Re Westgate Wool Co Pty Ltd (in liq)

[2006] SASC 372

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

In the Matter of WESTGATE WOOL CO PTY LTD (IN LIQ)

[2006] SASC 372

Judgment of The Honourable Justice Debelle

8 December 2006

PROCEDURE - COURTS AND JUDGES GENERALLY - COURTS - CONCURRENT JURISDICTION OF DIFFERENT COURTS - TRANSFER OF PROCEEDINGS UNDER CROSS-VESTING LEGISLATION

Examination pursuant to s 596B of the Corporations Act - application to transfer proceedings to Supreme Court of Victoria - whether it is a proceeding requiring determination within meaning of s 1337H of the Corporations Act – relevant principles – even if a proceeding, not appropriate to transfer – application dismissed.

PROFESSIONS AND TRADES - LAWYERS - SOLICITOR AND CLIENT - DUTIES AND LIABILITIES TO CLIENT

Solicitors for creditor in liquidation acting for liquidator in examination proceedings – whether solicitors are in breach of duty to client creditor – relevant principles – no breach – application dismissed.

Corporations Act 2001 (Cth) s 596A, s 596B, s 597(12A), s 597(14), s 597(16), s 1337A(2), s 1337H, s 1337L; Corporations Regulations 2001 (Cth) Reg 5.6.14; Jurisdiction of Courts (Cross-Vesting) Act 1987 (SA) s 5(2)(b)(iii), referred to.
Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1; Bankinvest AG v Seabrook (1988) 14 NSWLR 711; BHP Billiton Ltd v Schultz (2004) 221 CLR 400; Bourke v State Bank of New South Wales (1988) 22 FCR 378; Carter v Gartner (2003) 130 FCR 99; D’Arrigo v Carter (2003) 44 ACSR 162; Dwyer v Hindal Corporate Pty Ltd (2005) 52 ACSR 335; Kallinicos v Hunt (2005) 64 NSWLR 561; R v Dunwoody (2004) 212 ALR 103; re Steele (1994) 48 FCR 236; Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460; TAJ Productions Pty Ltd v White (2005) 56 ACSR 114, applied.
Cheney v Spooner (1929) 41 CLR 532; Douglas-Brown v Furzer (1994) 11 WAR 400; Emanuele v Emanuele Investment Pty Ltd (1997) 191 LSJS 412; Gould v Brown (1998) 193 CLR 346; Hamilton v Oades (1989) 166 CLR 486; James Hardie & Co Pty Ltd v Barry (2000) 50 NSWLR 357; re Appleton, French and Scrafton Ltd [1905] 1 Ch 749; re Beall [1894] 2 QB 135; re Equiticorp Finance Ltd (No 2) (1992) 27 NSWLR 391; re Kempal Pty Ltd (1989) 17 NSWLR 550; re Monadelphous Engineering Associates (NZ) Limited (in liq) (1989) 7 ACLC 220; re Partridge (Federal Court of Australia, Lockhart J, 22 December 1982, unreported); re Spedley Securities Ltd (in liq) (1991) 9 ACLC 492; re Temple [2000] FCA 1406, considered.

In the Matter of WESTGATE WOOL CO PTY LTD (IN LIQ)
[2006] SASC 372

Civil

1. DEBELLE J.        On 16 June 2004 the creditors of Westgate Wool Co Pty Ltd resolved to wind up the company voluntarily. The creditors appointed Mr M A Korda and Mr C R Powell as liquidators.

2. On 8 September 2006, a Master of this Court made orders pursuant to s 596B of the Corporations Act 2001 (Cth) summoning two persons for examination and to produce at the examination books and documents specified in the summons. Those two persons are Mr Andrew Kenneth Woolfe and Mr Noel Alexander Russell. A separate summons had been issued against each. For reasons which it is not necessary to relate, an order was made for a fresh summons to issue to Mr Russell.

3. In these proceedings Kelly & Co, solicitors in Adelaide, are acting for the liquidators.

4. Messrs Woolfe and Russell have each applied for orders in respect of the examinations. Both have applied for an order that the proceedings be transferred to the Supreme Court of Victoria. In addition, Mr Woolfe applied for an injunction restraining Kelly & Co from continuing to act as solicitors for the liquidators. Mr Russell also applied for an order that no person be entitled to inspect the documents produced by him until all claims for legal professional privilege in respect of the documents have been determined or otherwise resolved.

