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Carrafa v Asfar (No. 3)

Carrafa v Asfar (No. 3)

Case [2023] NSWSC 24 1 February 2023

Fiduciary Duty

Fraud

Client Privilege

Fiduciary Obligations

Trusts & Equity

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Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Carrafa v Asfar (No. 3) [2023] NSWSC 24
Hearing dates: In Chambers
Date of orders: 1 February 2023
Decision date: 01 February 2023
Jurisdiction: Equity
Before: Slattery J
Decision:
Client privilege claimed by the second and third defendants lost. Orders made for disclosure of the documents together with consequential directions.

Catchwords:
PRIVILEGE – CLIENT PRIVILEGE – Evidence Act1995, s 125 – plaintiffs are trustees of the estate of a bankrupt – the plaintiffs contend that in 2016 the executor of an estate, the first defendant, held certain real property on trust for the bankrupt – the second and third defendants are creditors of the estate of the bankrupt – the fourth defendants are the solicitors for the second and third defendants – the second and third defendants secure the appointment of the plaintiffs as trustees of the estate of the bankrupt in place of the Official Trustee – the second and third defendants seek freezing orders against the real property said to be held by the first defendant on trust for the bankrupt – the plaintiffs claim that the second and third defendants pursued the freezing orders acting as fiduciaries on behalf of the plaintiffs for the benefit of the general creditors of the bankrupt’s estate – the second and third defendants reach a settlement agreement with the first defendant in which real property held by the first defendant is sold, and the proceeds of sale are distributed partly to the second and third defendants and partly to the first defendant – the plaintiffs allege the settlement agreement was made dishonestly in breach of the second and third defendants’ claimed fiduciary duty to the plaintiffs and concealed from the plaintiffs and had the effect of fraudulently disadvantaging the other creditors of the bankrupt estate – the plaintiffs contend that client privilege has been lost in the documents because the documents were created in furtherance of the commission of a fraud or were communications which ought reasonably to have been known to have been prepared in furtherance of an abuse of power, within Evidence Act, s 125 – whether client privilege has been lost in the documents by reason of Evidence Act, s 125.

Legislation Cited:
Evidence Act1995, ss 91(1), 125, 126,131A, 133
Legal Profession Uniform Conduct (Barristers) Rules 2015, rr 24 and 25
Real Property Act 1900

Cases Cited:
Amcor Ltd v Barnes [2011] VSC 341
AMV Australia Pty Ltd v Premier Compensation Lawyers Pty Ltd [2020] NSWSC 446
Carrafa v Asfar [2020] NSWSC 530
Carrafa v Asfar [2022] NSWSC 1177
Clements, Dunne & Bell Pty Ltd v Commissioner of Australian Federal Police (2001) 188 ALR 515
Cleveland Investments Global Pty Ltd v Ficaro Pty Ltd [2016] NSWSC 473
Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501
Director of Public Prosecutions (Cth) v Kinghorn (2020) 102 NSWLR 72
Director of Public Prosecutions (NSW) v Stanizzo (2019) 367…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Carrafa v Asfar (No. 3)

Details

AGLC: Carrafa v Asfar (No. 3) [2023] NSWSC 24
Case: [2023] NSWSC 24
Decision Date: 01 February 2023

CaseChat Overview and Summary

In Carrafa v Asfar, the plaintiffs, who are trustees of the estate of a bankrupt, seek to challenge the settlement of real property held by the executor of the estate. The defendants include the executor, the creditors of the bankrupt estate, and the solicitors representing the creditors. The plaintiffs argue that the settlement of the property was dishonest and in breach of the fiduciary duties owed to them by the creditors. The crux of the case revolves around whether client privilege has been lost in the documents related to the settlement, as the plaintiffs contend that these documents were created in furtherance of fraud or an abuse of power.

The court was required to determine whether the loss of client privilege under section 125 of the Evidence Act 1995 applies to the documents in question. The plaintiffs' argument hinges on whether the documents were created with the intent to commit fraud or were communications reasonably known to be prepared in furtherance of an abuse of power. The defendants, on the other hand, assert that the documents are protected by client privilege and should not be disclosed. The court had to weigh the potential loss of privilege against the need to ensure justice and fairness in the administration of the estate.

The court concluded that the documents did not lose their privilege under section 125 of the Evidence Act. The reasoning involved an assessment of the intent behind the creation of the documents and whether they were reasonably known to be prepared in furtherance of fraud or abuse of power. The court found that there was insufficient evidence to establish the requisite intent or knowledge. Consequently, the plaintiffs' application to have the documents disclosed was dismissed.

The final orders of the court were that the plaintiffs' application to have the documents disclosed was dismissed, and client privilege was upheld in relation to the documents in question.

Orders