Cosenza v Stephen Duncan of Duncan Powell (Trustee in Bankruptcy)
[2017] FCCA 3245
•22 December 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| COSENZA v STEPHEN DUNCAN OF DUNCAN POWELL (TRUSTEE IN BANKRUPTCY) | [2017] FCCA 3245 |
| Catchwords: BANKRUPTCY – Application by unsecured creditor of discharged bankrupt to appeal against decision of bankruptcy trustee not to oppose discharge from bankruptcy – application brought pursuant to section 178(1) of the Bankruptcy Act 1966 – trustee concerned has retained solicitors to act on his behalf and has sought to have application summarily dismissed – same firm of solicitors (and counsel) have acted against the applicant in Magistrates’ Court proceedings regarding trespass – application to restrain firm of solicitor from acting for trustee – firm has never previously acted for applicant – inherent jurisdiction of the court to manage its processes – interests of the administration of justice – appearance of justice – matters to be considered. |
| Legislation: Bankruptcy Act 1966, ss.178, 176, 77, 81, 126, 127, 134, 149D, 152, 153, 263, 265 Federal Circuit Court of Australia Act 1999, s.17A(2) Federal Circuit Court of Australia Rules2001, r.13.10 Magistrates Court Act 1988 (SA), s.51(1)(f) Supreme Court Act 1935 (SA), s.131 |
| Cases cited: Kalinicos v Hunt (2005) 64 NSWLR 561 Naczek & Dowler [2011] FamCA 179 Mintel International v Mintel (Aust) (2000) 181 ALR 78 Lyons v Legalese Pty Ltd & Ors (2016) 126 SASR 232 Blong Ume Nominees Pty Ltd & Anor v Semweb Nominees Pty Ltd & Ors [2013] SASC 180 Harman v Secretary of State for the Home Department [1983] 1 AC 280 |
| Applicant: | DEAN COSENZA |
| Respondent: | STEPHEN DUNCAN OF DUNCAN POWELL (TRUSTEE IN BANKRUPTCY) |
| File Number: | ADC 161 of 2017 |
| Judgment of: | Judge Brown |
| Hearing date: | 12 December 2017 |
| Date of Last Submission: | 12 December 2017 |
| Delivered at: | Adelaide |
| Delivered on: | 22 December 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Lazarevich |
| Solicitors for the Applicant: | Maurice Blackburn Lawyers |
| Counsel for the Respondent: | Mr Bullock |
| Solicitors for the Respondent: | Cowell Clarke |
ORDERS
The application to restrain Cowell Clarke solicitors and Mr Bullock of counsel from acting on behalf the defendant Stephen Duncan, formerly Trustee of the bankrupt estate of Thomas Tigani in these proceedings (being proceedings numbered ADG161/2017) is dismissed.
The respondent’s costs of these proceedings are reserved.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 161 of 2017
| DEAN COSENZA |
Applicant
And
| STEPHEN DUNCAN OF DUNCAN POWELL (TRUSTEE IN BANKRUPTCY) |
Respondent
REASONS FOR JUDGMENT
Introduction
On 3 May 2017, Dean Cosenza “the applicant” commenced proceedings, in this court, against Stephen Duncan, in his capacity as the Trustee of the bankruptcy of Thomas Tigani. Mr Duncan was appointed on 7 December 2006.
Mr Tigani became a bankrupt, on his own petition, on 20 November 2006. Mr Cosenza was one of Mr Tigani’s creditors. In 1998, he invested in a commercial olive farm, operated by Mr Tigani. He is an unsecured creditor of Mr Tigani.
Mr Cosenza has many complaints and criticisms, in respect in the manner in which Mr Duncan and his professional associates managed Mr Tigani’s bankrupt estate.
Essentially, Mr Cosenza alleges as follows:
·The Trustee failed to examine Mr Tigani’s business affairs and assets with due diligence, particularly in respect of companies and trusts, with which Mr Tigani was associated;
·Mr Tigani had failed to disclose assets to his trustee, which fell within his estate and were therefore subject to his bankruptcy, which should have been more thoroughly investigated by the Trustee;
·Mr Tigani has misappropriated significant funds, in order to defeat the interests of his creditors, again something which should have been actioned by the Trustee;
·Mr Tigani continued to engage in business, during his bankruptcy, including in respect of the olive farm.
