Rumsley v Clifford
[2019] WASC 447
•6 DECEMBER 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: RUMSLEY -v- CLIFFORD [2019] WASC 447
CORAM: CURTHOYS J
HEARD: 26 NOVEMBER 2019
DELIVERED : 6 DECEMBER 2019
FILE NO/S: CIV 1702 of 2019
BETWEEN: ALAN PHILLIP RUMSLEY
Plaintiff
AND
MICHAEL JOHN CLIFFORD
First Defendant
SHERAZ PTY LTD
Second Defendant
Catchwords:
Legal practitioner - Conflict - Personal interest in outcome - Potential witness - Injunction
Legislation:
Nil
Result:
Injunction granted
Representation:
Counsel:
| Plaintiff | : | J Schoombee |
| First Defendant | : | P Lafferty |
| Second Defendant | : | P Lafferty |
Solicitors:
| Plaintiff | : | Western Legal |
| First Defendant | : | Clifford Chambers |
| Second Defendant | : | Clifford Chambers |
Case(s) referred to in decision(s):
Clifford v Vegas Enterprises [2011] FCAC 135.
Clifford v Vegas Enterprises Pty Ltd [2010] FCA 916.
Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2013] WASC 45.
Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4.
CURTHOYS J:
On 18 April 2019 Mr Rumsley issued a Supreme Court Writ against Michael John Clifford and Sheraz Pty Ltd seeking the recovery of fees and associated matters.
Michael John Clifford, the first defendant, is a director of Sheraz Pty Ltd, the second defendant. He is the brother of Phillip Clifford - the other director of Sheraz Pty Ltd.
The total amount sought by Mr Rumsley for legal services in about $750,000.
Mr Rumsley further alleges that Sheraz Pty Ltd engaged Phillip Clifford to provide legal services to clients.
Mr Rumsely alleges a 2009 agreement between he and Phillip Clifford whereby Mr Rumsley would act on Mr Clifford's behalf in proceedings against Vegas Enterprises Pty Ltd (WAD 28 of 2009). Mr Clifford's claim was dismissed.[1]
[1] Clifford v Vegas Enterprises Pty Ltd [2010] FCA 916.
Mr Rumsley alleges that in August 2010 Phillip Clifford instructed him to commence an appeal. On 3 November 2011 Phillip Clifford's appeal was dismissed.[2]
[2] Clifford v Vegas Enterprises [2011] FCAC 135.
Mr Rumsely alleges that in February 2012 Phillip Clifford instructed him to commence proceedings for Sheraz Pty Ltd in the Supreme Court of Western Australia against Vegas Enterprises Pty Ltd. Mr Rumsely alleges a fee agreement with Phillip Clifford relating to the costs of those proceedings. Sheraz Pty Ltd's claim was dismissed.[3]
[3] Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2013] WASC 45.
Mr Rumsley alleges a further fee agreement with Phillip Clifford in February 2013. Mr Rumsely agreed to act in an appeal against the Supreme Court decision. The appeal was dismissed by the Court of Appeal.[4]
[4] Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4.
Mr Rumsley alleges a further agreement in May 2013 between he and Phillip Clifford relating to proceedings in the State Administrative Tribunal concerning Phillip Clifford's practice certificate.
Mr Rumsley alleges that in February 2015 Phillip Clifford instructed Mr Rumsley to file an application for special leave against the Court of Appeal's decision. The application for special leave was dismissed. ([2015] HCASL 172)
Mr Rumsley makes a number of allegations relating to invoices issued to Sheraz Pty Ltd for fees rendered by Mr Rumsley for work undertaken on behalf of Phillip Clifford/ Sheraz Pty Ltd.
Mr Rumsley alleges that certain invoices were issued by Sheraz Pty Ltd to clients for legal services provided to Sheraz Pty Ltd by Phillip Clifford. Mr Rumsley alleges that Sheraz issued those invoices in breach of the Legal Profession Act 2008 were made from Sheraz Pty Ltd
On 2 May 2019, in these proceedings 1702 of 2019, Phillip Clifford entered an appearance on behalf of Mr Michael Clifford and Sheraz Pty Ltd.
