Santin v Sfameni
[2020] VSC 26
•7 February 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2019 03031
IN THE MATTER of the Will and Estate of EMILIO SANTIN, deceased
| CARLO SANTIN | First Plaintiff |
| - and - | |
| BRUNO SANTIN | Second Plaintiff |
| v | |
| ROSANNA SFAMENI (as executor and trustee of the estate of Emilio Santin, deceased) | Defendant |
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JUDGE: | MOORE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 31 January 2020 |
DATE OF JUDGMENT: | 7 February 2020 |
CASE MAY BE CITED AS: | Santin v Sfameni |
MEDIUM NEUTRAL CITATION: | [2020] VSC 26 |
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LEGAL PRACTITIONERS – Application by defendant for order restraining solicitor from acting for plaintiffs – Solicitor formerly acted for deceased – Whether solicitor should be restrained in the interests of the administration of justice – Whether solicitor might be a material witness – Whether danger of misuse of confidential information – Whether information could be used to detriment of former client – Application refused – Pinnacle Living Pty Ltd v Elusive Image Pty Ltd [2006] VSC 202.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J Smith | John Whelan Commercial Lawyer |
| For the Defendant | Mr B Murphy | Goldsmiths Lawyers |
HIS HONOUR:
Emilio Santin died on 2 March 2017. His daughter, Rosanna Sfameni, is the executor of his estate. Rosanna and two of her brothers, Carlo Santin and Bruno Santin, are residuary beneficiaries under their father’s last will dated 23 September 2011.
Carlo and Bruno seek that Rosanna be removed as executor and trustee of their father’s estate.[1]
[1]As well as ancillary relief. The relevant procedural history is set out in paragraphs 26–28 below.
Carlo and Bruno are represented by a solicitor, John Whelan. Rosanna seeks an order restraining Mr Whelan from continuing to act for Carlo and Bruno on the bases that Mr Whelan formerly acted for the deceased and is likely to be a material witness in relation to contested issues. It is uncontroversial that, between about September 2015 and January 2017, Mr Whelan did act for the deceased. This judgment concerns Rosanna’s application to restrain Mr Whelan from continuing to act for Carlo and Bruno.
The Court has inherent jurisdiction to restrain solicitors from acting in a particular case. The grounds upon which that jurisdiction may be exercised include the following which were relied on by Rosanna in her application in respect of Mr Whelan:
(a) to protect the due administration of justice where a reasonably informed member of the public would conclude that a solicitor should be prevented from acting; and
(b) if a reasonable person informed of the facts might reasonably anticipate danger of misuse of confidential information of a former client of the solicitor, and that there is a real and sensible possibility that the interest of the practitioner in advancing the case in litigation might conflict with the practitioner’s duty to keep the information confidential and to refrain from using that information to the detriment of the former client.
I will separately consider each of these grounds in determining whether it is appropriate for the Court, in the exercise of its discretion in the circumstances of this case, to make an order restraining Mr Whelan from acting for Carlo and Bruno.
Before considering these grounds, I will firstly address the factual background to the proceeding and the nature of the relief sought and allegations made by Carlo and Bruno. I will then outline Mr Whelan’s previous legal representation of the deceased and set out the legal principles relevant to the Court’s jurisdiction to restrain solicitors from acting in a particular case.
The proceeding and factual background
The essential factual background to the proceeding is not in dispute. Rosanna and her husband, Salvatore (Sam) Sfameni, were the mortgagees of a mortgage registered by Rosanna on 29 September 2011 as security for a loan of $473,385 that she and Sam provided the deceased. The mortgage was charged against the deceased’s property in Ascot Vale. The loan was used to discharge an earlier mortgage in which the deceased acted as guarantor for a loan taken out by his eldest son, Giuseppe (Joe) Santin, who subsequently defaulted on the repayments of the loan.
Against this factual background, the nature of the claims made by Carlo and Bruno are set out in an affidavit sworn by Carlo Santin on 5 June 2019 and in their statement of contention filed on 6 September 2019.
