Perpetual Trustee Company Limited v Michael John Miller
[2011] NSWSC 1406
•23 November 2011
Supreme Court
New South Wales
Medium Neutral Citation: Perpetual Trustee Company Limited v Michael John Miller [2011] NSWSC 1406 Hearing dates: 15/11/2011 Decision date: 23 November 2011 Before: Harrison AsJ Decision: (1)Mr Carroll cease acting as solicitor for Kevin Thomas Roberts and Roberts Lumley Pty Limited.
(2)Costs are reserved.
(3)The matter is listed for costs argument before Harrison AsJ on 5 December 2011 at 9.30 am.
Catchwords: PRACTICE AND PROCEDURE - application for order that solicitor cease to act - likelihood that solicitor will be called to give evidence in proceedings on contentious issues - conduct and reputation of solicitor will be in issue at trial - order made Legislation Cited: Revised Professional Conduct and Practice Rules 1995 (Solicitors' Rules) Cases Cited: Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561
Mitchell v Burrell [2008] NSWSC 772Category: Procedural and other rulings Parties: Perpetual Trustee Company Limited (First Plaintiff)
Challenger Managed Investments Limited (Second Plaintiff)
Michael John Miller (Defendant/Cross Claimant)
Kevin Thomas Roberts (First Cross Defendant)
Roberts Lumley Pty Limited (Second Cross Defendant)Representation: P Dowdy (Plaintiffs)
J van Aalst (Defendant/Cross Claimant)
L Fermanis (First & Second Cross Defendants)
Norton Rose Australia (Plaintiffs)
John Hertz & Associates (Defendant/Cross Claimant)
Carrolls Lawyers (First & Second Cross Defendants)
File Number(s): 2009/296733
Judgment
HER HONOUR: By notice of motion filed 18 August 2011, the defendant/cross claimant seeks an order that Michael Carroll, the solicitor acting for the first and second cross defendants, being likely to be called as a witness in these proceedings in relation to contentious issues concerning the cross claim, be restrained from continuing to act for the cross defendants.
The first plaintiff is Perpetual Trustee Company Limited. The second plaintiff is Challenger Managed Investments Limited. For convenience, I shall refer to the plaintiffs as "Challenger". The defendant/cross claimant is Michael John Miller ("Mr Miller"). The first cross defendant is Kevin Thomas Roberts ("Mr Roberts"). The second cross defendant is Roberts Lumley Pty Limited. Mr Roberts is an accountant and Roberts Lumley Pty Limited is an accounting practice. The reference to "Mr Roberts" in this judgment is a reference to him and to Roberts Lumley Pty Limited.
Mr Miller relied on his affidavit sworn 20 April 2011 and the affidavit of John Hertz sworn 24 August 2011. Challenger relied on the affidavit of John Hertz sworn 21 September 2011. Mr Carroll relied on his affidavit sworn 13 September 2011. Challenger supports Mr Miller's application. Mr Roberts opposes it.
The pleading framework
Challenger seeks possession of land and payment of money arising from a mortgage. Challenger agreed to loan money pursuant to a written loan agreement dated 10 December 2003 to Mr Miller. Mr Miller has defaulted in repayment of the loan. A mortgage was given by Mr Miller to Challenger as security for the loan. Mr Miller has breached the terms of the mortgage by failing to make the repayments.
On 22 March 2010, Mr Miller filed a defence and cross claim. At [8] of his defence, Mr Miller pleads:
"On or about 10 December 2003 without the knowledge, consent or authority of the defendant and contrary to his written direction and authority the plaintiffs or alternatively the second plaintiff released and paid the funds in accordance with the request of Kevin Thomas Roberts thereby facilitating a fraud committed by him on the defendant."
Mr Miller, in his cross claim, alleges that Mr Roberts engaged in misleading and deceptive conduct and unconscionable conduct.
Background facts
Mr Miller is 58 years of age. He is in bad health, his heart is not good and he weighs around 140 kilograms. Consequently, he is basically house bound and can only walk short distances before he experiences breathing difficulties. So far as his education is concerned, Mr Miller left school at 16 years.
On 18 January 1975, Mr Miller commenced employment with the Hilton Hotel in Sydney as a porter. He remained in that job for about 27 years until about January 2002.
Since about 1981, Mr Roberts has prepared Mr Miller's tax returns. Mr Miller recalls that both he and his mother would attend the office of Mr Roberts when they needed to have their tax returns prepared.