On 29 July 2019 Mr Rumsley filed a chamber summons seeking the following orders:
1.Phillip Clifford be restrained from acting as a lawyer for the defendants, or either of them, in these proceedings.
2.The defendants pay the plaintiff's cots of this application to be taxed if not agreed.
3.Such further order as to this honourable court deems fit.
The chamber summons was supported by an affidavit of Mr Rumsley sworn the same date.
Mr Rumsely filed submissions in support of his application on 29 August 2019 which read:
1.The plaintiff seeks orders under the inherent jurisdiction of the Court to restrain Mr Philip Clifford (Clifford) from acting as lawyer for the defendants, or either of them in these proceedings.
2.The grounds are that Philip Clifford will invariably or at least very likely be a material witness in these proceedings. He also has a personal and professional interest in the proceedings by reason of the scrutiny to which his conduct in a professional context will be subjected. This is notably so in relation to invoices issued under his direction claiming payment by Sheraz Pty Ltd (Sheraz), for legal services he had performed, and receipt of payment for the same by Sheraz, in circumstances where Sheraz was not an incorporated legal practice or otherwise entitled to claim payment for any legal services.
Relevant Background
3.There are two aspects to the substantive proceedings.
4.First the proceedings seek payment for legal fees in matters where the plaintiff (Rumsley) acted as solicitor of record for Sheraz Pty Ltd (Sheraz), in the Supreme Court, Court of Appeal and High Court, and for Clifford in the Federal Court and State Administrative Tribunal. Fees are claimed in all these instances on the basis that Clifford agreed with the Rumsley, when acting on behalf of Clifford and Sheraz, that Sheraz would pay the legal fees due to Rumsley.
5.Secondly, the proceedings involve the recovery of legal fees paid from the trust account of Rumsley, on behalf of a number of clients, to Sheraz. The payments were made in circumstances where Sheraz was not an incorporated legal practice for the purposes of the Legal Professions Act 2008 and not on any basis entitled to receive remuneration for legal services.
6.In previous proceedings involving Sheraz and Clifford, Sheraz was held to be no more than the alter ego of Clifford.
7.In respect of the legal proceedings where Mr Rumsley acted for Sheraz or Philip Clifford, and the payments for legal services were made to Sheraz, all of the relevant dealings of Mr Rumsley were with Philip Clifford.
8.Clifford and Sheraz made arrangements in 2011, for Sheraz to employ Clifford to provide legal services. The background is set out in the report of the trustee of the bankrupt estate of Clifford, attached to the affidavit of Mr Rumsley sworn 29 July 2019.
9.As pointed out above, Clifford will invariably or at least very likely be a material witness in these proceedings. He also has a personal and professional stake in these proceedings by reason of the scrutiny to which his conduct in a professional context will be subjected.
Jurisdiction
10.It has been accepted for a very long time that "all courts may exercise an authority over their own officers as to the propriety of their behaviour: for applications have been repeatedly made to restrain solicitors who had acted on one side, from acting on the other, and those applications have failed or succeeded upon their own particular grounds, but never because the court had no jurisdiction."
11.It is "a supervisory power which is of considerable importance for the maintenance of standards and enforcement of discipline in relation to legal practitioners". The function of the Supreme Court in supervising practitioners pursuant to its inherent jurisdiction is, in each case, to ensure the protection of the public.
12.As pointed out above, the basis for the exercise of the jurisdiction is that the conduct of Clifford is at the heart of the matters now in issue in these proceedings, where he is likely to be required to give evidence, such that Clifford cannot continue to act as he has an interest in these proceedings of the type referred to in Clay v Karlson (1997) 17 WAR 493, 495-496 and Afkos Industries Pty Ltd v Pullinger Stewart [2001] WASCA 372, [32].
Applicable Principles
13.What the WA Court of Appeal has decided in this context, should be noted – emphasis supplied:
where the acts or omissions of the law firm, including situations where the actions of the client are based on advice given by the solicitors, are at the heart of the question in issue, the firm is, in a real sense, 'defending' its actions or advice. There is, in such circumstances, a danger that the client will not be represented with the objectivity and independence which the client is entitled to and which the Court demands. There is no sound reason to presume or accept that the solicitors must first have the opportunity to clarify whether their client is liable as a result of their actions or of acting on their advice before confronting the conflict; and
Solicitors not only owe a duty to their clients to do their best for them but also owe an overriding duty to the Court. The same overriding duty is owed by counsel who have been granted a right of audience to appear in this Court. As part of their professional responsibility, therefore, solicitors and counsel must ensure that they do not appear in a matter in which they have an actual or potential conflict of interest or where, by reason of their relationship with their client, their professional independence can be called in question.
