Supreme Court of Western Australia
[2016] WASC 216
•19 JULY 2016
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS |
| CITATION | : | TRAFALGAR WEST INVESTMENTS PTY LTD AS TRUSTEE FOR THE TRAFALGAR WEST INVESTMENTS TRUST -v- SUPERIOR LAWNS AUSTRALIA PTY LTD [No 12] [2016] WASC 216 |
| CORAM | : | KENNETH MARTIN J |
| HEARD | : | ON THE PAPERS |
| DELIVERED | : | 19 JULY 2016 |
| FILE NO/S | : | COR 59 of 2011 |
| BETWEEN | : | TRAFALGAR WEST INVESTMENTS PTY LTD AS TRUSTEE FOR THE TRAFALGAR WEST INVESTMENTS TRUST Plaintiff |
| AND | ||
| SUPERIOR LAWNS AUSTRALIA PTY LTD First Defendant | ||
| KINGSLEY CRAIG FLUGGE Second Defendant | ||
| MARGARET FLUGGE Third Defendant | ||
| JEROME MATTHEW FLUGGE Fourth Defendant | ||
| LINLEY FLUGGE Fifth Defendant | ||
| DAMIEN CRAIG FLUGGE Sixth Defendant | ||
| Catchwords: |
Legal practitioner - Conflict of interest - Legal practice of record for plaintiff corporation - Application to restrain - Pro bono assistance from barrister - Exceptional circumstances alleged - Court's discretion to intervene and prohibit officer acting in conflict - Restraint order against acting to take effect in 30 days
Legislation:
Nil
Result:
Defendants' application allowed
Category: B
Representation:
Counsel:
| Plaintiff | : | No appearance |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
| Fourth Defendant | : | No appearance |
| Fifth Defendant | : | No appearance |
| Sixth Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Jebb Legal |
| First Defendant | : | Bennett + Co |
| Second Defendant | : | Bennett + Co |
| Third Defendant | : | Bennett + Co |
| Fourth Defendant | : | Bennett + Co |
| Fifth Defendant | : | Bennett + Co |
| Sixth Defendant | : | Bennett + Co |
[2016] WASC 216
Case(s) referred to in judgment(s):
Chapman v Rogers [1984] 1 Qd R 542
Clay v Karlson (1997) 17 WAR 493
Commissioner for Corporate Affairs v Harvey [1980] VR 699
Frigger v Mervyn Jonathon Kitay in his capacity as liquidator of Computer
Accounting & Tax Pty Ltd (in liq) [No 10] [2016] WASC 63
Hempseed v Ward [2013] QSC 348
Holborow v MacDonald Rudder [2002] WASC 265
Powell v In de Braekt [2007] WASC 4
Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West
Investment Trust v Superior Lawns Australia Pty Ltd [No 10] [2016]
WASC 111
Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 11] [2016] WASC 152
Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2]
[2012] WASC 169
[2016] WASC 216
KENNETH MARTIN J
KENNETH MARTIN J:
Introduction
1 At some time before noon on 30 May 2016, the second tranche of a
required security for costs payment in the amount of $100,000, was paid into court on behalf of the plaintiff (Trafalgar) by bank cheque. I had ordered that further failure to meet that extended payment deadline beyond noon on 30 May 2016 would result in a springing order then taking effect, striking out the plaintiff's statement of claim, and then entering judgment against for the defendants dismissing the plaintiff's action against them.
2 The consequence of the payment at the eleventh hour was that the
stay of the action, which had been in place and which had effectively inhibited all progress towards a trial since November 2015, was lifted: see Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 11] [2016] WASC 152.
3 Given those events, some residual, albeit deferred business, arising
out of the directions hearing of 18 December 2015, now revives for its necessary determination. These are previous issues which had been and remain amenable to resolution by my determination on the papers. One aspect involved a demand for production of the retainer agreement of the plaintiff's former solicitors.
4 But the second, and overwhelmingly important, of the suspended
issues from December 2015, is an application of the defendants, under their amended minute of proposed orders of 16 December 2015, seeking by proposed orders 3 and 4, that:
3. The notice of change of solicitor filed by Jebb Legal on 4 December 2015 is invalid and ineffective.
4. Unless the plaintiff is represented by an independent solicitor or counsel, the plaintiff shall be restrained from taking any step or filing any documents in these proceedings.
