Canberra Residential Developments Pty Limited v Brendas (No 2)

[2008] FCA 255

FEDERAL COURT OF AUSTRALIA

Canberra Residential Developments Pty Limited v Brendas (No 2) [2008] FCA 255

EVIDENCE – application for leave to cross-examine a witness by both senior and junior counsel for the applicant in circumstances where there was a non-provision of funds to the applicant’s solicitors to enable senior counsel’s retainer to be continued – application refused – no ‘special circumstances’

Phillips v Phillips (1966) 1 NSWR 49
Eva Pty Ltd v Charles Davis Ltd (1982) VR 515
GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No.3) (1990) 20 NSWLR 15
Lakatoi Universal Pty Ltd v Walker [1999] NSWSC 1337

CANBERRA RESIDENTIAL DEVELOPMENTS PTY LIMITED ACN 098 326 375 v SPIROS BRENDAS, BEVERLEY ROSE BRENDAS, KENOSS PTY LIMITED ACN 008 544 232 AND CANBERRA LAND DEVELOPMENTS PTY LIMITED ACN 103 875 823
ACD 21 OF 2006

GRAHAM J
4 MARCH 2008
CANBERRA

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	ACD 21 OF 2006

BETWEEN:

CANBERRA RESIDENTIAL DEVELOPMENTS PTY LIMITED ACN 098 326 375
Applicant

AND:

SPIROS BRENDAS
First Respondent

BEVERLEY ROSE BRENDAS
Second Respondent

KENOSS PTY LIMITED ACN 008 544 232
Third Respondent

CANBERRA LAND DEVELOPMENTS PTY LIMITED ACN 103 875 823
Fourth Respondent

JUDGE:	GRAHAM J
DATE OF ORDER:	4 MARCH 2008
WHERE MADE:	CANBERRA

THE COURT ORDERS THAT:

1.Leave not be granted to the applicant permitting the further cross-examination of Mr Brendas by different counsel.

2.The applicant pay the costs of the first, second and third respondents of the application made today ore tenus at 2.15pm.

3.The matter stand over until 10.15am on 5 March 2008.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	ACD 21 OF 2006

BETWEEN:

CANBERRA RESIDENTIAL DEVELOPMENTS PTY LIMITED ACN 098 326 375
Applicant

AND:

SPIROS BRENDAS
First Respondent

BEVERLEY ROSE BRENDAS
Second Respondent

KENOSS PTY LIMITED ACN 008 544 232
Third Respondent

CANBERRA LAND DEVELOPMENTS PTY LIMITED ACN 103 875 823
Fourth Respondent

JUDGE:	GRAHAM J
DATE:	4 MARCH 2008
PLACE:	CANBERRA

REASONS FOR JUDGMENT

1. The hearing of this matter commenced on Monday, 26 November 2007 and continued during that week up to and including Friday, 30 November 2007. The applicant was represented during that week by Mr R. Crowe SC and Mr M. Orlov of counsel.  The first to third respondents were represented by Mr A.S. Martin SC and Mr D.J.C. Mossop of counsel and the fourth respondent was represented by Mr B.J. Salmon QC.  When the matter was called today the appearances remained the same except that Mr Crowe of Senior Counsel did not appear for the applicant.  Mr Orlov alone appeared today.  He indicated that he would be continuing as counsel for the applicant but in the absence of Mr Crowe.

2. When the matter was adjourned part heard on 30 November 2007 cross-examination of the first respondent Mr Spiros Brendas had commenced and had progressed for some time.  Mr Crowe of Senior Counsel commenced his cross-examination at 11.45 am on Friday, 30 November and continued with that cross-examination, subject to the luncheon adjournment, until 4.11 pm on that day.  When the matter was called for hearing today and the position was made known that Mr Crowe would not be continuing in the matter the Court drew to Mr Orlov’s attention the problem that that created for the applicant in respect of continued cross-examination of Mr Brendas.

