MINING INNOVATIONS AUSTRALIA PTY LTD ‑v- MINING AND BUILDING SERVICES GROUP PTY LTD - [2017] WASC 240

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: MINING INNOVATIONS AUSTRALIA PTY LTD ‑v- MINING AND BUILDING SERVICES GROUP PTY LTD [2017] WASC 240

CORAM: BANKS-SMITH J

HEARD: 20 JULY 2017

DELIVERED : 17 AUGUST 2017

FILE NO/S: CIV 1672 of 2014

BETWEEN: MINING INNOVATIONS AUSTRALIA PTY LTD
Plaintiff
AND
MINING AND BUILDING SERVICES GROUP PTY LTD
First Defendant
MICHAEL GRAHAM WORTHINGTON
Second Defendant
LIN WILLIAM VOGLER
Third Defendant
(BY ORIGINAL ACTION)
MINING AND BUILDING SERVICES GROUP PTY LTD
Plaintiff by Counterclaim
AND
MINING INNOVATIONS AUSTRALIA PTY LTD
First Defendant by Counterclaim
ANDREW NOEL MONTEIRO
Second Defendant by Counterclaim
(BY COUNTERCLAIM)

Catchwords:

Practice and procedure - Application to restrain lawyer from acting - Where relief sought by opposing party - Inherent jurisdiction - Where alleged conflict - Where complaint made to disciplinary body

Evidence - Where settlement offer made without prejudice - Privileged communication - Where reference to contempt - Civil contempt - Whether comprised improper threat - Whether privilege abrogated

Legislation:

Legal Profession Act 2008 (WA), s 401, s 413

Result:

Application dismissed

Category: B

Representation:

Original Action

Counsel:

Plaintiff:     Mr L A Warnick & Mr A R W Bower
First Defendant              :     No appearance
Second Defendant         :     In person
Third Defendant            :     No appearance

Solicitors:

Plaintiff:     Corser & Corser
First Defendant              :     No appearance
Second Defendant         :     In person
Third Defendant            :     No appearance

Counterclaim

Counsel:

Plaintiff by Counterclaim                   :     No appearance
First Defendant by Counterclaim       :     Mr L A Warnick & Mr A R W Bower
Second Defendant by Counterclaim   :     No appearance

Solicitors:

Plaintiff by Counterclaim :                 No appearance
First Defendant by Counterclaim       :     Corser & Corser
Second Defendant by Counterclaim   :     No appearance

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

Allbeury v Corruption and Crime Commission [2012] WASCA 84; (2012) 42 WAR 425
Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98
Briggs v Lunt [No 4] [2011] WASCA 145
Butler v St John of God Health Care Inc [2008] WASCA 174
Caratti v Boban Pty Ltd (Administrators Appointed) [No 2] [2015] WASC 139 (S)
Donaldson v Nolan [No 3] [2015] WASC 194
Ferster v Ferster [2016] EWCA Civ 717
Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112
Hayes v Doran [2012] WASC 91
Hearne v Street [2008] HCA 36; (2008) 235 CLR 125
Holborow v McDonald Rudder [2002] WASC 265
Ismail-Zai v The State of Western Australia [2007] WASCA 150; (2007) 34 WAR 379
Jermyn v Spargos Mining NL [2001] WASCA 149
Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561
Lyons v Legalese Pty Ltd [2016] SASC 160
Street v Hearne [2007] NSWCA 113; (2007) 70 NSWLR 231
Unilever Plc v Proctor & Gamble Co [1999] 1 WLR 1630
Unilever Plc v Proctor & Gamble Co [2000] 1 WLR 2436
Witham v Holloway [1995] HCA 3; (1995) 183 CLR 525

BANKS-SMITH J:

Introduction

This is an application by the second defendant (Michael Worthington) to restrain the law firm Corser & Corser from acting for the plaintiff in these proceedings.
Mr Worthington alleges that communications contained in a settlement offer written by Corser & Corser comprised threats against him. He says he made a complaint to the Legal Profession Complaints Committee (LPCC) about the letter but the LPCC told him it would not investigate the conduct until these proceedings are completed. Mr Worthington alleges that Corser & Corser continue to act in this matter for the purpose of avoiding or at least delaying an investigation by the LPCC into their conduct and that they are therefore in a position of conflict and should be restrained from acting.
In my view, for the reasons that follow, the paragraphs of the letter the subject of Mr Worthington's complaints do not comprise blackmail or other unambiguous impropriety. Nor have Corser & Corser proceeded on the basis that the continuation of the proceedings provides any quarantine from investigation. I decline to restrain Corser & Corser from acting in these proceedings.

Summary of pleaded case

Mr Worthington and the third defendant (Lin Vogler) are the joint inventors of products and technology that modify tools used in the mining industry to reduce wear and tear (Inventions).[1] They applied for and registered provisional patent applications for the Inventions.
[1] Statement of claim [3].
The first defendant (MBS) was incorporated by Mr Worthington and Mr Vogler as a vehicle to pursue their various projects.[2]
[2] Since 3 December 2015 MBS has not been represented and is not actively involved in these proceedings.
In about May 2013 Mr Worthington and Mr Vogler were introduced to Bruce Havilah (a legal practitioner) and Sean Somerville. The four men then incorporated the plaintiff (MIA) in order to commercialise and exploit the Inventions. MIA issued an information memorandum and undertook a successful capital raising process. Mr Worthington and Mr Vogler assigned all right, title and interests in the Inventions to MIA under a deed of assignment dated 26 July 2013.[3]
[3] Statement of claim [12].
MIA and MBS entered into a service agreement (Agreement) on 29 July 2013. Under the Agreement, MIA was to pay MBS to work on and develop the Inventions to the point at which they could be commercialised. MBS was to meet objectives set out in a business plan.
In May 2014, MIA commenced these proceedings. It claims that the defendants:
(a)breached the Agreement by not completing the tasks assigned to them;[4]
(b)disclosed MIA's confidential information without authorisation;[5] and
(c)diverted business opportunities away from MIA.[6]
[4] Statement of claim [42] ‑ [45].
[5] Statement of claim [46] ‑ [59].
[6] Statement of claim [64] ‑ [79].
The defendants deny the allegations. They say that to the extent there has been any disclosure of confidential information, it was done with the implicit or express consent of MIA.

