Kyriackou v Edwards (ruling on trial by jury)

[2014] VSC 201

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

S CI 2010 06788

MICHAEL ANTONIO KYRIACKOU & ORS	Plaintiffs
v
WALTER PERCIVAL EDWARDS	Defendant

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JUDGE:	MACAULAY J
WHERE HELD:	Melbourne
DATE OF HEARING:	7 May 2014
DATE OF RULING:	9 May 2014
CASE MAY BE CITED AS:	Kyriackou & Ors v Edwards (ruling on trial by jury)
MEDIUM NEUTRAL CITATION:	[2014] VSC 201

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PROCEDURE – Trial by jury or by judge sitting without a jury – Supreme Court (General Civil Procedure) Rules 2005 r 47.02 – Professional liability claim against a solicitor founded on breach of retainer, duty of care and breach of fiduciary duties – Whether breach of duty caused the Australian Securities & Investment Commission to commence proceedings alleging plaintiffs were conducting an unregistered managed investment scheme – Complexity of fact and legal issues – Order directing trial without a jury.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	A Schlicht	John Yianoulatos
For the Defendant	Dr A Hanak	Colin Biggers & Paisley

HIS HONOUR:

Introduction

1. The plaintiffs, Michael Kyriackou and two companies, Australvic Home Loans Pty Ltd and Australvic Finance Pty Ltd, have sued the defendant, Walter Edwards, for damages alleging that Edwards breached various professional duties owed to them as their solicitor.

1. When filing the writ the plaintiffs nominated the mode of trial to be trial before a jury. The trial of the matter is now imminent. The defendant has applied pursuant to Rule 47.02(3) of the Supreme Court (General Civil Procedure) Rules2005 to have the action tried without a jury.  That application is opposed by the plaintiffs. 

1. Rule 47.02 provides that a proceeding commenced by writ and founded upon contract or tort shall be tried with a jury if the plaintiff signifies in the writ that the plaintiff desires to have the proceeding so tried.  However, the court may direct trial without a jury ‘if in its opinion the proceeding should not be in all the circumstances tried before a jury’. 

1. The principles relevant to an application under r 47.02 concerning the mode of trial were conveniently set out by J Forrest J in Matthews v SPI Electricity (Ruling No 8.)[1].  Those principles are as follows:

   [1](2012) 35 VR 643, 653-654, repeating, in substance, what his Honour had previously set out in Birti v SPI Electricity Pty Ltd [2011] VSC 566 and before that in Gunns Limited v Marr (No 5) [2009] VSC 284, cited with approval by Beach J in French v Herald & Weekly Times Pty Ltd (2010) 27 VR 140.

(a)subject to compliance with the rules of the court, a party is entitled to seek trial by jury provided the claim is founded in contract or in tort;

(b)for that entitlement to be enlivened, it is necessary for the party seeking trial by jury to comply with the procedural requirements of r 47.02(1)(a) and (b); otherwise the trial will be before a judge sitting alone (absent an order of the court to the contrary). Part 6 of the Juries Act provides the statutory basis for the conduct of the trial by jury;

(c)where a party has given notice regularly that a trial by jury is required, that will be the prescribed mode of trial unless the court is persuaded to dispense with the jury;

(d)notwithstanding the right of a party to opt for a jury trial, there resides in the court an overriding discretion to determine the mode of trial, regardless of the wishes of the parties;

(e)a court may at any stage of a proceeding direct a trial without a jury if it is satisfied that it should do so;

(f)as a general rule in this State (where civil juries are still the norm in tortious injury and defamation litigation), juries should be regarded as capable of dealing with issues of legal complexity as well as difficult issues of fact;

(g)the onus of proof in persuading a court to dispense with a jury trial rests upon the party making that application. A court will not lightly make such an order, given the entitlement of the other party to seek trial by jury. There must be some special reason to do so or, to put it another way, a party should not be deprived of such an entitlement in the absence of good cause;

(h)even if it is established that there will be a substantial saving in time and cost in a trial by judge alone that is not necessarily sufficient to deprive a party of its prima facie entitlement to trial by jury. Notwithstanding that trial by judge alone may take less time, there are countervailing advantages in a trial by jury such as the promotion of settlement and finality and, in some cases, savings of court time;

(i)the considerations which may influence a court to dispense with a jury trial are unfettered; the discretion may be exercised where it is warranted by the dictates of justice;

(j)subject to the statement of general principle set out in (i), in determining whether to accede to an application to dispense with the jury, the following matters may be relevant:

•the complexity of the factual matters that the jury will need to consider;

•the complexity of the legal issues relating to liability, particularly where the claim involves consideration of multiple causes of action and multiple defendants;

•the complexity of the jury’s task in relation to the assessment of damages;

•the potential duration of the trial (although this, of itself, could never be the determining factor); and

•the stage at which the proceeding or trial has reached; and

(k)a decision as to the mode of trial (by a judge alone or by jury) cannot of itself amount to a miscarriage of justice as whichever form is a trial according to law.