3. At 2.15 pm today after the luncheon adjournment an application was made by Mr Orlov on behalf of the applicant to continue the cross-examination of Mr Brendas notwithstanding that senior counsel previously retained had undertaken cross-examination of him from 11.45 am to 4.11 pm on 30 November 2007.  In making the application the applicant relied upon the affidavit sworn 4 March 2008 of Mark Duncan Flint, a partner in the firm of solicitors Bradley Allen, Lawyers who act for the applicant.  Reliance was also placed upon the document at page 44 in exhibit 1 and the document at pages 27 to 36 of exhibit 1.

4. It was made clear by Mr Orlov that the application was not founded upon any special circumstances such as illness, incapacity, loss of voice or bereavement affecting Mr Crowe’s ability to appear.  The application was put simply on the basis that the applicant had no funds or more accurately the applicant’s solicitors had no funds with which to pay senior counsel to appear.  Mr Flint was called to give oral evidence and was cross-examined by Mr Martin of Senior Counsel.  Mr Flint explained in his oral evidence that in essence the available funds did not permit Mr Crowe’s retainer to continue.  It was indicated that the firm of Bradley Allen Lawyers was continuing in the matter on a speculative basis.

5. The evidence suggests that the applicant entered into an agreement with Litigation Lending Management Pty Limited on 6 February 2007 under which, as I understand it, $320,000 was made available by Litigation Lending Management Pty Limited to Bradley Allen Lawyers to fund the litigation.  A further amount of $380,000 was received by Bradley Allen Lawyers from 19 parties to whom I will shortly refer.  They have been detailed in a schedule to Mr Flint’s affidavit under the heading ‘Amounts paid on behalf of HP2’.  The reference to ‘HP2’ is a shorthand reference to a development property known as Horse Park 2.

6. Some 34 individuals or companies or partnerships joined together in a joint venture in relation to another property known as Horse Park 1. 

7. Some of the 34 companies, partnerships and persons joined with others to make up, if I may use the word loosely, a syndicate of 51 participants in what was to have become a joint venture to be identified as ‘Horse Park 2’.  That joint venture did not eventuate when the land, which was known as Horse Park 2, was ultimately acquired by the fourth respondent, a company associated with Mr Brendas and another or other investors.

8. There has been no suggestion in the evidence on the application presently before the Court that due to oversight the applicant was not informed that there is a rule restricting the circumstances in which different counsel from that which commences cross-examination, may continue that cross-examination.  It may be assumed that the applicant and the applicant’s legal team was familiar with the rule restricting cross-examination to one counsel except where special or exceptional circumstances could be established.  Mr Orlov of counsel urges the view that special or exceptional circumstances exist in the present case where it is suggested that the reason for Mr Crowe SC’s absence today may be attributed to a lack of funds provided by the applicant to enable his retainer to continue.

9. It is clear from the evidence that Litigation Lending Management Pty Limited has since mid-February this year made it known to the applicant that it will not provide any further funds for security for costs and, I am asked to infer, for any other purpose either.  I think the evidence given orally by Mr Flint included evidence of a discussion with Michelle Silvers of Litigation Lending Management Pty Limited in which she said words to the effect, ‘I am okay with not retaining Bob Crowe for the balance of the hearing’. 

10. In relation to the 19 persons who provided the $380,000 to which reference has been made, Mr Flint has given evidence of a conversation on speakerphone with Mr Frank Porreca and he thought others at some stage prior to 25 February 2008 but after 1 January 2008 when Mr Porreca informed him in words to the effect that ‘further funds would not be provided’. 

11. In his affidavit sworn today Mr Flint deposed to a conversation on 25 February 2008 with Mr Porreca when Mr Porreca said words to the effect:

    ‘Canberra Residential Developments Pty Ltd will not provide any further security for costs.  There is no prospect of the contributories providing any further funding for the proceedings.’

12. As mentioned earlier, some 19 ‘contributories’ have provided $380,000 towards the funding of these proceedings, for reasons which will be apparent in a moment.  No evidence whatsoever has been provided that those 19 contributories, who have each subscribed $20,000, in two tranches of $10,000, are without means.  No evidence has been provided as to their capacity or incapacity in relation to the provision of further litigation funding. 