5. After hearing argument, I made orders dismissing both applications to transfer the proceedings to the Supreme Court of Victoria and dismissing the application by Mr Woolfe for an injunction. Orders were made dealing with the documents held by Mr Russell for which legal professional privilege might be claimed. In addition, other ancillary orders were made. These are the reasons for those orders.

   The Factual Background

6. On 12 July 2001 BWK Elders Australia Pty Ltd (“BWKE”) commenced an action in the Federal Court of Australia against Westgate Wool Co Pty Ltd (“Westgate”) and its directors. The action was issued out of the South Australian Registry of the Federal Court. Kelly & Co acted for BWKE and Mr A K Woolfe of Andrew Woolfe & Co, solicitors in a Melbourne suburb, acted as solicitor for the defendants.

7. Mr Woolfe instructed counsel in Melbourne to advise and act for the defendants. They were Mr J Hammond QC and Mr Russell. Both Mr Hammond QC and Mr Russell reside in suburbs of Melbourne and have chambers in the City of Melbourne.

8. By order of Mansfield J made in July 2002, the action was transferred to the Victorian Registry of the Federal Court. The interlocutory proceedings and the trial occupied a period of about three years. On 19 April 2004 the action was listed for trial to commence on 7 June 2004. On 27 May 2004 Mr D R McVeigh was appointed administrator of Westgate. At about that time, the directors of Westgate withdrew Mr Woolfe’s instructions. The trial commenced on 7 June 2004.

9. By order of the Federal Court of Australia made on 11 June 2004, Messrs Korda and Powell were appointed administrators of Westgate to replace Mr McVeigh. The order was made on the application of BWKE. On 16 June 2004 a meeting of creditors of Westgate resolved that Westgate should be wound up voluntarily. The creditors appointed Messrs Korda and Powell as liquidators.

10. On 25 June 2004 judgment was entered against the defendant directors for $1,368,624 plus $464,985.47 interest, a total of $1,833,609. Judgment was not entered against Westgate.

11. BWKE presented a creditor’s petition for bankruptcy against each of the directors of Westgate. On 19 October 2004 sequestration orders were made in the Federal Court against each of the directors.

12. On 22 October 2004 BWKE obtained an order in the Federal Court entitling it to access to Westgate’s books and records. Kelly & Co inspected those books and records on behalf of BWKE.

13. On 1 March 2005 BWKE issued proceedings against Mr Woolfe seeking orders that he pay the costs of BWKE in the action in the Federal Court on an indemnity basis or, alternatively, that he pay the costs wasted or thrown away as a result of the failure of Westgate and its directors to make proper discovery in the Federal Court action. Kelly & Co acted for BWKE in those proceedings. The claim against Mr Woolfe was for $521,990.10.

14. In the course of acting for BWKE, Kelly & Co were provided with all documentation now sought from Mr Woolfe by the liquidators, save and except for the trust account in the name of Mr Woolfe and copies of cheques and receipts. By affidavit of documents sworn on 15 July 2005, Mr Woolfe discovered almost 4,000 documents which comprised all of the documents the subject of the summons issued by the liquidators. On 1 and 2 August 2005 those documents were inspected by solicitors from Kelly & Co. The proceedings against Mr Woolfe were settled on a confidential basis at a mediation on 7 September 2005.

15. After the mediation and in or about October 2005 Kelly & Co ceased to act for BWKE. In April 2006 Kelly & Co were instructed by the liquidators to act for them in relation to the examination. Kelly & Co acted for the liquidators on the applications for the orders that Messrs Woolfe and Russell be summonsed for examination and to produce documents.

16. It is convenient to deal first with the application to transfer the proceedings to the Supreme Court of Victoria.

    The Transfer Application

17. The application for transfer by both Mr Woolfe and Mr Russell was made pursuant to s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 or, in the alternative, pursuant to s 1337H and s 1337L of the Corporations Act 2001 (Cth). Section 1337H applies where the transferor court is the Federal Court or the Supreme Court of a State or Territory and, relevantly for this application, where the relevant proceeding is a proceeding with respect to a civil matter arising under the Corporations Act. Section 1337H(2) provides for the circumstances in which a relevant proceeding may be transferred. It reads:

    Subject to subsections (3), (4) and (5), it if appears to the transferor court that, having regard to the interests of justice, it is more appropriate for:

    (a)     the relevant proceeding; or

    (b)     an application in the relevant proceeding;

    to be determined by another court that has jurisdiction in the matters for determination in the relevant proceeding or application, the transferor court may transfer the relevant proceeding or application to that other court.