Carlo and Bruno contend that there is an arguable case that the mortgage granted over the Ascot Vale property in 2011 should be set aside on the grounds of unconscionability. They allege that Rosanna and Sam ‘appear to have’ taken advantage of the deceased’s ‘special disabilities’, namely, that he spoke very limited English and was effectively unable to read English, that he trusted and relied on his children and Sam, was elderly and unsophisticated in commercial matters and had only one asset of consequence, being his residence in Ascot Vale. In an affidavit filed in the proceeding, Carlo deposes that:
My father’s English was poor. He told me that he had understood there was a caveat on his home but that he did not know or understand there was a registered mortgage on his home. He acknowledged the mortgage instrument was signed by him, but said that when he signed the document he had not been aware that he was signing a mortgage. I am not aware whether he received independent advice at the time.
Carlo and Bruno contend that Rosanna and Sam unconscionably took advantage of these special disabilities on the part of the deceased because:
(a) the mortgage granted in relation to the Ascot Vale property provided for interest only to be repayable;
(b) interest on the loan would accrue at 8.2% per annum, but if the instalment was not paid on time, interest would accrue at a higher rate of 10.2% per annum;
(c) the lower interest rate would mean that the monthly interest instalments were $3,234.79;
(d) unpaid instalments would be added to the principal and therefore bear interest as well;
(e) there would be a power of sale in the event of default;
(f) at the time of executing the mortgage, the deceased did not know or understand the nature of the document which he was signing and relied upon Rosanna and Sam to protect his interests;
(g) entering into the mortgage was against the deceased’s interests because:
(i) of the imposition of an interest rate which exceeded available retail interest rate;
(ii) of the imposition of a minimum monthly payment which exceeded the deceased’s income;
(iii) the deceased would inevitably be in default from the due date for the first instalment such that the defendant and Sam would have a power of sale over the property; and
(iv)the capitalisation of interest would inevitably consume the deceased’s equity in the property.
As a result of these matters, Carlo and Bruno contend that, upon entering into the mortgage, there immediately arose a conflict between the deceased’s interests and Rosanna’s interests.[2]
[2]Carlo and Bruno contend that the deceased was a mortgagor with an arguable claim to have the mortgage set aside for unconscionability and Rosanna was a mortgagee who benefited from the mortgage and against whom such a claim might be brought. This alleged conflict of interest is referred to by Carlo and Bruno in their claim as the ‘unconscionability conflict’.
Carlo and Bruno allege that their father was unable to meet a single repayment on the mortgage with the consequence that interest accrued at 10.2% per annum and was added to the capital of the loan.
On 25 March 2015 and then on 23 May 2015, the deceased and Rosanna entered into contracts for Rosanna to purchase the Ascot Vale property from the deceased. Neither sale proceeded.
On 1 September 2016, Rosanna’s solicitors served on the deceased a ‘Notice to Pay’. The notice demanded payment of $833,590 pursuant to the mortgage and threatened that the mortgagee would exercise its power of sale of the property if the deceased failed to comply with the demand within one month. It is alleged that Rosanna served another notice of default on the deceased on 23 December 2016.
The deceased died on 2 March 2017.
On 6 September 2017, Rosanna obtained a grant of probate of the deceased’s will. The Inventory of Assets and Liabilities included in Rosanna’s application for probate disclosed that there were gross assets of $1,210,919.19 comprised substantially of the Ascot Vale property which was valued at $1.2 million, and a single liability of $876,823.80 owing to Rosanna and Sam pursuant to the mortgage.
Carlo and Bruno allege that the Inventory of Assets and Liabilities lodged by Rosanna omitted certain of the deceased’s assets.[3]
[3]The plaintiffs allege that the Inventory of Assets and Liabilities omitted the deceased’s motor vehicle, various chattels and a double cemetery plot located in the Melbourne General Cemetery.
On 29 March 2018, the solicitors for Rosanna and Sam wrote to Carlo and Bruno’s then solicitor. The letter sought ‘the considered views of Carlo and Bruno in relation to Rosanna’s intentions concerning the administration of the Estate’. The solicitors explained that Rosanna instructed them ‘in her capacity of Executor of the Estate, Purchaser in the Sale Contract and as a Mortgagee named in the Mortgage’ and stated that ‘Rosanna is conscious of a potential conflict of interests’ in her respective positions.
Mr Whelan responded in a letter dated 13 April 2018 in which he advised that he acted for Carlo. He stated that Rosanna was ‘hopelessly compromised as executor’. He continued:
With respect, her options are:
1. renounce her appointment as executor; or
2.make application to the Supreme Court of Victoria to seek directions whether she might be exonerated from continuing to act in the face of the conflict between her duty to the beneficiaries and her personal interest claimed under the contract of sale and the mortgage; or
3.Remain as executor and not cease to enforce the alleged contract of sale or mortgage.
