Lapham and Ferman
[2020] FCCA 1029
•4 May 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| LAPHAM & FERMAN | [2020] FCCA 1029 |
| Catchwords: FAMILY LAW – De facto property settlement proceedings between husband and wife – parties reach a settlement and prepare draft consent orders – in response to a demand, the husband makes payment of the agreed settlement sum to the wife’s solicitor’s trust account prior to the consent orders being approved by the court – wife’s solicitor then accesses some of those trust moneys to meet the wife’s unpaid legal fees – court later declines to make the orders and proceedings are instead set down for trial – husband demands return of the settlement sum and the wife and her solicitors refuse – husband makes a formal complaint about the conduct of the wife’s solicitor to the Legal Services Commissioner – parties each bring competing interim applications as to the use of the settlement sum remaining in trust – trial dates looming – husband now applies to restrain the wife’s solicitor from continuing to act for her – consideration of the court’s “inherent jurisdiction” to restrain a solicitor from continuing to act for a party including question of delay – application dismissed |
| Legislation: Family Law Act 1975 (Cth), pt.VIII |
| Cases cited: Stanford v Stanford (2012) FLC 93-518 |
| Applicant: | MR LAPHAM |
| Respondent: | MS FERMAN |
| File Number: | NCC 1719 of 2017 |
| Judgment of: | Judge Betts |
| Hearing date: | 26 March 2020 |
| Date of Last Submission: | 31 March 2020 |
| Delivered at: | Newcastle |
| Delivered on: | 4 May 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr Graham |
| Solicitors for the Applicant: | O’Brien Winter Partners Pty Ltd |
| Counsel for the Respondent: | Mr Bateman |
| Solicitors for the Respondent: | Firm B |
ORDERS
The court dismisses the husband’s application to restrain the wife’s solicitor from continuing to represent her in the proceedings.
The proceedings are adjourned to 9.30am on 6 May, 2020 for further directions NOTING THAT the upcoming trial dates may need to be vacated.
The court will hear from the parties on the question of costs.
IT IS NOTED that publication of this judgment under the pseudonym Lapham & Ferman is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 1719 of 2017
| MR LAPHAM |
Applicant
And
| MS FERMAN |
Respondent
REASONS FOR JUDGMENT
Introduction:
These are property settlement proceedings arising out of the breakdown of the parties’ de facto relationship. [1] The proceedings have been on foot now for the better part of three (3) years and are currently listed for trial at the end of next month.
[1] Though the parties never married, for ease of reference I am referring to them in these reasons as “husband” and “wife” rather than “applicant” and “respondent”.
The prospects of that trial being able to run appear increasingly remote. Each of the parties have recently filed competing, and pressing, interim applications. They are all interconnected, arising out of an attempted settlement of the matter last year and events which followed.
Most pressing is the husband’s application to now restrain the wife’s solicitor from continuing to act for her. The application is brought pursuant to the court’s so-called “inherent jurisdiction” to control its officers in the interests of the administration of justice.
Short litigation history:
The wife commenced these proceedings on 14 June 2017.
The litigation has consistently been difficult. Each party has accused the other of failing to make full and frank financial disclosure, although the husband’s alleged non-disclosures are much more serious given his vastly greater asset base. Because the husband breached the orders requiring him to pay for the major asset valuations, the parties have never been able to agree on a Balance Sheet.
The matter seemed to be inexorably headed towards a trial when, in May 2019, the parties agreed upon a settlement. The agreement was that the husband would pay the wife the sum of $100,000 cash (“the settlement sum”) in full and final settlement of her claims against him, with payment to be made by 9 July 2019 (“the settlement date”).
A draft consent order was prepared to that effect, signed by the parties and submitted to the court at the end of May. The parties did not however provide the court with joint written submissions as to why the order was said to be “just and equitable”. [2]
[2] Section 79(2) Family Law Act; see also Stanford & Stanford (2012) FLC 93-518
By agreement, the proceedings were administratively adjourned from 6 June 2019 to 30 July 2019 - being a date when both legal representatives were available to make oral submissions as to the “just and equitable” requirement.
In the meantime the settlement date passed and the wife then demanded urgent payment of the settlement sum to her solicitor’s trust account. She threatened that if payment was not made, she would charge interest on the settlement sum.
