Nash v Timbercorp Finance Pty Ltd

Link copied
Case Copied 59 min read

FEDERAL COURT OF AUSTRALIA

Nash v Timbercorp Finance Pty Ltd (in liq), in the matter of the bankrupt estate of Nash [2019] FCA 957

File number(s): VID 750 of 2018
Judge(s): ANDERSON J
Date of judgment: 21 June 2019
Catchwords:

PRACTICE AND PROCEDURE – application by examinee in public examination under s 81 of the Bankruptcy Act 1966 (Cth) (Act) to restrain law firm acting for and advising the examination applicants – where law firm previously acted for examinee – whether examinee in examination has standing to seek injunctive relief to restrain law firm – inherent jurisdiction to control conduct of solicitors as officers of the court

LEGAL PRACTITIONERS – whether real and sensible risk of misuse by the law firm of confidential information of former client – whether breach of duty of loyalty owed by law firm to former client – whether a perception of conflict contrary to the proper administration of justice – delay of examinee in seeking restraint of law firm

BANKRUPTCY AND INSOLVENCY – application by examinee for access to affidavit in support of application for issue of examination summons (supporting affidavit) – whether arguable case for setting aside the examination – whether material breach of obligation to make full and frank disclosure upon seeking issue of summons – whether disclosure of supporting affidavit would frustrate examination process

Held: examinee has standing to seek injunctive relief to restrain law firm – law firm may continue acting for examination application for remainder of examination on conditions – restraint of five members of law firm – information barrier and undertakings –  application for access to supporting affidavit rejected
Legislation:

Bankruptcy Act 1966 (Cth) ss 5(1), 77(2)(a), 81, 81(1), 81(1B), 81(7), 81(8), 81(10), 81(11), 81(11AA), 81(11A)

Corporations Act 2001 (Cth) ss 596A, 596B
Cases cited:

Australian Medic-Care Co Ltd v Hamilton Pharmaceutical Pty Ltd (2009) 261 ALR 501

Babcock & Brown DIF III Global v Babcock & Brown International Pty Ltd [2015] VSC 453

Black v Taylor [1993] 3 NZLR 403

Bowen v Stott [2004] WASC 94

Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307

Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434

Dealer Support Services Pty Ltd v Motor Trades Association of Australia Ltd (2014) 228 FCR 252

Durban Roodepoort Deep, Limited v Mark David Reilly and Glenn Robert Featherby As Administrators of the Deed of Company Arrangement of Laverton Gold NL (Subject to Deed of Company Arrangement) & Ors [2004] WASC 269

Farrow Mortgage Services Pty Ltd (In liq) v Mandall Properties Pty Ltd [1995] VR 1

Gouriet v Union of Post Office Workers [1978] AC 435

Griffin v Pantzer (2004) 137 FCR 209

Grimwade v Meagher [1995] 1 VR 446

Hodgson v Amcor Ltd (No 4) (2011) 32 VR 568

In re A Firm of Solicitors [1997] Ch 1

In re Holloway; Young v Holloway (1887) 12 PD 167

In the matter of IPM Group Pty Ltd [2015] NSWSC 240

Kallinicos v…

CaseChat AU logo

Keep reading for free

Create a free CaseChat account to read Nash v Timbercorp Finance Pty Ltd and more:

  • Read every judgment in full
  • Ask AI and get answers linked to paragraphs
  • See how each paragraph was cited in later cases
  • Download judgments as PDF or Word
Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details
Case
[2019] FCA 957
Decision Date

CaseChat Overview and Summary

The case of Nash v Timbercorp Finance Pty Ltd involved Mr Nash, the examinee in a bankruptcy examination, seeking to restrain the law firm Mills Oakley from acting for and advising the liquidators during his examination. The firm had previously acted for Mr Nash and had acquired confidential information pertinent to the examination. The legal issues centered around whether Mr Nash had standing to seek injunctive relief against the law firm, the potential misuse of confidential information by the firm, and the impact of any conflict of interest on the administration of justice. The court ruled that Mr Nash had standing to seek relief and that certain members of the law firm should be restrained from participating in the examination to prevent any misuse of confidential information. The firm was permitted to continue acting for the liquidators, subject to specific conditions, including information barriers and undertakings. Mr Nash's application for access to the liquidators' affidavit in support of the examination summons was rejected as it would materially frustrate the examination process.

