Dundee Beach Pty Ltd v Maher

Case [2006] NTSC 96

Dundee Beach Pty Ltd v Maher [2006] NTSC 96

PARTIES:DUNDEE BEACH PTY LTD

(ACN 009 631 136)

v

PAUL GERARD MAHER

TITLE OF COURT:  SUPREME COURT OF THE NORTHERN TERRITORY

JURISDICTION:  SUPREME COURT OF THE NORTHERN TERRITORY EXERCISING CIVIL JURISDICTION

FILE NO:No 119 of 2006 (20625223)

DELIVERED:  18 December 2006

REPUBLISHED:  19 December 2006

HEARING DATES:  7 December 2006

JUDGMENT OF:  SOUTHWOOD J

CATCHWORDS:

PRACTICE AND PROCEDURE – Jurisdiction – Inherent jurisdiction – Officers and processes of court – Restraining solicitor from acting against previous client – Solicitor a material witness - Test to be applied – Relevant considerations – Conflict between duty to the court and interests of client.

EQUITY - Equitable remedies – Injunctions - Injunctions for particular purposes - Injunction to restrain breach of fiduciary duty against solicitors - Confidential information obtained by solicitors - Conflicting duties - Risk of use of confidential information to detriment of former client's interests

Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd [2005] NSWSC 550; Belan v Casey [2002] NSWSC 58; Black v Taylor [1993] 3 NZLR 403; Bowen v Stott [2004] WASC 94; British American Tobacco Australia Services Ltd v Blanch [2004] NSWSC 70; Everingham v Ontario (1992) 88 DLR (4th) 755; Grimwade v Meagher [1995] 1 VR 446; Holborow v Rudder [2002] WASC 265; Kallinicos and Another v Hunt and Others (2005) 64 NSWLR 561; Law Society(NSW) v Holt [2003] NSWSC 629; Mitchell v Pattern Holdings Pty Ltd [2000] NSWSC 1015; Newman v Phillips Fox (1999) 21 WAR 309; PhotoCure ASA v Queen’s University at Kingston (2002) 56 IPR 86; Prince Jefri Bolkiah v KPMG [1999] 2 AC 222; Williamson v Nilant [2002] WASC 225; - applied

Boyce (Trading as Hunt & Hunt Lawyers) v Goodyear Australia Ltd (NSWCA unreported 16 September 1996); C I & D Industries Pty Ltd v Keeling (NSWSC unreported 26 March 1997); Mallesons Stephen Jacques v KPMG Peat Marwick (1991) 4 WAR 357; Nasr v Vihervaara (2005) 91 SASR 222 – referred to

McVeigh v Linen House Pty Ltd [1999] 3 VR 394; Sent v John Fairfax Publication Pty Ltd [2002] VSC 429; Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501 – not followed

REPRESENTATION:

Counsel:

Plaintiff:C R A McDonald QC

Defendant:R Battley

Solicitors:

Plaintiff:De Silva Hebron

Appellant:Paul Maher

Judgment category classification:    B

Judgment ID Number:  Sou0635

Number of pages:  35

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN

Dundee Beach Pty Ltd v Maher [2006] NTSC 96

No. 119 of 2006

BETWEEN:

DUNDEE BEACH PTY LTD

(ACN 009 631 136)

Plaintiff

AND:

PAUL MAHER

Defendant

CORAM:    SOUTHWOOD J

REASONS FOR JUDGMENT

(Delivered 15 December 2006)

The application

  1. By a summons on originating motion filed on 4 October 2006 the plaintiff seeks to restrain the defendant, a solicitor who was previously retained by the plaintiff, from acting on behalf of Robert George Kendray against the plaintiff…

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AGLC
Dundee Beach Pty Ltd v Maher [2006] NTSC 96
Case
[2006] NTSC 96
Decision Date