    Section 1337L provides some factors to which the court must have regard when determining the application.

18. Section 1337A(2) provides that Division 1 of Part 9.6A of the Corporations Act operates to the exclusion of the Jurisdiction of Courts (Cross-Vesting) Act 1987. Section 1337H and s 1337L are both contained in Division 1 of Part 9.6A of the Corporations Act. Section 1337A(2) is a provision which expressly provides for the exclusive operation of s 1337H and s 1337L in relation to civil matters arising under the Corporations legislation. It is a provision which renders the Jurisdiction of Courts (Cross-Vesting) Act inoperative for the purposes, among others, of transferring civil matters arising under the Corporations legislation in the Federal Court or in a Supreme Court. The application under s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-Vesting) Act is, therefore, misconceived.

19. Before considering the issues under s 1337H, it is necessary to consider the nature and purpose of an examination. An examination is a proceeding: re Beall [1894] 2 QB 135; re Appleton, French and Scrafton Ltd [1905] 1 Ch 749; Cheney v Spooner (1929) 41 CLR 532. It is an incident of the judicial power of winding up and has a judicial character: Gould v Brown (1998) 193 CLR 346 at [35], [328].

20. Each examination is a separate proceeding in its own right. A separate order is required for each examination. That is apparent from the terms of s 596A and s 596B and is confirmed in re Monadelphous Engineering Associates (NZ) Limited (in liq) (1989) 7 ACLC 220 and Emanuele v Emanuele Investment Pty Ltd (1997) 191 LSJS 412 at 424.

21. An examination is a hearing inquisitorial in nature in which liquidators seek to obtain information concerning the affairs of the company being wound up. Examinations are a means by which the liquidators gather information in relation to the affairs of the relevant company: Douglas-Brown v Furzer (1994) 11 WAR 400 at 406. They have a dual public purpose. The first is to enable a liquidator to gather information to assist in the winding up and thereby protect the interests of creditors. The second is to enable evidence and information to be gathered to support the bringing of criminal charges in connection with a company’s affairs: Hamilton v Oades (1989) 166 CLR 486, per Mason CJ at 496. As the editor of McPherson, Law of Company Liquidation, notes at 15.620, the examinee is not called by a party to litigious proceedings. Instead, the examinee is a witness summoned by the court on the application of the liquidator.

22. A judicial officer presides over the examination. He is present to ensure that the examination is conducted in a fair and orderly manner and in accordance with the Corporations legislation. The judicial officer does not make any report or publish any determination affecting rights. There is no adjudication of rights save and except for the occasional ruling by the judicial officer presiding over the examination on the admissibility of questions. All that results is the transcript of the examination. Subject to s 597(12A) of the Corporations Act which provides for self-incriminating answers, an authorised transcript of the evidence of a person in an examination is admissible only against that person and not against third parties: s 597(14) of the Corporations Act.

23. When considering an application to transfer proceedings to another court, the following points are especially relevant:

    1.an examination is an inquisitorial hearing;

    2.an examinee is not a party but a person summoned by the court to answer questions;

    3.each examination is a separate proceeding in its own right; and

    4.an examination does not result in a determination or rights of parties.

    Each of these factors has material consequences on an application for transfer under s 1337H.

24. It is important to note the applications which have been made. Mr Woolfe applied for an order that the proceedings be transferred. On the hearing of the application, that application became an application for a change of the venue of the examination from this Court to the Supreme Court of Victoria. For his part, Mr Russell applied for an order that “this proceeding and the examination” be transferred to the Supreme Court of Victoria.

25. If the application is to transfer the whole of the proceeding, that is to say, the application for the summons, the order and the examination, there is nothing to transfer but the examination. Given that orders for the examination and the issue of the summons have been made in this proceeding, there is no further step required in the proceeding other than to conduct the examination. The court is functus officio in respect of all matters save and except the examination. If the proceeding were to be transferred to the Supreme Court of Victoria, there would be nothing for that Court to do but appoint a judicial officer to preside over the examination. Expressed another way, the proceedings against Mr Woolfe and Mr Russell have resulted in an order for the examination of each and the issue of a summons requiring them to attend for the examination. Save for the examination, the proceedings are at an end. Thus, the only issue for determination on this application is whether the examination should be conducted in this Court or in the Supreme Court of Victoria.

