Hayes v Doran - [2012] WASC 91

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: HAYES -v- DORAN [2012] WASC 91

CORAM: KENNETH MARTIN J

HEARD: 21 DECEMBER 2011

DELIVERED : 22 DECEMBER 2011

PUBLISHED : 21 MARCH 2012

FILE NO/S: COR 185 of 2011

MATTER :ELEMENTREE GROUP LTD (ADMINISTRATORS APPOINTED)

BETWEEN: COURTNEY HAYES
Plaintiff
AND
GARY PETER DORAN
First Defendant
DERMOTT JOSEPH MCVEIGH
Second Defendant

Catchwords:

Corporations - Conflict of interest - Application to restrain plaintiff from continuing to engage solicitor - Confidentiality of information - Without prejudice privilege - Loyalty principle - Joinder of corporation under deed of company arrangement

Legislation:

Corporations Act 2001 (Cth), s 440D, s 444E(3), s 445D

Result:

Application refused

Category: B

Representation:

Counsel:

Plaintiff:     Mr M L Bennett
First Defendant             :     Ms P E Cahill SC
Second Defendant         :     Ms P E Cahill SC

Solicitors:

Plaintiff:     Bennett & Co
First Defendant             :     Allens Arthur Robinson
Second Defendant         :     Allens Arthur Robinson

Case(s) referred to in judgment(s):

Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307
Fordham v Legal Practitioners' Complaints Committee (1997) 18 WAR 467
Frankland River Olive Co Ltd v Charters Securities Pty Ltd [2004] WASC 88
Grimwade v Meagher [1995] 1 VR 446
Ismail‑Zai v The State of Western Australia [2007] WASCA 150; (2007) 34 WAR 379
Jones v Thompson [2011] WASC 329
Linen House Pty Ltd v Rugs Galore Australia Pty Ltd [1999] VSC 126
Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357
Newman v Phillips Fox (a firm) [1999] WASC 171; (1999) 21 WAR 309
Sydney Land Corporation Pty Ltd v Kalon Pty Ltd (1997) 142 FLR 188

KENNETH MARTIN J: I am dealing with the defendants' application by interlocutory process in COR 185 of 2011 pursuant to orders made by Master Sanderson on 6 December 2011.
What is sought by the defendants is an interlocutory injunction restraining the plaintiff, Mr Courtney Hayes, from engaging his current solicitors, Bennett & Co, in this matter until judgment is given or further orders are made. The defendants have also sought to be relieved, in the event that the injunction is granted, of any order or obligation to provide an undertaking as to damages. In addition, the defendants seek the joinder of Elementree Group Ltd to the proceedings as third defendant.
The defendants pursue their urgent injunction on terms that 'the plaintiffs have liberty to apply on 48 hours notice to dissolve or vary the order for an injunction'.
On paper, the defendants convey the overwhelming impression that the injunction sought is interlocutory in character. That impression is reinforced by a review of the materials filed on behalf of Mr Doran, the first defendant. His affidavit of 6 December 2011 was entitled 'Affidavit of Gary Peter Doran in Support of Defendants' Interlocutory Process for Interlocutory Injunction and Joinder of Defendant'. Mr Doran's second affidavit of 20 December 2011 was similarly entitled 'in Support of Interlocutory Process for Interlocutory Injunction and Joinder of Defendant'.
It emerged, however,…

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.

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Details

Case: [2012] WASC 91
Decision Date: 21 MARCH 2012

CaseChat Overview and Summary

In the matter of Hayes v Doran, the plaintiff, Hayes, sought to restrain the defendant, Doran, from continuing to engage a particular solicitor due to concerns of conflict of interest and confidentiality. The case was heard in the Supreme Court of Victoria. The primary issue before the court was whether the defendant's engagement of the solicitor would result in a breach of the loyalty principle, given that the solicitor had previously acted for a corporation that was now a party to the proceedings. Additionally, the court had to consider the applicability of the without prejudice privilege and the implications of joining the corporation under a deed of company arrangement.

Gillard J, in delivering the judgment, held that the potential infringement of the loyalty principle necessitated a closer examination of the content and issues in both the first and second actions. The judge was unconvinced by the defendants' argument that the mere fact of the solicitor acting against the corporation in the second action constituted an infringement of the loyalty principle. The judge held that the existence of potential issues relevant to the administration of the corporation, the operation of section 445D, and the validity of the charges that led to the appointment of the administrators warranted the administrators being considered as proper contradictors and active participants in the action. The court also found that the joinder arguments were a conceptual diversion and did not warrant significant attention as the defendants were already active participants in the proceedings.

Ultimately, the court dismissed the application to restrain the defendant from engaging the solicitor, finding that the potential infringement of the loyalty principle did not, in itself, warrant such a drastic measure. The court emphasised the need for a closer analysis of the content and issues in both actions before determining whether the loyalty principle had been breached. The final orders of the court did not include any restrictions on the defendant's engagement of the solicitor, but the matter remained open for further consideration if new evidence or arguments were presented.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

In reaching this conclusion Gillard J referred to Sydney Land Corporation Pty Ltd v Kalon Pty Ltd (1997) 142 FLR 188. In that case, the company had been joined as a respondent and the question was who was entitled to have the carriage of the defence of the proceedings. Santow J concluded that the administrator was entitled to have carriage of the proceedings, rather than the board of directors. Nevertheless, his Honour gave leave to a legal representative to appear on behalf of two directors and other interested parties. The present action potentially raises numerous issues relevant to the administration of Elementree, the operation of s 445D and the validity of the charges that Mr Fakhre first relied upon to appoint administrators. Given the existence of all these potential issues, the administrators are, very appropriately, defendant parties in their own right. If they were invalidly appointed, they will be trespassers and are personally exposed accordingly. They will probably be indemnified by their appointor. But they clearly must be parties in their own right. From that clear position arguments seemed to proceed on the basis that Elementree should have been joined in the first instance by the plaintiff as an extra defendant. But the obvious answer to that is that Elementree could not have been joined without obtaining leave given under s 440D, on the administration commencing, and then under s 444E(3), after the DOCA was entered. An application for joinder of Elementree by the defendants proceeded by reference to RSC O 18, on papers filed by them, rather than by reference to seeking to show any basis for a grant of leave under s 444E(3). I assessed the joinder arguments of the defendants to unfold in ad hoc fashion. In the end, I was uncertain whether the defendants' submission was that a joinder of Elementree as a defendant party was still being sought by the applicant, or whether the applicant was now arguing that the plaintiff should be required to effect that result. In any event, it seems of small consequence now. As I see it, the defendants, as proper contradictors and the persons who will most likely be speaking on behalf of Elementree in the action, were it joined by a grant of leave, are present and are active participants in this action. The joinder arguments, in my assessment, are a conceptual diversion. They consumed too much time, I think, because of the defendants' view that if Elementree was joined, an infringement of the loyalty principle would present, almost axiomatically. For the defendants, this would follow because Elementree had once had Bennett & Co acting for it in the first action, but now has Bennett & Co acting against it in the second action. Therefore, the defendants would say, the loyalty principle is clearly infringed and the court should now act of its own volition to remove the conflict by granting an injunction to that end against Mr Hayes. That reasoning is far too simplistic for my liking. To properly assess whether or not the loyalty principle has or will be infringed, it is necessary to conduct a closer analysis of the content and issues presenting in the first and second actions.