HU & QIAN

[2015] FCCA 412

FEDERAL CIRCUIT COURT OF AUSTRALIA

HU & QIAN [2015] FCCA 412

Catchwords:
FAMILY LAW − Whether solicitor should be restrained from continuing to act for party − whether solicitors conduct in applying for registrar’s signature on contract breached solicitor’s duty to court   ̶  whether a fair-minded reasonably informed member of the public would conclude legal practitioner should be prevented from acting.

Legislation:  
Family Law Act 1975 (Cth), ss.106A, 75(2)(o)

Federal Circuit Court Rules 2001 (Cth), r.15.28(1)

Kallinicos & Hunt (2005) 65 NSWR 561
Pencious & Pencious (2012) FamCA 74

Applicant: MS HU

Respondent: MR QIAN

File Number: DGC 1533 of 2013

Judgment of: Judge Phipps

Hearing date: 13 February 2015

Date of Last Submission: 13 February 2015

Delivered at: Dandenong

Delivered on: 13 February 2015

REPRESENTATION

Counsel for the Applicant: Mr Nicholson

Solicitors for the Applicant: Anna Chen & Associates

Counsel for the Respondent: Mr King

Solicitors for the Respondent: Belleli King

Counsel for the Second Respondent: Mr Moisides

Solicitors for the Second Respondent: Belleli King

ORDERS

1. THAT the application in a case filed 29 October 2014 and amended application in a case filed 15 January 2015 are dismissed.

2. THAT the husband pay the wife’s costs fixed at $3,292.00 and the costs of Belleli King & Associates fixed at $7,625.00.

IT IS NOTED that publication of this judgment under the pseudonym Hu & Qian is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA

AT DANDENONG

DGC 1533 of 2013

MS HU

Applicant

And

MR QIAN

Respondent

REASONS FOR JUDGMENT

1. The husband applies for an order that the wife’s solicitors be restrained from acting on her behalf on these proceedings.  The application in the case also applies for discovery orders. 

2. The discovery order can be dealt with shortly.  The amended application in a case applies for orders that the wife produce to the respondent’s solicitor the following documents:

   a)bank statements for the payments received by the applicant wife from the Social Security Centre, (omitted) China, including pensions for the last three years;

   b)records and documents in relation to purchase of shares in (omitted).

3. Both parties have filed extensive affidavits.  The wife, in her affidavit of 14 January 2015 says she has provided the Social Security Centre documents and that in a previous affidavit she has deposed to purchasing shares in the company (omitted) and in an affidavit she gives full details concerning the transfer of shares into and out of her name.  Whether the wife has complied with her obligation for discovery is a matter to be decided at the trial of this proceeding and not by an order for further discovery.

4. The application for disqualification of the solicitors arises out the events surrounding the sale in August 2014 of a warehouse at Property B, registered in the names of both parties.  The warehouse was one of two parcels of real estate owned by the parties, the other being the former matrimonial home at Property O.

5. The property was put to auction on 22 August 2014, passed in at the auction and then sold after the auction on the same day.  The selling agent was retained only by the wife.  The contract of sale was signed by the wife on 22 August 2014.  The husband did not sign and on 28 or 29 August 2014, Registrar Riddiford signed on the husband’s behalf pursuant to an order under s.106A of the Family Law Act 1975 (Cth).

6. The issue is whether the solicitor, both the firm and the individual solicitor, should be disqualified.  The issue is not whether the Registrar’s decision to sign the contract was wrong or whether the solicitor having conduct of the proceedings on behalf of the wife breached any duty or can otherwise be criticised or whether the solicitor is a potential witness.  Those are matters of relevance to the ultimate decision but the ultimate decision is whether the solicitor should be disqualified.

7. The application is made on two grounds:

   a)the solicitors conduct in applying for the Registrar to sign the contract.  The solicitor affirmed an affidavit on 26 August 2014.  The husband’s argument is that the solicitor failed to disclose relevant matters to the Registrar; and

   b)the solicitor is a potential witness and so should not continue to act for the wife.