I do not believe that the court would exonerate and would require that she cease to act as executor and renounce her appointment. I expect that the third option would be rejected. Thus your client should renounce her appointment as executor.
An independent executor would need to be appointed, recognising that there will be litigation. …
On 7 June 2018, Rosanna’s solicitors informed Mr Whelan that Rosanna would not seek to enforce the contract of sale dated 25 March 2015 in relation to the Ascot Vale property, but would instead sell the property in her capacity as executor of the deceased’s estate and apply the funds to discharge the mortgage.
Mr Whelan responded on 8 June 2018, stating that Rosanna ‘remains compromised’ and could not ‘discharge a mortgage in favour of herself and her husband on terms that allow[ed] [her] to make her own calculation as to the amount due under the mortgage’. The letter stated that ‘[t]his has been an issue in dispute since before the death of the late Emilio Santin’.
On 20 October 2018, Rosanna and Sam entered into a contract of sale which provided for Sam to purchase the Ascot Vale property from the deceased’s estate for $1,250,000. The contract settled on 3 December 2018. Carlo and Bruno do not seek to impugn this transaction.
Carlo and Bruno allege that, in the period of nearly two years between when the deceased died and when the Ascot Vale property was purchased by Sam, the property was never rented out to generate income.
The distribution by Rosanna of the net proceeds of sale of the Ascot Vale property is central to the claims made by Carlo and Bruno in the proceeding. They allege that, from the purchase price of $1,250,000 paid by Sam, Rosanna caused $1,048,566.86 to be paid to herself and Sam pursuant to the mortgage over the property, $116,896.50 to be paid to herself for reimbursement of various personal expenses including her legal fees associated with her dispute with the deceased and the balance of $62,437.76 to be paid equally to herself, Carlo and Bruno pursuant to the terms of deceased’s will ($20,812.58 each).
Carlo and Bruno contend that the facts and circumstances outlined above leave Rosanna hopelessly conflicted in various ways between her personal interests and her duties as executor of the deceased’s estate so as to render her position as executor untenable. The central conflict they fix upon is that by paying herself $1,048,566.86 to discharge the mortgage over the Ascot Vale property, Rosanna breached her duty as executor not to place herself in a positon of conflict, or a real and substantial possibility of conflict, between her position of trust and her own interests. They advance ‘the simple proposition that an executor cannot make a payment to herself from the estate assets; all the more so in circumstances where the liability which she asserts may be tainted by unconscionability’.[4] In circumstances where it is at least arguable that Rosanna and Sam acted unconscionably in taking advantage of the deceased’s claimed special disabilities, they submit that the propriety of the mortgage transaction required ‘careful investigation’.[5] Rather than adopting that course, Rosanna simply paid herself and her husband out under the mortgage.
[4]Counsel’s emphasis.
[5]In Estate of Crane (2005) 93 SASR 198, 207 [41]; Mataska v Browne [2013] VSC 62, [28]–[30].
This alleged ‘mortgage discharge conflict’ is central to the application by Carlo and Bruno for Rosanna to be removed as executor. They submit that, whether the deceased was truly liable to Rosanna and Sam and in what sum, was not a matter which Rosanna could fairly and independently investigate. They make the point that Rosanna had expressly acknowledged her conflict of interest, but continued to act and to pay out the mortgage despite the fact that Carlo and Bruno clearly did not consent to her doing so or for her to continue to act as a conflicted fiduciary.[6] They submit that an independent administrator should be appointed to determine what, if any, further action is required in relation to the mortgage discharge conflict and the other conflicts which they have alleged.[7]
[6]See the correspondence referred to in paragraphs 18–21 above.
[7]Carlo and Bruno also relied upon various other alleged conflicts as providing a basis for Rosanna’s removal as executor: (a) the ‘unconscionability conflict’ referred to in paragraph 11 above; (b) a ‘reimbursement conflict’, being Rosanna’s alleged payment of personal expenses from the net proceeds of sale of the Ascot Vale property, which conduct is said to have been in breach on her duty an executor not to profit from a position of trust and her duty not to place herself in a positon of conflict between her position of trust and her own interests; (c) a ‘delay conflict’, being Rosanna’s alleged breach of her duty as executor to preserve the assets of the estate by failing to either sell the Ascot Vale property immediately upon the deceased’s death or to refinance the mortgage at a more favourable interest rate and to rent out the property pending sale; and (d) an ‘accounting conflict’, being Rosanna’s alleged breach of her duty as executor to account to the beneficiaries of the estate for all of the estate’s assets by failing to account for certain assets as alleged in paragraph 17 above.
