McCann v McCann
[2006] VSC 142
•11 April 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 9344 of 2005
F 5923
BETWEEN:
| GREGOR DONALD McINTYRE McCANN | Plaintiff |
| V | |
| WILLIAM SIDNEY McINTYRE McCANN AND OTHERS | Defendants |
AND BETWEEN
| WILLIAM SIDNEY McINTYRE McCANN AND OTHERS | Plaintiffs by counterclaim |
| v | |
| GREGOR DONALD McINTYRE McCANN AND OTHERS | Defendants by counterclaim |
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JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 April 2006 | |
DATE OF JUDGMENT: | 11 April 2006 | |
CASE MAY BE CITED AS: | McCann v McCann | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 142 | |
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Legal Practitioners – counsel – duty of loyalty – alleged conflict of interest – application to restrain continued retainer of counsel – application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C Gunst QC | Minter Ellison |
| For the Defendants | Dr K Hanscombe SC and Mr J Barber | Madgwicks |
HIS HONOUR:
By summons dated 3 April 2006, the plaintiff (who is also the first defendant to counterclaim) has applied for an order that the first, second, third, sixth and seventh defendants and plaintiffs by counterclaim (who I will refer to collectively as “the sibling defendants”) be restrained from continuing to retain Mr Jonathon Evans of counsel to represent them in this proceeding. The application is opposed.
The plaintiff and the first, second and third defendants are siblings, being the adult children of the late EW and EB McCann.
The fourth defendant Highview Agricultural Pty Ltd (“the Trustee”) is the proprietor of two contiguous pieces of rural land, which I will refer to together as “the land”.
The Trustee is a company owned by the siblings, or by companies associated with them, according to their respective entitlements to interests in the land. The plaintiff and the first defendant, who are brothers, each own 37.5% of the shares in the Trustee. The second and third defendants, who are sisters, each own 12.5% of the shares in the Trustee.
Each of the siblings is a director of the Trustee and a beneficiary of the trust of which it is Trustee.
There is a dispute between the siblings as to how the land should be dealt with in the future. On one side of the dispute is the plaintiff. On the other side of the dispute are his siblings and their associated companies who, together, constitute the sibling defendants.
There are substantial issues in the proceeding as to the efficacy and proper interpretation of a number of agreements which relate to the land.
It is not necessary for the purposes of this application to describe the dispute between the two sides in any great detail. It is sufficient for present purposes to state the following.
On 26 June 2004 there were two agreements entered into, a Heads of Agreement and a Development Agreement. Under the Development Agreement, the family company which was then owner of the land agreed to a substantial part of the land, known as “Highview”, being subdivided and developed. The plaintiff alleges that the Development Agreement is void for uncertainty and the sibling defendants deny this.
Under the Heads of Agreement, the family company which was the owner of the land at the time agreed to transfer the land to the siblings as tenant-in-common in the proportions in which they now hold shares in the Trustee.
Next, on 31 March 2005, the siblings transferred their respective legal interests in the land to the Trustee, to hold the land for them as absolute beneficial owners and to act as manager of the land on their behalf.
Also on 31 March 2005, the siblings entered into an agreement with the Trustee for the purpose of confirming and ratifying the Development Agreement in relation to the Highview parcel of the land. Again, the plaintiff alleges that this Confirmation of Development Agreement is void for uncertainty and the sibling defendants deny this.
Further, on 31 March 2005 the siblings entered into a Landowners Agreement under which they agreed to join together for the purpose of managing and exploiting the land. There is substantial dispute between the plaintiff and the sibling defendants as to the effect of the Landowners Agreement.
Against this background, hostilities broke out between the plaintiff on the one hand and the sibling defendants on the other. As a result, the plaintiff seeks to have his 37.5% interest in the land transferred to him absolutely. Further, consequent upon such a transfer taking place, and upon the lack of any agreement between the plaintiff and his siblings as to the future of the land, the plaintiff seeks an order under Part IV of the Property Law Act 1958 that the land be sold and the net proceeds divided amongst the beneficial owners according to their respective interests.
The central plank of the plaintiff’s case appears to be that the land is held by the Trustee as a bare trustee, unaffected by any obligations under the Development Agreement, the Confirmation of Development Agreement or the Landowners Agreement. To this end, on the day after this proceeding was commenced, the plaintiff directed the Trustee to transfer his interest in the land to him absolutely. The Trustee, did not, in the circumstances described below, comply with this request.
In their defence of the plaintiff’s claims, the sibling defendants contend in summary that the Trustee did not hold the land as a bare trustee but on a trust with powers to perform its obligations as manager as contemplated by the Landowners Agreement, the Development Agreement and the Confirmation of Development Agreement. They seek by counterclaim rectification of the Development Agreement and the Landowners Agreement and a declaration that the plaintiff is not entitled to seek relief from this Court under Part IV of the Property Law Act 1958 in relation to the land.