8. So far as the signature by the Registrar is concerned, the husband’s argument is that the sale of 22 August 2014 was not authorised by orders of the court and the wife could not undertake it unilaterally.

9. He then argues that the Registrar could not sign an order for the sale of the warehouse since the only relevant order authorised the Registrar to sign only in respect of the former matrimonial home.

10. I do not need to decide either of these points.  Implicit in the Registrar’s decision to sign the contract are findings that the sale was an authorised one and that the signature by the Registrar was authorised by an order of the court.  Both these findings were open to the Registrar.

11. On 25 July 2013, certain orders were made by consent.  These included:

    that each of the husband and wife do all acts and things necessary to forthwith sell the real property situated and known as Property B, (the warehouse)

    that for the purpose of the sale of (the warehouse) and each of the parties within 14 days nominate and agree in writing as to a selling agent, the terms and conditions of sale and the selling price.

12. Paragraph 3 then provided for application of the proceeds, which included outstanding school fees for the parties’ child, discharge of a mortgage to the (omitted) Bank, $100,000 to each party by way of partial settlement and the balance to be held in trust by the wife’s solicitors.

13. An order on 25 October 2013 provided for a conciliation conference final hearing and another directions hearing.  Paragraph 6 of the order provides;

    That unless the selling agent terms and conditions of the sale and selling price, for the purpose of paragraph 2, of the consent order made 25 July 2013 are agreed by 4 pm on 7 November 2013, the property at Property B be sold by an agent nominated by the President of the Real Estate Institute of Victoria for the time being or his/her nominee and the selling price decided by the agent nominated.

14. On 2 April 2014, the final hearing not having proceeded, the application was again fixed for final hearing.  The court ordered that the property, Property B be sold in a manner as if paragraphs 1, 2 and 3 of the order made on 25 July 2013 are repeated here seriatim.

15. The order or 25 July 2013, repeated by paragraph 2 of the order of 2 April 2014, required each party to do all acts and things necessary to sell the warehouse.  Paragraph 2 required the parties to confer within 14 days and agree as to agent terms and conditions and on a selling price.  A possible interpretation is that paragraph 1 is not dependent on the parties agreeing pursuant to paragraph 2, so that if the parties cannot agree, paragraph 1 still required each of them to all do acts and things necessary to sell the warehouse.

16. Under this interpretation, each could act unilaterally, retain an estate agent and put the property to auction or private sale.  Signing of both would be needed for a contract and other documents but that would be a separate issue.

17. Paragraph 6 of the order or 25 October 2013 required the property be sold by an agent appointed by the President of the Real Estate Institute of Victoria unless the parties had agreed upon an agent by the required date.  The husband argues that this order was still in force in August 2014.  A possible interpretation of the order of 2 April 2014 is that since this paragraph 6 was not referred to, it no longer applied.

18. On 12 May 2014, the husband signed an exclusive sale authority for the warehouse to (omitted) Real Estate.  On 27 June 2014, the wife signed an exclusive sale authority to (omitted) Real Estate.  The husband’s solicitor was informed of this by letter from the wife’s solicitor dated 30 June 2014.

19. On 25 July 2014, the wife’s solicitors again wrote to the husband’s solicitors advising that in the absence of hearing from their client, the wife had authorised the warehouse to be sold at auction through her appointed agent, (omitted) Real Estate and enclosing an advertisement for the auction.  The pamphlet gives the date and time of the auction as 22 August at 1.00pm on site.

20. On 20 June 2014, the parties agreed on consent orders that order 5 of the orders of 2 April 2014 and order 3 of the orders of 25 July 2014 be varied to be provided for the proceeds of sale of the warehouse with a variation from the earlier orders for the disbursement of the proceeds.

21. Paragraphs 2 and 3 of that order provided:

    2.   If by 19 September 2014 or such earlier date, as directed by the bank or otherwise agreed to between the parties in writing the sale of the warehouse has not been completed, the parties do all acts and things necessary to forthwith sell the former family home situated at Property O.

    3.  The former family home be marketed for sale at an asking price of $1,050,000 unless otherwise agreed between the parties.