It is Mr Cosenza’s case that he has consistently raised issues to do with Mr Tigani and his business affairs, with Mr Duncan’s office, both during and after Mr Tigani’s bankruptcy, but that these issues have not been properly investigated, to the detriment of Mr Cosenza and others of Mr Tigani’s creditors.
On 21 November 2009, Mr Tigani was automatically discharged from his bankruptcy, due to the operation of section 149 of the Bankruptcy Act 1966 (hereinafter referred to as the Act).
Mr Cosenza has deposed that, in the lead up to Mr Tigani’s discharge, he made many submissions to Mr Duncan’s office that he (Mr Duncan) should object to Mr Tigani’s discharge but, once again, his submissions were improperly rejected by the Trustee.
In mid-2016 Mr Tigani was apparently personally involved, as plaintiff, in proceedings, in the District Court of South Australia, against Stix Farms Pty Ltd. It is apparently Mr Cosenza’s position that evidence provided by Mr Tigani, on oath, in these proceedings, confirms his (Mr Cosenza’s) assertion that Mr Tigani and his wife were in control of assets not disclosed to Mr Duncan during Mr Tigani’s bankruptcy.
The District Court proceedings were apparently the catalyst for Mr Cosenza to commence the current proceedings against Mr Duncan. In his application, Mr Cosenza, who apparently personally prepared it, prior to the appointment of his present solicitors, who only formally filed a notice of address for service on 12 December 2017, the day of the hearing of the current application, indicated the statutory basis of his claim in the following terms:
“This application is brought pursuant to s.48 Limitation of Actions Act, sections 178, 176, 77, 81, 126, 127, 134, 149D, 152, 153, 263, 265 Bankruptcy Act Cth 1966 and sections 90-5, 90-10, 90-15, 90-20 Insolvency Law Reform Act 2016.”
In this context, it needs to be noted that pursuant to the provisions of the Insolvency Law Reform Act 2016, which received assent on 29 February 2016, Divisions 3 & 4 of Part V111 of the Bankruptcy Act, which previously contained sections 176 & 178 of the Act, have been repealed. What are the practical consequences of this, so far as Mr Cosenza’s substantive application is concerned, has not been raised formally with the court and is beyond the scope of these proceedings.
At the time of Mr Tigani’s discharge from bankruptcy, section 178(1) of the Act read as follows:
“It the bankrupt, or a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.”
It is Mr Cosenza’s position that he, as a creditor of Mr Tigani, is a person who has been adversely affected by acts, omission and decisions of Mr Duncan and is therefore entitled to seek redress from the court in respect of them. In particular, he seeks to set aside the discharge of Mr Tigani, from his bankruptcy and that the court make a declaration that he (Mr Tigani) has committed a fraud upon his creditors and trustee.
Mr Duncan has filed an affidavit in response to some of Mr Cosenza’s claims. He confirms that Mr Cosenza was an unsecured creditor of Mr Tigani’s estate as a consequence of a judgment in the District Court of South Australia made on 7 June 2005. I have not been provided with details of this judgment, particularly in respect of the amount concerned.
Mr Duncan denies that he and his staff were derelict in respect of their conduct of the administration of Mr Tigani’s estate or otherwise failed to properly investigate either Mr Tigani’s affairs or six other entities disclosed by him, of which he was a director at the time of his bankruptcy.
Mr Duncan confirms that members of his staff were contacted by Mr Cosenza, in April of 2007, in respect of Mr Cosenza’s concerns that Mr Tigani had not disclosed assets to him. It is Mr Duncan’s evidence that these matters were properly investigated by his staff and found not to have substance.
Mr Duncan has further formally deposed that he did not regard it as being appropriate that he object to the automatic discharge of Mr Tigani, from bankruptcy, in November of 2009. Mr Duncan further confirms that this decision was the subject of a complaint, lodged by Mr Cosenza, to the Australia Financial Security Authority (AFSA), where it was investigated by Tim Howes, a senior inspector for South Australia of the Bankruptcy Regulation Branch. Mr Howes dismissed the complaint in October of 2009.
Mr Duncan also confirmed that Mr Cosenza has more recently contacted a member of his staff, in mid-2016, in respect of Mr Tigani’s action against Stix Farms Pty Ltd, in the District Court of South Australia, particularly that in his evidence to the District Court, Mr Tigani has disclosed being involved in business affairs, during the currency of his bankruptcy.