In addition to seeking Rosanna’s removal as executor of the deceased’s estate, Carlo and Bruno originally sought declarations that Rosanna caused loss to the estate by failing to refinance the loan secured by mortgage over the estate property, failing to let the property, and failing to account for identified items. Equitable compensation for each of these alleged breaches was sought. They also sought a declaration that Rosanna and Sam be prohibited, from the date of the deceased’s death, from recovering interest pursuant to the mortgage over the property at a rate above the reasonably obtainable market rate.
By summons filed shortly before the hearing of Rosanna’s application to restrain Mr Whelan from acting, Carlo and Bruno sought leave to amend their Originating Motion to abandon their claims for all of the relief referred to in the previous paragraph. Rosanna neither consented to, nor opposed, this application. I heard this application before hearing Rosanna’s application to restrain Mr Whelan from acting. I gave leave to Carlo and Bruno to amend their Originating Motion as they had proposed.[8]
[8]See Santin v Sfameni (Supreme Court of Victoria, Moore J, 31 January 2020).
Having granted Carlo and Bruno leave to amend their Originating Motion, it follows that Rosanna’s application to restrain Mr Whelan from acting is to be considered in the context of the proceeding as being one which is now confined to the application for the removal of Rosanna as executor of the deceased’s estate and the appointment of an independent administrator in her stead.
Mr Whelan’s previous legal representation of the deceased
The material before the Court indicates that Mr Whelan acted for the deceased between about September 2015 and January 2017 in relation to a dispute about the repayment of the loan made to the deceased by Rosanna and Sam which was secured by the mortgage to which I have referred.
On 28 September 2015, Mr Whelan notified Rosanna and Sam that he acted for the deceased and stated that his client ‘wishes to arrange for payment of the debt owed to you’. He indicated his preliminary view that ‘there was no agreement between [the deceased] and you for payment of interest’ and invited them to submit material concerning the question of interest on the loan.
On 22 October 2015, Mr Whelan notified Rosanna and Sam that the deceased had decided to sell the Ascot Vale property. The letter continued:
As stated in my letter to you of 28 September 2015, my client wishes to pay the debt owed to you. He therefore proposes that at settlement of the sale of his property he pay you the amount yet to be determined and you provide a withdrawal of caveat.
My client greatly appreciates the assistance you have provided him and notwithstanding that no agreement was reached concerning interest, accepts that he must pay you reasonable interest in respect of the principal sum you advanced. My client is prepared to accept the interest calculation in respect of the principal which you provided me at our meeting on 15 October 2015. However, the interest you calculate in respect of meeting the instalments is, with respect, not something properly chargeable to my client.
My client therefore proposes that at settlement he will pay $474,685.00 plus $161,274.23 plus further interest paid by you on the principal sum from 15 September 2015 until settlement. …
On 7 October 2016, Mr Whelan corresponded with the solicitors acting for Rosanna and Sam about the notice to pay served on the deceased which demanded payment of $833,590 pursuant to the mortgage.[9] Mr Whelan stated his belief that the notice was defective and that the abovementioned amount required to discharge the mortgage was ‘plainly incorrect’. He continued, ‘[e]ven if the mortgagees could claim interest for the whole 5.5 years at 10.2%, the total amount owing is $738,000’.
[9]See paragraph 14 above.
On 18 October 2016, Mr Whelan again wrote to the solicitors acting for Rosanna and Sam stating, amongst other things, that ‘it appears that your method of calculating interest is compounding. The mortgage does not allow for this’.
Following further correspondence from Mr Whelan to the solicitors acting for Rosanna and Sam in late 2016, on 25 January 2017, an informal mediation was held at which Mr Whelan represented the deceased and counsel represented Sam (Rosanna did not attend).
As I have noted, the deceased died in March 2017.
Legal principles
There is no dispute between the legal principles which apply to Rosanna’s application. In Pinnacle Living Pty Ltd v Elusive Image Pty Ltd,[10] Whelan J referred to three principles applicable to whether a solicitor should be restrained from acting in a proceeding, stating:[11]
[10][2006] VSC 202.