14.The mandatory language used by the Court in the extracted passages should be noted.
15.As Templeman J, with the agreement of Parker, Wheeler and Pullin JJ held:
It is the purity of interest in the adversaries before the court that gives what fundamental utility and credence there is in the system. But where, as in this case, the solicitor has a personal interest in the outcome of the 'action that 'purity of interest' is absent; and in dealing with legal practitioners and the conduct of litigation, the courts can speak with authority in saying that it is "incontestably and on any view inimical to the public interest" to permit a solicitor to act in any case in which his interest conflicts with his client's interest.
Previous Instances of Clifford acting for Sheraz and relevant judicial findings
16.In Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4; 48 WAR 93, Chaney J, with the agreement of Buss and Murphy JJA , held that where Clifford appeared as barrister on the appeal of Sheraz; 'there is at least a serious risk that he could not bring to the Court the independence expected of counsel.' In that case no objection had been taken by the other party to Clifford appearing as counsel for Sheraz. At [191], Chaney J identified the interests of Clifford in that case as:
16.1Barker J found he controlled Sheraz at the time the relevant events took place, and he was described by Master Sanderson as the alter ego of Sheraz;
16.2Sheraz was the trustee of a discretionary trust of which he was a beneficiary; and
16.3Clifford would have been a key witness for Sheraz and it was highly likely that significant parts of his evidence would have been challenged.
17.In 20 July 2018, Birmingham DCJ, in the matter of Clifford v Rumsley action BUN CIV 4 of 2017, referred to the Court of Appeal findings, set out above and concluded that someone other than Philip Clifford must file an appearance and appear for Sheraz. That matter concerns claims by Clifford or Sheraz for payment by Rumsley of fees claimed in relation to clients Rumsley and Clifford acted for.
18.In proceedings in the Federal Court, in March 2019, the issue of Philip Clifford acting for Sheraz was raised by Mr Rumsley. This matter was an application by Sheraz to set aside a statutory demand. The docket judge, her Honour Justice Banks-Smith raised, through her associate, this issue with the parties and requested it be addressed at the case management hearing.
19.In the District Court and Federal Court proceedings referred to in the preceding two paragraphs, Armeli Molony Lawyers replaced Clifford as the lawyers for Sheraz.
20.The current proceedings will place in issue the professional conduct of Clifford in arranging the affairs of Sheraz and thereby advising Sheraz in respect of engaging Clifford as an employee initially and then as a consultant to provide legal services, for which Sheraz was paid.
Mr Rumsley's submissions correctly state the relevant legal principles.
The course of these proceedings
This matter was originally listed for hearing on 5 September 2019. The matter did not proceed on that day because of Phillip Clifford's ill health. Phillip Clifford filed submissions dated 3 September 2019 which made various complaints about Mr Rumsley's conduct of the proceedings. As is too often the case in submissions filed in this Court, failed to deal with the central issue in the proceedings and complain about alleged procedural irregularities that have little or no relevance to the matters the court is required to determine. It is not necessary to deal with those submissions in these reasons.
The matter was re‑listed on 13 November 2019. Phillip Clifford appeared on behalf of the defendants. He foreshadowed an application to dismiss the Supreme Court proceedings as an abuse of process. It was adjourned to 26 November because Phillip Clifford had filed an affidavit sworn by him, intended to be filed in these proceedings, in the District Court proceedings.
This matter was re‑listed for hearing on 26 November 2019. On that day the defendants filed a notice of change of representation. Mr Lafferty appeared for the defendants.
On 26 November 2019 the defendants also filed an application to dismiss the proceedings as an abuse of process. The chamber summons to dismiss was programmed for hearing in early 2020.
On 26 November 2019 Phillip Clifford filed 'further submissions' in opposition to Mr Rumsley's application for injunctive relief.