26. It was submitted on behalf of the applicants that the liquidators might apply for orders to examine the former directors of Westgate. That is an entirely irrelevant factor as a separate order is required for each examination. If the liquidators later apply to examine one or all of the former directors, it will be necessary for a separate order in respect of each and that application will be considered in light of the facts and circumstances at the time of the application.

27. The fact that an examination does not result in a determination of rights raises the question whether s 1337H invests a court with power to transfer an examination. Section 1337H(2) authorises the transfer of a proceeding or an application in the proceeding where it is more appropriate for the proceeding “to be determined by another court that has jurisdiction in the matter for determination in the relevant proceeding”. The terms of s 1337H(2) make it clear that it operates where the court will proceed to a determination. However, an examination does not result in a determination or require any determination. Instead, it is an inquisitorial hearing at which the examinee must answer the questions asked. It is apparent from its terms that s 1337H(2) is intended to apply to proceedings where there will be a determination of the rights of parties at the conclusion of the legal proceedings or at the conclusion of an application in those proceedings, that is to say, at the conclusion of an interlocutory application. Looked at another way, the Court has already made its determination when deciding to order the examination. There is no further determination to be made in each of the proceedings in which the orders for examination of Messrs Woolfe and Russell were made. For these reasons, s 1337H(2) has no operation in respect of an examination.

28. That conclusion is entirely consistent with the fact that an examination is not a determination of a proceeding or of an application in a proceeding. It is no more than an inquisitorial procedure in which a person is asked questions and is required to answer those questions. The examinee is but a witness ordered to attend and answer questions. The examinee is required to attend only for the duration of the examination. Once the examination is complete, the examinee is released.

29. For these reasons, s 1337H(2) does not apply to an examination.

30. All counsel proceeded on the footing that s 1337H(2) applies to an examination. For the reasons expressed above, I do not believe that it does. That is sufficient to determine the application to transfer the proceedings to the Supreme Court of Victoria. Lest I am wrong in that conclusion, I proceed to consider the issues arising under s 1337H and s 1337L and determine whether it is appropriate to make an order transferring the examination to the Supreme Court of Victoria. The fact that all that remains in the proceedings which led to each order for examination is the conduct of the examination itself is a very material factor in determining whether the examination should be transferred. That is to be contrasted with the position in the usual kind of case in which an application for transfer of proceedings is made. Generally speaking, the application is made at an early stage in legal proceedings in which it is likely there will be interlocutory proceedings as well as a trial and there are real questions of cost and convenience because witnesses and documents are in a jurisdiction different from that of the transferor court. Before examining that issue, I set out the relevant principles.

31. The issues which must be considered under s 1337H are, broadly speaking, similar to those in s 5(2)(b)(iii) of the Cross-vesting legislation of the States and Territories. There is one important difference. In the case of s 5(2)(b)(iii), if the transferor court is satisfied that it is in the interests of justice that proceedings be transferred to another court as the more appropriate court, the court has no alternative but to transfer the proceedings: BHP Billiton Ltd v Schultz (2004) 221 CLR 400 at [14], [63], and [169]. No question of discretion arises. However, under s 1337H(2), even if another court is the more appropriate forum, the transferor court retains a discretion whether to transfer the proceedings. That is apparent from the use of the word “may” in the concluding words of s 1337H(2).

32. Section 5(2)(b)(iii) requires the court to determine whether it is more appropriate for the relevant proceeding to be determined by another court: Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 730, that is to say, the court must determine with which court the action has the most real and substantial connection. When determining that question, it is not necessary that the transferor court be a “clearly inappropriate forum”: BHP Billiton Ltd v Schultz per Gleeson CJ, McHugh and Heydon JJ at [14], per Gummow J with whom Hayne J agreed at [42] and [69]. When determining the court with which the action has the most real and substantial connection, the court will consider the connecting factors referred to by Lord Goff in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 at 478. Lord Goff said:

    So it is for the connecting factors in this sense that the court must look; and these will include not only factors affecting convenience or expense (such as availability of witnesses), but also other factors such as the law governing the relevant transaction (as to which see Crédit Chimique v James Scott Engineering Group Ltd [1982] SLT 131), and the places where the parties respectively reside or carry on business.