[11]Pinnacle Living Pty Ltd v Elusive Image Pty Ltd [2006] VSC 202, [14].
(1) The Court will restrain a legal practitioner from continuing to act for a party to litigation if a reasonable person informed of the facts might reasonably anticipate danger of misuse of confidential information of a former client, and that there is a real and sensible possibility that the interest of the practitioner in advancing the case in litigation might conflict with the practitioner’s duty to keep the information confidential and to refrain from using that information to the detriment of the former client.[12]
[12]Sent & Primelife Corporation Ltd v John Fairfax Publication Pty Ltd and Hills [2002] VSC 429, [33].
(2) The danger of misuse of confidential information is not the sole touchstone for curial intervention where a solicitor acts against a former client. There is also an independent equitable obligation of loyalty which forbids a solicitor acting against a former client in the same or a closely related matter. Intervention may also be justified on this ground in the exercise of a Court's supervisory jurisdiction over its own officers.[13]
(3) There is an overriding jurisdiction to intervene so as to protect the due administration of justice arising where a reasonable informed member of the public would conclude that solicitors should be prevented from acting.[14]
[13]Sent & Primelife Corporation Ltd v John Fairfax Publication Pty Ltd and Hills [2002] VSC 429, [98]–[104]; Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501, 508–24 [25]–[53].
[14]Sent & Primelife Corporation Ltd v John Fairfax Publication Pty Ltd and Hills [2002] VSC 429, [111]–[114]; Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501, 522–5 [54]–[60].
Rosanna’s application to restrain Mr Whelan from acting was developed principally by reference to the third of these grounds (‘the administration of justice ground’), but also by reference to the first ground (‘the misuse of confidential information ground’).
It is well established that the Court’s jurisdiction to restrain a solicitor from acting on the administration of justice ground is exceptional and is to be exercised with caution.[15] As Mandie J stated in Tricontinental Corporation Ltd v Holding Redlich (a firm),[16] ‘[i]t is a serious matter to prevent a party from retaining the legal representative of its choice, particularly upon the application not of a former client but of an adverse party’. In Bahonko v Nurses Board of Victoria (No 3),[17] Middleton J went so far as to state that the ‘Court must be careful not to intervene unless it is absolutely required in the circumstances of the case’ and that the Court ‘should be mindful that sometimes applications for restraining legal practitioners may be misused or quite inappropriately pursued by a party to proceedings’.[18]
[15]Kallinicos v Hunt (2005) 64 NSWLR 561, [76]; ACN 092 675 164 Pty Ltd v Suckling [2018] VSC 620, [55].
[16]Tricontinental Corporation Ltd v Holding Redlich (a firm) (Supreme Court of Victoria, Mandie J, 22 December 1994).
[17][2007] FCA 491.
[18][2007] FCA 491, [3].
As stated by Brereton J in Kallinicos v Hunt,[19] the test to be applied in applying the administration of justice ground:[20]
… 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.
[19](2005) 64 NSWLR 561 (‘Kallinicos’).
[20]Kallinicos (2005) 64 NSWLR 561, 582 [76] (citations omitted).
His Honour continued that, in exercising the Court’s jurisdiction:[21]
… consideration is to be given to the prima facie right of a party to be represented by the lawyer of its choice, to the inconvenience, cost and disruption which might be occasioned by requiring a party to change lawyers, and to the “exceptional” nature of the jurisdiction.
[21]Kallinicos (2005) 64 NSWLR 561, 586 [92].
Rosanna’s submissions
Rosanna’s principal objections to Mr Whelan continuing to act for Carlo and Bruno are threefold: (a) Mr Whelan may be required as a material witness in the proceeding regarding Carlo and Bruno’s claims of unconscionability; (b) Mr Whelan possesses confidential information relating to his representation of the deceased; and (c) that when the unconscionability issue falls to be determined, Mr Whelan’s conduct when representing the deceased may be called into question.
Central to these objections is Rosanna’s claim that, in contrast to the ‘serious allegations of impropriety and misconduct’ now made against her, the correspondence sent by Mr Whelan when he acted for the deceased raised no such concerns and provided ‘no suggestion of unconscionable conduct’ on her part. Instead, the correspondence indicates that the deceased acknowledged the debt, wished to repay it and appreciated he would have to obtain refinance or sell the property to do so.