It is beyond me why Mr Clifford's submissions, the chamber summons to dismiss and the change of representation were not filed until the morning of 26 November 2019. No explanation was offered by Phillip Clifford.
Phillip Clifford's submissions stated:
1.The plaintiff completed oral submissions on 13 November 2019 and the hearing was adjourned part-way through the defendants' submitting the injunction application is premature.
2.On 21 November 2019, the plaintiff filed a supplementary list of authorities identifying an additional eight cases, noting all would be read from. There is no indication of why those cases are relied on or what issue or matter they may go to.
3.The plaintiff's submissions so far are anchored on a submission Sheraz is obliged to repay monies paid to it by the plaintiff because of section 102 of the Legal Professions Act 2008 (LPA).
4.Difficulties with this submission include:
4.1Sheraz Pty Ltd (Sheraz) has never engaged in legal practise and no evidence is produced saying it did;
4.2the same allegation is made in District Court proceedings BUN CIV 4 of 2017 and remains alive in those proceedings;[5]
[5] See Deputy Registrar Hewitt's reasons dated 16 September 2019, Clifford v Rumsley [2019] WADC 128 at paragraphs [11] – [13]
4.3in Sheraz Pty Ltd v Rumsley[6] at paragraph [4], the Court found:
[6] [2019] FCA 493 (9 April 2019).
Mr Rumsley is a solicitor who between 2011 and 2016 retained the services of Philip Clifford a barrister who is a director and shareholder of Sheraz meaning the finding is not Sheraz provided legal services and, again, the plaintiff does not produce evidence or offer any particulars that it did.
5.As to the claim for $500,000, the plaintiff issued an invoice to Sheraz more than six years after he claims to have provided services to Sheraz which claim had already been extinguished in the Estate of Mr Philip Clifford. Also, the plaintiff's account does not comply with any of the LPA requirements imposed upon solicitors issuing accounts. There is also the additional complication of the plaintiff having been paid $110,000 for legal services he provided in the Federal Court trial to Mr Philip Clifford.
6.Importantly to this application, the issues raised in the plaintiff's submissions are also issues in the District Court proceedings. As examples, see the whole of the pleadings but in particular, the issues expressly raised in Mr Rumsley's defence regarding the status of Sheraz, Mr Philip Clifford, the clients of Mr Rumsley, payment by Mr Rumsley of some accounts and statutory construction issues of the LPA.[7]
[7] Paragraphs [1] to [14]
7.The plaintiff here is attempting to raise in these proceedings the same "construction issues" on the same evidence as that in the District Court proceedings.[8]
[8] See paragraphs [8], [15], [19], [21], [24] and [59] to [71] of the Statement of Claim in these proceedings
8.Further and directly contrary to the position taken by the plaintiff in the pleadings in these proceedings and in the District Court proceedings, the plaintiff, apparently aware of his duties and obligations and the relevant law, made various payments and made various admissions that monies were owing for legal services provided solely by Mr Philip Clifford and various promises of payment.[9]
[9] See paragraphs [64] to [71] of the affidavit of Philip George Clifford dated 17 May 2019 ("PGC affidavit")
9.Many of these LPA contentions and the payment arrangements have been raised in the District Court proceedings and ruled upon in that Court already.
10.The Chamber Summonses out of which these LPA and payment arrangement issues arose are at PGC affidavit:
10.1 pages [72] and [73] security for costs – now dismissed;
10.2 pages [75] and [76] strike out – now dismissed; and
10.3 pages [78] and [79] strike out – now dismissed.
11.In pursuing these applications, the plaintiff raised many of the issues of fact and law he pleads in this Court. None of the plaintiff's arguments succeeded and, one assumes, by continuing to defend the District Court proceedings, those issues remain alive. The plaintiff does not say otherwise.