The husband complied with the demand. He paid the moneys into the trust account of his solicitors. In turn they, with his authority, paid the settlement sum to the wife’s solicitor’s trust account on 17 July 2019.
On 30 July 2019, both solicitors appeared before me - Ms B for the wife and Ms C for the husband. I invited them to make submissions as to why the draft order was just and equitable, observing that courts are not mere rubber stamps.[3]
[3] Harris v. Caladine (1991) FLC 92-217
The hearing that followed was illuminating.
· Ms B contended that, as best could be ascertained, the asset base was $4,225,915. She conceded that the husband had introduced assets of $2.5M to the wife’s $20,000 – so that the husband’s initial contribution exceeded 99% of their combined assets;
· Ms B submitted that it was a five (5) year relationship wherein the wife made real contributions, particularly in respect of the husband’s successful business, itself worth around $1.35M. Ms B also submitted that the wife was entitled to a contributions uplift on account of the husband’s family violence towards the wife during the relationship pursuant to the principles set out in Kennon & Kennon (1997) FLC 92-757; [4]
· Ultimately Ms B contended that the wife’s “true” just and equitable entitlement at the end of the relationship was in fact in the range of 10% - 15% of the combined assets, equating in round terms to a figure of $422,000 - $633,000. The $100,000 provided for in the consent order equated to the wife receiving around 2.5% of the combined assets, or perhaps 2.8% taking into account the other modest assets of $20,000 that she already held.
· Ms B submitted that the husband’s vastly stronger financial position, and his breaches of orders, had essentially enabled him to bully the wife into the settlement “at much lower than what we might otherwise have expected if this matter were to go to trial.”
[4] The wife had obtained an AVO against the husband around the time of separation
Ms C contended that the asset base was much lower ($3M). She also submitted that it was only an eighteen (18) month relationship. As to the “just and equitable” requirement, she initially submitted that the wife’s contributions-based entitlement to the combined assets was in the order of 5%. But when I observed that this produced a figure of $150,000 on her figures, without any allowance for potential s 90SF(3) factors, Ms C then “walked back” that submission, suggesting instead that the wife’s 5% contributions-based entitlement should really be limited to the business only – equating in cash terms to $67,500.
The length of the relationship was central to each party’s position.
When I expressly invited Ms B to concede that the relationship was eighteen (18) months, the wife would not do so – she maintained that it was five (5) years.
In the circumstances I was not satisfied that the orders were just and equitable. I expressed concern that they sounded more like an abuse of process by a party with much stronger financial means. While I suggested to the parties that they could enter into a Binding Financial Agreement in terms of the draft order, or that the proceedings could be otherwise dismissed without an order being made, they were unable to agree to either course.
The parties thus found themselves at a stalemate. In the circumstances the matter was adjourned to the callover list on 12 September, at which time it was set down for trial, with priority, on 28 May 2020.
Wife admits having accessed the settlement moneys, spawning competing interim applications:
At the date Ms B received the settlement moneys, the wife owed her $28,816.36 in legal fees. The settlement moneys were the only moneys held in Ms B’s trust account for this matter. Ms B took the view that the settlement funds were immediately accessible by the wife. Thus Ms B had the wife execute a trust account authority enabling her fees to be paid from trust. Pursuant to that authority, on 19 July 2019 Ms B withdrew those moneys from trust and applied them towards her outstanding fees.
Ms B did not inform the husband’s solicitors of that withdrawal. Nor was it referred to in court on 30 July 2019.
When on 30 July 2019 the court declined to make the consent order, Ms C promptly wrote to Ms B. Her letter requested the immediate return of the settlement moneys - or alternatively that Ms B agree to hold them “in escrow” pending further order or agreement.[5]
[5] Affidavit of the wife filed 12/12/19, annexure “EE”.
Despite the obvious urgency of that letter, Ms B did not respond until 19 August 2019 – a full twenty (20) days later. Her lengthy letter asserted that there were:
no conditions imposed upon the release of those funds, a portion of which has since been distributed toward substantial outstanding legal fees. We do not agree to return said funds back to your Trust account, nor to hold those monies in escrow.
The balance of those funds currently remains in our trust account and shall be maintained to meet our client’s ongoing obligations for payment of legal fees, and disbursed at her direction….[6]
[6] Affidavit of the wife filed 12/12/19, annexure “FF”.