22. Paragraph 4 provided for the proceeds of sale of the warehouse but the parties must have intended paragraph 4 to apply to the proceeds of sale of the former matrimonial home otherwise the order does not make sense

23. Paragraph 7 provides:

    In the event that either party refuses or neglects to execute a deed and/or instrument in compliance with any provisions of this order the Registrar of the Federal Circuit Court of Australia at Dandenong is hereby appointed pursuant to section 106A of the Family Law Act 1975 to execute all deeds and instruments in the name of that party and all acts and things to give validity and operation to the deeds and/or instruments upon first being satisfied by affidavit by the party attesting to such non-compliance by the other party.

24. On 20 August 2014, the husband’s solicitors wrote to the wife’s solicitors stating that paragraph 6 of the order of 25 October 2013 stated that the President of the Real Estate Institute of Victoria should nominate an agent and that the husband objected to and did not consent to (omitted) Real Estate being appointed as selling agents.

25. On the same day, the wife’s solicitors replied that (omitted) Real Estate would be conducting an auction on 22 August 2014.  On 21 August 2014, the husband’s solicitor  repeated that the husband had not agreed to (omitted) Real Estate as a selling agent.

26. The auction on 22 August 2014 proceeded.  The wife attended with her solicitor.  The husband was not present.  There was an altercation.  The wife’s solicitor, in her affidavit, asserting that the husband had been obstructive.  The wife and purchaser signed a contract of sale after the auction.  On the same day the wife’s solicitors wrote to the husband’s solicitor describing what had occurred on that day, referred to the earlier unsuccessful auction and stated that it appeared to be in the best interests of both parties for the warehouse to be sold.

27. The letter concluded with this statement:

    We put you on notice that should we be required to make an application to the court to have a Registrar sign on behalf of your client, we will produce this letter on the question of costs.

28. In signing the contract of sale the Registrar acted under paragraph 7 of the order of 20 June 2014.  The husband’s argument is that it only authorised signature of the contractor’s sale of the former matrimonial home and so not the warehouse.

29. Since paragraph 1 of the order of 20 June 2014 varies the disbursement provision for the warehouse proceeds in paragraph 3 of the order of 2 April 2014 and paragraph 5 of that order of 25 July 2013, paragraph 1 of the order of 25 July 2013, must remain in force.  This is the paragraph that requires the parties to do all acts and things necessary to sell the warehouse.

30. The preferred option under the order of 20 June 2014 is sale of the warehouse.  That is apparent from the terms of the order.  Sale of the warehouse required the signature of the husband on the contract, one of all acts and things necessary to forthwith sell the warehouse.

31. The Registrar was entitled to conclude that refusal or neglect by the husband to execute a contract of sale of the warehouse was a refusal or neglect to execute an instrument in compliance with the provisions of the order of 20 June 2014.

32. I do not need to decide whether the Registrar was correct or otherwise.  I consider it sufficient to say that that was an interpretation open to him.

33. Following the appointment of (omitted) Real Estate as agent by the husband to sell the house, the wife’s solicitor spoke to and wrote to Mr G of that firm informing of the wife’s appointment of solicitors. 

34. The wife’s solicitor wrote to Mr G on 20 June 2014 confirming that in the telephone conversation she had said that the court orders required joint appointment of an agent for the purpose of selling the warehouse and in the absence of agreement each party might appoint their own agent.

35. She then stated that (omitted) Real Estate continue to have authority to market the property until such time as agreement is reached between the parties as to a joint agreement.

36. Thus it is that in May and June 2014, each party considered that they were entitled to appoint an agent to sell the warehouse because each party did.  Earlier in 2014 there had been an auction conducted in conjunction by two agents, each appointment by one of the parties.

37. Quite apart from the arguments about the proper interpretation of the various orders that provide for sale of the warehouse, there seems to be an argument that by conduct the parties have an implied agreement that each could do this.  This may well be an argument for the final hearing and I need say no more about it here.