5 On 3 June 2016, my associate received a communication from the
solicitors for the defendants, in the aftermath of the second tranche
security for costs payment being paid, in terms:Accordingly, the defendants respectively request that his Honour proceed to determine their application to restrain Jebb Legal from acting for the
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plaintiff on the papers, in accordance with orders made on the 18th of
December 2015 (submissions having already been filed by the parties).
I will proceed accordingly.
The written submissions filed by the parties on this application
7 Before I mention extensive written submissions of the parties which
were exchanged in January 2016, I need to mention the content of an affidavit of Patrick Gerard Gladwyn Jebb sworn 14 December 2015, that is relied upon by the plaintiff on this application to resist the relief sought by the defendants against Jebb Legal and himself.
In that affidavit Mr Jebb, who describes himself as a solicitor and company director, relates:
1. The plaintiff (Trafalgar West Investments Pty Ltd) has at all times undertaken this action as trustee for the Trafalgar West Investments Trust (Trust) which is the beneficial owner of the shares in the first defendant.
2. I am the:
(a) sole director of and the holder of 50% of the issued shares in the Plaintiff and am duly authorised to depose hereto on behalf of the Plaintiff; (b) sole appointor and guardian for the Trust; (c) primary witness to be called by the Plaintiff in these proceedings having been formerly an executive director of the First Defendant for much of the period at issue; (d) the primary beneficiary of the Trust; and (e) the principal, and only solicitor, employed at the law firm Jebb Legal and am authorised to depose hereto on behalf of the firm. 3. In October 2015 LCM Litigation Fund Pty Ltd (LCM) terminated its funding agreement with the plaintiff.
4. On 24 November 2015 Corrs Chambers Westgarth terminated its retainer with the Plaintiff.
5. The Plaintiff remains unable to finance independent legal representation other than through the support of third party loans or litigation funding.
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KENNETH MARTIN J
6. On the basis of the facts stated in paragraphs 4 to 8 above I instructed Jebb Legal, on behalf of the Plaintiff, to act for the Plaintiff.
7. As I was mindful of the history of the matter, my lack of independence to the plaintiff and my direct personal interest in the matter, I sought independent advice before doing so.
8. Annexed hereto marked PGJ1 is a true copy of a letter settled by counsel, sent to the solicitors for the defendants (dated) 4 December 2015 which was served with my Notice of Appearance.
9. As is apparent from Annexure PGJ1 in filing an appearance I intend no disrespect to the Court and recognise that the Court must consider whether the extraordinary circumstances justify my continued acting.
9 Annexed letter PGJ1 was sent on the letterhead of 'Jebb Legal'. It
was signed by Mr Jebb personally - as principal of that legal practice. The letter is directed to the solicitors for the defendants. It read in the following terms:
On 24 November 2015, the solicitors for the plaintiff in the above matter, Corrs Chambers Westgarth, terminated their retainer following earlier notification from the plaintiff that LCM Litigation Fund Pty Ltd had terminated its funding agreement.
The plaintiff has no current ability to pay for legal representation and, in the absence of a dispensing power in the Supreme Court Rules allowing the Court to consider my application to represent the plaintiff personally, the Rules require the plaintiff corporation to be represented by a legal practitioner.
Accordingly served with this letter is a copy of a Notice of Change of
Solicitors filed today.In light of the history of the matter, and the fact that I have a substantial personal interest in the proceedings and am the primary witness for the plaintiff, I recognise that only in extraordinary circumstances could my firm be permitted to represent the plaintiff.
In this regard I note that Mr Penglis has agreed to accept instruction to attend at any conferral and appear in respect of any application the defendants may make in this regard (or any review of the issue by the Court of its motion).
Separately I confirm that the plaintiff is continuing to pursue alternative funding and, in the event this is secured, it is expected that Corrs Chambers Westgarth's retainer will be reinstated.
[2016] WASC 216
KENNETH MARTIN J
The accompanying notice of change of solicitors was filed in this court on 7 December 2015. It advised that:
Corrs Chambers Westgarth has ceased to act for the plaintiff in this action, and that the plaintiff has appointed the firm of Jebb Legal as its solicitors, whose address for service is …
Preliminary observations
11 Some early observations may be conveniently made at this point,
prior to my considering the written submissions the parties have exchanged - with a view to the objection to Jebb Legal acting for the plaintiff corporation being determined on the papers.