It was only then that the husband discovered that the wife had already accessed the settlement moneys.
On 22 August 2019, again with the wife’s written authority, Ms B applied a further $2,154.49 of the settlement moneys towards meeting the wife’s legal costs. This left $69,027.15 of the settlement moneys still in trust.
Husband’s law firm formally complains about Ms B’s conduct to the Legal Services Commissioner (NSW):
Unknown to Ms B, on 21 August 2019 the husband’s law firm had already complained to the Legal Services Commissioner about Ms B’s conduct of her trust account. She was specifically accused of contravening Part 4.2 of the Legal Profession Uniform Law. [7]
[7] The complaint is annexed to the husband’s Further Written Submissions filed 30/03/20
The husband complained that Ms B had never provided his solicitors with a trust account receipt in respect of the settlement moneys. More significantly, he complained that Ms B had been obliged to hold the settlement moneys on escrow until either:
(a) final settlement had taken place; or
(b) the court had ordered a disbursement; or
(c) the husband or his solicitors had given a written trust direction to disburse;
none of which had occurred.
Ms B had in fact generated a trust account receipt for the payment on 17 July 2019. It recorded that the moneys were received from the husband’s solicitors on the husband’s behalf, and that its purpose was “payment to Ms Ferman by way of settlement proceeds.” [8] (Ms B later asserted that the husband’s solicitors had in fact never asked for a copy of that receipt.)
[8] Wife’s affidavit filed12/12/19, annexure “BB”
In my view, the real gravamen of the husband’s complaint was that pending final settlement Ms B had been holding the settlement moneys on trust for the husband, not the wife as Ms B was asserting. The husband was contending that Ms B’s withdrawals constituted a breach of that trust.
The interim applications begin – Ms B is joined to the proceedings:
On 2 October 2019, the husband filed an Application in a Case – naming Firm B as Second Respondent. He sought a declaration that Ms B held the settlement moneys on trust and in escrow pending the court making the consent orders the parties had signed in May 2019. He sought that the wife, or Firm B, be ordered to repay the settlement moneys in full with interest, and that Firm B pay his costs of the application on an indemnity basis.
Upon being advised of this application, the wife verbally withdrew her general authority to Ms B (arising pursuant to their Costs Agreement) whereby Ms B could access trust moneys on account of fees. At that time, the only moneys in Ms B’s trust account were the settlement moneys.
By the time the wife withdrew her authority, Ms B had raised a further tax invoice to the wife in the amount of $4,161.26. As will be seen, this particular invoice went on to become quite troublesome.
Hearings on 2 & 12 December 2019:
In light of this latest dispute, when the matter came back before me on 2 December 2019 I restrained the wife and Ms B from further drawing on the settlement moneys until further order. The matter was otherwise adjourned to 12 December 2019 so that the court could obtain and consider previous transcripts.
When the matter came back before me on 12 December 2019, the wife had that very day filed an Amended Initiating Application seeking interim orders that Ms B be discharged as a party and that the injunction of 2 December 2019 be lifted. She sought an order that the parties execute any necessary authority, to include an authorisation nunc pro tunc for payment of the settlement moneys to Ms B. The wife sought liberty to access the settlement moneys at her discretion – with such moneys to be characterised at trial. (She otherwise sought periodic spousal maintenance, disclosure orders and various other relief which she indicated would either be pressed at trial, or earlier if the need arose.)
I allocated an interim hearing date in March 2020, specifically limited to the following issues:
(a)whether Ms B should repay the settlement moneys to the husband in full ($100,000);
or
(b)whether the wife should be able to access the settlement moneys either by way of interim property division, pursuant to the spousal maintenance power or by way of costs order;
and
(c)whether Ms B should be discharged as a party.
Wife corrects evidence set out in her earlier affidavit:
On 24 January 2020, the wife’s mother loaned the wife some money to assist her with her legal fees. This money was paid into Ms B’s trust account, and applied towards outstanding legal fees.
On 18 February 2020, the wife filed an affidavit correcting what were said to be errors in her earlier filed material. Her affidavit was an amalgam of her own direct evidence and included various admissions effectively made by Ms B through her.