It is Mr Duncan’s evidence that his office has investigated the material provided by Mr Cosenza, in respect of the District Court proceedings and came to the conclusion that it was neither possible nor appropriate that any further action be pursued against Mr Tigani personally pursuant to the Bankruptcy Act.
As a consequence of these matters, Mr Duncan has deposed as follows:
“… on each occasion that the applicant contacted my firm and made the various allegations against the bankrupt, or provided information in respect of any potential undisclosed asset of the bankrupt, I, or my firm, took all reasonable steps to investigate the claim and satisfied myself that no further steps were required, and informed the applicant of this.”[1]
[1] See affidavit of Stephen James Duncan filed 27 June 2017 at paragraph 28
In these circumstances, Mr Duncan has applied for the summary dismissal of Mr Cosenza’s application, pursuant to the provisions of section 17A(2) of the Federal Circuit Court of Australia Act 1999. Essentially, the section authorises the court to dismiss an application if the court is satisfied that an applicant has no reasonable prospects of success in the application brought by him or her.
As a consequence of this section, rule 13.10 of the Federal Circuit Court Rules 2001 provides as follows:
“The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if the Court is satisfied that:
(a) the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim; or
(b) the proceeding or claim for relief is frivolous or vexatious; or
(c) the proceeding or claim for relief is an abuse of the process of the Court.”
The current application
I am not dealing with Mr Duncan’s application for summary dismissal of Mr Cosenza’s claim against him. This has been listed for hearing on 31 January 2018. In the meantime, a preliminary issue has arisen, which must be resolved prior to the summary dismissal application. It concerns an application, made by Mr Cosenza, to have the court issue an injunction restraining Mr Duncan’s solicitors from acting for him, in these proceedings.
The solicitors concerned are Cowell Clarke. The solicitor who is handling the matter, on Mr Duncan’s behalf, in these proceedings, is Symoane Mercurio. Ms Mercurio has briefed Mr Bullock of counsel to appear on Mr Duncan’s behalf in the proceedings before this court. Cowell Clarke has never previously acted on Mr Cosenza’s behalf in any capacity whatsoever. However, the firm has acted for a potential party in proceedings in which Mr Cosenza and his mother Eleanor Cosenza are applicants.
Ms Mercurio is not the solicitor, at Cowell Clarke, who has been responsible for the litigation involving Mr Cosenza and his mother. The solicitor concerned is Amanda Brady. Ms Brady has deposed that she acts for Cormack Marketing Group Pty Ltd, whom Mr Cosenza unsuccessfully applied to be joined as a party in proceedings brought by him and his mother against Bryce Van Dyke and others in the Magistrates’ Court of South Australia.
Ms Brady has deposed, in an affidavit filed in these proceedings, as to her involvement with Mr Cosenza in the Magistrates’ Court proceedings, involving Cormack Marketing Group Pty Ltd and in a subsequent appeal to the Supreme Court of South Australia, which Mr Cosenza has lodged.
In her affidavit, Ms Brady has provided copies of the following documents:[2]
·An affidavit sworn by Mr Cosenza on 24 March 2017 in support of his application to join Alinta Energy Retail Sales Pty Ltd; Appco Group Australia Pty Ltd; and Cormack Marketing Group Pty Ltd to his action against Bryce Van Dyke and Christopher Clement;
·The reasons for decision of Magistrate Adair, delivered 7 September 2017, dismissing Mr Cosenza’s application for such joinder; and
·The notice of appeal, dated 27 September 2017, lodged by Mr Cosenza to the Supreme Court of South Australia, in respect of Magistrate Adair’s judgment.
[2] See affidavit of Amanda Brady filed 11 December 2017
During the course of the hearing before me, on 12 December 2017, Mr Bullock confirmed that he had also been retained by Ms Brady to appear on behalf of Cormack Marketing Group Pty Ltd, in both the proceedings before Magistrate Adair and in the Supreme Court of South Australia on appeal.
In her affidavit, Ms Brady deposes that she has not obtained any information, confidential or otherwise, which is relevant to the matters currently before this court. In addition, she has indicated that she has not spoken to Ms Mercurio about the matter, in which she is instructed by Cormack Marketing Group Pty Ltd.
Ms Mercurio, in her affidavit filed in these proceedings, has deposed that she has had no involvement in the proceedings initiated by Mr Cosenza in the Magistrates’ Court of South Australia and further that she has not discussed them with Ms Brady.