12 First, Mr Jebb has frankly acknowledged a conflict of interest
position, which obviously manifests in respect of his acting professionally for this plaintiff by Jebb Legal. The extent of the conflict is not to be assessed as minor or technical. Mr Jebb does not, as I assess his materials, submit otherwise. The nature of the conflict extends beyond Mr Jebb merely presenting as the major witness for the plaintiff corporation at the looming trial. It extends to Mr Jebb's direct financial interest in the trial outcome as a primary beneficiary of the Trust.
13 The underlying dispute which has been the subject of multiple prior
interlocutory reasons which have issued since the matter's inception in 2011, is a complex one. The underlying disputed facts extend to raising a controversy over events at a time when Mr Jebb was engaged as an executive director of the first defendant. The allegation is made by the defendants, that in that period Mr Jebb provided the first defendant corporation with his legal advice. That controversy compounds the dimensions of Mr Jebb's conflict of interest position.
14 Second, there have been prior points in time during the course of this
litigation when Mr Jebb, who holds a practice certificate as a legal practitioner in Western Australia, has sought to act in person for the plaintiff corporation. On those occasions I have declined to countenance that situation: see Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2] [2012] WASC 169.
15 There is now the legal practice, Jebb Legal which, without my leave,
has unilaterally made itself the legal practice of record for Trafalgar, since
7 December 2015.16 Third, Jebb Legal is only a business name. It is not an incorporated
legal practice. I have been provided, without objection, with a copy of a
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business name search for that name, showing that the name is owned by Mr Jebb personally. It was registered on 3 March 2010 with a start date of 1 November 2012. Mr Jebb has also said in his affidavit, as I quoted above, that he is the only legal practitioner within that legal practice.
17 Fourth, although Mr Jebb makes some reference at his pars 8 and 9
above to the filing of a 'notice of appearance' in that affidavit, that is not at all correct as regards Jebb Legal acting for the plaintiff. What was filed by Jebb Legal was a 'notice of change of solicitor'. The change was from Corrs Chambers Westgarth, to Jebb Legal. There is provision under the rules of court, see Rules of the Supreme Court 1971 (WA) (RSC) O 8 r 2, allowing for such a notice of change of solicitor to be filed. That is not a memorandum of appearance - filed on behalf of a defendant under RSC O 12 r 2. Trafalgar is the plaintiff corporation. It is wholly misconceived to speak of a memorandum of appearance by such a plaintiff.
18 Mr Jebb's affidavit and his letter render it clear that the change of
legal representation was filed unilaterally. No permission from the court was sought beforehand. The notice was filed, effectively as a 'fait accompli', as regards Jebb Legal acting for the plaintiff corporation from 7 December 2015.
19 Fifth, Mr Jebb would appear to acknowledge not only his conflict of
interest, but also what he refers to as a need for 'extraordinary circumstances' to be established by Jebb Legal, in order to justify this (ie his) legal practice acting in this matter for the plaintiff.
20 Sixth, I note that a notice of change of solicitor document, albeit
dated 4 December, was filed at court for this plaintiff on 7 December
2015.
Seventh, in Mr Jebb's email to the court to my associate of 3 June 2016 he related:
In relation to the defendants' application for me to be restrained from continuing to act for the plaintiff I confirm the offer previously made that the plaintiff will agree not to file any document or take any steps in these proceedings without the approval of Mr Penglis as pro bono counsel.
An existence of the pro bono assistance offer from an independent barrister adds an extra and unique dimension to the present arguments.