Procedural history

Injunction

On 9 June 2014 MIA filed a chamber summons seeking an interlocutory injunction to prevent the defendants from disclosing, using or procuring the use of any information concerning the Inventions.
On 12 June 2014, the defendants provided the court with an undertaking (Undertaking) and MIA's application for an injunction was dismissed.
The Undertaking provides:
The defendants each jointly and severally undertake to this Honourable Court and to the plaintiff that until trial, further order of this Honourable Court or the consent of the plaintiff, they will refrain from disclosing or otherwise using or procuring or inducing the use by any other person of:
1.any information concerning the substance of the inventions the subject of:
a.Australian provisional patent applications for: Click-On Wear Plate System (2013901876) dated 27 May 2013; Bucket Light Armour (2013903018) dated 9 August 2013; Track Pad Armour (2013903017) dated 9 August 2013; Ground Engaging Tool Armour (2013903015) dated 9 August 2013; and
b.An international patent application under the Patent Co‑operation Treaty (PCT) for Click-On Wear Plate System (PCT/AU2014/000562) dated 27 May 2014 (based on provisional application 2013901876); or
(collectively the 'Inventions')
2.any improvements, modifications or alterations to the Inventions or products produced from the Inventions.

Mediation

On 22 April 2015 the parties participated in a mediation before a registrar of this court. The dispute was not resolved. It appears from the court record that from 21 April 2015 Mr Worthington and Mr Vogler were no longer represented by solicitors and have acted in person. Prior to that time, they were represented by JNC Legal.
On 9 June 2015 Corser & Corser wrote to the defendants by letter headed 'without prejudice' (June letter).[7] The June letter is central to the current application, but before turning to it in detail, it is necessary to refer to two other procedural steps.

Vexatious litigant application

[7] Affidavit of Michael Worthington filed 28 June 2017, MG3.

In 2015, Mr Worthington and Mr Vogler issued fresh proceedings CIV 2913 of 2015 in which they sought an order that MIA be declared a vexatious litigant under the Vexatious Proceedings Restriction Act 2002 (WA). The complaints relied upon arose out of these proceedings. Le Miere J dismissed the application.

Application to lift undertaking

In May 2016 Mr Worthington and Mr Vogler commenced proceedings CIV 1861 of 2016 seeking an order that the Undertaking be lifted. They contended that as the patent applications had lapsed, there was no longer an obligation on them to maintain confidentiality pending the trial of this action and that the Undertaking had a detrimental effect on their ability to pursue employment.
The application came before me on 30 September 2016 for directions. MIA contended that the fresh proceedings comprised an abuse of process by way of collateral attack on these proceedings. Ultimately, the proceedings in CIV 1861 of 2016 were dismissed on the basis that if they wished to apply to be relieved from the Undertaking, Mr Worthington and Mr Vogler should bring that application in these proceedings.
On 2 November 2016, Mr Worthington applied in this action for an order releasing him from the Undertaking. Mr Worthington says that the information referred to in the Undertaking is no longer confidential because the patent applications have expired, that all confidential information pertaining to the patent applications is in the public domain and further that MIA has disclosed the confidential information.[8]
[8] Mr Worthington's submissions in support of application to lift undertaking filed 28 February 2017 [5], [10].
MIA contends the defendants have knowledge that remains confidential and that such knowledge is beyond the matters set out only in the patent applications. It says (amongst other things) that the provisional patent applications only disclose to the public the name of the inventors and the title of the invention. It refers to a confidentiality clause in the information memorandum and a clause in the Agreement with MBS that required anyone testing and trialling the Inventions to sign a non‑disclosure agreement.[9]
[9] MIA's submissions in opposition to application to lift undertaking filed 3 April 2017 [14], [18]; Statement of claim [28].
Mr Worthington's application to lift the undertaking was listed for hearing on 10 May 2017.

The restraint is raised

At the commencement of the hearing on 10 May 2017 Mr Worthington said that he wished to apply for an injunction preventing Corser & Corser from acting in these proceedings. Accordingly, the application to lift the Undertaking was adjourned.
Mr Worthington then filed this application which is in effect an application for a final injunction.[10]
[10] Hayes v Doran [2012] WASC 91.