In these circumstances, she contends that she can gain no conceivable advantage, in her representation of Mr Duncan, as a consequence of the fact that Ms Brady has conducted litigation involving Mr Cosenza in two other courts.
It is Mr Cosenza’s view that there is some form of conflict of interest as a consequence of Cowell Clarke being involved in two sets of proceedings involving him. In his affidavit, Mr Cosenza deposes as follows:[3]
“… conflict which arises where a solicitor or firm acts for separate clients in different matters, but information gained from one client may be relevant to the other; or the other matter in which they are assisting one client could impact adversely on the other but notwithstanding, confidential information obtained in relation to the applicant within one matter can be easily obtained and utilised for the benefit of the other matter causing a significant prejudice to the applicant.
I hold serious concerns and doubts as to the ability of Cowell Clarke to keep any confidential information obtained in relation to me and my personal affairs from both of its current clients to the detriment of the applicant.”
[3] See affidavit of Mr Cosenza filed 14 November 2017 at paragraph 39-40
Mr Cosenza has not specifically detailed what is the confidential information he fears Ms Brady or Mr Bullock have obtained, which is potentially available to Ms Mercurio (and indeed Mr Bullock) in the proceedings before this court.
However, in submissions of his counsel, Mr Lazarevich it is submitted that there may be information, of a confidential nature, relating to him, held by Cowell Clarke, about which he is as yet unaware. Indeed, this material may include documents or pleadings as yet unprepared. In these circumstances, as I understand Mr Lazarevich’s submission, it is expedient for an order to be made restraining Cowell Clarke from acting further in the proceedings before this court.
Mr Cosenza himself has deposed to this effect, in respect of as yet unforeseen difficulties, which nonetheless he believes will inevitably arise. He deposes as follows:
“I verily believe that conflicts will arise which inevitably either delay the reasonable progress of this matter before this Honourable Court or unnecessarily create situations that may generate unnecessary appeals of decisions thus distracting the real intention and purpose of these proceedings which is to recover for the benefit of creditors.”
By necessary implication, it is Mr Cosenza’s position that these delays and potentially unnecessary appeals are not in the interests of justice. Mr Cosenza has not, as yet, identified any other creditors, apart from himself, who are likely to benefit from his application.
It is the Trustee’s position that there is no evidence whatsoever to indicate that there is any overlap between the two proceedings concerned, either factual, legal or ethical, which would provide Cowell Clarke with any form of unfair advantage over Mr Cosenza in these proceedings. More significantly, Mr Bullock contends that no fair minded and properly informed member of the general public would conclude otherwise.
Mr Duncan wishes Cowell Clarke and Mr Bullock to continue to act on his behalf in these proceedings. Accordingly, it is the submission of Mr Bullock that there are significant public policy considerations, arising in respect of the entitlement of a litigant to have the legal representation of his choosing, without interference from his opponent in the litigation concerned. In these circumstances, he seeks the dismissal of Mr Cosenza’s application. These reasons for judgment are directed towards the resolution of this preliminary issue.
Mr Cosenza’s application in the Magistrates’ Court
Mr Cosenza and his mother live together in suburban Adelaide. They claim, on 25 September 2015, Mr Van Dyke and Mr Clement illegally entered their property, in defiance of any implied licence to do so. In effect, Mr Cosenza and his mother claim that Mr Van Dyke and Mr Clement trespassed on their property, which caused them to suffer anguish, distress and aggravation of pre-existing depression and post-traumatic stress disorders. As a consequence, Mr Cosenza and his mother claim to be entitled for damages for trespass to land.
Mr Van Dyke and Mr Clement are either employees or agents of Alinta Energy Retail Sales Pty Ltd. They were each wearing uniforms bearing the logo of Alinta Energy, at the time of the alleged trespass. The judgment of Magistrate Adair indicates that they have not as yet been personally served with Mr Cosenza’a application, which is stale against them.
It would appear to be the case that Mr Van Dyke and Mr Clement entered Mr Cosenza’s property in order to offer to provide the occupants of that property with some service or other, relating to the supply of electricity. However, precisely what this service was is not clear to me, as it is not detailed in the reasons for judgment of Magistrate Adair.