13. It must be assumed in the circumstances that the applicant understood and was prepared to take the risk when it chose not to retain Mr Crowe SC any further in the litigation and, most importantly, to allow him to complete his cross-examination of Mr Brendas. 

14. I mention the contributories for the reason that they subscribed the money which they did, totalling $380,000, so as to enable them to profit from the litigation presently before the Court.  The evidence of one of the applicant’s directors and secretaries, who was also a shareholder, Mr Robert Cobanov, was that the applicant had no assets other than its subscribed share capital of $8 which sat ‘at the accountant’s office on the file’.

15. The applicant had no bank account in its own name as opposed to in a representative capacity.  It had never ‘earned $1’ and never lodged an income tax return on its own account.  In that context the applicant wrote to the intending participants in the Horse Park 2 Joint Venture in the following terms.  The letter is undated but it is plain from the evidence that it was sent before November 2006 or very early in that month.  The letter provided as follows, it being directed to the intending participants in the Horse Park 2 joint venture:

    ‘CRD v Brendas and Anor – Federal Court proceedings ACD 21 of 2006
    Joint Venture to Purchase Horse Park 2 Estate

    You may be aware already that CRD has commenced litigation in the Federal Court against Spiros Brendas, Beverley Brendas, Kennoss Pty Ltd [sic] and Canberra Land Developments Pty Ltd arising out of Spiros Brendas’ involvement in Canberra Land Developments’ acquisition of Horse Park 2 Estate while he was still a director of CRD.

    The claims made against Mr Brendas include that, as a director of CRD, he had a duty to the company to act in its interests and to avoid putting himself in a position where his personal interests conflicted with the interests of the company.  It is alleged, among other things, that by being involved in Canberra Land Developments’ acquisition of Horse Park 2 while he was still a director of CRD when CRD was interested in acquiring that property for the benefit of the Horse Park 2 joint venture, Mr Brendas breached his fiduciary duties to CRD.

    The proceedings have been brought by CRD as trustee on behalf of the members of the Horse Park 2 joint venture (ie the 51 members who provided a $50,000 cheque to CRD on 25 or 26 March 2003).  These members collectively are the beneficiaries of the litigation and will be entitled to share in the proceeds if the litigation is successful.

    It was resolved at a meeting that any members of the Horse Park 2 joint venture who wished to participate as beneficiaries of the litigation should each contribute an amount of $10,000 towards the cost of the litigation payable immediately and a further $10,000 at a later time if required by CRD.  It was also resolved that CRD would approach a litigation funder to make up any shortfall in the cost of the litigation and to provide security to cover the risk of any cost orders that might be made against CRD if the litigation is not successful.

    That means that the members will not be asked to contribute any more than $20,000.

    CRD’s solicitors, Bradley Allen, have already been in contact with a reputable litigation funder and are in the process of providing information to them.

    If you wish to participate you must provide a cheque for the initial payment of $10,000 made out to Bradley Allen Trust Account to one of the current directors of CRD by not later than 4.00pm on Tuesday 7 November 2006.’

    (Emphasis added)

    The letter was signed by Mr Andro Glavinic as ‘Chairman Canberra Residential Developments’. 

16. The evidence establishes that only 19 of the 51 intending members in the Horse Park 2 joint venture chose to join together in funding the current litigation.  It seems clear that they have done so to the extent of $20,000 per contributor.  As I have earlier said, there is no evidence whatsoever to suggest that those 19 contributors who are described in the letter as ‘beneficiaries of the litigation’ are without means to enable at least sufficient funds, additional funds, to be provided to permit Mr Crowe to complete the cross-examination upon which he had embarked on 30 November 2007.

17. The circumstances in which the Court in its discretion may permit cross-examination of a particular witness by more than one counsel have been considered in Phillips v Phillips (1966) 1 NSWR 49; Eva Pty Ltd v Charles Davis Ltd (1982) VR 515; GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No.3) (1990) 20 NSWLR 15 (‘GPI Leisure’) and Lakatoi Universal Pty Ltd v Walker [1999] NSWSC 1337.

18. In the first of the cases mentioned, Phillips v Phillips, Allen J said at 50:

    ‘… it is beyond any doubt a well-established rule that one counsel and one counsel only may cross-examine a particular witness, be he party or otherwise, unless there be some special reason to allow a departure from that proposition.’