1. Counsel for Edwards, Dr Hanak, relied upon the following factors in this application:

·The complexity of the factual matters that the jury will need to consider.

·The complexity of the legal issues relating to liability.

·The complexity of the task in relation to the assessment of damages.  

·The fact that the trial has not yet proceeded but has reached the point where the issues and the evidence are readily ascertainable.

1. It is not disputed that now is the appropriate time to consider the issue in view of the stage that has been reached.

Nature of claim and issues

1. In 2007 the Australian Securities & Investments Commission (ASIC) issued proceedings against Kyriackou and various companies in what had been described as the ‘Australvic Group’.  ASIC alleged various contraventions of the Corporations Act 2001 (Cth), including that:

(a)Kyriackou and the Australvic Group had been operating an unregistered managed investments scheme;

(b)the Australvic Group had been trading whilst insolvent;

(c)the Australvic Group had not been keeping proper books and records;  and

(d)Kyriackou had diverted scheme funds to his own personal use.

1. The two corporate plaintiffs in this proceeding were members of the Australvic Group and were respondents to the ASIC proceedings.  Ultimately, the ASIC proceedings were discontinued by consent.  The respondents to that proceeding sought their costs against ASIC but Goldberg J ordered that each party bear its own costs. 

1. In this proceeding allegations are made against Edwards based on alleged breaches of retainer and various duties owed by him as a solicitor.  The plaintiffs allege they retained Edwards to provide legal advice to them about whether a proposed joint venture, to which they were each to provide financial services, complied with applicable legislation.  The joint venture was to be between a developer (Rocco Calderone) and Australvic Property Management Pty Ltd (APM) — not one of the plaintiff companies but another company within the ‘group’.  Edwards was a director of APM between 1 June 2005 and 23 January 2007 except for a period of about 12 days in September 2006. 

1. Edwards denies he was retained by the plaintiffs or that he provided them with legal advice.  He admits providing limited advice to APM as to one aspect of the deeds entered into between financiers and APM (the Deed).

1. The plaintiffs allege that Edwards breached his retainer and duty of care by:

(a)preparing the Deed and allowing the plaintiffs to put the joint venture into effect without ensuring the arrangement complied with the provisions of the Corporations Act relating to managed investment schemes;

(b)permitting Kyriackou to sign the Deed as a director of APM when he was not a director and when Edwards was the sole director; and

(c)informing ASIC that Kyriackou was the ‘controlling mind’ of the joint venture in circumstances where APM was a joint venture party but Kyriackou was not a director of APM, Edwards was its sole director and Kyriackou’s role was limited to sourcing finance. (Some of that information, apparently, was given by Edwards by answering questions asked of him in an examination conducted by ASIC pursuant to s 19 of the ASIC Act 2001 (Cth).)

1. The plaintiffs also allege Edwards breached fiduciary duties owed to them in that he allegedly:

(a)provided to ASIC a copy of a letter containing confidential legal advice to the plaintiffs when they had not waived privilege;  and

(b)gave to ASIC other confidential information that was subject to legal professional privilege that was not waived by the plaintiffs.

1. Further, the plaintiffs also allege breach of retainer, duty of care and fiduciary duty in that Edwards informed ASIC that Kyriackou was the controlling mind of the joint venture when in fact Edwards himself was in control of it.  Edwards denies that he was in control of the joint venture.

1. The losses which the plaintiffs claim as a result of Edwards’ alleged breaches of retainer, duty of care and fiduciary duty comprise the legal costs and expenses incurred by them in defending a number of legal proceedings.  The first of those is the ASIC proceeding I have already mentioned.  The second was a proceeding brought against APM by Xat Ky, an investor in the joint venture.  The third is another Federal Court matter called Kyriackou & Others v ASIC, a proceeding that I understand was brought to restrain ASIC taking certain steps. 