    Expressed another way, regard should be had to what has been called the “nuts and bolts” management decision as to which court, in the pursuit of the interests of justice, is the more appropriate to hear and determine the substantive dispute: Bankinvest per Street CJ at 713 - 714. These principles have been consistently applied in all jurisdictions: see, for example, James Hardie & Co Pty Ltd v Barry (2000) 50 NSWLR 357. In the case of an application pursuant to s 1337H, the same factors must be considered when determining which is the more appropriate forum.

1. When determining the more appropriate forum, the court must also have regard to the interests of justice.  That expression is to be interpreted broadly: Bourke v State Bank of New South Wales (1988) 22 FCR 378 at 394; Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1 at 3. It allows a wide range of considerations to be taken into account. They include:

   ·matters relating to the efficiency of litigation which in turn include its economy and expedition;

   ·matters of convenience having regard to the location of witnesses of record; and

   ·matters of policy relating to the administration of justice by the Federal Court and the Supreme Courts of States and Territories.

   See Acton Engineering Pty Ltd v Campbell per Davies J at 4 – 5 I also have regard to the factors affecting the interests of justice set out in Dwyer v Hindal Corporate Pty Ltd (2005) 52 ACSR 335.

2. In addition to those factors, the court must consider the factors listed in s 1337L, namely,

   (a)the principal place of business of any body corporate concerned in the proceeding or application;

   (b)the place or places where the events that are the subject of the proceeding or application took place; and

   (c)the other courts that have jurisdiction to deal with the proceeding or application.

   The fact that the principal place of business of Westgate used to be in Victoria is not a material factor given that the company is being wound up. When a company is no longer operating, its principal place of business will not usually be a decisive consideration: TAJ Productions Pty Ltd v White (2005) 56 ACSR 114 at [7]. The only relevant fact which flows from the fact that Westgate used to conduct its business in Victoria is that most of the creditors are located in Melbourne, a factor to which reference has already been made. In all likelihood, the place or places where the events the subject of the examination occurred was Melbourne or in suburbs of Melbourne. That factor does not have any weight when considering where an examination should take place, particularly given that the liquidators are paying the costs of the examinees of being examined in Adelaide. That is a factor which applies when considering the transfer of proceedings where the issues to be determined concern events in a jurisdiction different from that of the transferor court. It might be a particularly relevant factor if a view is necessary or witnesses and documents are located in another jurisdiction. Finally, the Supreme Court of Victoria plainly has jurisdiction to conduct the examination. However, that factor standing alone, has no particular weight.

3. A number of relevant factors are quite neutral in their operation in this case.  There is no relevant difference between the substantive law of Victoria and the substantive law of this State.  If there is any forensic advantage or detriment to either the liquidators or the examinees in the location of the examination, it is to the particular detriment of the liquidators if the examination is conducted in Melbourne.  There is no particular convenience or inconvenience to either this Court or the Supreme Court of Victoria. There is no suggestion of forum shopping.

4. Few of the factors affecting the interests of justice and the determination of the more appropriate forum have any weight on the question whether these examinations should be transferred to the Supreme Court of Victoria. The factors are reduced essentially to a question of the inconvenience of the examinees on one hand and a question of costs and inconvenience to the liquidators on the other hand.

5. The examinee is a witness, not a party.  The examinee has been summoned to give evidence only.  The liquidators have agreed to pay the expenses to be incurred by Messrs Woolfe and Russell in answering the summons addressed to each.  Those expenses will include airfares, accommodation in Adelaide, and, in the case of Mr Russell, the cost occasioned by transporting to Adelaide some 20 to 30 boxes of documents.  The payment of those expenses accords with the decisions in re Kempal Pty Ltd (1989) 17 NSWLR 550; re Equiticorp Finance Ltd (No 2) (1992) 27 NSWLR 391; and re Spedley Securities Ltd (in liq) (1991) 9 ACLC 492.

6. The liquidators are partners of KordaMentha, a firm of chartered accountants with a national practice.  The firm has offices in Adelaide and in Melbourne, as well as a number of other cities in Australia.  Mr Mentha resides in Melbourne and is a partner in the Melbourne office.  Mr Powell resides in Adelaide and is a partner in the Adelaide office.  When they were appointed liquidators, they intended that the everyday management of the liquidation would take place in Adelaide.  The charge-out rates of the Adelaide office are less than those of the Melbourne office.

7. In July 2004, the books and records of Westgate were shipped from Melbourne to Adelaide and they have remained in Adelaide.  The records are voluminous and comprise more than 170 boxes.