The wife deposed that Ms B had reviewed her file on 10 February 2020, at which time she had discovered some significant errors requiring disclosure and correction of the court record. The wife deposed that:
(a)On 18 October 2019, after the wife had withdrawn her authority to do so, Ms B had nonetheless drawn a further $4,161.26 from the settlement moneys in order to pay her tax invoice;
(b)This withdrawal was said to have been in error as the wife’s withdrawal of authority was not in writing nor had any note of it been placed on the wife’s file;
(c)The withdrawal was made after normal office hours. The very next business day, Ms B’s accounts manager fell ill, at a time when the $4,161.26 payment had not yet been recorded in the ledger. Despite the accounts manager returning to work later in the year, this error had not been discovered until 10 February 2020;
(d)The wife’s affidavit of 12 December 2019 had deposed that the tax invoice of $4,161.26 remained outstanding. The wife (and Ms B) erroneously believed this to be true at the time. Consequently, the balance of the settlement moneys said to be held in Ms B’s trust account at that time was also over-stated by $4,161.26;
(e)Ms B had promptly self-reported her breach of the wife’s trust account authority to the NSW Law Society. A copy of Ms B’s statement to the NSW Law Society was one of the wife’s affidavit annexures.
The loan from the wife’s mother had included the sum of $4,161.26 to meet that invoice. Ms B’s trust account balance had therefore increased by that $4,161.26 – so that the balance was in fact now the $69,027.15 figure deposed to in the wife’s December affidavit.
The wife also deposed that she needed to issue numerous subpoenas and obtain valuation evidence for trial and that the expenses would be significant. She deposed that she did not have the funds to do so as her mother had loaned her the limit of what she could afford, and the wife said she had been refused legal aid.
The husband files the restraint application:
The matter was still tracking towards interim hearing when, on 19 March 2020 the husband filed an Amended Response – now seeking for the first time that the wife’s solicitor be restrained from continuing to act.
The husband filed an affidavit in support, which under the heading “Firm B” offered the following scant evidence in support of the proposed restraint:
10. I am concerned that Ms B of Firm B continues to act for the Applicant. Notwithstanding that she is a party to these proceedings. Even if she were not a party to these proceedings, it is likely that she would need to give evidence.
11. There is currently a complaint to the Law Society that remains unresolved. Annexed hereto and marked with the letter “E” is a copy of the letter received from the Office of the Legal Services Commissioner.
Ms B had apparently been unaware of this complaint despite it having been made nearly seven (7) months earlier. Unhelpfully the complaint was not annexed. The annexed letter from the Legal Services Commissioner of 5 November 2019 merely stated that the complaint had been referred to the NSW Law Society.
The restraint hearing on 26 March 2020:
The restraint application effectively de-railed the competing interim applications concerning the settlement moneys. Accordingly the restraint was argued before me as a discrete issue on 26 March 2020.
At that hearing Mr Graham of counsel appeared for the husband and Mr Bateman of counsel appeared for the wife.
Mr Graham relied upon his written submissions filed 25 March 2020. [9] Those submissions listed the documents that the husband relied upon.
[9] Exhibit “R1”
Mr Bateman relied upon written submissions filed on 26 March 2020. [10] Those submissions listed the documents that the wife relied upon.
[10] Exhibit “A1”
Counsel’s written submissions were supplemented by oral argument. In the course of that argument I decided that, as the husband’s restraint argument revolved around Ms B’s alleged conduct and what was now said to be her conflict of interest, I needed a copy of his complaint to the Legal Services Commissioner. Accordingly I directed that the husband provide the court with a copy of that complaint, and that the parties file and serve any supplementary written submissions arising. The husband filed his on 30 March 2020 [11] and the wife filed hers on 31 March 2020. [12]
[11] Exhibit “R2”
[12] Exhibit “A2”
In arriving at my decision, I have had regard to all of the above material.
The jurisdiction to restrain a solicitor:
In its unanimous judgment in Osferatu and Osferatu (2015) FLC 93-666, the Full Court [13] helpfully reviewed the authorities relating to the making of restraining orders against solicitors.
