed, please let us know. Subject to any further instructions, we do not understand your position has changed, given your previous instructions that you relied on the Respondents ' representations only.
(emphasis added)
Two days later, Mr R sent an email in response to the reply email, saying:
[REDACTED] [REDACTED] [REDACTED] [REDACTED]
[REDACTED]
THE PRIMARY JUDGE’S REASONS
The primary judge found that, although Mr R now claimed that BQQ23 had played an important role in inducing him to cause BQC23 to invest, nowhere in his affidavits filed in support of the injunction application did Mr R either describe what he meant by the role that BQQ23 had played or specifically identify how it was that anything BQQ23 said or did had induced Mr R or BQC23 to invest. His Honour found [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].
Accordingly, his Honour found that [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] His Honour set out parts of other documentary evidence, to some of which I have referred, [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
His Honour found that, in his various affidavits in support of the injunction application, Mr R had said little about what confidential information of BQC23 the lawyers had that was not otherwise available to all of the clients. However, his Honour noted a general concession, on which he acted, that all of the solicitor–client documents which the lawyers produced in connection with the injunction application, together with the underlying information on the basis of which the lawyers produced those documents, and the “getting to know you factors” which the lawyers acquired in their meetings with Mr R during BQC23’s retainer of them, provided information to which a duty of confidence might attach. His Honour observed that it may have been more accurate to regard the relevant information as having been received by all of the clients jointly, in the context of their joint retainer, so that it was not confidential only to BQC23. However, for the purposes of deciding the application for injunctive relief, the primary judge acted on the basis that whatever information of BQC23 that the lawyers had received was confidential and was in the lawyers’ current possession.
The primary judge found that the critical question was whether or not the lawyers proposed to act for the investors against BQC23 so that there could be a real or sensible possibility that if they continued to act for the investors, they might be faced with a conflict of interest or duty to their former client, BQC23.
He found that, although they had conceded confidentiality, the lawyers’ and investors’ position was that BQC23 had failed to identify with any precision how any relevant information could be used or misused by the lawyers against it. He found that, at the present time, all the clients’ positions, including that of BQC23, were aligned. He found that BQC23 had made no claim against the other clients, including BQQ23, and could not do so now, because, as BQC23 accepted, any such claim would be statute barred. His Honour found:
Accepting, for the sake of argument, Mr [R’s] evidence on this application that [BQC23] was induced to invest in the project by [BQQ23], that the pleading of [BQC23’s] claim at … of the amended statement of claim does not give proper expression to this, and that Mr [R’s] evidence would support the apportionment and contribution defences that have been pleaded by [some of the promoters] against [BQQ23], the fundamental difficulty with [BQC23’s] position is that the asserted conflict between Mr [R] and [BQQ23] is entirely theoretical. [BQC23], it must be emphasised, makes no claim against [BQQ23] in the proceeding or otherwise. It proposes no amended pleading and has not commenced a cross-claim against [BQQ23]. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] In these circumstances it cannot realistically be concluded that [the solicitors are] proposing to act against the interests of [BQC23] in the present proceeding.
It is also significant that [BQC23] does not explain with any clarity how any of its confidential information in the hands of [the solicitors] and [counsel] could be deployed against [BQC23] in aid of [BQQ23] in the proceeding as it is presently formulated. Despite Mr [R’s] evidence on this application there is no conflict between [BQC23] and [BQQ23] on the [clients’] case as it is currently pleaded. [BQC23] and the other [clients] are not “against” each other in the sense that expression is traditionally used in adversarial litigation. Indeed, as the [clients] have submitted, [BQC23’s] interests are wholly aligned with the [clients] on the pleadings, [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Nor can it be accepted that the fact of the apportionment/contribution defences taken by [some of the promoters] against [BQQ23] could affect this conclusion in circumstances where [BQC23] denies in its reply that [BQQ23] was a concurrent wrongdoer and it seems to be accepted by [BQC23] that any claim it might have had against [BQQ23] is now statute barred. Insofar as [BQC23] submits that Break Fast Investments Pty Ltd v Rigby Cooke Lawyers (a firm) [2021] VSC 398 at [133] (Macaulay J) and Ji v Bluestars Real Estate Pty Ltd [2018] VSC 11 (Elliott J) compel a different conclusion, those authorities are distinguishable on the significantly different facts of the present case.
To be clear, I do not accept that any of the confidential information in the possession of [the solicitors] and [counsel] is relevant to [BQC23’s] case against the respondents [scil: the promoters] in the sense that it could be deployed to the detriment or disadvantage of [BQC23] in the litigation by [the solicitors] or [counsel]. [BQC23’s] case has been articulated in the applicants’ pleading. That case has been advanced on the basis of [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. He has been informed that the solicitors for some of the [promoters] have raised the existence of a possible conflict, and he has had the opportunity to seek separate advice about the existence of any conflict. Until very recently, however, he has declined to do so.