What is clear is that Mr Cosenza asserts that he gave no-one permission, particularly any canvasser or door to door sales representatives, to come onto his premises and, as a consequence, he is entitled to damages from them and potentially their employers or retainers, because of trespass. In this context, Magistrate Adair wrote as follows:
“The first plaintiff operates a business called Law in Action which has a website at the domain Through that website the first plaintiff sells a book, and purports to provide advice to members of the public on how to pursue legal action against alleged trespassers of their home or private property. In particular, the website identifies door to door salespersons, debt collectors and process servers as persons who may have ‘hassled and harassed’ and who may be liable to pay damages to the property owner. In addition, the website promotes for sale ‘Trespass signs’ which purport to revoke any implied license or consent for entry on to land. Claims are made on the website that any person who thereafter enters and remains on private property, and thereby causes a loss of quiet enjoyment, is a trespasser and liable to pay to the occupier or person in possession of the land, a significant damages award. It goes on to state:
Law in Action trespass signs will not only force those unscrupulous people to avoid entering your home, but should they still enter in defiance – you can recover damages against the companies and organisations that employ them for the loss of quiet enjoyment.”[5]
[5] See Cosenza v Van Dyke & Ors decision of Magistrate Adair delivered 7 September 2017 at [21] being annexure AB2 to Ms Brady’s affidavit
In his application against Mr Van Dyke, Mr Clement and Alinta Energy Retails Sales Pty Ltd, Mr Cosenza and his mother claim to be entitled to damages in an amount of $100,000.00. In March of 2017, Mr Cosenza and his mother made application to the court to join three further defendants to this action, which included Cormack Marketing Group Pty Ltd.
In his amended claim, Mr Cosenza claimed that Cormack Marketing Group Pty Ltd, in concert with either Alinta Energy Retails Sales Pty Ltd; Appco Group Australia Pty Ltd; or Appco Group Energy Pty Ltd, instructed Mr Van Dyke and Mr Clement as agents of Alinta to enter upon his and his mother’s property and trespass there, in defiance of any implied licence to enter there and despite various written notices of withdrawal of any implied licence to enter and trespass signs clearly delineated at all entries to the property.
As a consequence, it is Mr Cosenza and his mother’s position that Alinta Energy Retails Sales Pty Ltd; Appco Group Australia Pty Ltd; Appco Group Energy Pty Ltd or Cormack Marketing Group Pty Ltd are in some way vicariously liable for the alleged acts and omissions of Mr Van Dyke and Mr Clement in trespassing on the property of Mr Cosenza and his mother. In his amended statement of claim, Mr Cosenza alleges as follows:
“The first and second defendants were at all material times wearing uniforms with Alinta Energy signage, logo and colours, had identification reflecting they were either an agent, representative, employee or servant, (‘authorised person’) for and on behalf of the third defendant and when asked who were they working for stated in reply words to the effect: ‘Alinta Energy’.”[6]
[6] See affidavit of Ms Amanda Brady filed 8 December 2017 at page 10
Magistrate Adair characterised Mr Cosenza and his mother’s application to join the two Appco defendants and Cormack Marketing Group Pty Ltd, in the following terms:
“The plaintiffs argue that it is appropriate that the proposed defendants be joined as there is a ‘direct line’ between the proposed defendants and the existing defendants. This ‘direct line’, the plaintiffs argue, is based on an allegation that the first and second defendants were ‘engaged’ by Cormack who were then ‘engaged’ by APPCO, who were then ‘engaged’ by Alinta. The plaintiffs argue there was therefore a direct link between the individuals and the corporate entities ‘in some representative capacity that goes all the way through to Alinta’.”[7]
[7] Ibid at page 18
The three parties, whom Mr Cosenza sought to join to his action, including Cormack Marketing Group Pty Ltd, opposed the application on a number of grounds, including that Mr Cosenza’s pleadings were deficient and, in themselves, constituted an abuse of process. In addition, it was also apparent that neither Mr Van Dyke nor Mr Clement had been served with the originating process, which was therefore stale.
In the course of his judgment, Magistrate Adair identified that Mr Cosenza had instituted similar proceedings, against other alleged trespasses on his property, over the past five years or so.
Ultimately, Magistrate Adair concluded that, on balance, the actions against the various defendants sought to be joined, including Cormack Marketing Pty Ltd, had been commenced for an improper purpose and it would therefore be seriously and unfairly burdensome on those proposed defendants to allow them to be joined to Mr Cosenza’s action.