The Federal Court found that Mr Nash had standing to bring his application and that there was a real risk of misuse of confidential information if certain members of Mills Oakley were not restrained from acting for the liquidators. The court was satisfied that a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice required restraint of these individuals. The court considered the inherent jurisdiction to control the conduct of solicitors and protect the integrity of the judicial process. It concluded that the public interest in the client not being deprived of the solicitor of their choice and the unnecessary cost and inconvenience to restrain the other members of the law firm outweighed the risk of misuse of confidential information. The court ordered that specific members of Mills Oakley be restrained from participating in the examination, while allowing the rest of the firm to continue, provided they adhered to strict conditions including information barriers and undertakings. The court also rejected Mr Nash's request for access to the liquidators' affidavit, finding that it would undermine the examination process.

Orders

Orders of the court

1. Paragraph 1 of the interim orders sought by Richard Robert Nash (Mr Nash) is dismissed.

2. The respondents to the interim application by Mr Nash (collectively, liquidators), whether by themselves, their servants, agents or howsoever otherwise, be restrained from continuing to retain:

(a) Stuart Lewin (Mr Lewin), a Partner of Mills Oakley Lawyers (Mills Oakley); and

(b) Alison Malek, Justin Davidson, Amy Carruthers and Dona Hansani, each in the employ of Mills Oakley,

(collectively, Restrained Persons) from having any involvement whatsoever with the examination of Mr Nash ordered in these proceedings by Registrar Allaway on 19 July 2018 (Richard Nash Examination).

3. The liquidators, whether by themselves, their servants, agents or howsoever otherwise, be restrained from continuing to retain the Restrained Persons to give them advice in relation to any matter in respect of the Richard Nash Examination.

4. The liquidators' solicitors, Mills Oakley, provide undertakings to the Court for each solicitor, law clerk or other team member previously or currently involved in the Richard Nash Examination, except for the Restrained Persons, (collectively, Revised Examination Lawyers) substantially in the form of the undertaking set out in Annexure “SAL-67” to the affidavit of Mr Lewin sworn 16 May 2019 (first Lewin affidavit).

5. Each solicitor, law clerk or team member at Mills Oakley that becomes involved in the Richard Nash Examination (New Examination Lawyer) must provide an undertaking to the Court substantially in the form of the undertaking set out in Annexure “SAL-67” to the first Lewin affidavit.

6. The liquidators' solicitors, Mills Oakley, provide undertakings to the Court for each person identified as a current partner of, or person currently employed by, Mills Oakley in the table set out in Annexure “SAL-65” to the first Lewin affidavit as having previously been involved in any matter on behalf of Mr Nash, Stellar Finance Pty Ltd (ACN 098 500 362) and/or Kenneth Robert Nash (collectively, Continuing Lawyers) substantially in the terms of the undertaking set out in Annexure “SAL-66” to the first Lewin affidavit.

7. The liquidators’ solicitors, Mills Oakley, undertake to the Court to implement an information barrier substantially in accordance with the Law Institute of Victoria's Information Barrier Guidelines adopted on 20 April 2006, being Annexure “SAL-64” to the first Lewin affidavit, for the purpose of safeguarding against the risk of the flow of confidential information of Mr Nash between, on one side, the Continuing Lawyers and the Restrained Persons and, on the other side, the Revised Examination Lawyers and any New Examination Lawyers.