(emphasis added)
His Honour found that the fact that the lawyers had confidential information in relation to BQC23’s case that was consistent with the way the case was pleaded did not create a problem of the magnitude that would justify the grant of an injunction restraining the lawyers from continuing to act in the proceeding on behalf of all of the investors. He found that there was no real or sensible possibility of a danger that the lawyers might have occasion to misuse any of BQC23’s confidential information in their possession and that any possibility that this might occur was purely hypothetical, including through any misuse of the “getting to know you” factors. His Honour found that, in circumstances where BQC23 did not make any claim against BQQ23, it was not apparent how there could be any relevant conflict between the evidence of Mr R, as to the basis of the inducement that BQC23 received to invest, and the evidence of BQQ23 on that subject, in the sense of any personal knowledge which the lawyers might have obtained about Mr R’s position that related to those matters.
In those circumstances, his Honour found that there was no basis to grant an injunction on the ground that there was a real and sensible possibility of a conflict of interest arising if the lawyers continued to act for the investors.
The primary judge found that there had been very significant delay by Mr R and BQC23 in raising their currently asserted claims for the grant of an injunction. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], notwithstanding that the main proceeding had been listed twice for a trial. Two trial fixtures were vacated while the lawyers had been acting for BQC23 since before the commencement of the main proceeding until the fee dispute in 2021.
The primary judge found that BQC23 had not given any coherent explanation for its delay in seeking separate advice, and thus delaying its bringing of its injunction application. He referred to Mr R’s evidence that his general practice was not to read attachments to emails or letters; including any court documents [REDACTED] [REDACTED] that, for example, the solicitors had sent to him. His Honour did not accept that Mr R’s asserted practice served to relieve him of any obligation to engage [REDACTED] that the solicitors had given him. His Honour found, in my opinion unassailably, that Mr R’s failure to open email attachments, or read court and other documents that he received, did not provide a proper explanation for his and BQC23’s failures to act in a more timely manner to bring his allegations of conflict to the fore and seek relief. He found that:
In all the circumstances it may be accepted that there has been such a significant delay on the part of [BQC23] in bringing the present application that [BQC23] should be regarded as having waived its rights to object to the ongoing retainer of [the solicitors] and [counsel] by the other applicants in the proceeding.
(emphasis added)
The primary judge found that the effect of BQC23’s delay on the cost, inconvenience and impracticality of requiring the lawyers to cease to act for the investors was considerable and that to grant BQC23 the relief sought would occasion further substantial delay in listing the main proceeding for trial. That was because of the need for the investors to obtain new solicitors and counsel, and for them to familiarise themselves with the matter. The main proceeding, by then, had been on foot for many years. His Honour found that such an additional delay provided a further basis to conclude that, were BQC23 separately represented in the main proceeding, the lawyers should not be restrained from continuing to act for the investors because of any alleged real or substantial possibility of a conflict of interest or duty that arose because they had acted in the past for BQC23.
THE DUTY OF LOYALTY AND ADMINISTRATION OF JUSTICE ARGUMENTS
His Honour then discussed the conflict in the authorities as to whether a lawyer had a duty of loyalty that provided a basis on which to grant an injunction against the lawyers continuing to act for the investors. He noted that single judges of this Court and some appellate courts had found that no duty of loyalty existed, whereas other courts had found, in Australia and elsewhere, that there was such a duty. In any event, the primary judge said that, even if he were to have found that such a duty of loyalty applied in respect of BQC23, he would have exercised his discretion against the grant of any injunction restraining the lawyers from continuing to act for the investors for the same discretionary reasons that he had given for refusing to enjoin them based on the alleged conflict of interest.
His Honour also rejected the third basis on which BQC23 relied, namely that in an appropriate, but exceptional, case the Court had an inherent jurisdiction to restrain lawyers from acting for a client if to do so would be contrary to the proper administration of justice. His Honour discussed the authorities, but found that the difficulty with accepting BQC23’s submissions was, again, the fact that there was no cross-claim on foot between BQC23 and BQQ23 nor any prospect of one. Accordingly, he found that there was no active factual issue on the clients’ pleadings as to anyone other than the promoters having caused BQC23 to invest and that, as matters presently stood, it was difficult to see why the lawyers would have any occasion to contradict Mr R’s evidence on this point if he repeated at the trial the evidence that he had given on the injunction application. His Honour found it difficult to see how the investors could be allowed to cross-examine Mr R on any such evidence or how BQC23’s lawyers could be allowed to cross-examine the investors’ witnesses (including BQQ23). In those circumstances, his Honour found that a reasonably informed, fair-minded member of the public could not conclude that, having acted for the clients for many years, the lawyers should be now restrained from continuing to act for the investors.