8. In the first year of the winding up, more than half the work was undertaken in Melbourne (245 hours in Melbourne and 173 hours in Adelaide, that is to say, some 58 per cent of the work was done in Melbourne). Most of the work since has been undertaken in Adelaide (32 hours in Melbourne and some 87 hours in Adelaide). The Melbourne office does little more than arrange meetings and lodge documents prepared by the office in Adelaide. As the majority of the creditors of Westgate are located in Victoria, meetings of creditors must be convened in Melbourne: reg 5.6.14 of the Corporations Regulations 2001 (Cth). The Adelaide office is investigating the potential causes of action against the legal representatives of Westgate. Mr Powell is being assisted in that task by two employees of KordaMentha. It is likely that the employees will be present at the examination for the purpose of assisting counsel. The legal advisers to the liquidators are both in Adelaide. Lipman Karas, a firm of solicitors has advised the liquidators generally. Kelly & Co has been retained to apply for and conduct the examinations.

9. In short, the administration of the winding up has been conducted from Adelaide for more than 12 months.  Three persons in the Adelaide office of KordaMentha have been involved in investigating claims against the legal representatives of Westgate. The books and documents are in Adelaide. The legal advisers of the liquidators are in Adelaide.

10. Mr Powell asserts, and I find, that the expenses of bringing Messrs Woolfe and Russell to Adelaide as well as the cost of transportation to Adelaide of the documents held by Mr Russell will be considerably less than the cost of transferring to Melbourne those in KordaMentha engaged on the liquidation, the solicitors and counsel, and the books and records of Westgate.

11. It is not uncommon for the issues of cost and inconvenience involved in an application to transfer proceedings to boil down to one party’s advantage being another party’s disadvantage. That is not the case here. The liquidators will be paying the travelling and accommodation expenses of the examinees so that the examinees will not be disadvantaged in cost. Mr Woolfe has expressed an intention to bring legal advisers to the examination. Notwithstanding s 597(16) of the Corporations Act, I assume, without deciding, that it is relevant on an application for transfer of proceedings to consider the cost to be incurred by an examinee in that respect.  The cost which Mr Woolfe will incur will be quite significantly less than the cost the liquidators will have to incur if the proceedings are transferred to the Supreme Court of Victoria, a cost which will include the cost of transporting to and accommodating in Melbourne those in KordaMentha’s legal office who have been working on the facts to be investigated in the examination as well as solicitors and counsel. In addition, it will be necessary to transfer all necessary documents to Melbourne. The cost to be incurred by the liquidators will be quite disproportionately higher than the cost to be incurred by Mr Woolfe.

12. Both Messrs Woolfe and Russell will be personally inconvenienced by having to attend the examination.  The liquidator says that the examination will occupy two days.  Both examinees believe the examination will last longer, especially given the number of documents involved.  Whether the examination occupies two days or more, each will be inconvenienced.  There will, of course, be an obvious interference with the ability of each to conduct his practice. However, it is important to note that that interference will occur in any event be the examination conducted in Melbourne or in Adelaide.  If the examination is held in Adelaide, there will be a degree of added inconvenience, given the necessity to travel to Adelaide and to remain in Adelaide for the duration of the examination.  However, with the availability and sophistication of modern means of telephonic and electronic communication, including the mobile telephone and internet communication, any inconvenience will be substantially reduced.  The speed and facility of both enables ready contact when either Mr Woolfe or Mr Russell are absent from Adelaide. There will be a corresponding inconvenience to the liquidators and their legal advisers if the examination is heard in the Supreme Court of Victoria. This is but another instance of one person’s legitimate convenience being another’s inconvenience. However, there will be more persons inconvenienced if the examination is transferred to the Supreme Court of Victoria than if it remains in this Court. The balance of convenience heavily weighs against any order for transfer.

13. When stripped to its essentials, this is a case where two persons have been summoned to give evidence. Each will be reimbursed for the expenses they incur in doing so. Each will suffer some personal inconvenience but most of that inconvenience would also result if the examination was held in Melbourne.  Any added inconvenience to the examiners is substantially outweighed by the inconvenience to the liquidators if the examination is transferred to Melbourne. More importantly, that inconvenience is significantly outweighed by the cost which will be incurred by the liquidators if the examination has to be transferred to the Supreme Court of Victoria.