23 Eighth, a component of the plaintiff's written submissions of
27 January 2016 (signed by pro bono independent counsel on behalf of
the plaintiff) reads in these terms:
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KENNETH MARTIN J
18. In the alternative, the Plaintiff submits that the application would be dismissed on the basis of the Plaintiff undertaking:
(a) not to file any document with the Court not previously approved by independent counsel; and (b) not to engage in direct conversations with solicitors for the Defendants by way of conferral otherwise other than through independent counsel. 19. This would provide an appropriate 'check and balance' against Jebb Legal's interest in the proceedings affecting the manner in which the proceedings are conducted …
Other issue: Corr's retainer document
24 I mentioned that there is the other, less significant carryover
unresolved issue which also arose at the 18 December 2015 directions hearing, concerning the defendants' requested production of the retainer agreement between the plaintiff and Corrs which is referred to in par 4 of Mr Jebb's affidavit. As the written submissions of the defendants reveal, the defendants requested under the force of RSC O 26 r 8(2), discovery and production of that document - on the basis that it had been referred to by Mr Jebb's affidavit. The terms of that subrule say in part:
Any party to a cause or matter shall be entitled at any time to serve a notice on another party in whose pleadings or affidavits reference is made to any document requiring him to produce that document for inspection …
25 I have already dealt in previous reasons in Trafalgar West
Investments Pty Ltd as Trustee for the Trafalgar West Investment Trust v Superior Lawns Australia Pty Ltd [No 10] [2016] WASC 111, with a request for a copy of the funding agreement between the plaintiff and LCM Litigation Fund Pty Ltd - requiring that document to be produced. As regards the retainer with Corrs it is convenient to deal with that issue now. In short I do not accept the defendants' submissions that RSC O 26 r 8(2) has been engaged in present circumstances. As seen from the quoted par 4 in Mr Jebb's 14 December 2015 affidavit, his statement in par 4 was simply to Corrs having 'terminated its retainer with the Plaintiff'. I do not assess such a statement as being a 'reference' to the written retainer agreement that will necessarily require a production of the document. Rather, I assess that as Mr Jebb's reference to the termination event itself concerning the former solicitor/client relationship.
[2016] WASC 216
KENNETH MARTIN J
26 In any event, it is difficult to see why those private retainer
arrangements are presently material. That production application will be
refused.
Evaluations re Jebb Legal: restraint against acting for the plaintiff 'issues'
I now return to the core residual issue, which is the application to restrain Mr Jebb and Jebb Legal from acting for the plaintiff.
I proceed on the basis of it being convenient to append to these submissions, as schedules A, B and C respectively:
(1) the defendants' written submissions of 13 January 2016; (2) the plaintiff's written submissions of 27 January 2016; and (3) the defendants' reply submissions of 5 February 2016.
This alleviates me from the burden of unduly needing to summarise the parties' rival positions.
More background
30 Before going further, it is necessary to revisit some of my prior
determinations made in October 2011 and again in May 2012, when I was asked to but refused to approve Mr Jebb acting as the legal practitioner of record for Trafalgar.
31 On 25 October 2011, Mr Jebb appeared in person in chambers. At
the time Trafalgar's lawyers were seeking to remove themselves as lawyers of record. Mr Jebb was seeking leave to replace them in personally acting for Trafalgar. At the time these exchanges followed which I repeat below (and which occur across ts 38 - 41):
KENNETH MARTIN J: All right, Mr Jebb. I will just deal with your ex parte motion of 19 September 2011. The difficulty was of course this is filed in COR 59 of 2011. I take it the application - and I should have mentioned this to Mr Karp - is in COR 59 of 2011 and the 2010 matter, COR 138 of 2010 as well, so essentially then, as I read your ex parte motion, assuming it now to be correctly filed, you want leave to appear personally on behalf of Trafalgar West Investments Pty Ltd.
JEBB, MR: Your Honour, I understand subsequent to correspondence from the court that the court rules don't permit that and that the only reason for not filing an appearance using my certificate was that I was under the apprehension, perhaps mistaken, that I couldn't do that as I was a material witness.
[2016] WASC 216
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KENNETH MARTIN J: I think your antennae is absolutely right, if I may say so. The problem is not so much, as you say, material witness but the problem is a conflict of interest which would debar, in the ordinary course, a firm, from properly acting in such circumstances for a corporate party where there is a manifest conflict of interest.
The authority that I am guided by here, which no one has referred me to but which is well-known, is the decision of Hasluck J in Eastern Metropolitan Region Council v Four Seasons Construction Pty Ltd, [2000] WASC 178; 22 WAR 372.
I then referred to passages from Hasluck J's reasons at [43], [44] and
[47] - [60].