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His Honour found that the solicitors did all that reasonably could have been expected of them in the prevailing circumstances as at the relevant times and, accordingly, refused to grant injunctive relief.
PROPOSED GROUNDS OF APPEAL
The draft amended notice of appeal asserts in substance that his Honour erred:
·in considering the application for an injunction on the basis of the current pleadings in the main proceeding because BQC23 had not been granted leave to be separately represented and could not have amended the statement of claim and or reply which “had been purportedly filed on its behalf”;
·in relying upon contemporaneous documents to resolve any controversy between Mr R’s evidence and that of the solicitors because they were trained to take notes as legal professionals;
·by failing to give adequate reasons;
·by failing to follow cited cases (that I note had different facts);
·by failing to find that BQC23 would now advance its case based on its current instructions that BQQ23’s representations were a cause that had induced BQC23, through Mr R, to invest as opposed to the case that had been “purportedly pleaded on its behalf”;
·by failing to find that the investors had an evidential onus to demonstrate there was no real or sensible possibility that confidential information obtained by the lawyers could or would be misused against BQC23 or Mr R; and
·by failing to find that, in effect, BQC23’s choice to cease being represented by the lawyers created a duty of loyalty and or a requirement of the due administration of justice that the lawyers ought be restrained from acting for the investors.
SHOULD BQC23 BE PERMITTED TO RAISE A NEW ARGUMENT NOT PUT TO THE PRIMARY JUDGE?
In opening his submissions today, counsel for BQC23 raised new arguments that did not appear to have been put to his Honour and were not articulated either in the draft notices of appeal or its written submissions filed in support of its application for leave to appeal. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
In Coulton v Holcombe (1986) 162 CLR 1 at 7–8 Gibbs CJ, Wilson, Brennan and Dawson JJ said:
To say that an appeal is by way of rehearing does not mean that the issues and the evidence to be considered are at large. It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish.
In my opinion, it follows that it would not be appropriate to allow a newly articulated argument that was not put below to be able to be advanced were leave to appeal granted.
BQC23’S SUBMISSIONS
BQC23’s written and oral submissions repeated those put to his Honour and were pitched at the same levels of generality. The submissions failed to identify specifically any particular information which might be considered confidential, beyond the general matters that the investors conceded that the lawyers knew and to which his Honour had regard, to support the three bases on which BQC23 claimed injunctive relief below.
CONSIDERATION
The principles for the grant of leave to appeal are well established. The applicant for leave must establish that, first, the decision in question is attended by sufficient doubt to warrant the grant of leave and, secondly, substantial injustice would result if leave to appeal were refused: Bienstein v Bienstein (2003) 195 ALR 225 at 231 [29] per McHugh, Kirby and Callinan JJ.
His Honour expressed cogent and, in my opinion, correct reasons for exercising his discretion against granting an injunction on any of the three bases put. It was necessary for BQC23 to satisfy his Honour that there was a basis to grant injunctive relief, at least, because there was a serious question to be tried and that the balance of convenience favoured this. BQC23 had to demonstrate a real and substantial (as distinct from “sensible” as BQC23 asserted) possibility of a conflict for the lawyers between their duty and the interests of BQC23 and their duties to, and or the interests of, the investors by their continuing to act for the latter: Pilmer v The Duke Group Limited (in liquidation) (2001) 207 CLR 165 at 199 [78]-[79] per McHugh, Gummow, Hayne and Callinan JJ. As Brennan CJ, Gaudron, McHugh and Gummow JJ said in Maguire v Makaronis (1997) 188 CLR 449 at 466:
What is required for a fully informed consent is a question of fact in all the circumstances of each case and there is no precise formula which will determine in all cases if fully informed consent has been given.
The reasons of the primary judge carefully traversed each of the three substantive arguments that BQC23 advanced in support of its claim for injunctive relief, none of which his Honour accepted either as matters of substance or in the exercise of his discretion. His Honour based those findings on the evidence, [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Mr R was fully informed that there was no conflict, so long as [REDACTED] [REDACTED] [REDACTED] each of their cases was that they had relied solely on the representations made by the promoters and not on anything said by or done by BQQ23. Nothing could be clearer than [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] there was no issue for BQC23 in respect of denying the basis of the pleaded apportionment defence [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].