In 1985 Mr Roberts' mother died and left her entire estate to him, which included the property at Redfern where he has lived all of his life. After his mother's death, Mr Miller continued to use Mr Roberts to prepare his tax returns.
In January 2002, Mr Miller was unwell and decided to retire from his employment because his routines were changed and he did not get on with his new boss. He became unhappy and decided that he did not want to work there anymore.
There are two significant events that form the basis of the application to restrain Mr Carroll from continuing to act for Mr Roberts. They are, firstly, a meeting of 9 or 10 October 2003 that was attended by Messrs Miller, Roberts and Carroll; and secondly, the loan to George and Maria Papadeas. What occurred at the meeting and in relation to the loan is in dispute and can only be resolved at trial.
The meeting of 9 or 10 December 2003
Firstly, I shall summarise Mr Miller's version of events. It is as follows:
In early to mid October 2003, Mr Miller went to see Mr Roberts at his Bondi Junction office. It was about a year after his retirement and he was broke. Mr Miller asked Mr Roberts if he could borrow money against his house. Mr Miller needed about $25,000 for himself because until he got the Centrelink pension he would have no money. Mr Roberts told Mr Miller that he knew somebody who was building townhouses in Melbourne, he could have one of the townhouses for $300,000 and that he would get the money back when they sold it. Mr Miller says that Mr Roberts told him that it would cost around $2,500 a month, the $25,000 would pay for the interest for the year and when the townhouses were completed and sold the money would go back into his mortgage and he would be able to pay it off. Mr Miller reiterated to Mr Roberts that he was in a desperate financial situation and had no money and that he only wanted $25,000 to carry him over until he could get the Centrelink pension.
Mr Miller then says that Mr Robert told him that they could borrow $350,000 on his home and that he could invest the balance after he got the $25,000 in the townhouse development in Melbourne, and he would become the owner of number 4, free of any mortgage. Mr Roberts told Mr Miller that he would then receive an income from renting the townhouse. Mr Miller says that Mr Roberts said "I know the builder". He also told Mr Miller that he could fly to Melbourne, get a train to Frankston and a taxi to the development site to inspect the site if he wanted. Mr Roberts told him that he would get the loan through Challenger. Mr Miller said "why don't you get the loan through a bank" and Mr Roberts replied "They are robbers". Mr Roberts then wrote down the name of his lawyer and handed it to Mr Miller. Mr Roberts said "You will have to see my lawyer in the city. I will ring you and give you his address and the time to attend at his office."
A loan application, on the letterhead of Commercial Funding, dated 21 October 2003, records that Mr Miller was a self-employed investor who earned $85,000 annual gross income. Security details of the Redfern property are given together with an estimate of the value of the property of $550,000. The solicitor was recorded to be Millea & Millea at Waverton (not Mr Carroll). The document is signed. It is Mr Miller's evidence that, while he cannot be definite, he may have signed this document in Mr Roberts' office.
Mr Miller's version of the meeting on 9 or 10 December 2003 (Aff, 20.4.2011) continues as follows:
"33. Sometime after that telephone conversation which I believe may have been on or close to 10 December 2003 but I cannot be certain, I went to the building at 77 Castlereagh Street and I waited for Mr Roberts to arrive, after which we went to Mr Carroll's office. Mr Roberts said to me "wait in the reception room and we will get you when we are ready". I saw him go into what I understood may have been Mr Carroll's office.'
34. About ten minutes later Mr Roberts asked me to go with him into a conference room where he introduced me to Mr Carroll and after introductions we sat down at a conference table, there was also a lady in the room but I don't know who she was or why she was there.
35. I saw a file with documents in it on the table, and after the initial conversation Mr Carroll said to me after he took documents out of the file, "would you please sign your name on each of the pages where I show you and as I turn them over on each of these documents."
These documents were:
(a) Deed of loan dated 10 December 2003 between Challenger Managed Investments Limited and Mr Miller;
(b) A mortgage with a schedule that Mr Miler had granted over his property to Perpetual Trustees Australia Limited with registered number ABXXXXX XD;
(c) An acknowledgement of finance advice from Mr Miller dated 9 December 2003; and
(d) Mortgage AAXXXXX XP.
Mr Miller says that he did not, nor could he, read the documents. Mr Carroll did not explain the documents to him, nor were they read to him. Prior to the meeting Mr Miller had not met Mr Carroll before. He says that he did not ask Mr Carroll to represent him. It was his understanding that Mr Carroll was Mr Roberts' solicitor. Mr Miller did not receive a tax invoice from Mr Carroll.