In the event that the plaintiff is entitled to seek relief under Part IV of the Property Law Act, the sibling defendants seek, as an alternative to an order for sale, an order for partition of the land. For this purpose only, the Trustee has been joined as a defendant to the counterclaim as it is the registered proprietor of the land.
As I have said, the Trustee did not comply with the plaintiff’s request for a transfer to him of his interest in the land. The Trustee acted on the basis of legal advice received from Mr Jonathon Evans of counsel. Mr Evans gave that advice in the following circumstances.
Prior to the issue of this proceeding on 15 November 2005, Mr Evans had already been retained by the sibling defendants in respect of their dispute with the plaintiff. He has never acted for, met or communicated with the plaintiff in any way.
Mr Evans appeared for the sibling defendants in court on 16 November 2005.
Also on 16 November 2005, the plaintiff made his request to the Trustee for a transfer of his interest in the land. This request was in writing.
There was a board meeting of the directors of the Trustee on 16 November 2005, attended by all of the siblings. It was resolved that legal advice be sought in respect of the plaintiff’s request. The Minutes do not record that the plaintiff voted against this resolution, or abstained from voting. This is in contrast to the conduct of the plaintiff in respect of other business at the meeting, in particular when it was resolved to appoint Madgwicks to act as solicitors to act for the Trustee “during its issues with” the plaintiff. The plaintiff abstained from voting on that issue.
Madgwicks then briefed Mr Evans to advise the Trustee as to whether it ought to comply with the plaintiff’s request.
By memorandum of advice dated 21 November 2005, Mr Evans advised the Trustee, in summary, that:
(1)If the Trustee holds the land on a bare trust for the beneficiaries in the proportions to which they are absolutely entitled, then the requested transfer to the plaintiff ought be made.
(2)If the Trustee holds the land for sale as well as management, then the plaintiff’s request should properly be refused by the Trustee unless all beneficiaries consent.
(3)Based on the documents with which he was briefed, it was clearly arguable that the Trustee holds the land on a trust for sale as well as management.
(4)In these circumstances, the Trustee should not accede to the plaintiff’s request “at present” but should seek the consent of the other beneficiaries and, if that consent was not forthcoming, seek to cause the issue to be determined by this Court in this proceeding and abide by the decision.
Notwithstanding that Mr Evans was acting for the sibling defendants at this time, his advice was, in my view, properly described as neutral. He did no more than state that it was arguable that the Trustee holds the land on a trust for sale as well as management and, in the absence of the consent of all of the siblings as beneficiaries, advised the Trustee to abide by the decision of the Court in proceedings already on foot.
A copy of the memorandum of advice by Mr Evans was provided to the plaintiff at a board meeting of the Trustee held on 30 November 2005. At this board meeting, the plaintiff’s siblings declined to consent to his request for a transfer of his interest in the land.
This proceeding then continued, with Mr Evans acting for the sibling defendants without any objection from the plaintiff or his lawyers.
On 17 February 2006 the sibling defendants applied for orders that the proceeding be admitted into the Commercial List and that it continue on pleadings. The plaintiff opposed these orders and, in respect to the application for pleadings, it was submitted on behalf of the plaintiff that the affidavit material sufficiently identified the issues and that the issues could be further articulated in written outlines of submissions to be exchanged before trial. I did not accept these submission and ordered that the proceeding be admitted into the Commercial List and that it continue on pleadings.
I should add that, although Madgwicks initially filed a protective appearance for the Trustee, it has ceased to act for the Trustee. Given the deadlock between the plaintiff on the one side and the sibling defendants on the other, the Trustee will remain unrepresented and be bound by the decision of the Court.
On 17 March 2006, Mr Evans signed a defence and counterclaim on behalf of the sibling defendants. As I have said, this counterclaim seeks, as an alternative claim if the principal relief sought in the counterclaim is not granted, an order for partition of the land. For this purpose only, the Trustee has been joined as a defendant to the counterclaim.
It is the signing of the counterclaim which has prompted the application to restrain the continued retainer of Mr Evans. It is unnecessary to speculate as to whether, in the absence of pleadings, this application would have been made. As I have said, the plaintiff opposed the order which I made for pleadings in the proceeding.
There is no doubt that the Court has the power to make the order which the plaintiff seeks. It was not in contention that each case must be decided on its own facts and that, in considering an application such as this, the Court starts from the position that a litigant has the right to choose his, her or its legal representatives, be they solicitors or counsel.
For example, in Grimwade v Meagher[1], Mandie J said:
“I have taken into account... the right of the litigant to retain counsel of his, her or its choice. This is an important right and it is a serious matter to prevent a party from retaining such counsel, particularly upon the application not of a former client of that counsel but of an opposite or adverse party.”
[1][1995] 1 VR 446 at 455.
