Porter and Bergman

[2007] FamCA 847

FAMILY COURT OF AUSTRALIA

BERGMAN & BERGMAN (NO. 2) [2007] FamCA 847

FAMILY LAW – Practice and Procedure – Notice of objection to solicitors acting – Alleged conflict of financial material – Shareholders agreement – Content of future affidavit evidence

Family Law Act 1975 (Cth)

APPLICANT: MR BERGMAN (BY HIS CASE GUARDIAN, MS BERGMAN)

RESPONDENT: MS BERGMAN

POTENTIAL THIRD PARTY:	MR SARINSSON
POTENTIAL FOURTH PARTY: PAUL SAVENKOV	MR PORTER

FILE NUMBER: MLF 5245 of 2003

DATE DELIVERED: 3 AUGUST 2007

PLACE DELIVERED: MELBOURNE

PLACE HEARD: MELBOURNE

JUDGMENT OF: YOUNG J

HEARING DATE: 3 AUGUST 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR ST JOHN SC, with MR STRUM

SOLICITOR FOR THE APPLICANT: CAROLINE COUNSEL FAMILY LAWYERS

COUNSEL FOR THE RESPONDENT: MR VAN DER HAYDEN

SOLICITOR FOR THE RESPONDENT: MARSHALLS & DENT

COUNSEL FOR THE POTENTIAL THIRD PARTY: MR ROCKMAN

SOLICITOR FOR THE POTENTIAL THIRD PARTY: ROCKMAN & ROCKMAN

COUNSEL FOR THE POTENTIAL FOURTH PARTY: MS NICOU,SC

SOLICITOR FOR THE POTENTIAL FOURTH PARTY: CAREW COUNSEL PTY LTD

ORDERS

1. THAT within ten (10) days Rockman & Rockman, solicitors make available for inspection and copying (at the expense of the Case Guardian) by the solicitors for the Case Guardian all files, notes, drafts, instructions, memoranda and counsel’s written opinion(s) (if any) held within their possession, power or control and pertaining to the drafting or execution of:

   (a)        the sale of Shares Agreement; and
   (b)        the Share Holders Agreement
   between the husband, W Corporation, Mr Sarinsson and/or Mr Porter.

2. THAT on or before Tuesday 11 September 2007 the Case Guardian make, file and serve an affidavit(s) limited to evidence in support of the Orders sought in paragraphs 4 or 5 of her application in a case filed 11 July 2007 or otherwise the specific issue of the joinder of Mr Sarinsson in the proceedings.

3. THAT on or before Friday 21 September 2007 Mr Sarinsson, or such other deponent as his solicitors may determine make, file and serve any answering affidavit(s) upon which he intends to rely as to the issues identified in the preceding order.

4. THAT the further hearing of the extant applications contained within paragraphs 4 and 5 of the amended Form 2 application filed 11 July 2007 and any issues of the joinder of Mr Sarinsson to the proceedings be otherwise adjourned for hearing as a one (1) day special fixture on Thursday 11 October 2007.

5. THAT the costs of the Case Guardian and Mr Sarinsson of and incidental to the preparation and presentation of their case this day be reserved to the adjourned hearing date.

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Young delivered this day will for all publication and reporting purposes be referred to as BERGMAN & BERGMAN

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 5245 of 2003

MR BERGMAN (BY HIS CASE GUARDIAN, MS BERGMAN) 

Applicant

And

MS BERGMAN

Respondent

And

MR SARINSSON
Potential Third Party

And

MR PORTER
Potential Fourth Party

REASONS FOR JUDGMENT

1. This judgment is directed to matters of and concerning the case guardian for the husband on the one hand and Mr Sarinsson, represented by Mr Rockman, as the other party.  Ms Nikou SC and Mr Van Der Hayden have not been involved in nor made submissions on these limited interim and procedural issues before the court.  The application with which I am dealing is that contained in paragraphs 4 and 5 of the amended application in a case filed by the case guardian on 11 July 2007.  The orders now sought is that the firm of solicitors, Rockman and Rockman, be restrained from acting for the Potential Third Party, Mr Sarinsson, and further that any counsel retained or briefed by those solicitors be likewise disqualified from holding a brief or appearing in this or any subsequent proceeding. 

2. The Case Guardian filed an affidavit on 11 July 2007 which I have read.  In that affidavit, as drawn by her solicitors, she has provided information to the court or purported evidence of her knowledge and belief as to matters of and concerning the firm of solicitors, and in particular paragraphs 15-17 (inclusive) thereof, and otherwise has made reference to matters of and concerning Mr Sarinsson in paragraphs 18-23 (inclusive) thereof.  I have read carefully those paragraphs of that affidavit.  The recent but relevant history seems to be that formal notice by way of an objection to the firm Rockman and Rockman acting was highlighted before Watt J on 12 June 2007 but it was really the filing of the amended application almost one month thereafter on 11 July 2007 that formulated the orders sought. 