Rosanna submits that it is difficult to reconcile this correspondence with the allegations of unconscionable conduct now made by Carlo and Bruno. Either the deceased said nothing to Mr Whelan to found an allegation of unconscionability, or he rejected advice provided by Mr Whelan to the effect that the mortgage was unconscionable. It is therefore argued that Mr Whelan’s conduct will be in issue in the case and his professional conduct called into question as to why the deceased did not challenge the mortgage during his lifetime. Mr Whelan will be a ‘required witness’ and, given his prior dealings with the deceased, he will be ‘in a very difficult position such that he should not be permitted to continue [acting for the plaintiffs] in this proceeding’.
In her reliance on the administration of justice ground, Rosanna places particular emphasis on Kallinicos in which Brereton J considered a solicitor was likely to be a material witness on controversial issues of substance. Rosanna argues that Mr Whelan’s position is almost the same as the solicitor (Mr Moloney) in Kallinicos. The following conclusions drawn by Brereton J in that case are therefore said to be ‘entirely apposite’ to the present matter:[22]
Accordingly, in my opinion, Mr Moloney will be a material witness on issues of substance which appear to be controversial and in respect of which questions of credibility and integrity (not necessarily his own) are likely to arise.
Moreover, there is a high degree of probability that Mr Moloney’s evidence and/or conduct will come under scrutiny. It seems almost inevitable that Mr Kallinicos would query how being on notice of the interest and claims of Mr Kallinicos, Mr Moloney could accept instructions to distribute the entire balance of proceeds for the benefit of Mr Hunt. There may be a perfectly good explanation, but one can anticipate that it will be the subject of rigorous testing.
Thus, the propriety of Mr Moloney’s conduct is likely to be examined in the proceedings, and his evidence is likely to be material. He will be in a position in which his client’s interest, his own interest, and his obligation to the court may well be in conflict. …
[22]Kallinicos (2005) 64 NSWLR 561, 584 [84]–[86].
Rosanna also relied on the following observations by Whelan J in Adam 12 Holdings Pty Ltd v Eat & Drink Holdings Pty Ltd:[23]
In my view, a relevantly similar position has arisen here. Mr Goldsmith is a potential witness. It seems to me that a challenge to his conduct is a possibility. Here, these circumstances are combined with the fact, not present in Kallinicos, that Mr Goldsmith was at the time acting for the company which is now the opposite party. In my view, a fair-minded reasonably informed member of the public would conclude that these circumstances so compromise Mr Goldsmith’s independent objectivity as to require the court’s intervention in the interests of protecting the administration of justice and the appearance of justice.
The position in Kallinicos was not the same as the position here. The circumstances in Kallinicos were that the solicitor was a material witness whose conduct was likely to be challenged. In this case, it is not as clear that Mr Goldsmith will be a witness, or that his conduct will be challenged. But the potential for that to occur does exist, and it is combined here with the fact that at the relevant time he was acting for the opposite party.
[23]Adam 12 Holdings Pty Ltd v Eat & Drink Holdings Pty Ltd [2006] VSC 152, [38]–[39].
In relation to the misuse of confidential information ground, Rosanna further submits that, as the deceased’s solicitor, Mr Whelan will have been in receipt of confidential information that is subject to legal professional privilege. If Mr Whelan deploys such information to advance Carlo and Bruno’s case, it is submitted that he would be in breach of his obligations as the deceased’s solicitor. It is also submitted that there is a risk that Mr Whelan may withhold information obtained from the deceased and relevant to Carlo and Bruno’s case.
Consideration
For the reasons that follow, I do not consider that the nature and circumstances of this proceeding are such that, in light of Mr Whelan’s previous representation of the deceased, it is appropriate on either the administration of justice ground or the misuse of confidential information ground to restrain him from acting for Carlo and Bruno.
Administration of justice
The submissions advanced on behalf of Rosanna failed to grapple with the significant confinement in the nature of the relief sought by Carlo and Bruno which was effected by the grant of leave to amend the Originating Motion filed in the proceeding. As I have explained, with that amendment, the proceeding is now limited to an application to remove Rosanna as executor of the deceased’s estate and appoint an independent administrator in her place. I agree with the submissions advanced on behalf of Carlo and Bruno that Rosanna erroneously characterises this proceeding as a claim for relief based upon the unconscionability of the loan provided by her and her husband to the deceased in 2011.