CaseChat Overview and Summary

The case of Dundee Beach Pty Ltd v Maher involved a dispute regarding the inherent jurisdiction of the court to restrain a solicitor from acting against a previous client due to potential conflicts of interest. The plaintiff, Dundee Beach Pty Ltd, sought to restrain the defendant, a solicitor, from acting for Mr Robert George Kendray in Supreme Court proceeding No 111 of 2005. The plaintiff argued that the defendant, who had previously received confidential information during his retainer with the plaintiff in 1998, would be a material witness in the proceeding and that his continued involvement could compromise the administration of justice. The court was required to decide whether the defendant should be restrained from acting for Mr Kendray based on the potential for conflict of interest and the risk of the defendant using confidential information to the detriment of the plaintiff.

The court considered the principles established in relevant case law, such as Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd and Holborow v Rudder, which highlighted the importance of maintaining the independence and objectivity of the legal profession. The court also considered the defendant's obligations of loyalty to his client and his duty to the court to be frank and truthful. The court found that the defendant's evidence was not only material but also potentially powerful in relation to the credit of Messrs Booth, Sanders, and Kendray. The court concluded that if the defendant continued to act for Mr Kendray, a fair-minded reasonably informed observer might think that there was a conflict of interest that could interfere with the proper administration of justice. The court determined that the appearance of the due administration of justice would be subverted by the defendant both continuing to act for Mr Kendray and giving evidence potentially harmful to the interests of Mr Kendray and potentially damaging to his credit.

Based on the reasoning above, the court made an order restraining the defendant from continuing to act for Mr Robert George Kendray against the plaintiff in Supreme Court proceeding No 111 of 2005. The court's decision was grounded in the need to preserve the integrity of the legal process and to ensure that the administration of justice was not compromised by potential conflicts of interest. The court's order aimed to prevent any appearance of impropriety and to maintain the public's confidence in the legal system.

Orders

Orders of the court

The defendant is restrained from continuing to act for Mr Robert George Kendray against the plaintiff in Supreme Court proceeding No 111 of 2005

Background

Background to the litigation

The principal issue in this case is whether the defendant should be restrained from acting for Mr Kendray in Supreme Court proceeding No 111 of 2005 because the defendant is likely to be a material witness in the proceeding. Although the defendant received confidential information during the course of his retainer by the plaintiff in 1998 a reasonable observer, aware of the relevant facts, would not think that there was a real, as opposed to a theoretical, possibility that the confidential information given to the defendant by the plaintiff might be used by the defendant to advance the interests of Mr Kendray to the detriment of the plaintiff. The confidential information that the defendant received from the plaintiff in 1998 is more than likely to be incapable of advancing the interests of Mr Kendray. Further, it would be futile to grant an injunction on this basis as it is more than likely that Mr Kendray knows about the instructions that were given to the defendant in 1998. He was involved in instructing the defendant in 1998 and he gave the defendant instructions about the offer to purchase Mr Hassall’s interest in the plaintiff. In any event Mr Booth is to give evidence on behalf of Mr Kendray in support of his defence and counterclaim in Supreme Court proceeding No 111 of 2005. The information that is the subject of the proceeding before the court is common knowledge to all of the parties.The facts Having considered the whole of the evidence I make the following findings of fact. The plaintiff is a registered company. On 3 September 1986 Mr Kendray, Mr Hassall, Mr Booth and John David Sanders were appointed directors of the plaintiff. The current directors of the plaintiff are Robert Williams Woolley, Allan Charles Garraway, David Eric Walker and Danielle Maria Pokorny. The current shareholders of the plaintiff are Territory Realty Pty Ltd – 16 shares, Bishop Estate Pty Ltd – 16 shares and Excess Pty Ltd – 16 shares. The defendant is a legal practitioner whose style of practice is as a solicitor. In 1998 the defendant was a partner in the legal firm of James Noonan Solicitors. He is currently a sole practitioner and he was a sole practitioner at the time he received instructions from Mr Kendray about Supreme Court proceeding No 111 of 2005. On or about 1 November 1994 a deed of loan agreement was executed by the plaintiff, Territory Realty Pty Ltd, H & K Earthmoving Pty Ltd, Mr Kendray and Mr Hassall. Under the terms of the deed of loan agreement the plaintiff was to lend Territory Realty Pty Ltd the sum of $220,500, H & K Earthmoving Pty Ltd the sum of $220,500, Mr Kendray the sum of $110,250 and Mr Hassall the sum of $110,250 for the purpose of financing the purchase of 12 shares that were held in the plaintiff by Dowling Investments Pty Ltd. The 12 shares were to be purchased in accordance with the terms and conditions contained in a written agreement that was annexed to the deed of loan agreement dated 1 November 1994. The terms of the deed of loan agreement provided that the term of the loans shall be for 10 years from 1 November 1994 and the borrowers shall repay their respective portions of the loan to the plaintiff by equal annual instalments in arrears commencing on 1 November 1996. If any instalment was not paid within 14 days of the date upon which it became due and payable then the borrower was to pay the plaintiff penalty interest at the rate of 10 per cent per annum.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