38. On 26 August 2014, Mr G contacted the wife’s solicitor and advised he had had an oral offer of $615,000.  On 27 August 2014, the wife’s solicitors emailed Mr G stating:

    Given the costs involved and the effort gone to by our client’s agent, (omitted) Real Estate, our client will only agree to a sale to your purchaser on the following considerations.  Your commission on $615,000 is paid to you.  (omitted) Real Estate commission on $560,000 is paid to them.  Advertising costs to be paid to the respective agents.  The contract is not subject to finance.  Settlement is not more than 120 days.  A full contract of sale is to be executed by close of business today.

39. The email concludes:

    If you and your purchaser are agreeable, please provide a signed copy of the executed heads of agreement in the above terms by 2 pm today and execute an unconditional contract of sale by close of business today.

40. The husband alleges that prior to 2.00pm Mr G emailed the wife’s solicitors with the signed heads of agreement and a copy of a paid deposit cheque.  The heads of agreement said that the agreement is subject to the purchaser obtaining finance from a lending institution of the purchaser’s choice within seven days of the date of agreement.

41. On 29 August 2014 Mr G emailed the wife’s solicitors with a copy of his purchaser’s email which said that the purchaser agreed to sign an unconditional contract, either that day or first thing next week.

42. The wife’s solicitors, on the wife’s behalf, made application to the Registrar for his signature by affidavit affirmed on 26 August 2014 and filed on 27 August 2014.  This was not served on the husband prior to being filed and so put before the Registrar.  Paragraph 7 of the order of 20 June 2014 provided for this process and it is normal practice.  The husband argues that the wife’s solicitors breached their duty to the court by not disclosing material matters.

43. The wife’s solicitor’s affidavit of 26 June 2014 states that pursuant to paragraph 5 of the orders dated 2 April 2014, the warehouse is to be sold according to paragraphs 1, 2 and 3 of the orders dated 25 July 2014.  The order is, in fact, the order of 25 July 2013 but this would be apparent to the Registrar.

44. One of the allegations of non-disclosure is that the affidavit does not refer to the order of 25 October 2013 which says that in default of agreement the sale would be by an agent nominated by the President of the Real Estate Institute of Victoria.  The Registrar’s attention was obviously drawn to the provisions of the order of 20 June 2014.

45. The wife’s solicitor’s affidavit did not refer to the advice from Mr G that he had found a purchaser at a higher price, heads of agreement or the cheque for a deposit.

46. Kallinicos & Hunt (2005) 65 NSWR 561, sets out three grounds for injunction restraining a solicitor from acting:

    a)A breach of confidence arising from the law of contract and equity;

    b)Breach of the solicitor’s duties in accordance with equitable principles;

    c)It is necessary for the exercise of justice in a superior court’s inherent supervisory jurisdiction over its officers.

47. Brereton J said, at [76]:

    The court always has inherent jurisdiction to restrain solicitors from acting in a particular case as an incident of its inherent jurisdiction over it’s officers and to control its process in aid of the administration of justice.  The test is to be applied in this inherent jurisdictions 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.

48. The husband argues that the wife’s solicitor breached her duty to the court by omission from her affidavit of 26 August 2014 applying to the Registrar for signature of the contact.  The husband’s written submission referred to cases which outline this duty.

49. For the purpose of this case, the statement of duty can be put as not to mislead the court by omission where there is an ex parte application.  The omissions are alleged to be:

    a)Failure to draw the Registrar’s attention to the order of 25 November 2013 which made provision for a  nomination of an agent by the President of the Real Estate Institute of Victoria.

    b)Failure to draw the Registrar’s attention to the husband’s solicitor’s letter of 23 August 2014 where the husband’s solicitors dispute the appointment of the agent, particularly by reference to the order of 25 October 2013.

    c)Failure to draw the Registrar’s attention to the notification by Mr G that he had a purchaser at a higher value, the heads of agreement and the deposit cheque.

50. The husband’s solicitor’ letter of 20 August 2014 says that at no time since orders made on April 2014 did he consent to the agents currently used and refers to order 6 of the 25 October order which has the President of the Real Estate Institute of Victoria provision.

51. The letter states that the client has no faith in (omitted) Real Estate and says that at court on 2 April 2014 they were informed that there were two offers of $650,000 for the warehouse.  The letter states that they were agreeable to that price and were not given formal offers in relation to it.