The June letter

Following the unsuccessful mediation of 22 April 2015, Corser & Corser sent the June letter to Mr Worthington, Mr Vogler and also to JNC Legal, who at that time remained on the record for MBS. The letter was signed by Ronald Bower on behalf of Corser & Corser and headed 'without prejudice save as to costs'. Parts of the letter detail a compromise that MIA was prepared to accept. It is not necessary to disclose all parts of the letter in order to deal with this application.
The four page letter referred to a 'broad proposal' discussed at the mediation and said that following careful consideration MIA did not consider that proposal was workable. One reason given was that it would have required the various parties to have an ongoing working relationship. It put forward an alternate proposal. In short, the alternate proposal provided for a sale of MIA's entire business and associated intellectual property rights as a going concern to Mr Worthington and Mr Vogler for a specific price, with certain terms including as to vendor finance and security to be agreed. The letter included some explanation as to the benefit the purchasers would receive under the proposal, for example, the receipt of proceeds of sale of units going forward.
Mr Worthington's complaint concerns the final section of the letter which states:
Absence of agreement
Negotiations at the mediation conference were based upon certain statements by the defendants in relation to their financial circumstances. Subsequent to the conference, the plaintiff has undertaken further enquiries the results of which call into question the accuracy of those statements. Consequently the plaintiff has formed an opinion that should an agreement not be reached the plaintiff will proceed with its legal action.
The defendants should also be aware that the plaintiff is in possession of documents indicating that the defendants have already breached their court undertakings and may be in contempt of court. Should legal proceedings continue the plaintiff will likely consider bringing an application in this regard.
As it was mentioned by the second defendant at the mediation conference as a concern for him, it is also likely that Directors of the plaintiff will pursue the separate matter of a statement published by the (then) director of the trustee company of The OPR Trust regarding the alleged misconduct of the directors of the plaintiff.
Our clients encourage you to give serious consideration to the alternate proposal as an acceptable outcome to resolve the outstanding claim for all parties.
We await your response within 10 working days of this letter.
In the meantime our clients will consider programming orders to advance the matter in the event it is not resolved.
On 15 June 2015, Mr Worthington and Mr Vogler emailed Mr Bower asking if the offer was genuine.[11]
[11] Worthington affidavit, MGW4.
On 18 June 2015, Ms Feng of Corser & Corser replied that the offer was sincere and was made on behalf of the Board of MIA.[12]
[12] Worthington affidavit, MGW5.
On 23 June 2015 Mr Worthington and Mr Vogler replied, stating they would seek advice on the way forward and expected to revert in 14 days.[13]
[13] Worthington affidavit, MGW6.
On 26 June 2015, Ms Feng confirmed that MIA would extend the time for a definitive response by the additional 14 days requested, and noting that if an acceptance was not received in that timeframe programming orders would be sought.[14]
[14] Worthington affidavit, MGW8.
On 7 July 2015, Mr Worthington and Mr Vogler sent a three page 'due diligence' letter to Ms Feng setting out numerous requests for information as to the books and records of MIA and its business and requesting copies of any auditor's report on which the sale price was determined and an explanation of the basis upon which the value of the business had been assessed.[15]
[15] Worthington affidavit, MGW10.
On 15 July 2015, Ms Feng replied stating that the offer related to the business and not the company, and that many of the questions were irrelevant. She said the offer applies to the intellectual property, the confidential information and its exploitation and was made in order to expedite a commercial settlement with the value set accordingly. MIA offered to provide specific details following an 'in principle acceptance'.[16] The letter also stated that as there had been no acceptance of the offer, then programming orders would be sought in the proceedings.
[16] Worthington affidavit, MGW11.
On the same day, Mr Worthington and Mr Vogler replied seeking definitions of the business and intellectual property proposed to be sold, stating that they had already said they were 'interested in principle' and stating, 'if [the alternate proposal] was not an genuine offer, it brings into question the intent of Mr Bowers letter'.[17]
[17] Worthington affidavit, MGW11.
On 3 August 2015, Mr Worthington and Mr Vogler wrote to Ms Feng asking for any response to their 15 July 2015 email.[18]
[18] Worthington affidavit, MGW 14.
It is apparent that by that time the negotiations with respect to the alternate proposal had broken down and there is no evidence before the court of any further communications between the parties on the proposal.
Relevantly, in none of the correspondence from Mr Worthington at the time does he raise any issue with the terms of the June letter about which he now complains.

Complaint to the LPCC

Mr Worthington contacted the LPCC by email dated 20 July 2015. The email reads, relevantly:[19]
The [June letter] is in our opinion not proper. Mr Bower states in his letter that the other party are offering us their business for sale; however if we do not buy the business they will not only pursue the writ against us they will accuse us of breaching court orders.
Mr. Bower states his clients are in possession of a document that proves we have breached our court agreement and if we do not buy the business for $[redacted] plus GST they will report the matter to the court.
As a lay person it reads that:
Give me $[redacted] or I will accuse you of an indictable offence.
This behaviour needs to be reported to you as we now believe it has gone past just bullying tactics and they have committed a crime.
1. Trying to sell a business under duress 2. Blackmail
I will await your response before reporting the matter to the Federal Police and the Chief Justice.
[19] Worthington affidavit, MGW 13.
It does not appear from the email that the LPCC was provided with a copy of the June letter.
The email was not provided to Corser & Corser.
Mr Worthington says he did not receive a written response but received a telephone call from the LPCC:[20]
Ms. [SC] rang within a few days of the email [copied above] and stated words to the effect 'The LPCC is not authorised to make judgments on such matters, only a Judge can make such determinations; however, lawyers are not permitted to include threats in demand letters and the threats in this letter could be considered as extortionistic threats and as such you need to bring it to the Judge's attention'.
[20] Worthington affidavit [16].
In oral submissions, Mr Worthington described the phone call in slightly different terms, saying:[21]
They said it could be extortionistic threats, at best coercion or demand with menace. And they used those types of words and said 'But we are not allowed to tell you that's what it is, they are just things that may, in your opinion, be formed', but they won't investigate until they're off the record.
[21] ts 23.
Mr Worthington says that he conducted his own legal research online using google and formed the view that by the June letter he was being accused of an indictable offence. That view engendered some fear in him and his wife, but he did not seek any legal advice as to the letter, its meaning or any appropriate response.[22]
[22] ts 23.

Correspondence with Corser & Corser after the LPCC complaint

In September 2016 Mr Worthington wrote to Mr Bower asserting that he had a conflict of interest in that (amongst other things) he would be required to give evidence in the new proceedings he had instituted (CIV 1861 of 2016).[23]
[23] Worthington affidavit, MGW18.
Although those new proceedings were discontinued, in November 2016 Mr Worthington again wrote to Mr Bower alleging he was in a position of conflict in these proceedings, because he would be, 'a witness in respect of several issues that are central to disposition of these proceedings'.[24]
[24] Worthington affidavit, MGW20.
It is in this letter that Mr Worthington raises the contents of the June letter with Mr Bower. He claims that Mr Bower has accused him of an indictable offence and he sets out what he says is s 416 of the Criminal Code, inferring that Mr Bower has made a threat to him contrary to that section.[25] He asks Mr Bower to remove himself from the record and to apologise for any 'mis‑interpretation and consequent distress' caused by the June letter.
[25] The section which Mr Worthington sets out was s 416 of the Criminal Code (Qld), until it was repealed in 2008. However the Criminal Code (WA) does have an analogous provision being s 398, dealing with threats with intent to extort, including accusing or threatening to accuse any person of committing any indictable offence.