Further, in Tottle Christensen v Westgold Resources NL[2], the Full Court of the Supreme Court of Western Australia considered the inherent jurisdiction of the Court to control the conduct of members of the legal profession in their role as officers of the court so as to ensure the preservation of public confidence in the integrity and fairness of the administration of justice. The Court said[3]:
“In our opinion, there can sensibly be no closed list of circumstances which will justify the exercise of what, on any view, must be regarded as an exceptional jurisdiction and power. Ordinarily, litigants are entitled to solicitors and counsel of their choice and it is only in a clear case that the Court would make an order which would interfere with that right.”
[2][2003] WASCA 224.
[3][2003] WASCA 224 at [4].
Mr Gunst QC, who appeared for the plaintiff, submitted that this was a clear case which required the Court to intervene. He placed reliance upon a number of grounds. First, it was submitted that the overarching consideration is the administration of justice. Mr Gunst submitted that it was, in the words of Bryson J in D&J Constructions Pty Ltd v Head[4] “subversive to the appearance that justice is being done” for a lawyer such as Mr Evans to be seen to “change sides”. However, I note that Bryson J continued and said:
“The appearance which matters is the appearance presented to a reasonable observer who knows and is prepared to understand the facts. The court should weigh the facts and assess the risks in the eye of reality, theoretical risks should be disregarded...”
[4](1987) 9 NSWLR 118 at 123.
Secondly, it was submitted that Mr Evans owed a duty of loyalty to the Trustee as his former client. It was submitted that this duty required Mr Evans to refrain from acting against the Trustee with respect to the same matter which was the subject of his advice to the Trustee, or with respect to a related matter. Reliance was placed upon the statement by Brooking JA in Spincode v Look Software[5] that:
“...there is an equitable obligation of ‘loyalty’, which forbids not only the concurrent holding of two inconsistent engagements by different clients in the same matter but also the holding of two successive inconsistent engagements... By inconsistent I mean only that the solicitor who formerly acted for one client in the same matter now acts in that matter for a client with an interest adverse to that of the former client.” (Emphasis added.)
[5](2001) 4 VR 501 at 522.
Thirdly, it was submitted that Mr Evans was committing professional misconduct in breach of Rules 92(l) and (q) of the Rules of Conduct of the Victorian Bar. These rules relevantly provide:
“92.A barrister must refuse to accept or retain a brief or instructions to appear before a court:
...
(l)where the barrister has already advised... and is then offered a brief from the other side in the matter, unless the first client, on being informed of the offer of the brief by the other side, states that there is no objection to the barrister accepting the brief.
...
(q)where to do so would... involve the barrister in a conflict of interest.” (Emphasis added.)
I do not accept the submissions made on behalf of the plaintiff. In my view they are not in accord with the reality of the facts of this case. Mr Evans has not “changed sides” so that he is now acting for “the other side” in relation to the question of whether the Trustee should have complied with the plaintiff’s request for a transfer of his interest in the land. The advice by Mr Evans to the Trustee was given at a time when he was already acting for the same side of the dispute as he now represents. In any event, the advice which was given was neutral in character, advising the Trustee, in the absence of the consent of all siblings, to abide the decision of the Court in proceedings already on foot.
Nor is Mr Evans seeking to act in relation to this aspect of the proceeding in a manner which is adverse to the interests of the Trustee. In my view, the Trustee has no interest in the outcome of this proceeding. It is joined as a formal party because it is the legal owner of the land. There are only two sides to the dispute before the Court – the plaintiff on the one hand and the sibling defendants on the other. The Trustee is not represented and I cannot see any conceivable reason why it will ever need to be represented. None was referred to by Mr Gunst. Accordingly, Mr Evans’ position as counsel for the sibling defendants is not capable of being characterised, as a matter of substance as opposed to mere form, as one where Mr Evans now acts for a client with an interest which is adverse to any interest of the Trustee.
It follows that the position of Mr Evans does not involve him in a position of conflict of interest, as his former client does not have any interest in the outcome of the proceeding. This is not a case like Nangus Pty Ltd v Charles Donovan Pty Ltd[6], which was relied upon by Mr Gunst, where Young CJ referred to the undoubted general rule that counsel should not appear for two clients whose interests may conflict, even where the clients consent.
[6][1989] VR 184 at 185.
There is one final matter which I should deal with. In oral argument, Mr Gunst said that he did not wish to foreclose the possibility that Mr Evans might be a witness or that he might comment on the failure of the sibling defendants to call Mr Evans as a witness to explain advice which he has given on another issue. It was submitted that this other advice by Mr Evans contains an implied opinion by Mr Evans that the Development Agreement is or may be void for uncertainty. In my view, even if the advice by Mr Evans in this regard so states or implies, that will not, as a matter of reality and ignoring theoretical risks or possibilities, make Mr Evans a relevant witness. Whether or not the Development Agreement is void for uncertainty is a matter for the Court to determine, on the basis of construction of the terms of the Development Agreement in its factual matrix and having regard to any orders for rectification which may be made. The subsequent opinion of Mr Evans on the issue, express or implied, will be irrelevant.
Accordingly, the plaintiff’s application by summons will be dismissed.
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