19. In Phillips v Phillips, M.D. Healy QC and P.A. Twigg of counsel, appeared for the petitioner.   For the first several days of the trial, the respondent was represented by M.D. Broun of counsel.  On the sixth and seventh days of the trial, Mr Broun embarked upon his cross-examination of the petitioner. 

20. When the hearing resumed on 22 March 1966, approximately one week later, Mr R.S. Watson QC appeared with Mr Broun as counsel for the respondent.  He sought leave as leading counsel for the respondent to take up or resume the uncompleted cross-examination of the petitioner.  This had been interrupted by the adjournment and was ‘yet to proceed for some time’.  Allen J initially demurred to the suggestion made by Mr Watson that he should follow his junior in a part-heard cross-examination of the petitioner.  His Honour continued:

    ‘Both counsel recognized what I put to them, that there was a long established practice against such a proceeding, but Mr Watson for his part claimed that he was not in law under any obligation to establish any special circumstance for the exercise of discretion in his favour to allow such a cross-examination by him; or alternatively, if he were regarded as so obliged, that there was here in this present case such circumstances as might be properly regarded as special.’

    Allen J obviously considered circumstances of ‘sudden illness, loss of voice or other emergency which removed from the party’s representation the counsel whom he or she had had up to that point’ as amounting to special circumstances. 

21. In the result his Honour declined Mr Watson’s application to take over the cross-examination of the petitioner. 

22. In Eva Pty Limited v Charles Davis Limited Beach J restated the matter of principle to which Allen J had referred.  The circumstances of that case were somewhat different from the present case and from Phillips v Phillips.

23. An application was made by Mr Sher of Queen’s Counsel who appeared with Mr Charles of Queen’s Counsel and Messrs Hayes and Sutherland of counsel for the defendants to split the cross-examination of a witness, Erdi, between himself and his junior Mr Hayes.  The application to so split the cross-examination was made before the event.  At 519 Beach J said:

    ‘The special circumstance relied upon in the present case is that the issues involved in the many actions before the court are of such magnitude and complexity that it is beyond the physical capacity of any one counsel appearing for the Charles Davis interests to properly prepare and conduct the cross-examination of the witness Erdi which will be required if he is to do justice to the case for those interests.’

    In the circumstances Beach J was satisfied that it was a proper case to permit the splitting of the cross-examination. 

24. In GPI Leisure Young J, as his Honour then was, was concerned with a cross-claim for rectification of a certain contract.  Senior and junior counsel represented the cross-claimants.  Senior and junior counsel represented one of the cross-defendants (the plaintiff).  Yet another senior counsel and a junior represented another cross-defendant (the plaintiff’s mortgagee) and other senior and junior counsel represented other cross-defendants and one junior counsel alone represented yet other cross-defendants.

25. In the course of the hearing of the matter Mr Bongiorno QC who was leading counsel for the cross-claimants objected to both Mr T.E.F. Hughes QC, who was leading counsel for the cross-defendant (plaintiff), and Mr A.C. Archibald QC, who was the leading counsel for the cross-defendant (plaintiff’s mortgagee), cross-examining witnesses in the matter.  Mr Bongiorno QC submitted that there was a general rule that where parties were in the same interest that only the most senior of the counsel representing those parties may cross-examine.  He submitted that an owner and mortgagee of units in a unit trust were parties in the same interest.

26. GPI Leisure may be distinguished from the present case in that it concerned two different counsel for two different parties who were thought to be in the same interest rather two counsel for the one party each wishing to cross-examine the same witness. During the course of the hearing, Young J ruled that he should permit both Mr Hughes QC and Mr Archibald QC to cross-examine the cross-claimant’s witnesses, provided that there was no overlapping in the cross-examination.  He indicated that he would provide his detailed reasons later.  The reported judgment handed down on 3 May 1990 would appear to have followed a hearing on 9-12 April 1990, when his Honour granted the leave to which reference has been made. 

27. At the end of his review of the authorities, Young J endeavoured to draw all the threads together, to use his expression.  He indicated inter alia:

    ‘(1)      The only actual “right” is the right to have a fair trial.