12.For example, see PGC affidavit at pages:
12.1[85] – promises to pay;
12.2[86] to [90] – inadequate plea in contract;
12.3[93] to [95] – injunction to restrain solicitor;
12.4[97] to [98] – provision of legal services;
12.5[101] to [105] – provision of legal services, construction of LPA, what administration of law means;
12.6[106] to [108] – admissions monies to be paid for legal services provided solely by Mr Philip Clifford;
12.7[113] to [114] – construction of LPA;
12.8[116] to [118] – legal services provided solely by Mr Philip Clifford described by the plaintiff as "first class";
12.9[125] to [128] – legal services, how alleged contract formed;
12.10[131], [134] to [136] – LPA construction, and in particular, what now seems to be a further attempt in these proceedings to allege criminal conduct by Sheraz;
12.11[144] to [145] – Rules of Court and the plaintiff's conduct in filing a false set of statements – unfortunately;
12.12[148] to [150] – construction of LPA.
13.The matter has progressed to a point where it is now time to make a dismissal, stay and/or strike out application.
14.The correspondence has progressed this application to a point where it cannot be resolved without such an application.[10]
[10] See affidavit of Philip George Clifford dated 12 November 2019
Phillip Clifford's submissions do not directly address the matters raised in Mr Rumsley's submissions and the issue of whether Phillip Clifford could continue to represent the defendants.
Phillip Clifford characterise Mr Rumsley's claim as 'anchored on a submission Sheraz is obliged to repay monies paid to it by the plaintiff because of s 102 of the Legal Professions Act 2008 (LPA)'.
It is not clear what Mr Clifford means by 'anchored'. The principal claim in these proceedings is for fees owing to Mr Rumsley pursuant to a number of oral agreements to which Phillip Clifford was a party.
Phillip Clifford further alleges that her Honour Justice Banks in Sheraz Pty Ltd v Rumsley[11] the court found:
Mr Rumsley is a solicitor who between 2011 and 2016 retained the services of Philip Clifford a barrister who is a director and shareholder of Sheraz [4].
[11] Sheraz Pty Ltd v Rumsley [2019] FCA 493.
Justice Banks‑Smith's decision concerned the validity of a notice of statutory demand. Whether Phillip Clifford was or was not a barrister was not a finding by her Honour but rather an introduction to her reasons.
Phillip Clifford's basic submission seems to be that because the matter may never proceed to trial no issue of conflict has yet arisen and may never arise. That submission must be rejected.
Phillip Clifford is alleged to have been a party to a number of oral agreements for the payment of Mr Rumsley's fees. It is inevitable that if the matter proceeds to trial that Mr Clifford will be a witness.
Even if the claim is ultimately found to be statute barred that will not prevent the matter proceeding to trial.
As the Court of Appeal has made clear:
Solicitors not only owe a duty to their clients to do their best for them but also owe an overriding duty to the Court. The same overriding duty is owed by counsel who have been granted a right of audience to appear in this Court. As part of their professional responsibility, therefore, solicitors and counsel must ensure that they do not appear in a matter in which they have an actual or potential conflict of interest or where, by reason of their relationship with their client, their professional independence can be called in question
Mr Clifford's personal interest in the matter will inevitably infect every decision he makes in the proceedings. Mr Clifford cannot possibly exercise his duty to the Court dispassionately when he has a personal stake in the outcome via Sheraz. Further, as noted, above he will be a witness.
It is artificial to suggest that there is a relevant distinction between trial and pre-trial procedures. Many of the decisions made in pre‑trial proceedings inevitably impact the trial. For example, Phillip Clifford has already filed an affidavit in these proceedings. That affidavit already illustrates how Phillip Clifford's personal involvement in the matter has distorted a proper appreciation of the reasons of Justice Banks-Smith.
The Court of Appeal could not have made the potential for conflict any clearer to Phillip Clifford given his relationship to Sheraz. The fact that he entered an appearance for Sheraz Pty Ltd illustrates a fundamental failure to appreciate his actual or potential conflict.
Mr Lafferty was not prepared to concede that the filing of a notice of change of representation on 26 November 2019 represented a concession on Phillip Clifford's part that there was a conflict. Accordingly orders restraining Phillip Clifford in the terms sought by Mr Rumsley should be made.
Costs should follow the event, ie the defendants should pay Mr Rumsley's costs.
Orders
1.Phillip Clifford be restrained from acting as a lawyer for the defendants, or either of them, in these proceedings.
2.The defendants pay the plaintiff's costs of this application to be taxed if not agreed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MDM
Associate to the Honourable Justice Curthoys5 DECEMBER 2019
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