Mr Worthington sent another letter to Mr Bower on 5 January 2017 referring to s 416 of the Criminal Code and the Australian Consumer Law and again asking Mr Bower to remove himself from the record.[26]
[26] And complaining that the provisional patent applications had lapsed at the time of the June letter: Worthington affidavit, MGW21.

Grounds relied upon by Mr Worthington

Mr Worthington's written submissions raised three grounds.
First, it was said that the June letter was misleading or deceptive in that it purported to provide for the transfer of patents when in fact those patents had lapsed.
Second, it was said that Mr Bower's conduct by the 'unambiguous impropriety' of the June letter meant that he could not seek to rely upon the without prejudice nature of the letter and the letter should be evidence in the proceedings. Therefore Mr Bower should be called as a witness in the proceedings, and so it followed that he had a personal interest and a conflict.
Third, although not clearly defined, it appears Mr Worthington asserts that Mr Bower did not disclose his alleged conflict to the court and would be continuing to defend his own actions if he were able to remain on the record.
At the hearing, Mr Worthington put the complaint on a more limited and specific basis. He submitted that for as long as Corser & Corser remain on the record, they have the opportunity to drag out the litigation and so postpone the prospect of an investigation into their conduct in writing the June letter. He contends that the interest in postponing an investigation puts them in a position of conflict and the court should intervene and restrain them from acting in such circumstances.

MIA's opposition

MIA opposed the application and maintained it should have its choice of lawyers on the proceedings. It relies on the affidavit of its director and chairman, Andrew Monteiro.[27]
[27] Affidavit of Andrew Monteiro filed 12 July 2017. Mr Monteiro also refers in that affidavit to his affidavit filed 6 June 2014.
Although Mr Worthington narrowed the scope of his argument during the hearing, it is appropriate to record MIA's responsive submissions.
First, as to the alleged misleading or deceptive conduct, the June letter does not in fact specify the transfer of particular patent applications but refers to the transfer of the business and associated intellectual property rights. MIA contends that the relevant intellectual property is broader than merely the matters set out in the patents. Further, the evidence suggests that as at the date of the mediation at least one patent application remained pending.[28] But in any event, as indicated by his due diligence letter Mr Worthington was alive to the need to clarify any uncertainty as to the property to be transferred. He did not accept the offer to purchase the business and has not acquired the intellectual property or any part of the business, however described.
[28] Worthington affidavit, MGW26; Monteiro affidavit [13] ‑ [15].
Second, the without prejudice nature of the letter means it cannot be relied upon in this application or in the proceedings and is not relevant to the proceedings. There was no unambiguous impropriety or illegitimate threat such as to take the conduct outside the range of permissible conduct in hard fought litigation.
Third, there is no cause for Mr Bower to be a witness in the proceedings and so no conflict arose that ought to have been disclosed.
Fourth, there is no suggestion that Corser & Corser have proceeded on the basis that their conduct is not open to inquiry or scrutiny until the litigation is completed. There is no reason to believe the LPCC would not or could not intervene at any stage if it considered it necessary.

Matters to be determined

Two matters can be dealt with briefly. I do not consider that on the evidence available to me I could determine that Mr Bower's conduct was misleading or deceptive. There is a difference between the parties as to the property that comprises 'intellectual property'. That difference remains to be resolved in the proceedings. It does not follow from the fact that a party propounds a contested position in a dispute that its position is misleading or deceptive. Mr Worthington did not accept the June letter offer, he did not make a counter-offer in response and he does not assert he took any step in reliance upon it.
I accept MIA's submissions that the circumstances of the mediation are not relevant to the ongoing proceedings in this matter. Accordingly, there is no real prospect that Mr Bower would be called to give evidence about the mediation or the June letter.
The substantial issues raised by the submissions are:
(a)has Corser & Corser lost the benefit of without prejudice privilege because of the content of the June letter; and
(b) does the content of the June letter and the alleged quarantine from inquiry reveal a conflict such that the court should intervene.