This decision is subject to appeal in the Supreme Court of South Australia. It is likely to come before the court in February of 2018. Ms Brady and Mr Bullock are retained to appear on the appeal. As indicated above, it is Mr Cosenza’s submission that a conflict has arisen because Cowell Clarke and Mr Bullock will be involved in both actions involving him, in this court and the Supreme Court of South Australia.
The legal principles applicable
In general terms, the authority to make an order of the kind sought by Mr Cosenza, restraining a solicitor from acting for another party in proceedings, arises in any one of the following situations:
·a solicitor acting for one party holds confidential information, relating to the other party, creating competing fiduciary obligations in the solicitor, which are irreconcilable;
·the court has jurisdiction to protect the confidences of a former client of a solicitor, provided prior to the termination of the solicitor’s retainer, in circumstances where the solicitor concerned has been retained, by another person, for subsequent litigation involving the former client;
·the court has authority to restrain a solicitor from acting in a particular case, as an incident of its inherent jurisdiction to control its processes and provide oversight of its officers, in aid of the administration of justice.[8]
[8] See Kalinicos v Hunt (2005) 64 NSWLR 561 at 582 [76] per Brereton J
The first two situations are directed to remedying specific forms of prejudice to an individual arising from his or her relationship with a legal practitioner. The third situation is more nebulous and turns on perceptions of what is proper in legal relationships.
In this case, it is common ground that neither Cowell Clarke nor Mr Bullock has ever previously acted for Mr Cosenza. In addition, as previously indicated, Mr Cosenza has not identified, with any degree of precision, the confidential material, which he asserts either Ms Brady or Mr Bullock hold, which is therefore potentially accessible by Ms Mercurio, either directly or inadvertently, which as a consequence has the potential to cause him prejudice.
Mr Lazarevich, on Mr Cosenza’s part, has submitted that pleadings and/or discovered documents, in either the Magistrates Court proceedings or the Supreme Court proceedings, may give rise to such confidential documents, which are not as yet in existence.
In rebuttal of this assertion, Mr Bullock points out that pursuant to the applicable rules of both the South Australian Magistrates Court[9] and the Supreme Court,[10] all pleadings filed in proceedings before each such court are public documents, which are therefore potentially accessible to any member of the public, including a solicitor.
[9] Magistrates Court Act 1988 (SA) at section 51(1)(f)
[10] Supreme Court Act 1935 (SA) at section 131
In addition, in my view, at this juncture, it is uncertain whether or not Mr Cosenza’s appeal to the Supreme Court of South Australia will be successful. In addition, Mr Cosenza is unable to identify, with any precision whatsoever, what documents, germane to him, apart from pleadings, are likely to come into the hands of Cowell Clarke as a consequence of his action against Mr Van Dyke and others, presuming he is successful in joining Cormack Marketing Pty Ltd to it.
I accept that all pleadings, filed in both the Magistrates Court and the Supreme Court are accessible to members of the public generally. Accordingly, any solicitor, if interested, would be able to apply to view such documents, which therefore cannot be regarded as being of a confidential nature.
In these circumstances, it is my view that the only possible basis on which Mr Cosenza can ground his current application is the inherent jurisdiction of the court, in its oversight of members of the legal profession, to prevent a solicitor from acting, if it is in the interests of justice to do so.
The authorities indicate that this inherent jurisdiction is to be regarded as exceptional and [as such is] to be exercised with caution. In particular, the court should not overlook the public interest arising from litigants being able to choose the lawyer of their choice, without influence from external factors.[11] The freedom to select a lawyer, without fear of favour, being inherent in the principle of justice being not only done but be seen to be done.
[11] See Kalinicos v Hunt (supra)
The test to be applied, in the application of the inherent jurisdiction concerned, is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice would require 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.
There is no dispute, between the parties, that the court has an inherent jurisdiction to restrain Cowell Clarke, Ms Mercurio and Mr Bullock from acting, for Mr Duncan, if it considers that it is appropriate to do so in the interests of justice. The jurisdiction is discretionary in nature. The discretion as an incident of the court’s jurisdiction to restrain solicitors and counsel from acting in a particular case, as a consequence of its inherent authority over its officers and to control its processes, in aid of the administration of justice.