[13] Finn, Ainslie-Wallace and Aldridge JJ
The Full Court confirmed that there are three (3) established categories of case in which a solicitor may be restrained from acting against a client or former client:
(i)to prevent a breach of confidence;
(ii)to prevent a breach of fiduciary duty; and
(iii)otherwise in the exercise of the court’s inherent jurisdiction over its officers and to control its process. (This category may overlap with the first two, but the basis for the exercise of the jurisdiction in each category is different.)
Both parties argued this matter by reference to the court’s inherent jurisdiction. As a court of record, and a court of law and equity, [14] the Federal Circuit Court does have an inherent power to restrain a solicitor from acting for a party in proceedings before it where the interests of justice so require.[15]
[14] Section 8(3) of the Federal Circuit Court of Australia Act 1999
[15] While I will refer to it as the “inherent” power, it may more appropriately be referred to as an “implied” or “incidental” power – see the discussion of Johnston J in Luthra & Betterley [2015] Fam CA 1080, unreported, 30 June 2015 which cites the High Court decision in DJL v The Central Authority (2000) 201 CLR 226.
The basis of the jurisdiction and the relevant authorities were helpfully discussed by Brereton J in Kallinicos v. Hunt (2005) 64 NSWLR 561 – a decision which has subsequently been cited with approval and applied in both the Family Court and Federal Circuit Court.
At paragraph 76 of Kallinicos, Brereton J distilled the following principles:
(a)the court retains an inherent jurisdiction to restrain a solicitor from acting in a particular case as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice;
(b)the test to be applied is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner [16] should be prevented from acting, in the interests of the protection of the integrity of the judicial process and due administration of justice, including the appearance of justice;
(c)the jurisdiction is to be regarded as exceptional and is to be exercised with caution;
(d)due weight should be given to the public interest in a litigant not being deprived of the lawyer of his/her choice without due cause;
(e)the timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief. [17]
[16] Or by extension, a law firm
[17] Pages 582 – 583 of the reported judgment.
At the heart of the inherent jurisdiction is the recognition that the integrity of the legal process must be preserved. Thus legal representatives may be restrained if they cannot be seen to possess the objectivity and independence which their professional responsibilities and obligations to the court require of them: see Bowen v Stott [2004] WASC 94, per Hasluck J.[18]
[18] See paragraph 52 of Heenan J’s reasons, citing Newman v Phillips Fox (a firm) (1999) 21 WAR 309.
The categories of case potentially warranting the exercise of the inherent jurisdiction are never closed. Each case must turns on its own facts.
Should Ms B be restrained?
The husband submits that Ms B should be restrained due to her perceived interest in the outcome of the proceedings and the real likelihood that she will be a material witness at trial.
The husband contends that Ms B’s reputational interests are at stake, particularly given his formal complaint about her conduct. In that respect I think it can safely be accepted that alleged breaches by solicitors of the relevant legislation and rules concerning operation of their trust account are inherently serious matters. In an appropriate case such breaches can warrant a solicitor being struck off or suspended, with obvious potential reputational consequences.
Where a solicitor’s reputation is at stake in litigation, this can certainly warrant the exercise of the court’s inherent jurisdiction. In Chapman v. Rogers; ex parte Chapman [1984] 1 Qd R 542, Campbell CJ held where a solicitor’s personal or reputational interest is challenged then this is:
“a strong indication that the interests of justice – which in this field involve clients being represented by independent and objective lawyers unfettered by concerns about their own interests – require the lawyer to be restrained from continuing to act.”
Such instances can include where, in connection with the litigation, a solicitor is accused of:
(a)fraud, malicious conduct, wilful breach of trust or other similar serious misconduct: Holborow & Ors v MacDonald Rudder [2004] WASC 265 (Supreme Court of WA, Heenan J);
(b)serious criminal conduct: Bahonko v Nurses Board of Victoria [2007] FCA 491 (Federal Court of Australia, Middleton J).