The defendant has spoken to both Mr Booth and Mr Sanders. Both of them have offered to cooperate with Mr Kendray and give evidence in support of both Mr Kendray’s defence and his counterclaim.Conclusion The evidence that the defendant is capable of giving is material to the determination of the contested issues in Supreme Court proceeding No 111 of 2005. There will be an issue in Supreme Court proceeding No 111 of 2005 as to why the oral agreements pleaded in the defence and counterclaim were not brought into account in the offer to purchase Mr Hassall’s interests in the plaintiff in 1998 and were not mentioned in the facsimile referred to in par [44] above. There will also be an important issue about what instructions Messrs Booth, Sanders and Kendray gave the defendant in 1998. I agree with Mr McDonald QC that it is significant that the instructions to the defendant about the offer to purchase Mr Hassall’s interest in the plaintiff in 1998 did not bring into account the pleaded oral agreements. While much of the evidence which the plaintiff seeks to lead from the defendant about the instructions that the defendant received from Messrs Booth, Sanders and Kendray in 1998 is hearsay evidence, and it is not clear what statements, if any, were made by Mr Kendray to the defendant in 1998, the evidence of the defendant may nonetheless be admissible to prove admissions by an agent, Mr Booth, against the oral agreements pleaded in pars [48] and [49] above, to prove prior inconsistent statements made by Mr Booth and prior inconsistent conduct by Messrs Booth, Sanders and Kendray and to put the contents of the documents set out in pars [34], [37] and [44] above in context. If, as is to be expected, the evidence of Messrs Booth and Sanders is to be tendered in Supreme Court proceeding No 111 of 2005, then any evidence of prior inconsistent statements they have made about the oral agreements referred to in pars [48] and [49] above may be tendered in the proceeding against Mr Kendray. Such evidence as the defendant can give, even if his evidence is limited to what is contained in the James Noonan Solicitors’ file, is more than likely to be inconsistent with the interests of Mr Kendray. His evidence may be used to refute Messrs Booth’s, Sanders’ and Kendray’s evidence about the oral agreements pleaded in the amended defence and counterclaim. The evidence that the defendant is capable of giving is not only material evidence but is potentially powerful evidence in relation to the credit of Messrs Booth, Sanders and Kendray. The defendant will be in a position in which Mr Kendray’s interests may well conflict with his obligation to the court. He will owe obligations of loyalty to Mr Kendray and he will have a duty to the court to be frank. If the defendant continues to act, a fair minded reasonably informed member of the public might think that there was a conflict of interest which might interfere with the proper administration of justice because the independent objectivity of the defendant may be compromised because of his obligation of loyalty to Mr Kendray. A fair minded reasonably informed observer would conclude that the appearance of the due administration of justice would be subverted by the defendant both continuing to act for Mr Kendray and giving evidence potentially harmful to the interests of Mr Kendray and potentially damaging to his credit.

Ratio Decidendi

Legal Principle Established

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