Allegation of threat in without prejudice communication

MIA's starting point was that the without privilege nature of the correspondence meant that it could not be relied upon in this application or the proceedings generally.[29]
[29] ts 30.
Clearly, it was necessary for the court to review the June letter in order to assess Mr Worthington's application. What that means for case management of the litigation going forward is a separate issue. Whilst its relevance appears tenuous, disclosure of parts of the letter arguably might comprise some prejudice to MIA: accordingly these reasons do not disclose the proposed sale price of the business.
Assuming that the letter may have some relevance and assuming that MIA wishes to rely on the privilege, the question is whether it contains threats which would justify the abrogation of the privilege.
Not every threat in negotiations justifies its abrogation. It is inherent in any negotiations that a party may threaten to enforce their rights should a compromise not be reached and may bring to the other party's attention the consequences of not compromising.[30]
[30] Unilever Plc v Proctor & Gamble Co [1999] 1 WLR 1630, 1642; confirmed on appeal in Unilever Plc v Proctor & Gamble Co [2000] 1 WLR 2436.
However, as Robert Walker LJ stated in Unilever Plc v Proctor & Gamble:[31]
[O]ne party may be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the exclusion of the evidence would act as a cloak for perjury, blackmail or other 'unambiguous impropriety' (the expression used by Hoffmann LJ in Forster v Friedland (unreported), 10 November 1992; Court of Appeal (Civil Division) Transcript No. 1052 of 1992). … But this court has, in Forster v Friedland and Fazil-Alizadeh v Nikbin (unreported), 25 February 1993; Court of Appeal (Civil Division) Transcript No. 205 of 2993, warned that the exception should be applied only in the clearest cases of abuse of a privileged occasion.
[31] Unilever Plc v Proctor & Gamble Co [2000] (2444).
That the court must approach the task carefully was noted by Anderson J in Jermyn v Spargos Mining NL:[32]
In my opinion, the Court should not be quick to find that bona fide settlement negotiations fall within one or other of the exceptions, such as that the communications contained a threat of some kind. It would not be at all unusual for robust settlement negotiations to be capable of yielding a threat if the content of the negotiations is raked over later.
[32] Jermyn v Spargos Mining NL [2001] WASCA 149 [4].
Mr Worthington relies upon Ferster v Ferster.[33] In that case, three brothers were involved in a shareholder dispute. One of the actions on foot related to an unfair prejudice petition brought by one of the brothers (Jonathan) under the Companies Act 2006 (UK). A without prejudice email was written to him on behalf of his brothers after an unsuccessful mediation. Jonathan then applied to rely on the letter in the unfair prejudice petition and the application was allowed. The email withdrew an existing settlement offer that had been made and increased the amount proposed for payment:[34]
[A] fair reading of the email is that they wanted more for their shares because they had learned of their ability to cause the company to take the steps identified [to instigate committal proceedings]. Thus the offer was increased 'because we have become aware of further wrongdoings by Jonathan' and because 'Jonathan is in very serious trouble'. The 'very serious trouble' would also 'have implications for' Jonathan's family 'by reason of Jonathan's actions.' For that reason the offer would be 'beneficial to [Jonathan] and [his partner]'. The email went on to make a thinly-veiled threat that, if the offer was not accepted within 48 hours, the allegations being made would be made public. Acceptance of the offer would obviate 'the need of further steps such as committal proceedings'. The email goes on to draw attention to the criminal consequences of giving false evidence, including perjury, perverting the course of justice and likely imprisonment. Jonathan's 'credibility and reputation will be destroyed barring him out of the online gaming business in the future'. (original emphasis)
[33] Ferster v Ferster [2016] EWCA Civ 717.
[34] Ferster v Ferster [18].
In finding the threat went beyond what was permissible, the Court of Appeal took into account in particular that the threat of criminal action (not limited to civil contempt proceedings) went beyond what was reasonable in pursuit of civil proceedings, that there were said to be implications for Jonathan's family because of Jonathan's wrongdoing and that there was a threat of immediate publicity.[35]
[35] Ferster v Ferster [23].
The particular terms of the June letter that Mr Worthington contends comprise impropriety are:
The defendants should also be aware that the plaintiff is in possession of documents indicating that the defendants have already breached their court undertakings and may be in contempt of court. Should legal proceedings continue the plaintiff will likely consider bringing an application in this regard.
As it was mentioned by the second defendant at the mediation conference as a concern for him, it is also likely that Directors of the plaintiff will pursue the separate matter of a statement published by the (then) director of the trustee company of The OPR Trust regarding the alleged misconduct of the directors of the plaintiff.
I will refer to these as the 'contempt paragraph' and the 'defamation paragraph' respectively, and have considered them in the context of the letter as a whole.
Counsel for MIA submitted that a reasonable reader would take the contempt paragraph as a warning that if proceedings continued, the plaintiff would make an application to the court for remedial orders to stop the defendants from breaching their undertakings, that being a civil and not criminal process.
The distinction between civil and criminal contempt was examined by Buss JA in Allbeury v Corruption and Crime Commission:[36]
There is a distinction between civil and criminal contempt of court. This distinction is based on the difference between proceedings which are remedial or coercive in the interest of a private individual (civil contempt) and proceedings in the public interest to vindicate judicial authority or maintain the integrity of the judicial process (criminal contempt). See Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98, 106 (Gibbs CJ, Mason, Wilson & Deane JJ); Witham v Holloway [1995] HCA 3; (1995) 183 CLR 525, 530 (Brennan, Deane, Toohey & Gaudron JJ).
The critical point is whether the contempt proceedings are in essence punitive (in which case they will be classified as 'criminal') or whether they are in essence remedial or coercive (in which case they will be classified as 'civil'). See Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 [22] (Kirby J), [132] - [133] (Hayne, Heydon & Crennan JJ).
[36] Allbeury v Corruption and Crime Commission [2012] WASCA 84; (2012) 42 WAR 425 [61] ‑ [62]. See also Briggs v Lunt[No 4] [2011] WASCA 145 [31] ‑ [42].
There are also statements to the effect that a breach of an injunctive order or undertaking that is wilful but not contumacious is regarded as a civil contempt.[37] More generally, disobedience to a court order may amount to criminal contempt if it is contumacious.[38]
[37] Street v Hearne [2007] NSWCA 113; (2007) 70 NSWLR 231 [59] (Ipp JA): not determined by the High Court (see Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 [130]).
[38] Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98, 106, 108; Briggs v Lunt [37].
An allegation of contempt is a serious one and even if the contempt is classified as civil, proceedings 'must realistically be seen as criminal in nature'[39] and the onus of proof is beyond reasonable doubt.[40]
[39] Witham v Holloway [1995] HCA 3; (1995) 183 CLR 525, 534; Donaldson v Nolan [No 3] [2015] WASC 194 [19], [27]. See also s 98 of the Civil Judgments Enforcement Act 2004 (WA).
[40] Caratti v Boban Pty Ltd (Administrators Appointed)[No 2] [2015] WASC 139 (S).
However, against that backdrop, I do not consider that the 'contempt' paragraph comprised a threat of criminal proceedings. It is unfortunate that Mr Worthington considered otherwise based on his on‑line research. Whilst the letter does not specify the relief to be sought in any threatened application, in the context of the existing Undertaking and the purpose of the Undertaking (to protect against the disclosure of confidential information), the statement does not rise higher than a statement that MIA would seek to enforce its rights if necessary. The letter does not threaten criminal proceedings. It does not use words alleging criminal or contumacious conduct. If the intellectual property were sold to Mr Worthington by a settlement, clearly issues as to past and future compliance with the Undertaking would be resolved. It was therefore a matter relevant to the proposed settlement.
I also take into account that there is no suggestion Mr Bower was seeking to take advantage of the fact Mr Worthington was unrepresented: the June letter was also sent to JNC Legal, who remained the solicitors for MBS. Mr Worthington was given a reasonable time to take advice and respond, a time period which was extended at his request. He did not seek clarification about any aspect of the contempt paragraph. It was not until the offer was withdrawn that Mr Worthington appears to have raised any concerns about its content. Even then, those concerns were not raised with MIA until November 2016.
Whilst in hindsight it is always possible to notionally redraft letters in a manner which might better express matters, I do not consider it was improper for MIA to bring to Mr Worthington's attention the fact that one consequence if the litigation proceeds is that it may take further steps to ensure its existing rights under the Undertaking are protected and that may include an application in relation to contempt proceedings.
As to the defamation paragraph, it appears from Mr Worthington's submissions filed in the application to lift the Undertaking that at some point Mr Havilah asserted that [redacted] had made a defamatory statement.[41] Mr Worthington refers to the issue of a letter of demand by Tottle Partners, presumably on behalf of (at least) Mr Havilah. It is apparent from the June letter that Mr Worthington referred to the defamation claim during the mediation. The defamation paragraph clarifies that from MIA's perspective such proceedings are to be pursued. They are not expressly released under the alternate proposal. The claim is not referred to by way of any threat or incentive to accept the alternate offer. Even if it were intended to be released by the alternate offer, my view would be the same: the issue having been raised by Mr Worthington, it was not improper that MIA or its directors confirm that they intended to pursue their alleged rights in that regard.
[41] Mr Worthington's submissions in support of application to lift undertaking, page 4 [8].
Care should be taken in settlement negotiations to ensure that the claims the subject of any release or potentially the subject of a release are made clear.[42] It was not inappropriate to raise matters such as the defamation claim and so provide to Mr Worthington the opportunity to ensure that any such claim was also released by any settlement.
[42] Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112; Butler v St John of God Health Care Inc [2008] WASCA 174 [3] ‑ [6] (Buss JA).
In the circumstances I do not consider there has been an illegitimate threat or a threat in the nature of blackmail or other impropriety such as to abrogate without prejudice privilege. Any such abrogation should occur only in a clear case and this is not such a case.