In Kooky Garments Ltd v. Charlton [1994] 1 NZLR 587, Thomas J held that solicitors should not act "where the acts or omissions of the solicitors are an integral part of the other party's complaint or the client has been sued in circumstances where he or she was acting on the advice of their solicitors, and it is effectively that advice which is in issue". [19]
[19] A case which has been applied in Australia and is referred to in a number of authorities
The husband contends that Ms B is a material witness. His written submissions assert that: “There remains a significant and fundamental dispute between the parties that centres on the actions of the solicitor in receiving and then expending monies for her own benefit. It will be necessary for her to give evidence regarding this.” [20]
[20] Submissions of 25/03/20, para 9
Where a solicitor’s credibility is at stake as a potential witness, this can warrant exercise of the inherent jurisdiction: Bowen v Stott (supra). But as Young J observed in Sheehan & Sheehan [2019] FCCA 1085, the mere circumstance that a solicitor may be a material witness, even on a controversial matter, does not in or of itself, justify restraining a solicitor from continuing to act. The line will be crossed only where the solicitor has a personal stake in the outcome of the proceeding beyond the recovery of proper fees in acting. [21]
[21] In support of that proposition, his Honour cited Mitchell & Burrell [2008] NSWSC 772
The husband also contends that Ms B has a direct financial interest in the proceedings above and beyond the recovery of her fees. In particular, she is at risk of having to personally repay the husband the settlement moneys already accessed by her to meet the wife’s legal fees.
For their part, Ms B and the wife contend that the husband’s restraint application lacks merit.
They submit that Ms B’s reputational interests are not at stake as the settlement moneys had always been held on trust for the wife, not the husband. Save for the specific $4,161.26 withdrawal, Ms B acted with the wife’s authority at all times. Moreover, the wife has herself raised no complaint about that latter withdrawal and those funds have now been replenished courtesy of the loan from the wife’s mother.
The wife and Ms B refer to the relevant legislation and rules governing legal practitioners and observe that:
· the husband has not expressly pointed to any specific breach thereof; and
· the Legal Services Commissioner has not given the matter any urgency to date, nor have the NSW Law Society.
The wife rejects the submission that Ms B will be a material witness.
I respectfully agree. It seems to me that the following basal facts are uncontroversial:
(a)the terms of the parties’ agreement as embodied in the draft consent order;
(b)the husband’s payment of the settlement moneys to Ms B in response to her written demand – and the relevant correspondence exchanged between the solicitors at the time will speak for itself;
(c)that Ms B applied some of the settlement moneys towards payment of the wife’s invoices (the dates and amounts involved being undisputed as between the wife and Ms B);
(d)that, save for Ms B’s specific $4,161.26 invoice, Ms B had the wife’s written authority to do so;
(e)that Ms B did not have the husband’s express written authority to do so.
The real question comes down to the terms of the alleged trust upon which the settlement moneys were held by Ms B. The wife’s case is that the wife had an immediate beneficial entitlement to access them, the husband’s case is that she did not.
It seems to me that this is essentially a legal rather than a factual question. Neither Ms B, or for that matter Ms C, have gone on affidavit. Their contemporaneous correspondence will speak for itself in any event.
I therefore struggle to see how Ms B could be seen as a material witness. Ms B’s claim to the settlement moneys rises or falls in accordance with the court’s decision on the legal question. The wife no doubt authorised the withdrawals on the advice of Ms B, advice which will prove at a later date to have been correct or incorrect.
Both the wife and Ms B are running the same case, namely that the $4,161.26 withdrawal (and consequent misleading of the court) were a result of honest errors on Ms B’s part. The wife will be available for cross-examination at trial. There is no contrary evidence.
These matters, now corrected, do not warrant thee proceedings now being turned into some sort of wide-ranging commission into the operation of Ms B’s trust account. Nor should it be assumed that the husband has a right to cross-examine Ms B. In Holborow (supra), Heenan J made the following observations concerning the inherent jurisdiction:
[T]hese principles do not render counsel or solicitors generally examinable at the suit of their client’s opponents. The duty of a legal practitioner is not to his client’s opponent and he is not answerable to his client’s opponent. His duty is to the court and he is certainly answerable to the court and to his or her professional and disciplinary bodies.
Ethical issues may potentially arise for Ms B depending upon the court’s decision as to the respective beneficial entitlements to the settlement moneys. But absent a positive finding that Ms B acted egregiously or that she otherwise took a position that was not reasonably arguable, it is difficult to see how she could be at risk of any serious reputational damage. The delay in the husband’s complaint being investigated to date suggests to me that the regulatory bodies have not regarded the matter as egregious.
I would add here that the wife has other interim applications pending whereby she might potentially still be able to access the settlement moneys, including on a nunc pro tunc basis the moneys already accessed. The making of such an order would potentially render the husband’s complaint otiose, or at least remove much of its potential sting. It is also possible that Ms B may be removed as a party at that time.