52. The letter in reply, which is annexed to the wife’s solicitor’s commences:

    We refer to your letter of even date.

    And then says:

    With respect the October orders are no longer relevant to the sale of the warehouse.

53. It then refers to paragraph 5 of the orders dated 2 April 2014 which provide that the warehouse is to be sold according to paragraphs 1, 2 and 3 of the orders dated 25 July 2013.

54. Submissions on behalf of the husband put it that the wife’s solicitor’s letter of 20 August 2014, annexure Q4 to the wife’s solicitor’s affidavit, was not before the Registrar because it is an annexure to an affidavit. I do not understand the submission. The document was properly before the Registrar pursuant to Rule 15.28(1) of the Federal Circuit Court Rules 2001 (Cth) which provides;

    A document to be used in conjunction with an affidavit must be annexed to the affidavit.

1. It may have been better if the wife’s solicitor’s affidavit did contain all the correspondence.  However, the wife’s solicitor’s letter of 20 August 2014 draws the Registrar’s attention to the October orders and that there is a dispute about their applicability.

2. The letter also draws the Registrar’s attention to the lack of confidence in the agent appointed by the wife.  Consequently, the wife’s solicitors, through the annexing of this letter, drew the Registrar’s attention to the fact that there was a dispute about the validity of the sale and the circumstances in which it was conducted.

3. The wife’s solicitor’s affidavit did not draw the Registrar’s attention to the purchaser found by Mr G and the heads of agreement.  It may have been better if it had.  If the Registrar had all the correspondence and all the information, the Registrar may have referred the application for signature to me as the docket judge.  Whether that would have happened is not the ultimate issue nor is the issue whether the wife’s solicitor breached her duty to the court.

4. The issue is whether the wife’s solicitor should be disqualified from continuing to act for her.  The test is that set out by Brereton J in Kallinicos & Hunt (2005) 65 NSWR 561; 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.

5. The question is not whether the wife’s solicitor has a conflict of interest.  The conflict of interest test is similar to that set out by Brereton J; that is what a fair-minded reasonably informed member of the public might conclude.

6. The wife’s solicitor has not obtained any confidential information of or concerning the husband.  There is no doubt that the husband dislikes her or is even antagonistic towards her.  That is common in family law proceedings and is no reason for disqualifying a solicitor.

7. The wife’s solicitor was acting as the solicitor for the vendors in the sale by (omitted) Real Estate.  This, undoubtedly, gave her a duty to act in the best interests of both vendors, even though one might have been an unwilling vendor.  When the agreed facts are looked at it cannot be said that she breached the duty.

8. Both parties agree that the warehouse needed to be sold.  Both had appointed agents.  Both had agreed, because it is contained in the consent order, that the sale, if there should be one, needed to have a settlement date by 19 September 2014.

9. If there had not been the prospect of a purchaser at a higher price, there could be no criticism of the wife’s solicitor’s actions in acting as solicitor for the vendors.  The parties were agreed that the warehouse needed to be sold.  The property was put to a public auction and was sold.

10. If there was a full examination of the wife’s solicitor’s actions in acting a solicitor for the vendor, the conclusion might be that she had acted properly, even if there was evidence that the prospective purchaser at a higher price were genuine and could have completed the sale.

11. The conclusion could be that the wife’s solicitor was right to conclude that the vendors’ interests were best served by pursuing the completion of an unconditional contract signed by the purchaser rather than wait to see what might happen with the prospective purchaser.  Without the vendor’s signature on the contract signed on the day of the auction, the purchaser under that contract might have withdrawn and the vendors might be left without a purchaser.

12. In Pencious & Pencious (2012) FamCA 74 this is said:

    The independent observer must also understand that while a court expects a high standard of legal practitioners, the removal of that practitioner should not occur simply because of negligence, error or mistake but rather where there is evidence of a calculated or conscious breach of standards which has the effect of a denial of justice to another party.  That same observer must also be able to put into the context of highly conflictual proceedings all of the facts which I have considered enabling a judgment to be formed as to what happened here.