The restraint issue

Principles - restraining a solicitor from acting

The principles are well known.[43] The three recognised grounds for restraining solicitors from acting are:
(a)the danger of misuse of confidential information;
(b)breach of a fiduciary duty of loyalty not to act against the former client;
(c)the court's inherent jurisdiction to control the conduct of solicitors as officers of the court.
[43] Eg Ismail-Zai v The State of Western Australia [2007] WASCA 150; (2007) 34 WAR 379.
In this case, it is the third precept that is to be considered.
In Kallinicos v Hunt,[44] Brereton J summarised the following principles as to the inherent jurisdiction from the authorities:[45]
(a)the test to be applied in this inherent jurisdiction is whether a fair‑minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a lawyer 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;
(b)the jurisdiction is exceptional and is to be exercised with caution;
(c)due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause;
(d)the timing of the application may be relevant, in that the cost, inconvenience and impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief.
[44] Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561.
[45] Kallinicos v Hunt (582 ‑ 583).
The jurisdiction may be invoked by an opposing party in litigation. In Holborow v McDonald Rudder,[46] EM Heenan J said:[47]
It seems to me that if it can be demonstrated that there is a risk that a practitioner will disregard his overriding duty to the court that this will usually, if not always, require action by the court to avoid such a risk by preventing the practitioner from acting even if the relief is sought by an opposing party in the litigation. But these principles do not render counsel or solicitors generally examinable at the suit of their client's opponents. The duty of the 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.
[46] Holborow v McDonald Rudder [2002] WASC 265.
[47] Holborow v McDonald Rudder [30].
Categories of conduct where the inherent jurisdiction may be invoked include where a solicitor may be a material witness in proceedings with an interest in its outcome or where a solicitor has a family or other close relationship with a client. However, it is not necessary for a litigant to bring themselves within any particular category and there will be cases that in fact straddle categories.[48]
[48] Lyons v Legalese Pty Ltd [2016] SASC 160.
The basis for Mr Worthington's application does not fall neatly within an established category but in my view if it were established that a solicitor deliberately delayed or interfered with proceedings for their own benefit, then there is potential for the court to invoke its inherent jurisdiction.