I accept that Ms B’s accessing of the settlement moneys could potentially render her liable to future disciplinary action, thus potentially impacting her reputation. But such action is far from inevitable and at this stage the court has before it various interim applications which would logically require determination first.
Notably, Ms B is not herself on affidavit; she is not seeking separate representation of her own interests; on the face of her submissions it necessarily follows that she is not intending to give evidence herself.
In a sense Ms B is “casting her lot” in with the wife and vice versa. That seems logical; Ms B’s entitlement to access the settlement moneys would seem to rest entirely upon whatever was the wife’s lawful entitlement to authorise her to do so. Likewise, it is obvious that the wife acted on Ms B’s advice to her in that regard.
I do accept that Ms B does have an identifiable pecuniary interest to the extent that an order for Ms B to repay the settlement moneys already accessed by her will have to come from her own pocket. But the amount involved is relatively modest. Moreover Ms B is then entitled to recover those same amounts directly from the wife anyway given that they represent her proper fees charged pursuant to their costs agreement. I accept that doing so would be inconvenient and that she may have some difficulties in enforcement given the wife’s pleaded financial position.
Delay:
I am concerned about the husband’s delay in bringing this restraint application.
His application comes just days before a substantive interim hearing and just 2 months prior to the trial date. His complaint to the Legal Services Commissioner about Ms B was made a full 7 months beforehand and he had joined Ms B as a party 5 months beforehand.
What fact has recently come to his attention which now warrants such exceptional relief, depriving the wife of her chosen solicitor at this time?
The husband points to the wife’s “correcting” affidavit filed on 18 February 2020. His written submissions contend that “The solicitor has provided incorrect information to her client on at least four occasions and breached the client’s instructions on at least one occasion.”
This is true, as such matters are admitted in the affidavit.
But how do they in any way change the situation from the husband’s perspective? How does Ms B’s withdrawal of the additional $4,161.26 make a practical difference? While the wife did not consent to that withdrawal, the husband’s case has always been that her consent to the withdrawals from the settlement moneys is insufficient.
The husband also points to Ms B’s letter to the wife of 9 May 2019, which was sent to her in the leadup to the parties agreeing upon the settlement and which is annexed to the wife’s affidavit filed 12 December 2019. In that letter Ms B is pressing the wife to make a commercially sensible decision about settling the case.
For reasons that are unclear, the wife objects to that letter being referred to at all – saying it was not put into evidence by her despite it being annexed to the wife’s own affidavit. The wife contends that the letter should be excluded by virtue of s 131 of the Evidence Act.
Rather than re-listing the application for further argument on this belatedly-raised point, I have taken a pragmatic approach. I have seen the letter. I consider it innocuous.
Lastly, to the extent that the husband complains that Ms B did not answer a recent subpoena directed to her trust account records, the husband had himself failed to provide the requisite conduct money as required by the rules. While many solicitors might have complied with the subpoena regardless, Ms B was not obliged to. The husband cannot legitimately complain about it. Mere animosity between lawyers on opposing sides of litigation does not usually warrant the court’s intervention: Holborow (supra).[22]
[22] Paragraph 31 of the reasons of Heenan J.
In my view the husband’s delay is lengthy and unexplained. In my view any such application should have been made months earlier, probably in his 2 October 2019 Application in a Case in which he joined Ms B as a party. In my view he was aware of the critical facts by then.
Conclusion and Orders:
I have come to the view that neither Ms B’s potential reputational or pecuniary interests in the litigation could be seen to imperil fulfilment of her duties and obligations to the court. In so deciding I am also mindful of the observations of Middleton J in Bahonko (supra):
The court must be careful not to intervene unless it is absolutely required in the circumstances of the case. [23]
[23] Paragraph 3 of his Honour’s reasons
I am also mindful of the husband’s delay.
The court’s inherent jurisdiction to restrain a solicitor from acting is to be regarded as exceptional and exercised with caution.
There is no proper basis for its exercise here.
I make the orders set out at the commencement of these reasons.
I certify that the preceding ninety-four (94) paragraphs are a true copy of the reasons for judgment of Judge Betts
Date: 4 May 2020
0
8
3