13. If there has been a breach of standards by the wife’s solicitor, it is not such that a fair-minded observer would conclude that the solicitor should be restrained from acting further.

14. The worst thing that has happened to the husband is that the property has been sold for $55,000 less than it might have been.  Both parties agreed that the property should be sold.  Consent orders provided for the sale.  The wife’s solicitors were acting on the instructions of the wife.  The value of the property pool is far in excess of $55,000, ample to compensate the husband if he has suffered a loss.

15. The other ground for applying for the disqualification of the wife’s solicitor is that she is a potential witness in the proceeding.  The wife has a family violence intervention order in her favour against the husband.  I was informed that arising out of the events surrounding the auction, the husband has been charged with breach of the intervention order, a criminal charge.  The wife’s solicitor is a witness or at least a potential witness.  That is not this proceeding and the fact that she may be a witness against the husband’s interest in another proceeding is not grounds for disqualifying her here.

16. Counsel for the husband said that application may be made to join the wife’s solicitors as parties to the proceedings.  That application has not been made and that will not necessarily succeed.  I do not consider I have to consider that as a ground for disqualifying the wife’s solicitors when they are not parties to the proceeding.

17. The husband’s submissions assert that the wife’s solicitor is a potential witness.  I do not see that that is necessarily so.  The husband can pursue a claim that there should be an adjustment against the wife in these property proceedings, It could be taken into account under s.75(2)(o) of the Family Law Act 1975 (Cth) as “any fact or circumstance, which in the opinion of the court the justice of the case requires to be taken into account”.  His claim will be that the property should have been sold for an additional $55,000.

18. The wife’s solicitor’s involvement is clear.  She corresponded with the husband’s solicitor and the agent appointed by the husband.  There is a factual dispute about a conversation between the wife’s solicitor and the husband’s agent; that is whether the husband’s agent said he would cease advertising.  I do not see the relevance of that to the husband’s claim for a loss.  There is no issue that the conversation took place and that the wife’s solicitor told the husband’s agent that the wife had already appointed an agent.

19. There is no dispute that the auction took place, that the wife’s solicitor attended and that a purchaser signed a contract of sale.  The wife’s solicitor’s affidavit alleges certain behaviour by the husband but I do not see how behaviour by the husband is relevant.  The dispute is not about what happened at the auction.  The only relevant fact is that after the auction the contract was signed.

20. There is no dispute about the notification to the wife and the wife’s solicitor of the prospective sale for $615,000 and the correspondence relating to it.  There is no dispute that the wife’s solicitor applied to the Registrar and that the Registrar signed the contact of sale.

21. The factual dispute which might arise is whether the prospective purchasers for $615,000 were genuine and had the ability to complete the contract.  That does not involve the wife’s solicitors.  The wife’s solicitor’s conduct is known.

22. The husband’s submission says that instructions the wife gave to her solicitor are relevant and submitted the wife had waived privilege. From the material I have seen there is no issue about whether the wife’s solicitor was acting on the wife’s instructions. The wife’s solicitor was. Thus, if the husband can establish that the wife’s solicitor’s conduct entitles him to some financial benefit then the wife is responsible for her solicitor’s conduct. Issues about the wife’s solicitor’s conduct will be a matter of submission. Evidence by the wife’s solicitor will not be necessary.

23. There are no grounds for restraining the wife’s solicitor from continuing to act.  The application is dismissed.

24. The order is that the application in a case filed 29 October 2014 and amended application in a case filed 15 January 2015 are dismissed. And order that the husband pay the wife’s costs fixed at $3,292 and the costs of Belleli King & Associates fixed at $7,625.

25. The reasons for the costs orders are these.  The husband has been wholly unsuccessful in the application.  There is a substantial amount of money available to each party once this case is finally resolved.  It is well in excess of a million dollars.  The husband’s income is not clear.  The wife is relying on Social Security payments so in those circumstances it is appropriate to make costs orders.

I certify that the preceding seventy nine (79) paragraphs are a true copy of the reasons for judgment of Judge Phipps

Associate: 

Date:  3 March 2015