Application of principles in this case

For the reasons set out above, I do not consider the impugned conduct to comprise unambiguous impropriety or an illicit threat.
However, that does not mean that a complaint about such conduct would be dismissed out of hand or ignored by the LPCC. As Mr Worthington made a complaint, the practitioner's conduct was open to being investigated and the issue in terms of a conflict is whether Mr Bower (or Corser & Corser) has deliberately sought to avoid any disciplinary inquiry by staying on the record and so postponing an inquiry.
Mr Worthington maintains that he was told by the LPCC that it would not investigate his complaint until these proceedings are concluded. Although there was no admissible evidence to that effect, for the purpose of the application I will proceed on the basis that Mr Worthington gained that impression from his conversation with the LPCC. However, I do not accept that the LPCC was unable to intervene or carry out investigations if it considered it appropriate to do so. Ongoing proceedings of themselves do not justify a general stay of any investigations into the conduct of parties on the record.
The Legal Profession Act 2008 (WA) (LPA) has as its purpose the regulation of legal practice in Western Australia. That includes the regulation of legal practitioners. It has a public interest regulatory objective.
Part 16 div 2 of the LPA establishes the LPCC as the regulatory authority charged with securing compliance with the standards of conduct required of practitioners.[49] The LPCC is to inquire into complaints against practitioners for the purpose of determining whether the conduct may comprise unsatisfactory professional conduct or professional misconduct.[50]
[49] The Committee is a committee of the Legal Practice Board (s 555). The Board does not direct the Committee as to the performance of its functions (s 557(4)).
[50] s 557(2)(b) of the LPA.
Part 13 of the LPA determines the process by which the Committee deals with complaints and the discipline of legal practitioners. Importantly, s 401 states:
The purposes of this Part are as follows -
(a)to provide for the discipline of the legal profession in this jurisdiction, in the interests of the administration of justice and for the protection of consumers of the services of the legal profession and the public generally;
(b)to promote and enforce the professional standards, competence and honesty of the legal profession;
(c)to provide a means of redress for complaints about lawyers.
Nothing in the LPA expressly prevents the LPCC from investigating the conduct of solicitors who are on the record. Its broad purposes would clearly encompass such an investigation where appropriate. It has broad powers of investigation under Part 15 of the LPA.[51]
[51] By s 422 of the LPA.
Section 413(1) of the LPA requires the LPCC to as soon as practicable inform a legal practitioner of a complaint that has been made. However, s 413(2) allows the LPCC to refrain from notifying a practitioner of a complaint if, relevantly, it considers that to do so would prejudice pending court proceedings.
I do not know whether the LPCC formed a view that it would refrain from notifying Corser & Corser of the complaint and, if so, on what basis. However, apparently Corser & Corser were notified of the complaint. I was told by counsel that there had been a discussion between Corser & Corser and the LPCC but they were not aware of any ongoing investigation.[52]
[52] ts 17.
However, more to the point, counsel submitted it was implausible that the LPCC would have determined not to investigate the complaint until the proceedings were completed:[53]
It is simply not a logical position … for the LPCC to take. If a lawyer engages in egregious misconduct in the conduct of a case, the LPCC doesn't have to wait until the case finishes to do something about it. I mean, Mr Worthington, on his own evidence, reported this to the LPCC years ago. Nothing has happened.
[53] ts 30.
Three points flow from this:
(a)apparently Corser & Corser are not aware of any ongoing investigation into the complaint. It cannot be said that they are prolonging the litigation in order to avoid any known investigation;
(b)Corser & Corser do not consider there would be any reason why the LPCC could not intervene at any point and investigate their conduct, regardless of the fact they are on the record. There is therefore no benefit to them in staying on the record and deliberately prolonging the proceedings. In their view, an investigation can proceed regardless; and
(c)there is no evidence that Corser & Corser have been told by the LPCC that there will be no investigation until the matter is resolved and so there is no evidence they are operating under any such assumption.
Therefore, on the evidence before me I am not satisfied that Corser & Corser are seeking to obtain or indeed can obtain any benefit by way of delay of an investigation by staying on the record and continuing to act in these proceedings. They are in fact proceeding on the basis there is no such benefit. There is no real prospect that they are modifying their behaviour in these proceedings because of any complaint process or that they are failing to give proper regard to their overriding duty to the court.
Applying the principles set out in Kallinicos v Hunt, I am not satisfied that a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that the inherent jurisdiction of the court be invoked to restrain Corser & Corser from continuing to act in these proceedings. Whilst it would no doubt be possible for MIA to retain new lawyers, that is not to the point. I must be cautious in denying MIA its choice of lawyers, lawyers who have been on the record for some years. I do not consider this is one of the exceptional circumstances where the court should exercise its jurisdiction.
I will hear the parties as to the management of these proceedings going forward and as to appropriate orders.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: MINING INNOVATIONS AUSTRALIA PTY LTD -v- MINING AND BUILDING SERVICES GROUP PTY LTD [2017] WASC 240 (S)

CORAM: BANKS-SMITH J

HEARD: ON THE PAPERS

DELIVERED : 26 SEPTEMBER 2017

FILE NO/S: CIV 1672 of 2014

BETWEEN: MINING INNOVATIONS AUSTRALIA PTY LTD
Plaintiff
AND
MINING AND BUILDING SERVICES GROUP PTY LTD
First Defendant
MICHAEL GRAHAM WORTHINGTON
Second Defendant
LIN WILLIAM VOGLER
Third Defendant
(BY ORIGINAL ACTION)
MINING AND BUILDING SERVICES GROUP PTY LTD
Plaintiff by Counterclaim
AND
MINING INNOVATIONS AUSTRALIA PTY LTD
First Defendant by Counterclaim
ANDREW NOEL MONTEIRO
Second Defendant by Counterclaim
(BY COUNTERCLAIM)

Catchwords:

Costs - Indemnity costs - Litigant in person

Legislation:

Nil

Result:

Application for indemnity costs dismissed

Category: B

Representation:

Original Action

Counsel:

Plaintiff:     No appearance
First Defendant              :     No appearance
Second Defendant         :     No appearance
Third Defendant            :     No appearance

Solicitors:

Plaintiff:     Corser & Corser
First Defendant              :     No appearance
Second Defendant         :     In person
Third Defendant            :     No appearance

Counterclaim

Counsel:

Plaintiff by Counterclaim :                 No appearance
First Defendant by Counterclaim       :     No appearance
Second Defendant by Counterclaim   :     No appearance

Solicitors:

Plaintiff by Counterclaim :                 No appearance
First Defendant by Counterclaim       :     Corser & Corser
Second Defendant by Counterclaim   :     No appearance

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

Mining Innovations Australia Pty Ltd v Mining and Building Services Group Pty Ltd [2017] WASC 240
Ogawa v University of Melbourne (No 2) [2004] FCA 1275
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)
Tey v Optima Financial Group Pty Ltd [2012] WASCA 192