14. For these reasons, a consideration of all relevant factors clearly points to the conclusion that the Supreme Court of Victoria is not a more appropriate forum for the examination of Messrs Woolfe and Russell.  The application to transfer the proceedings will therefore be dismissed.

    Application For Injunction

15. The application by Mr Woolfe for the injunction to restrain Kelly & Co from acting for the liquidators is grounded on the fact that they have acted as solicitors for BWKE throughout the proceedings in the Federal Court against Westgate and its directors and as solicitors for BWKE in its claim against Mr Woolfe. Mr Woolfe contends that there is an actual or perceived conflict of interest in Kelly & Co now acting for the liquidators.

16. The court has an 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: Kallinicos v Hunt (2005) 64 NSWLR 561 at [76] where Brereton J reviews and examines the relevant principles. Other relevant principles identified by Brereton J at [76] include:

    76    The foregoing authorities establish the following:

    ●     During the subsistence of a retainer, where the court’s intervention to restrain a solicitor from acting for 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 Bolkiah).

    ●     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 Bolkiah).

    ●     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 Bolkiah; Belan v Casey; PhotoCure ASA; British American Tobacco Australia Services Ltd; Asia Pacific Telecommunications Ltd; contra Spincode Pty Ltd; McVeigh; Sent).

    ●     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 Ltd).

    ●     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).

    I have omitted the citation for each of these principles.

17. Although Kelly & Co have acted as solicitors for BWKE for about four years, they no longer do so. They ceased to act for BWKE in late 2005. They commenced to act for the liquidators in April 2006. In a letter to Mr Woolfe’s solicitors dated 17 October 2006, Kelly & Co explained the present position in these terms:

    2.1Kelly & Co acts for the Liquidators in the examination proceedings;

    2.2in all other respects other solicitors represent the Liquidators;

    2.3Kelly & Co does not act for BWK Elders Ltd (BWKE) in any other capacity and ceased doing so in late 2005; and

    2.4Kelly & Co will not act for BWKE in any capacity until such time that its retainer with the Liquidators is determined.

    The assertion in paragraph 2.4 seems a little unrealistic but the issues in this application can be determined without reference to that paragraph. I find, therefore,

    1.that Kelly & Co acted for BWKE in the proceedings in the Federal Court;

    2.that Kelly & Co acted for BWKE in its claim against Mr Woolfe;

    3.that late in 2005 Kelly & Co ceased to act for BWKE and are not at present acting for BWKE;

    4.that since April 2006 Kelly & Co have been acting for the liquidators in respect of the examination proceedings;

    5.that other solicitors are advising the liquidators on other matters.

    It is reasonable to infer from these facts, as I do, that the liquidators have decided that, by reason of their past involvement in proceedings against Westgate and its directors and in the proceedings against Mr Woolfe, Kelly & Co is likely to have an extensive knowledge of the facts relating to Westgate, its directors and its legal advisors so that it will be to the advantage of the liquidators to retain Kelly & Co to conduct the examinations. The liquidators will thereby gain the benefit of that knowledge. In addition, the liquidators will be considerably more advanced in their knowledge of the affairs of Westgate and will save the time and cost which would be necessary if other solicitors were retained and had to start afresh to gain that knowledge. I also find that BWKE has no objection to Kelly & Co acting for the liquidators. Indeed, there is a real likelihood that it will be to the advantage of BWKE if Kelly & Co represents the liquidators on the examination since the examinations may disclose information to the benefit of the prosecution of any action by the liquidators. BWKE is the most substantial creditor of Westgate and is likely to receive a financial settlement if the proceedings are successful.

18. Mr Woolfe’s application for an injunction fails for two reasons. The first is that he does not have standing to seek an injunction of this kind. The second is that the application is entirely premature.

19. The fact that the solicitors for the liquidators also act for a major creditor of Westgate does not, standing alone, give rise to a conflict of interest or necessarily result in any breach of duty on the part of Kelly & Co towards BWKE: D’Arrigo v Carter (2003) 44 ACSR 162 at [20] and Carter v Gartner (2003) 130 FCR 99 at [49].

20. Even if the evidence given at the examination is confidential, a question on which I share the doubts expressed by Selway J in D’Arrigo v Carter at [18] and [19], any disclosure of that information by the liquidators to BWKE is not a breach of any duty of confidentiality: D’Arrigo v Carter at [20], Carter v Gartner at [49].