    (2)      It is the duty of the trial judge to ensure that all parties have a fair trial.

    (3)       In carrying out his duties the trial judge must so exercise his discretion in and about the examination and cross-examination of witnesses that a fair trial is assured.
    …

    (5)      Where there is more than one counsel for the same party, then ordinarily the judge will not permit any more than one counsel to cross-examine the same witness.

    (6)      Where there are parties in the same interest, the judge will apply the same rule as stated in (5).
    …’

28. His Honour explained the application of the principles, which he discerned, to the facts of the case which were before him by indicating that Mr Hughes’ client and Mr Archibald’s client were not in precisely the same interest.  There were matters which did affect one client as mortgagee which may not affect the other client.

29. Lakatoi Universal Pty Ltd v Walker was a judgment of Einstein J in the New South Wales Supreme Court handed down on 6 July 2000.  In that particular case the plaintiffs were represented by R.J. Ellicott QC and V.R.W. Gray, A.E. Galasso and S.D. O’Campo of counsel and the defendants were represented by A.B. Shand QC, DPF Officer QC, R.J. Powell and C.J. Leggat of counsel.  Mr Shand had become unavailable and it was proposed that Mr Officer be permitted to continue with his cross-examination of witnesses whom Mr Shand had been cross-examining.  Mr Shand had at all times had Mr Powell with him as one of his juniors. 

30. Mr Powell was available to appear in the matter as junior to Mr Officer in Mr Shand’s absence.  On the understanding that Mr Powell would be present throughout cross-examination by Mr Officer QC of witnesses, who had already been cross-examined in part by Mr Shand QC, his Honour permitted Mr Officer in the circumstances of that case to continue with the cross-examination. 

1. At paragraph [7] of his reasons Einstein J made it clear that Mr Shand QC would be unavailable to appear in the case then before him, or any other case, for medical reasons and that he would be so unavailable until the end of 1999.  That was a matter of common ground.

2. In my opinion the applicant has failed to establish special circumstances justifying a grant of leave to Mr Orlov of counsel to continue with the cross-examination, commenced by Mr Crowe SC, of the first respondent, Mr Spiros Brendas.  The only basis on which the application was made was that the solicitor was without funds to meet Mr Crowe’s fees and Mr Crowe had indicated that he was unwilling to appear on a speculative basis, to bring the case to a conclusion.

3. No evidence was proffered as to why the 19 ‘beneficiaries of the litigation’ were unwilling to provide additional funds to meet Mr Crowe’s fees, at least to allow him to complete his cross-examination of Mr Brendas. 

4. It is clear that the Court would be confronted by difficult issues in assessing the credit of Mr Brendas when two different cross-examiners had challenged his evidence and asked questions going to his credit.

5. No evidence has been provided to suggest any inability of Mr Crowe to represent the applicant this afternoon, when the hearing was ready to resume, in circumstances where the potential problem of Mr Crowe’s absence had been raised at 10.15 this morning.  One would have thought that if the beneficiaries of the applicant’s litigation were keen to see Mr Brendas further cross-examined they would have taken appropriate steps to secure Mr Crowe’s attendance this afternoon.

6. In the circumstances I am not prepared to accede to the applicant’s application.  I dismiss that application and will not permit cross-examination of Mr Brendas by Mr Orlov in addition to the cross-examination of Mr Brendas by Mr Crowe SC.

I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham.

Associate:

Dated:        5 March 2008

Counsel for the Applicant:	R Crowe SC (only on 26, 27, 28, 29 and 30 November 2007) and M Orlov
Solicitor for the Applicant:	Bradley Allen
Counsel for the First, Second and Third Respondents:	A S Martin SC and D J C Mossop
Solicitor for the First, Second and Third Respondents:	Gillespie-Jones & Co
Counsel for the fourth respondent:	B J Salmon QC
Solicitor for the fourth respondent:	J S O’Connor Harris & Co
Date of Hearing:	26, 27, 28, 29, 30 November 2007 and 4 March 2008
Date of Judgment:	4 March 2008