After Mr Miller had signed the documents he said to Mr Roberts in the presence of Mr Carroll "I won't lose my house will I" and Mr Roberts said "No everything will be alright". Mr Roberts also added "I have arranged for you to get a lift home from a valuer who wants to have a look at your property". There has been no contact between Mr Carroll and Mr Miller since 9 or 10 December 2003.
Mr Carroll's version of the December 2003 meeting
I will now summarise Mr Carroll's version of the December 2003 meeting. It is as follows.
On or about 9 December 2003, Mr Carroll says that he received a telephone call from Mr Roberts who said words to the following effect: "I'm in the city. I need you to witness a document." Mr Carroll said, "Sure. Pop in."
It was Mr Carroll's usual practice that when a client or a potential client wanted to retain him to provide advice or other legal services, he would make an appointment in his diary and open a file for that client. In the event that he provided advice to a client, it was his usual practice to issue a tax invoice to that person for his services rendered. He says that he did not make an appointment for either Mr Roberts or Mr Miller.
Mr Carroll says that prior to him witnessing Mr Miller signing the documents, he recalled asking him for some identification so he could confirm Mr Miller's identity. He does not recall the details or substance of any conversation when he witnessed Mr Miller's signature or when he left his office.
He did not make an appointment in his diary for Mr Miller or Mr Roberts because he was not retained for or on behalf of either Mr Miller or Mr Roberts. He was not retained by Mr Miller to give him advice in respect of the documents and therefore he did not open a file for Mr Miller. He was not asked by either person to provide advice to Mr Miller in respect of the documents or explain to him the nature of the documents that he had witnessed Mr Miller sign.
The loan agreement between Mr Miller and George Papadeas and Maria Julia Papadeas dated 9 December 2003
Mr Miller says that until the commencement of these proceedings he had not been aware that Mr Roberts instructed James Millea ( of Millea & Millea solicitors ) to prepare an agreement for loan and supporting security documents to secure a loan of $100,000 from Mr Miller to George Dimitrius Papadeas and Maria Julie Papadeas ("Mr and Mrs Papadeas").
He says that he did not instruct or authorise Mr Roberts to lend any money to Mr and Mrs Papadeas, nor did he instruct or authorise Mr Millea to act for him in respect of the loan. He says that he has never met, spoken to or otherwise had any communication with James Millae. Mr Miller says that, prior to the commencement of these proceedings, he had not seen the letter dated 9 December 2003 from Millea & Millea to Mr and Mrs Papadeas relating to Mr Miller's loan to the couple . He did not authorise the firm of Millea & Millea to prepare any of the documents referred to in the letter nor did he, either directly or indirectly, retain that firm to act for him in relation to that transaction or in relation to any other transaction.
In relation to the loan agreement between him and Mr and Mrs Papadeas dated 10 December 2003 and the mortgage, Mr Miller says that he has no recollection of placing his signature on page three of the document. He says that it is possible that he may have signed the page when he was in Mr Carroll's office, but he noticed that his signature is placed in the position of the person intended to witness his signature. He recognises the signature which appears opposite his signature as being that of Mr Roberts.
Mr Miller says that he had not seen that loan agreement until after the commencement of these proceedings. He also says that he has never received the interest of $10,000 referred to, nor has he received any other moneys, whether principal or interest, which are the subject of that loan agreement.
Mr Miller says that at no stage, during the time he was signing documents with Mr Carroll and Mr Roberts in Mr Carroll's office, was he told by either Mr Carroll or Mr Roberts that he was going to make a loan of $100,000 to Mr and Mrs Papadeas, nor did he authorise or permit any person to arrange for the loan or take any steps towards making any such loan to those persons.
Mr Carroll says that he has from time to time acted for Mr and Mrs Papadeas.
The following documents are in existence:
(a) Acknowledgement of finance advice dated 9 December 2003 signed by Mr Miller .
(b) Folio identifier search for X/XXXXX X in the name of George Dimitrius Papadeas and Maria Julie Papadeas.
(c) Consent by borrower/guarantor to legal advice dated 10 December 2003 and signed by George Dimitrius Papadeas.
(d) Consent by borrower/guarantor to legal advice dated 10 December 2003 and signed by Maria Julie Papadeas.
(e) Acknowledgement undated and signed by George Dimitrius Papadeas and Maria Julie Papadeas.