Critically, with the amendment of the Originating Motion, it will be unnecessary for the Court to finally determine whether or not Rosanna and Sam did in fact engage in unconscionable conduct towards the deceased in relation to the grant of the mortgage over the Ascot Vale property. The submissions advanced on behalf of Rosanna rested, to a considerable extent, on the false premise that it would be necessary for the Court to finally determine that matter.
The nature of the removal case advanced by Carlo and Bruno indicates that this is not so. First, it is important to note that many of the grounds advanced for Rosanna’s removal are wholly limited to her conduct since her appointment as executor and do not turn at all on the claims of unconscionable conduct.[24]
[24]See the ‘reimbursement conflict’, the ‘delay conflict’ and the ‘accounting conflict’ referred to in fn 7 above.
As to the central controversy concerning the ‘mortgage discharge conflict’ and the connected ‘unconscionability conflict’, the contentions advanced on behalf of Carlo and Bruno make clear that the gravamen of their claim is that Rosanna should be removed and an independent administrator appointed because of her failure to carefully investigate the mortgage transaction where it was at least arguable that she and Sam had engaged in unconscionable conduct towards the deceased. Instead of adopting that course, Rosanna simply paid herself and her husband out under the mortgage.
Without making any observation about the merits of this claim for removal, I observe that this contention appears to be the formulation and application of an orthodox claim for removal based upon an executor’s alleged conflict of interest. No submission was advanced to the contrary.
Two important conclusions then follow. First, in ultimately dealing with this ground for removal, it will be unnecessary for the Court to finally determine the claims of unconscionable conduct. Secondly, in broad terms, the resolution of this ground of removal will likely fundamentally turn on two matters: (i) whether Rosanna and Sam arguably engaged in unconscionable conduct when the mortgage was entered into in 2011; and (ii) an examination of the propriety of Rosanna’s conduct as executor and in particular her conduct in paying out the mortgage. As to the second of these issues, Rosanna’s calculation of what was said by her to be owing pursuant to the mortgage and the payment of that sum to herself and Sam from the proceeds of sale is at the core of the case for removal. Mr Whelan’s previous representation of the deceased is wholly unrelated to the determination of this issue. There is no suggestion that Mr Whelan was implicated in Rosanna’s decision to pay herself out.
As to the first matter referred to above, I make the general observation that Mr Whelan’s dealings with the deceased in 2015–2017 can only be indirectly relevant to whether Rosanna and Sam engaged in unconscionable conduct in 2011. It is difficult to conceive of how an examination of the communications between Mr Whelan and the deceased and the correspondence sent by Mr Whelan on his behalf to Rosanna could, at best, be of more than limited relevance to determining whether Rosanna and Sam arguably engaged in unconscionable conduct.
Further and in any event, Rosanna’s submission about the claimed difficulty in reconciling the current allegations of unconscionable conduct with the correspondence sent to Rosanna by Mr Whelan on behalf of the deceased is overstated. It stems from an incomplete and decontextualised interpretation of the correspondence sent by Mr Whelan to Rosanna and her legal representatives.
For example it is submitted that Mr Whelan’s letter to Rosanna dated 28 September 2015 contains no suggestion of unconscionable conduct. While that is true, this is Mr Whelan’s first letter to Rosanna. And in it Mr Whelan goes on to seek information to confirm the conditions of the mortgage. In the context of a self-evidently sensitive family controversy, it is unsurprising that the letter does not include a reference to unconscionable conduct.
The complaint that Mr Whelan’s later correspondence also did not include any suggestion of unconscionable conduct, while again strictly true, also presents a simplistic interpretation that is not entirely borne out by the content of the relevant letters. For example, in his letter of 22 October 2015,[25] Mr Whelan states that ‘no agreement [had been] reached concerning interest’ and that ‘the interest you calculate in respect of meeting the instalments is, with respect, not something properly chargeable to my client’. Read as a whole, one sees in this correspondence a politely framed ongoing concern regarding the interest being charged to the deceased. No doubt it was a delicate situation, given the familial context.
[25]See paragraph 32 above.