It is apparent that the interests of the investors have continued to remain similar to those of BQC23 because all of them assert that they relied on the promoters’ alleged misrepresentations. [REDACTED][X] Mr R now says that he will give evidence, according to his current instructions, that there was some role played by BQQ23 that induced BQC23, through Mr R, to make its investment. As the primary judge found, even if BQC23 did rely on BQQ23, that fact does not raise any real or sensible possibility of any conflict of interest or duty were the lawyers to continue to act for the investors. It simply means that, based on any evidence of Mr R of having relied on BQQ23, the proportionate liability defence will be established against BQC23. It does not mean, or tend to prove, that any of the other investors relied on BQQ23. To the extent that BQC23 is found entitled to less damages or compensation, were its claim against the promoters to succeed, it may be in a less advantageous position than the investors. But Mr R’s reliance on BQQ23 and his state of mind cannot be or create any conflict or a problem for the investors who, as the evidence now stands, will continue to say that they did not rely on BQQ23.
It is difficult to see how it is in any of the clients’ interests for them or their controlling minds, such as Mr R, to do other than give honest evidence. I am not persuaded that there is any basis to conclude his Honour erred in the findings that he made, including those on which he based the exercise of his discretion.
I am unable to see that his Honour made any arguable error in finding that, until the fee dispute was raised, there was no potential real or sensible possibility that the lawyers might have had any conflict of interest or duty, [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]: Maguire 188 CLR at 466. Nor I am able to see any error in the exercise of his Honour’s discretion to refuse injunctive relief based on his reasons about, first, the failure of BQC23 to advance any draft pleading on which it proposed to rely against the promoters, were it to be granted leave to be separately represented, or any claim against either BQQ23 (which BQC23 accepted was statute barred) or the lawyers or any of them.
As his Honour reasoned, the fact that BQC23 now appears to accept that the promoters can establish a proportionate liability defence against it, because Mr R relied on something BQQ23 may have said to him, is not evidence against, or an admission by, any other investor. BQC23’s general assertions about Mr R’s proposed evidence, which was not specific, appear to be that BQQ23 influenced his state of mind to invest. That [REDACTED] [REDACTED] does not affect the case put by any other investor. The evidence on which the primary judge acted was that, at all times, the other clients [REDACTED] [REDACTED] had instructed them on numerous occasions in writing that they did not rely on BQQ23 and relied solely on the promoters’ representation in deciding to invest.
[REDACTED] [REDACTED] about Mr R’s state of mind could not rationally raise a possibility that the investors’ position would be adversely affected if BQC23 and Mr R put the new case at trial; hence the primary judge’s difficulty, and mine, in comprehending how either the investors could be allowed either to cross-examine Mr R or BQC23 allowed to cross-examine BQQ23. There was no justiciable issue between the clients, including because, as BQC23 contended to his Honour (and me), any cause of action that it may have had against BQQ23 was statute barred.
There is no reason to doubt his Honour’s finding that BQC23 gave no clear explanation of how any of the, conceded, confidential information might be used against BQC23 if the lawyers were allowed to continue to act for the investors, particularly in light of BQC23’s failure, at any time before his Honour and even on this application, to advance what its claim is that might raise that conflict. I reject BQC23’s argument that, until it is granted leave to be represented separately, there was “no point” in drafting a pleading to articulate precisely how BQC23’s case might be put that would raise a real and substantial possibility of a conflict. As McHugh, Gummow, Hayne and Callinan JJ said in Pilmer 207 CLR at 200 [83]:
The conflicting duty or interests must be identified. Conflict is not shown by simply pointing to the fact that there had been past dealings between the appellants and interests associated with the Kia Ora directors.
(emphasis added)
Here, a conflict is not shown simply by BQC23 pointing to the fact that the lawyers had confidential or “getting to know you” information because of having acted for it until the present dispute arose. In my opinion, BQC23’s failure to identify, by a properly articulated pleading or submission, exactly how the separate interests of BQC23 could raise a real and substantial possibility of a conflict for the lawyers if they continued to act for the investors, were BQC23 allowed separate representation in the main proceeding, was a compelling basis on which his Honour could exercise his discretion not to grant injunctive relief on all three bases that BQC23 advanced. I am not satisfied that there is any reason to doubt the correctness of his Honour taking that factor into account as a reason not to grant an injunction.
Moreover, his Honour’s finding that Mr R’s failure, if there were one, to open emails or read documents did not justify his or BQC23’s delay in raising the new issue for several years while the proceeding progressed with the lawyers acting for all of the clients was another powerful factor to justify his Honour’s decision.
DISPOSITION
In all those circumstances, for these reasons, I am unable to see that there is any, or any sufficient, reason to doubt the correctness of his Honour’s refusal to grant an injunction on each of the three bases on which it was sought. Moreover, I am not satisfied that substantial, or any, injustice would flow from a refusal of leave to appeal. Accordingly, I will refuse to grant BQC23 leave to appeal. I will order that the application be dismissed with costs.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rares. Associate:
Dated: 1 August 2023
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