(f) Acknowledgement of legal advice by proposed borrower by George Papadeas dated 10 December 2003 and signed by George Papadeas and Maria Papadeas.
(g) Acknowledgement of legal advice by proposed borrower by Maria Papadeas dated 10 December 2003 signed by Maria Papadeas and George Papadeas.
(h) Declaration by borrower dated 10 December 2003 and signed by George Dimitrius Papadeas and Maria Julie Papadeas.
(i) Direction to pay from Roberts Lumley and Associates Pty Limited to Sunman & Walker dated 10 December 2003.
(j) Mortgage between George Dimitrius Papadeas and Marie Julie Papadeas as mortgagor and Michael Miller as mortgagee (undated); and
(k) Direction to pay from Michael Carroll & Associates to Sean Wilkins & Associates dated 31 March 2004.
The consent to borrower/guarantor to legal advice dated 10 December 2003 reads:
"I George Dimitrius Papadeas [separate consent by Maria Papadeas]
acknowledge that Michael Carroll (my solicitor) has been requested to advise me regarding certain loan documents between George Dimitrius Papadeas and Maria Julie Papadeas (borrowers ) and Michael Miller ( lender ) relating to property located at X XXXX XXXXX , Matraville in the State of New South Wales and being the whole of the land contained in Folio Identifier X/XXXXX X in company with my co-borrowers(s), sureties or co-guarantors, namely Maria Julie Papadeas.
My solicitor has informed me, before giving such advice:
that where the interests of the parties to the transaction may conflict the solicitor may only act for more than one such party provided he has obtained the informed consent in writing of those parties to the solicitor acting for them;
such consent being given in the knowledge that there is or may be a conflict between the parties, and as a result;
that solicitor may be disabled from disclosing to each party the full knowledge which he possesses as to the transaction; or
that the solicitor may be disabled from giving advice to one party which is contrary to or conflicts with the interests of the other or others.
I hereby confirm my consent to the solicitor advising me together with the abovenamed other parties to the transaction notwithstanding the possible conflict between the interests of the parties to the transaction..."
This document implies that Mr Carroll acted for Mr and Mrs Papadeas and for the other party in the transaction as well, although there is no counterpart for Mr Miller available on inspection.
The other documents (referred to above) were inspected by Mr Miller's solicitor in Mr Carroll's office.
It is Mr Carroll's version of events that he did not act for either Mr or Mrs Papadeas in respect of the loan between them and Mr Miller. The first time he became aware of the transaction and the purported loan was on or about 11 February 2010 when Mr Hertz (Mr Miller's solicitor) pointed it out to him on his inspection of documents provided by Mr Roberts. However, on any view of this documentation, there is a mortgage (undated) between Mr Miller and Mr and Mrs Papadeas.
The law
Brereton J has written two decisions on the topic of when a court should restrain solicitors from acting in particular cases. They are Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561 and Mitchell v Burrell [2008] NSWSC 772. In Kallinicos v Hunt his Honour stated at [76]:
"[76] The foregoing authorities establish the following:
- During the subsistence of a retainer, where the another is sought by an existing client of the solicitor, the foundation of the court's jurisdiction is the fiduciary obligation of a solicitor, and the inescapable conflict of duty which is inherent in the situation of acting for clients with competing interests [ Prince Jefri ].
- Once the retainer is at an end, however, the court's jurisdiction is not based on any conflict of duty or interest, but on the protection of the confidences of the former client (unless there is no real risk of disclosure) [ Prince Jefri ].
- After termination of the retainer, there is no continuing (equitable or contractual) duty of loyalty to provide a basis for the court's intervention, such duty having come to an end with the retainer [ Prince Jefri ; Belan v Casey ; Photocure ; British American Tobacco ; Asia Pacific Telecommunications ; contra Spincode ; McVeigh ; Sent ].
- However, the court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice [ Everingham v Ontario ; Black v Taylor ; Grimwade v Meagher ; Newman v Phillips Fox ; Mitchell v Pattern Holdings ; Spincode ; Holborow; Williamson v Nilant ; Bowen v Stott ; Law Society v Holt ]. Prince Jefri does not address this jurisdiction at all. Belan v Casey and British American Tobacco are not to be read as supposing that Prince Jefri excludes it. Asia Pacific Telecommunications appears to acknowledge its continued existence.
- 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 legal practitioner 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 [ Everingham v Ontario ; Black v Taylor ; Grimwade v Meagher ; Holborow ; Bowen v Stott ; Asia Pacific Telecommunications ].