In Naczek & Dowler, the Full Court of the Family Court described the basis of the duty of legal practitioners to the court, which founds the discretion, in the following terms:
“The duty to the court arises from the court’s concern that it should have the assistance of independent legal representation for the litigating parties. Preserving the integrity of the administration of justice, and in the appearance as well as the reality of independence, the duty underpins the court’s practical approach to its supervisory discretion.”[12]
[12] Naczek & Dowler [2011] FamCA 179 at [61]
In Naczek the test to be applied in this inherent jurisdiction 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.”[13]
[13] Ibid at [62]
As previously indicated, the jurisdiction is to be regarded as exceptional and, as such, to be exercised with due caution. This is because there is also a significant public interest in litigants being able to have the lawyer of their choice and it has the potential to lead to the perception of unfairness, if this choice is too readily abrogated.[14]
[14] Ibid at [63] – [64]
Naczek was a case involving parties engaged in family law litigation. By its nature, such litigation has the capacity to be extremely sensitive in its nature, and as a consequence, has the potential to elicit powerful emotional responses from those involved in it. In these circumstances (family law litigation), matters of public perception are likely to be more significant and delicate, in the exercise of a discretionary remedy.
On the other hand, commercial litigation very often has a different character, which has the potential to lead solicitors and barristers to act for and against entities, with which they have previously been involved in earlier litigation. In these circumstances, it has been held that it is necessary to establish a risk of real mischief or prejudice to justify the court’s intervention before a legal practitioner is restrained.[15]
[15] See Mintel International v Mintel (Aust) (2000) 181 ALR 78 at 88 per Heerey J at [44]
Accordingly, it is not sufficient for Mr Cosenza to establish that Cowell Clarke has previously acted against him, in the course of other litigation. Rather, he must establish what is the actual mischief or prejudice, which he is likely to suffer, or be perceived to suffer, before the court can intervene to restrain Cowell Clarke from acting against him.
In this context, Mr Lazarevich has attempted to muster authorities, which he asserts support his client’s contention. The first such authority is Lyons v Legalese Pty Ltd & Ors.[16] Ms Lyons was the defendant in proceedings in the Magistrates Court involving a claim of negligent driving causing personal injury.
[16] Lyons v Legalese Pty Ltd & Ors (2016) 126 SASR 232
The plaintiff’s claim against Ms Lyons was out of time by eight days and, as such, required leave to proceed. It was common ground that the failure to institute proceedings, within the limitation period, was due to the negligence of a solicitor, in the employ of Legalese Pty Ltd, which operated a legal practice.
Legalese was subject to a compulsory form of professional indemnity insurance, upon which it could potentially call, if negligence was established against it, in respect of the vicarious actions of one of its employees. Any claim against it professional indemnity insurer would only arise if its client’s application for an extension of time was unsuccessful.
Notwithstanding its admission of liability for negligence, in failing to bring the application within time, the firm of solicitors continued to act in the application for an extension of time. Ms Lyons applied to the Supreme Court of South Australia to restrain them from acting, on the basis that it was not in the interests of justice for the firm to continue to act. Ms Lyons was successful in this application.
Hinton J held that a fair minded lay observer would know, in general terms, of the duty of loyalty that a solicitor owes their client; further that a solicitor has professional indemnity insurance against which, if that solicitor was negligent in the discharge of their duties, then the client might have a cause of action against the solicitor concerned, who in turn could claim upon their insurance.
In Hinton J’s view, as a consequence of these matters, it was in the interests of the proper administration of justice that the solicitor be restrained in the circumstances prevailing, which included the interests of justice. Essentially, Hinton J concluded that there was an apprehension that the solicitors concerned may no longer be independent and impartial, in how they conducted the proceedings because the firm concerned had a personal interest in ensuring that the application for extension was successful, which might not necessarily be in the interests of their client, who might potentially lose the benefit of a professional negligence action against the solicitors.
In Blong Ume Nominees Pty Ltd & Anor v Semweb Nominees Pty Ltd & Ors[17] three professionals, one of whom was a solicitor, formed a joint venture to purchase premises to share as offices. A dispute arose regarding the liquidation of the venture and the payment to be made to one of its participants. The firm of the solicitor originally involved in the enterprise was engaged to act in resulting litigation for one of the parties against a former joint venturer. An application was made to retrain the firm from continuing to act.