8. The parties are to bear their own costs of and incidental to this application.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Finally, Mr Nash is not entitled to access the liquidator’s affidavit. To permit such access would materially frustrate the purposes for which his examination is held. Background Mr Nash relies upon affidavits sworn by him on 10 April and 31 May 2019 in support of his application. The liquidators rely upon the affidavits of Mr Lewin sworn 16 May 2019 (first affidavit), 5 June 2019 and 13 June 2019 (third affidavit). The key factual matters from those affidavits are summarised as follows. Mr Nash is married to Elizabeth Nash. His parents are Kenneth Nash and Gail Nash. Mr Nash is a former director and company secretary of Stellar Finance Pty Ltd (Stellar Finance). The history of the company reveals that:(a)from 8 November 2001, being the date of incorporation of Stellar Finance, to 2 April 2002, Mr Nash and Neil Smoli (Mr Smoli) were the directors and company secretaries of Stellar Finance;(b)from 2 April 2002 until 27 May 2003, Mr Nash and Kenneth Nash were the directors and company secretaries;(c)from 27 May 2003 until 1 August 2016, Mr Nash was the sole director and sole company secretary;(d)from 1 August 2016, Elizabeth Nash became the current sole director and sole company secretary; and(e)Stellar Finance is and was at all relevant times a private company. Nash Family Holdings Pty Ltd is the sole shareholder of Stellar Finance. Each of Mr Nash, Mr Smoli and Kenneth Nash were previously shareholders of Stellar Finance. Stellar Finance formerly traded as a mortgage manager and broker. The loan book of Stellar Finance was sold in 2013 and the company has since been dormant.Mills Oakley’s previous matters for Mr Nash and Stellar Finance Mills Oakley has previously acted for Mr Nash and Stellar Finance in a number of matters, both contentious and non-contentious, between about 2001 and 2009. Mills Oakley advised and acted for him and/or Stellar Finance in six contested matters (collectively, Previous Contentious Matters) as follows:(a)the “Smoli Dispute” between about 2001 and 2008;(b)the “Van Prooyen Dispute” between 2004 and 2005;(c)the “Gateway Dispute” during 2006;(d)the “Vero Dispute” between 2007 and 2008;(e)the “Gaynor Dispute” between 2007 and 2008; and(f)the “Hawthorn East Lease Dispute” between about mid-2007 and 2009. Mr Nash alleges that the following partners and employees of Mills Oakley were involved in the Previous Contentious Matters:(a)Smoli Dispute: Partners Mr Lewin, Roger Jepson (Mr Jepson) and Andrew Brown (Mr Brown) (all current Partners of Mills Oakley), Senior Associates Louise Gehrig (Ms Gehrig) and James Tobin (Mr Tobin) (the latter now a Partner of Mills Oakley), and Lawyer Jarrod Munro (Mr Munro);(b)Van Prooyen Dispute: Partner Mr Jepson (current Partner of Mills Oakley) and Solicitor Peter Bradley;(c)Gateway Dispute: Partner Mr Jepson (current Partner of Mills Oakley) and Senior Associate Ms Gehrig;(d)Vero Dispute: Partners Mr Jepson and Mr Brown (both current Partners of Mills Oakley), Senior Associates Ms Gehrig and Mr Tobin (the latter now a Partner of Mills Oakley), and Lawyer Mr Munro;(e)Gaynor Dispute: Partners Mr Jepson and Mr Brown (current Partners of Mills Oakley), Senior Associate Mr Tobin (now a Partner of Mills Oakley), and Articled Clerk Eliza Garrett; and(f)Hawthorn East Lease Dispute: Partner Mr Jepson (current Partner of Mills Oakley) and Senior Associate Ms Gehrig. Current Partners Mr Lewin and Mr Brown were also identified in the relevant costs agreement and disclosure statement as “likely to be involved in this work”.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