- The jurisdiction is to be regarded as exceptional and is to be exercised with caution [ Black v Taylor; Grimwade v Meagher; Bowen v Stott ].
- 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 [ Black v Taylor; Grimwade v Meagher; Williamson v Nilant; Bowen v Stott ].
- The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief [ Black v Taylor; Bowen v Stott ]." (citations omitted)
In Mitchell v Burrell , Brereton J elaborated on the situation where, as in this case before me, the solicitor is likely to be called as a witness and referred to Rule 19 of the Law Society of NSW's Professional Conduct and Practice Rules.
The current version of Rule 19 can be found in the Revised Professional Conduct and Practice Rules 1995 (Solicitors' Rules). It reads:
"A practitioner must not appear as an advocate and, unless there are exceptional circumstances justifying the practitioner's continuing retainer by the practitioner's client, the practitioner must not act, or continue to act, in a case in which it is known, or becomes apparent, that the practitioner will be required to give evidence material to the determination of contested issues before the court.
In Mitchell v Burrell , Brereton J stated at [20]:
"[20] That said, I do not accept that the mere circumstance that a solicitor will be a material witness, even on a controversial matter, of itself justifies restraining the solicitor from continuing to act. As Windeyer J pointed out in Scallan v Scallan [2001] NSWSC 1078, it is, for example, not unusual for instructing solicitors in contested probate proceedings to give evidence of facts relevant to instructions for and execution of a Will. Similarly, in contested conveyancing proceedings, it is not unusual for solicitors who have acted on the conveyance to continue to act in the proceedings for specific performance or rescission and to give evidence in those proceedings. Accordingly, despite r 19 of The Law Society of New South Wales Professional Conduct and Practice Rules, which imposes a professional obligation (as distinct from a private right), I do not accept that in every case where a solicitor acting for a party is a material witness even on a controversial matter, the Court will restrain the solicitor from continuing to act. Although some observations of Campbell CJ in Chapman v Rogers; ex parte Chapman [1984] 1 Qd R 542 at 545, may go somewhat further, the cases indicate - as Campbell CJ did in that case itself - that the line is crossed only when the solicitor has a personal stake in the outcome of the proceedings or in their conduct, beyond the recovery of proper fees for acting, albeit that the relevant stake may not necessarily be financial, but involves the personal or reputational interest of the solicitor, as will be the case if his or her conduct and integrity come under attack and review in the proceedings. The presence of such circumstances will be a strong indication that the interests of justice - which in this field involve clients being represented by independent and objective lawyers unfettered by concerns about their own interests - require the lawyer to be restrained from continuing to act."
This is not a case about contested probate proceedings. However, I accept that there are some conveyancing issues in this case. There will be serious allegations made against the solicitor Mr Carroll, namely, his role in the December 2003 meeting, the issue of whether he acted for both the lender and borrower in a loan transaction and his alleged relationship with the accountant Mr Roberts, for whom he is currently acting. I am in no doubt that, not only will he be called as a witness, his conduct, integrity and reputation will come under attack so much so that, in the interests of justice, he should be restrained from continuing to act. It is difficult to see how Mr Carroll can be unconcerned about his own reputation, conduct and integrity and therefore how he can act for Mr Roberts unfettered by his concerns. I should make it clear, once again, that this court is not making , nor should it make, any findings on these matters. These issues can only be resolved at trial. Nevertheless, it is clear to this court that Mr Michael Carroll, the solicitor acting for the first and second cross defendants, should be restrained from continuing to act for the cross defendants.
As the jurisdiction invoked involves the Court's supervisory jurisdiction over its solicitors, the appropriate costs order is one directed to Mr Carroll. He appeared, with counsel, to oppose the application; it is he who should bear the costs. However, I should give Mr Carroll the opportunity to make submissions as to why this order should not be made.
I make an order that Mr Carroll cease acting as solicitor for Kevin Thomas Roberts and Roberts Lumley Pty Limited. Costs are reserved. The matter is listed before me for costs argument on 5 December 2011 at 9.30 am.
The Court orders that:
(1) Mr Carroll cease acting as solicitor for Kevin Thomas Roberts and Roberts Lumley Pty Limited.
(2) Costs are reserved.
(3) The matter is listed before Harrison AsJ for costs argument on 5 December 2011 at 9.30 am.
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Decision last updated: 25 November 2011
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