When read in its entirety and in context, it is apparent from Mr Whelan’s correspondence to Rosanna and her solicitors that he maintained, at least, an ongoing concern about the calculation of interest in respect of the mortgage. Contrary to the submissions advanced on behalf of Rosanna, it is therefore not necessarily the case that difficulties will arise in reconciling Mr Whelan’s correspondence with the allegations of unconscionable conduct now made by Carlo and Bruno. It likewise follows that I do not accept that Mr Whelan’s conduct will, or will likely, be in issue in the case. I am therefore not persuaded that it is likely that Mr Whelan will be required as a material witness in the trial of the removal application.
Rosanna’s capacity to compel Mr Whelan to give evidence is not only constrained by questions of relevance of the type to which I have referred above but, as counsel for Carlo and Bruno foreshadowed, may also raise issues of legal professional privilege which might preclude that result. Although it is unnecessary and inappropriate for me to express a final view on the point, in circumstances where the interests of Carlo and Bruno broadly align with the deceased’s interests[26] and in circumstances where the proceeding is about the propriety of Rosanna’s conduct as executor of the deceased’s estate, Mr Whelan would have at least an arguable basis to seek to set aside any subpoena which might issue to compel him to give evidence in Rosanna’s case on the basis of legal professional privilege.
[26]Considered further below in paragraph 65.
In summary, as Riordan J stated in ACN 092 675 164 Pty Ltd v Suckling[27] in his review of the authorities dealing with the administration of justice ground: [28]
Of course, each case must be determined on its own facts, but critically the practitioner in each of the above cases was alleged to be a significant actor in a critical event in the proceeding.
[27](2018) 56 VR 448.
[28]ACN 092 675 164 Pty Ltd v Suckling (2018) 56 VR 448, 467–8 [80].
For the reasons I have explained, Mr Whelan was not a significant actor in the critical events relevant to Carlo and Bruno’s removal application. Mr Whelan’s position is not analogous to that of Mr Moloney in Kallinicos.[29] I do not consider that a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that Mr Whelan 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.
[29]As was submitted on behalf of Carlo and Bruno, the evidence to be given by Mr Moloney in Kallinicos was central to one of the issues in dispute in that he caused certain sums to be distributed to the defendants in circumstances where some of the proceeds ought to have been paid to the plaintiffs. The basis upon which Mr Moloney made those distributions, including at whose direction, was likely to be in issue at trial.
In reaching this conclusion, I also take into account Carlo and Bruno’s prima facie right to be represented by their lawyer of choice and the inconvenience, cost and disruption to which they inevitably would be subject if they were required to change legal representatives. I am also mindful of the exceptional nature of the Court’s jurisdiction to restrain a lawyer from acting.
Misuse of confidential information
This ground is without substance. Central to it is the existence of a risk that confidential information may be misused. Rosanna has not demonstrated any actual or likely conflict between the deceased’s interests and those of Carlo and Bruno which might reasonably give rise to such an apprehension.
If anything, the material before the Court suggests that the interests of Carlo and Bruno and those of the deceased are broadly aligned. When he acted for the deceased, Mr Whelan conveyed to Rosanna and her solicitor an ongoing concern about the interest charged to the deceased pursuant to the mortgage. Now, acting on behalf of Carlo and Bruno, Mr Whelan seeks to challenge the legitimacy of Rosanna’s conduct as executor in calculating the amount owed under the mortgage (which plainly included interest) and then paying herself and Sam from the proceeds of sale of the property.
These circumstances belie any suggestion that, by Mr Whelan continuing to act for Carlo and Bruno, there is a risk of confidential information being misused. As Mr Whelan himself observed in correspondence well before this proceeding was commenced, Rosanna’s intention to discharge the mortgage in favour of herself and to make her own calculation of the amount due under the mortgage had been an issue in dispute since before the deceased’s death.
Rosanna has failed to establish any proper basis for me to conclude that a reasonable person properly informed about the facts and circumstances of this matter might reasonably anticipate that there is a danger that the deceased’s confidential information may be misused as a consequence of Mr Whelan acting for Carlo and Bruno. Further, there is no real and sensible possibility that Mr Whelan’s interest in advancing their case might conflict with his duty to keep the information confidential and to refrain from using that information to the deceased’s detriment.
Disposition
The Court orders that Rosanna’s summons filed on 25 September 2019 be dismissed and that the proceeding be listed for further directions at the next directions hearing before the Judicial Officer in charge of the Trusts, Equity and Probate List.
Within seven days the parties are to submit any proposed consent orders in respect of costs or, in the absence of agreement on costs, any proposed orders on costs and short submissions in support.
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