3. The issue of the case guardian, in general terms, is that either the solicitors or any counsel briefed would have an unfair knowledge or advantage or otherwise be privy to information, advice or documents that might be not disclosed or known to those acting for the Case Guardian.  That submission is at the heart of the material relied upon by Mr St John but I do read those submissions in the context of paragraph 16 and what seems to be the high point of present instructions and evidence of the case guardian as to the dealings that her father had with the firm of solicitors and instructions then provided.  Whether the belief or fact of the conflict of interest exists and whether it is substantial or appropriate will need to be determined, as will the consequences of the agreement and how that underlines any necessity to exclude or limit the involvement of Rockman and Rockman.

4. Subsequently, Mr Rockman, as solicitor for Mr Sarinsson, filed an affidavit on 1 August 2007.  The reality is that that document was produced to me on Wednesday of this week at a time when Mr St John and his junior counsel and Ms Nikou were not before the court and I generally indicated that it should be filed and be before the court today.  The affidavit is relatively brief, but that is not to say that the contents thereof are not of very real significance.  I have been referred to that affidavit, the effect of which is to highlight the shareholders agreement and clause 5 thereof which is alleged to be clear, unambiguous and a common agreement in like commercial arrangements.  I have otherwise been referred to that shareholders agreement which is before the court as exhibit "KMJ1" to the affidavit of the case guardian filed on or about 13 April 2007 and which is otherwise document 193 in the court index.  That shareholders agreement exhibited thereto is dated 1 October 2002 and paragraph 5 thereof deals with the pre-emptive rights and transfers of shares. 

5. The issue in this case would currently focus upon the disposition of the shares of Mr Sarinsson for valuable consideration to Mr Porter.  As outlined by Mr Rockman to the court, the specific issue is as to the validity or otherwise as to sale on 25 May 2007 of the shares of Mr Sarinsson for consideration of $1.35 million to Mr Porter.  That is said to be a completed transaction.  As best I understand the competing submissions and the legal search for evidence and an understanding of what occurred, the Case Guardian may have initially understood that the transfer occurred pursuant to the pre-emptive procedure in 5.2 of the shareholders agreement.  If so, there were certain notices and a very fixed procedure to follow.  I do not make that or indeed any finding.  I do not traverse those issues at this time.

6. What I do understand, however, Mr Rockman to indicate to the court is that indeed the transfer was alternatively permitted pursuant to clause 5.1.3; that is, a transfer, pursuant to 5.3, which was made by a member to another member.  Again I make no finding on that issue.  I have touched upon these issues to include them in these extempore reasons for judgment so there will be an easy reference to what seems to be the very heart of the dispute and that may be relevant to the outcome of these proceedings and to any and all ancillary applications that arise in that regard.

7. Mr St John's complaints at the moment are, first, the short service or limited time which he and more particularly his solicitors have had to analyse and take instructions upon the recent affidavit of Mr Rockman.  There is an issue as to whether other commercial solicitors advising the case guardian, and not her family law solicitors, should be involved and whether they are actively providing instructions, and in that regard a solicitor by the name of Mr Sweeney is identified in various documents.  As part of those issues, the contents of the file held by Rockman and Rockman that is relevant to this case and to which the husband, at a time when he was party to various agreements and was giving instructions, is to be disclosed or known to all parties, in particular the case guardian, is a live issue. 

8. Mr Rockman has adopted a practical approach by way of indicating an acceptance of an outcome of production of documents and information relevant to either a share agreement or the shareholders agreement.  His concern is to primarily limit issues to those documents upon any adjourned application whereby the determination of the orders sought in paragraphs 4 and 5 of the recently filed application in a case remains for determination.  I have had submissions from the parties' legal practitioners but it does seem to me that hand in hand with the determination of the appearance or otherwise of Mr Rockman and his firm is the question of the joinder of Mr Sarinsson in the proceedings.

9. The reality may be that if the joinder issues were not meritorious or if the shares of Mr Sarinsson have indeed been sold and the sale is found to be valid, enforceable and binding, then on one view there would be no purpose nor benefit in having Mr Rockman representing Mr Sarinsson before the court.  There is therefore a balance as to what interest - that is, the solicitors' conflict of interest and representation or the joinder issue - should come first.  On balance, I consider that an appropriate disclosure of documents and information is required.  I have invited Mr St John and his junior counsel to prepare a minute of order which would not be made by consent as to that procedure. 

10. Mr Rockman has had the opportunity to address the court and has sought to curtail the proposed paragraph 2 thereof so that the affidavit is not at large and is limited to specific issues.  His approach - and the issues to which he would have limited that affidavit - is in my opinion too narrow, but generally these issues should not be wholly at large.  I propose to limit the issues to supporting paragraphs 4 and 5 of the application and any issue of joinder of Mr Sarinsson but not at large in the case on any extended financial or commercial issue.  It may be trite to say that the reality in this case is that one day it will have to wholly focus upon primary issues.  That is not said with any criticism because I understand the process at the moment is still trying to identify, ascertain, perhaps even limit issues where one party may be without direct and immediate knowledge and instructions.

I certify that the preceding paragraphs are
a true copy of the reasons for judgment herein
of The Honourable Justice Young

………………………………………………………..
Associate:          
Date: 13 August 2007