BANKS-SMITH J: On 17 August 2017 I dismissed Mr Worthington's application to restrain the law firm Corser & Corser from acting in these proceedings.[54] Mr Worthington is a litigant in person. The plaintiff had opposed the application. After judgment was delivered, the plaintiff sought an indemnity costs order against Mr Worthington, and the parties exchanged written submissions.
[54] Mining Innovations Australia Pty Ltd v Mining and Building Services Group Pty Ltd [2017] WASC 240.
As the reasons for dismissing the application indicate, at the heart of Mr Worthington's complaint was the content of a without prejudice letter of 9 June 2015.
The plaintiff submitted:
(a)Mr Worthington's application was always hopeless;
(b)Corser & Corser had informed him that the application was hopeless by letter dated 11 May 2017 in which they advised that they had senior counsel's advice that they did not have a conflict in continuing to act, either in relation to being called as witnesses or as a result of their without prejudice letter;
(c)they also advised in that letter that the Legal Profession Complaints Commission did not consider his compliant to it about the letter had any valid basis and did not warrant investigation;
(c)Corser & Corser had invited Mr Worthington to withdraw the application and said that if he did not do so they would seek indemnity costs.
The principles applicable to indemnity costs were summarised in Swansdale Pty Ltd v Whitcrest Pty Ltd.[55] I do not need to repeat them, but in short, an indemnity costs order will constitute an appropriate sanction marking the disapproval of improper or unreasonable conduct by a party or its advisers.[56]
[55] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S).
[56] Swansdale Pty Ltd v Whitcrest Pty Ltd [10].
There are various authorities where the position of litigants in person is discussed.
The plaintiff referred in particular to Tey v Optima Financial Group Pty Ltd:[57]
[57] Tey v Optima Financial Group Pty Ltd [2012] WASCA 192 [16].
Where it is alleged that a person's conduct was improper or unreasonable so as to justify an order for indemnity costs, the fact that the person was without legal representation will ordinarily be a relevant factor in determining whether such an order is justified. What might be considered conduct warranting an indemnity costs order where a party is legally represented may not appear in the same light when account is taken of the lack of legal expertise of a litigant in person. That will necessarily depend upon the particular circumstances of the case. But where, after taking into account the lack of legal representation, the conduct of an unrepresented party is such as to warrant an indemnity costs order the court should not be reluctant to make such an order. Litigants in person have the capacity to inflict a great deal of unnecessary expense and hardship on other parties and the court should not stay its hand where such censure is properly called for.
The plaintiff also referred to Ogawa v University of Melbourne (No 2);[58]
[58] Ogawa v University of Melbourne (No 2) [2004] FCA 1275 [42].
Generally speaking, courts are more reluctant to make orders for indemnity costs against litigants in person than against legally represented litigants, although, in an appropriate case, they will make such an order. In Bhagat v Royal and Sun Alliance Life Assurance Australia Ltd [2000] NSWSC 159 at [13] Hodgson CJ in Eq observed:
'… I accept that a court does have to make allowances for the position of litigants in person, and to try to ensure that such a litigant does not lose out because of lack of expertise; although there is a limit to what the Court can do in that regard, while still remaining an impartial determinant of a dispute. The Court may in those circumstances refrain from making orders against litigants in person for conduct that might be considered as justifying orders for costs against represented litigants. By the same token, litigants in person can cause great hardship and expense to other parties, through making allegations and claims that lawyers would recognise as allegations and claims that could not reasonably or even properly be made, and through making proceedings much longer and much more expensive than they would otherwise be, by not focusing accurately on the real issues in the case. Conduct of that nature by legally represented parties would often lead to orders for indemnity costs. Litigants in person may escape the consequence of indemnity costs, but I do not think that the circumstance that a party is a litigant in person is a ground for displacing the ordinary result that costs follow the event.'
Mr Worthington denies his application was hopeless, says it was not brought for any improper purpose and said the court should not make an order absent blameworthy behaviour.
I have determined that costs should be disposed of in the usual way, that is, on a party/party basis. I decline to order that Mr Worthington pay the plaintiff's costs on an indemnity basis.
The principal reason is that in my view, Mr Worthington's application was not strong, but was not hopeless. Regardless of the fact that Mr Worthington is a litigant in person, the application required close consideration of the meaning and context of the without prejudice letter in order to assess whether it comprised a threat such as to justify the exercise of the court's jurisdiction.
There are other reasons, particularly taking into account the principles set out in Tey:
(a)Although Corser & Corser informed Mr Worthington that they had senior counsel's opinion that his application was hopeless, I have viewed their letter and they do not disclose any reasons or foundation for that opinion. In other words, the letter does not inform Mr Worthington, as a litigant in person, of anything that might assist him in understanding why they considered the application hopeless. It simply makes the assertion;
(b)Corser & Corser knew from at least September 2016 that Mr Worthington considered that the without prejudice letter accused him of criminal contempt and he thought that was an indictable offence. There is no evidence that Corser & Corser took any step to disabuse him of that notion. It seems to me that Corser & Corser could have readily informed him that they were referring to civil contempt. Had they done so, it is possible that Mr Worthington would not have continued with his application. Had he continued in the face of such information, there would then have been a stronger argument for indemnity costs;
(c)Although Corser & Corser say in their letter and submissions that the LPCC did not consider Mr Worthington's complaint to it had any valid basis and did not warrant investigation, Corser & Corser did not provide any evidence in support of that proposition. During the hearing of the application, the following exchange occurred with the plaintiff's counsel:[59]
[59] ts 17.
BANKS-SMITH J: Perhaps while you're looking I'm just going to ask Mr Warnick a question. Mr Warnick, do you know anything about any investigation by the LPCC?
WARNICK, MR: There's certainly no ongoing investigation, your Honour. There has been, I think, a discussion between the LPCC and Mr Bower some time ago; certainly no ongoing investigation.
BANKS-SMITH J: That's all you're aware of. Thank you.
There was no other evidence given about information provided to Corser & Corser by the LPCC.
In all the circumstances, I decline to order costs be paid on an indemnity basis.