1. Those legal costs and expenses were substantial:  more than $1,130,000 across the three proceedings.  Also claimed is interest on monies borrowed to fund the proceedings, and an indemnity for costs orders made against the plaintiffs in the various proceedings. 

1. By his defence Edwards puts in issue many of the factual allegations. 

1. He denies he was the controlling or directing mind of APM and says, rather, that Kyriackou was.  The relevance of the allegations concerning who was the ‘controlling mind’ and that Edwards told ASIC that it was Kyriackou, is said to reside in the causal connection between Edwards’ breach and the incurring of the legal costs (ie the losses).  That is, the plaintiffs’ case is that the information given by Edwards to ASIC on that subject, in alleged breach of his various duties, is what caused ASIC to instigate the proceedings against them, particularly against Kyriackou himself, and so cause the losses to be incurred.

1. What is in issue on that general topic includes:

·whether it was true to say that Kyriackou was the controlling or directing mind of the various companies or joint venture;

·what information was given by Edwards to ASIC about that situation;

·whether doing so breached a contractual duty, a tortious duty, or a fiduciary duty arising from the concepts of legal professional privilege and/or a solicitor’s duty of loyalty to a client;

·the intersection between those duties and the obligations of a solicitor to answer accurately questions asked of him under a compulsory examination conducted pursuant to s 19 of the ASIC Act;  and

·what bearing that information, if in fact given, had on ASIC’s decision to commence proceedings when other information was, allegedly, also given by other complainants concerning the plaintiffs’ conduct of the joint venture. 

1. Edwards further alleges that any loss suffered by the plaintiffs was caused by their own actions.  That is, he alleges that the reason the ASIC proceeding was instituted was because ASIC suspected Kyriackou and the companies which he controlled operated an unregistered managed investment scheme and that the companies were trading whilst insolvent and had not kept proper books and records.  It also suspected, Edwards alleges, that Kyriackou diverted funds that were part of the scheme for his own use.  Those assertions are in issue.

1. Dr Hanak argued that the factual issues thrown up by the pleadings are in themselves complex.  Perhaps more significantly, he argued that the legal context in which those factual disputes have to be resolved will necessitate an understanding of — and therefore directions to the jury about — the following legal issues:

(a)The law of confidentiality.

(b)The law of legal professional privilege.

(c)An explanation of a managed investment scheme in corporations law and the regulatory environment surrounding it.

(d)The legal content of the notion of a ‘controlling mind’ of a corporation.

(e)The different principles concerning, on the one hand, causation and assessment of damage or compensation on common law principles and, on the other hand, equitable principles (ie, in relation to the breach of fiduciary duty).

1. Dr Hanak argued that the combination of these legal and factual complexities renders this proceeding unsuitable for trial before a jury and far more suited to trial before a judge alone. 

1. In essence, Mr Schlicht, who appeared for the plaintiffs argued that the complexities asserted by the defendant will evaporate once the simplicity of the factual issues become apparent. Mr Schlicht contended that the factual issues concerning whether or not Edwards did disclose confidential or privileged information to ASIC is a simple one. He submitted that disclosure will be proved by the documents which Edwards sent to ASIC and the content of the answers he gave in an examination conducted under s 19 of the ASIC Act. 

1. Likewise he argued that the question of whether or not Edwards was the one who caused the instigation of the ASIC action will be easily demonstrated by proving that he was the one who informed ASIC of his belief that Kyriackou was conducting a managed investment scheme, and that he arranged others to also complain.

1. Mr Schlicht did not disagree that the trial judge will need to explain to the jury the various legal issues and concepts that I have described but submitted that the content of that explanation will be relatively simple given that the dispute is so readily resolvable on a factual basis. 

Proposed evidence

1. Both parties have been required to provide outlines of evidence of the witnesses they propose to call.  The plaintiffs have provided a list of 21 witnesses it proposes to call.  The first is Kyriackou himself.  A somewhat detailed outline of evidence has been provided in respect of Kyriackou.  Short, point‑form outlines are provided in relation to about 12 other witnesses, and the rest are said to be on subpoena so that outlines cannot be given.  Alternatively, they are to give evidence in accordance with (currently unidentified aspects of) particular reports or affidavits they provided in other circumstances. 