My view is that, if Mr Nash wishes to do so, he is capable of advancing an application to set aside the Summons on the grounds specified above in the absence of access to the liquidator’s affidavit.Conclusion For these reasons, Mills Oakley may continue to act for, and advise, the liquidators in respect of the examination of Mr Nash, but only on the strict conditions expressed in my orders set out above at pages i-iii. Moreover, Mr Nash will not be granted access to the liquidator’s affidavit. Both Mr Nash and the liquidators have experienced mixed success in this application. Mr Nash was not successful in his application to obtain access to the liquidator’s affidavit, nor his attempt to restrain Mills Oakley as a firm from acting for the liquidators. However, although the ultimate outcome was not his favour, a number of elements of Mr Nash’s application was successful in the face of opposition from the liquidators. Mr Nash was successful in establishing that he had standing to bring the application. He was also successful in establishing that Mills Oakley possessed confidential information of his that was potentially relevant to his examination. The Restrained Persons will be restrained from acting for, and advising, the liquidators in relation to his examination. In light of this mixed success, the parties should bear their own costs of and incidental to the application.

Ratio Decidendi

Legal Principle Established

It follows that I will not order that Mills Oakley be restrained from acting for the liquidators on this second basis.Third basis for restraint: Proper administration of justice The third and final basis for Mr Nash’s contention that Mills Oakley should be restrained arises from the Court’s inherent jurisdiction to ensure the due administration of justice, to protect the integrity of the judicial process and restrain solicitors from acting in a particular case as part of its supervisory jurisdiction: Grimwade v Meagher [1995] 1 VR 446 at 452; Dealer at [37], [93]-[94]. 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 the solicitor be prevented from acting in the interests of the protection of the integrity of the judicial process and the appearance of justice. This basis for disqualification is an “exceptional one” and “to be exercised with appropriate caution”, with due weight to be given “to the public interest in the client not being deprived of the solicitor of its choice”: Dealer at [95]. As explained above at [114], I am satisfied that there is a real risk of misuse of confidential information if the Restrained Persons—Mr Lewin, Ms Malek, Mr Davidson, Ms Carruthers and Ms Hansani—are not restrained from continuing to act for, or give advice to, the liquidators for the remainder of the examination of Mr Nash. A fair-minded, reasonably informed member of the public would, in my opinion, conclude that the proper administration of justice would be brought into disrepute if they were not restrained. However, provided the liquidators are restrained from retaining the Restrained Persons to act or advise in relation to the examination of Mr Nash, I am of the opinion that there is no proper basis to restrain the other Examination Lawyers from acting and advising in relation to the examination. That is for the following reasons:(1)the solicitors and law clerks previously involved in acting for, and advising, Mr Nash in respect to the Previous Files, and in particular the Continuing Lawyers, have no involvement in the examination of Mr Nash;(2)each of the Continuing Lawyers are prepared to give undertakings to the Court not to divulge any information they may have relating to Mr Nash, Kenneth Nash or Stellar Finance;(3)none of the Examination Lawyers, other than Mr Lewin, were employed by Mills Oakley during the period Mills Oakley acted for Mr Nash and/or Stellar Finance and/or Kenneth Nash in respect of the Previous Matters;(4)the Examination Lawyers were not involved in the Previous Matters;(5)the Examination Lawyers (other than the Restrained Persons) will undertake to the Court not to seek to obtain any information from the Continuing Lawyers;(6)with the exception of the Restrained Persons, there is no actual conflict of duty with Mills Oakley acting for the liquidators in respect of the examination;(7)Mr Nash ceased to utilise the services of Mills Oakley 10 years ago and made his own commercial decision to retain new solicitors to undertake his legal work from time to time;(8)to restrain the liquidators from continuing to engage Mills Oakley (other than the Restrained Persons) will cause unnecessary cost and inconvenience: see Dealer at [110]; and(9)there has been an inordinate delay in making this application and no proper explanation provided by Mr Nash for the delay. The effect of delaying bringing the application on the cost, inconvenience and impracticality of the Court requiring lawyers to cease to act is relevant to the Court’s discretion to restrain a solicitor from acting: Sent at [60]-[64]; In the matter of IPM Group Pty Ltd [2015] NSWSC 240 at [72] and [73]; Meyfield Developments Pty Ltd v Altus Development Pty Ltd (No. 2) [2018] VSC 25 at [30]-[34].