21. The grounds on which the Court will prevent a solicitor who has acted for one client from acting for another is not merely to avoid a conflict of interest but in order to protect the confidences of the former client: Kallinicos v Hunt at 570. As it is the former client who has imparted confidential information to the solicitor, it is the former client only who has standing to seek to prevent disclosure of that confidential information. Thus, the only person entitled to apply for an order to restrain Kelly & Co from acting for the liquidators is BWKE. Mr Woolfe does not, therefore, have any entitlement to apply for an injunction of the kind he seeks. As the question of the propriety of Kelly & Co acting for the liquidators on the examination is a matter for BWKE, Mr Woolfe is seeking to meddle in affairs which are not his own.

22. In addition, Mr Woolfe has no other role than as a witness. He has been summoned to give evidence and to produce documents. A witness has no standing to litigate the question whether it is proper for a firm of solicitors to be acting in the proceedings in which he has been summoned to give evidence. There is, therefore, no ground upon which Mr Woolfe is entitled to seek to restrain Kelly & Co from acting for the liquidators.

23. Mr Woolfe’s application was grounded in part on the fact that, when acting for BWKE in the proceedings against Westgate and its directors and in the later proceedings against him, Kelly & Co had prosecuted the proceedings “in a vigorous and robust manner”.  That is not a ground which justifies the Court in preventing Kelly & Co acting for the liquidators.

24. Ms McMillan SC, who appeared for Mr Woolfe, submitted that, if Kelly & Co advise the liquidators on matters arising out of the examination, they will be placed in a conflict between the proper interests of the liquidators and the proper interests of BWKE. When considering this argument, I will ignore the assertion that BWKE has terminated its instructions to Kelly & Co and will not again instruct Kelly & Co until after its retainer with the liquidators comes to an end. I will assume that Kelly & Co are still acting for both BWKE and the liquidators. I repeat, the fact that Kelly & Co acted for BWKE does not, standing alone, give rise to a conflict of interest so that Kelly & Co should not continue to act for both during the examination. If, after the examination, the liquidators seek advice from Kelly & Co on the question whether proceedings should be commenced against Westgate’s former legal advisors, BWKE can then consider whether it has any objection to that course. As the liquidators know that Kelly & Co acted for BWKE in the proceedings against both Westgate and Westgate’s legal advisers, they will only be too well aware of any risk that Kelly & Co might give advice which might favour the interests of BWKE. In short, the question whether Kelly & Co has a conflict of interest when giving advice to the liquidators is a matter for the liquidators and BWKE, not for Mr Woolfe. Furthermore, these are issues for consideration after the examination. They depend on whether the liquidators do in fact retain Kelly & Co to advise. The liquidators might prefer to retain other legal advisers to advise them. It is, therefore, premature to examine the issue now. It is a matter for determination only if the liquidators retain Kelly & Co to give advice.

1. Ms McMillan SC, relied on the observations in re Temple [2000] FCA 1406 where O’Loughlin J applied the principle expressed in re Partridge (Federal Court of Australia, Lockhart J, 22 December 1982, unreported) that a trustee in bankruptcy must not only be scrupulously careful to avoid being placed in a conflict of interest but must be, and be seen to be, impartial. She contended that the same principle applied in the circumstance of Kelly & Co advising the liquidator. The submission fails to have regard to the fact that the issues in re Temple were altogether different from those in this case. In that case, there had been a long and bitter dispute between two creditors of a bankrupt estate. The same firm of solicitors was acting for the trustee in bankruptcy and for one of the disputant creditors. There is no question that a liquidator must avoid a conflict of interest but, for the reasons expressed, the principle does not assist Mr Woolfe in the circumstances of this case.

   Privilege

2. Mr Russell points to the fact that he is not at liberty to hand to the liquidators the documents they seek.  He says that, save for some fee slips and like documents, they are all documents for which legal professional privilege might be claimed by the former directors of Westgate.  Privilege in the documents has been waived on behalf of Westgate by the liquidators but the directors have not waived any privilege that they might have in the documents.  Each of the directors is bankrupt and the trustee in bankruptcy of each has purported to waive privilege.  It is doubtful whether the trustee in bankruptcy is able to waive privilege on behalf of a bankrupt: re Steele (1994) 48 FCR 236 at 245; R v Dunwoody (2004) 212 ALR 103. There are also issues whether the directors have in fact waived privilege. The parties have sensibly agreed a régime for the production of the documents to the court. The issues as to privilege will be a matter for later determination.