1. The defendant has filed five more detailed outlines of evidence.  I was informed that  there are another three to come.  In total, there are about 30 witnesses.  Mr Schlicht was quick to point out that, in his view, half of them will be ‘very short’.  That is not  because they will be giving ‘formal’ evidence only but, rather, because they will be giving evidence of their contact with Edwards over joint venture matters which, according to Mr Schlicht, he will hardly be able to gainsay. 

1. A joint court book of 4 volumes containing nearly 1900 pages has been filed.  There is at least a risk further documents will be added because the plaintiff has issued a large number of subpoenae to produce documents, some of which are returnable at trial.

Analysis

1. Having regard to the nature of the proceeding, the factual and legal issues that are likely to arise, and the number of witnesses and the degree to which their evidence has been disclosed, I am persuaded that the defendant has discharged his onus to persuade me that this matter ought to be tried by judge alone. 

1. In my view there is ‘special reason’ or ‘good cause’ for so ordering, resulting from a combination of considerations.  Those considerations are as follows:

(a)The proceeding involves complex factual matters that the jury will need to consider.  They include, by way of particular example (but not limited to it), the extent to which the matters that Edwards allegedly disclosed to ASIC was the cause of the commencement of any or all of the three proceedings which gave rise to the legal costs claimed by way of damages.

(b)The complexity of the legal issues relating not only to liability but also the cause and assessment of damage.  By that I refer to the need to direct the jury on the full range of the legal matters I identified earlier and to relate those to the factual issues that have to be decided.  I enquired of the parties if either had considered what a list of questions to the jury at the end of the trial would look like.  Neither had apparently considered that issue.  In my view it would be a complex, extensive and inherently difficult list of questions for a jury to grapple with, covering the numerous factual issues to decide on the  multifarious legal bases upon which the plaintiffs put their claim.

(c)A large number of the witnesses to be called in this case are on subpoena by the plaintiffs and have evidently not provided to the plaintiffs an outline of their proposed evidence.  In my view, that circumstance is very likely to result in frequent objections to the admissibility of evidence and the consequent frequent need to send the jury out while legal argument proceeds.  I have observed enough of the nature of this litigation thus far to be concerned about this prospect as a very real likelihood.

(d)There are four volumes of court book which, apart from highlighting the likely factual complexity of this case, will have to be duplicated for each juror to enable them to follow the evidence and submissions (ie 24 volumes). 

(e) These last two factors in my view raise a serious concern about the relative cost which is likely to accompany this particular matter being tried by jury compared to it being tried before a judge alone, as well as a real risk there will be an unreasonable degree of inconvenience to jurors.  The plaintiffs estimate the case will run about three (perhaps a little more) sitting weeks if tried by a jury.  Edwards did not disagree but submitted that the time taken without a jury would be ‘significantly less’, without attempting to put a figure on it.  I think that is likely to be correct.  I have taken those concerns into account, in the mix of considerations, although none of them alone would necessarily warrant depriving the plaintiffs of a prima facie right to have their case heard by a jury.  Costs and time savings which are no greater than the inevitable consequence of trial before judge alone are not alone sufficient to warrant depriving a party of that prima facie right.[2] 

(f)Finally, in my view it is instructive to consider whether any other similar litigation has been tried by jury in this court in recent times.  No party volunteered an example, I cannot think of one and my enquiries have not unearthed an example outside of the traditional areas of personal injury, medical negligence and defamation.  At least it can be said such a case would be very unusual.  Again, whilst not determinative, this observation is consistent with my intuitive sense that this particular case is inherently better suited for determination by a judge who will start with a sophisticated understanding of the issues involved in a claim against a legal practitioner and many if not all of the legal issues that arise from the particular complaints made. 

[2]Trevor Roller Shutter Services Pty Ltd v Crowe [2011] VSCA 16, [43].

1. I was not comforted by Mr Schlicht’s argument that the degree of instruction that will need to be given to the jury on the range of legal matters identified by Dr Hanak (and not disputed by Mr Schlicht) will be low because the factual issues will become so obvious once the evidence is given.  To be confident, at this stage, that there will little need to charge on the identified legal issues because the facts will all fall the plaintiffs’ way involves, of course, a degree of prejudgment which the court cannot make. 

1. Otherwise, it is difficult to see why the extent of the instruction on the law necessary to give to the jury so that they understand their task in making findings will vary appreciably depending on whether the evidence looks (to the court) stronger for one side or the other.  The jury will still have to make its decision armed with a proper understanding of the applicable law.

Conclusion

1. For these reasons I will order that the proceeding be tried without a jury.