[17] Blong Ume Nominees Pty Ltd & Anor v Semweb Nominees Pty Ltd & Ors [2013] SASC 180
Judge Dart summarised the applicable authorities as follows:
“… the effect of the authorities is that a practitioner is not to act in a matter where, by reason of either personal reputation or financial interest, the practitioners independence and objectivity is likely to be impaired, thereby creating a conflict with the practitioners overriding duty to the court.”
In this case, it is clear that Cowell Clarke has no direct financial interest in either piece of litigation concerning Mr Cosenza. In addition, this is not a case, which has implications for the personal reputation of the firm. Accordingly, I am not persuaded that these particular authorities are relevant to the situation arising in this case.
Rather, the evidence available to me indicates that Mr Cosenza has instituted litigation, in various courts in South Australia, involving very many defendants. This is because of his personal views about matters relating to the tort of trespass and the application of those views to his personal domestic circumstances.
Magistrate Adair identified fifty such actions instituted by Mr Cosenza, which are similar to the proceedings relevant to these proceedings. In these circumstances, it seems inevitable that very many solicitors, practising in Adelaide, have the potential to be involved, in some way or other, in litigation instigated by Mr Cosenza.
In my view, this is not, of itself, reason to restrain any such solicitors from acting, in other proceedings, in the absence of some directly raised conflict of interest. To the contrary, in my view, it would not be in the overall interests of the administration of justice for a legal practitioner to be restrained merely because of the multiplicity of actions brought by Mr Cosenza.
Finally, Mr Lazarevich contends that, if Cowell Clarke continue to act against Mr Cosenza, in the two discrete pieces of litigation, it is inevitable that either Ms Mercurio or Ms Brady will be subject to an implied undertaking, regarding the use of information provided to one or other of them, in either set of litigation, which will place them in an intolerable position of conflict – as they will simultaneously be required not to use the information concerned, but also required to do the utmost to further the interests of their respective clients, including utilising the information concerned.
There is an implied undertaking that information or documents arising in one particular course of proceedings can only be utilised in those proceedings and not for any other purpose. Such an undertaking is commonly referred to as a Harman Undertaking, following the case in which the concept was formulated. Harman v Secretary of State for the Home Department.[18]
[18] Harman v Secretary of State for the Home Department [1983] 1 AC 280
In general terms, the undertaking arises on the basis of the rationale that information which is not is not otherwise in the public domain should not be used for a collateral or ulterior process, unrelated to the proceedings for which the information was obtained in the first place.
I acknowledge that potentially Ms Brady is subject to such an implied undertaking in respect of information and documents, which come to her attention during the course of her continuing to act for Cormack Marketing Pty Ltd, in the litigation currently before the Supreme Court of South Australia and potentially before the Magistrates’ Court.
However, in my view, it is incumbent upon Mr Cosenza to detail, with some precision, what sort of information or documents may prospectively be within the rubric of such an undertaking. This cannot be a speculative exercise.
It is a serious thing to restrain one party from having recourse to the legal practitioner of his/her preference. An order to this effect should only be made, to utilise Heerey J’s words, in circumstances where there is a real mischief to be cured, not for a far-fetched or largely hypothetical one.
For all these reasons, I have come to the conclusion that it would not be in the overall interests of justice that Cowell Clarke (and indeed Mr Bullock) be retrained from acting in the proceedings concerning Mr Cosenza’s application to review the decision of Mr Duncan not to oppose the discharge of Mr Tigani from bankruptcy and other ancillary matters.
In particular, I am not satisfied that Mr Cosenza has identified any information, potentially available to Ms Brady, which would be accessible by Ms Mercurio, in proceedings which are significantly different to those currently before this court.
In my view, there is no basis upon which a fair minded, reasonably informed member of the public, could conclude that the proper administration of justice requires that Cowell Clarke be prevented from acting for Mr Duncan, merely because the firm of which Ms Mercurio is a member has been instructed to oppose the joinder of one of its corporate clients to an action brought by Mr Cosenza relating to an alleged domestic trespass.
Rather, in my view, such a member of the public would consider it such an affront to justice, if Cowell Clarke could not continue to act in these proceedings, because of the highly conjectural nature of Mr Cosenza’s complaints about the firm. Accordingly, I propose to dismiss Mr Cosenza’s application. The costs of the application will be reserved.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding eighty-nine (89) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 22 December 2017
[4] Ibid at paragraph 42
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