…
Having regard to a number of cases his Honour [ie Hasluck J] [says]:'… I am of the view that a Judge of the Supreme Court in this State does not have the power to dispense with the explicit requirements of the rules with the result that, even in exceptional circumstances, an individual is not at liberty to take a step in the action on behalf of a company. This is so notwithstanding the inherent jurisdiction of the Supreme Court to regulate its proceedings where the rules deal with a matter specifically and impose a prohibition. Where the Supreme Court Rules deal with a certain matter specifically, and impose a prohibition, one is obliged to conclude that Judges collectively, as a collegiate body, have established the practice to be observed. In the absence of a dispensing power, it is difficult to see on what basis the explicit rule can be disregarded.'
I won't read it, but it's important to bear in mind what his Honour said at paragraphs 48, 49 and 50. Perhaps I should say that what his Honour then did go on to do in the particular circumstances of that case was to let the director speak on behalf of the company on an application as what is known as a McKenzie friend; in other words, to make a submission as the spokesperson on behalf of the company.
I continued:
Your situation is slightly different in the sense that as augmented your application is to in effect act through your firm for the corporate plaintiff, which I think is an unprecedented situation, not the situation his Honour was obviously dealing with, but the principles that his Honour dealt with apply, and the question then is whether I can sanction a situation of a sole practitioner firm essentially acting in circumstances of conflict of interest where, as you yourself say, you would be a material, probably the material, witness in the case.
[2016] WASC 216
KENNETH MARTIN J
What it would also envisage is you as the sole practitioner would make communications with the court and the other side as the solicitor of record in circumstances of a conflict of interest.
This exchange followed:
JEBB, MR: Your Honour, if you could clarify the conflict of interest. I have attempted to confirm to my ex-wife and the other shareholder of Trafalgar West that on no account will I be charging any fees to the corporate entity but I accept the difficulty in terms of being a material witness.
KENNETH MARTIN J: The position essentially is that because you have a personal interest in the outcome of the action, which is obvious, on behalf of the plaintiff, you are not independent from it as an independent solicitor who provides dispassionate distanced advice would be.
You are very much in the maelstrom of the merits of this action and it just strikes me as being impossible for you to put on a hat at one moment saying you are the dispassionate independent solicitor who was an officer of the court on the record for this corporate plaintiff and yet at the same time take off that hat and then put on another one saying now you are the material witness, the person who is affected by all the events that are the subject matter of the litigation. That seems to me to be the worst conflict of interest imaginable.
The question then is, can the court sanction a replacement of Karp Steedman as solicitors of record by a firm of solicitors in a conflict of interest scenario, and that's my difficulty. I don't think the court can or should sanction a conflict of interest scenario.
JEBB, MR: Your Honour, may I suggest that the conflict to the extent it may be cured, can be cured at the company level. To the extent that it's an issue for the court in the jurisdictional sense and the operational sense, I accept that there is an issue, but would it not be the case that a conflict of interest is, under normal duties, normal common law, something that can be cured by the fully informed consent of all shareholders of Trafalgar West?
KENNETH MARTIN J: It's beyond that, I think, Mr Jebb. Your personal dealings as a solicitor with the company are one thing but as a solicitor of record sanctioned by the court, you owe a primary responsibility to the court. That's your first obligation.
JEBB, MR: I accept that, your Honour.
34 Then, on 29 May 2012, I dealt with a fresh application by
Mr Jebb - see Trafalgar v Superior Lawns [No 2]. I explained at
[1] - [12]:
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KENNETH MARTIN J
In three Corporations Act actions, Mr Patrick Jebb on 9 January 2012 applies in person a second time to be substituted as the plaintiff, pursuant to Rules of the Supreme Court 1971 (WA) (RSC) O 18 r 7(2). I first refused a similar application by Mr Jebb on 7 December 2011. He seeks his personal substitution as plaintiff in lieu of the corporation, Trafalgar West Investments Pty Ltd (Trafalgar). Alternatively, Mr Jebb applies to be added as second plaintiff, with Trafalgar, on the basis that he would then be the active plaintiff and essentially carry Trafalgar along with him.
The three actions are said to have been brought by Trafalgar 'as trustee for the Trafalgar West Investments Trust' (the Trust). The heading of COR 59 of 2011 carries that description of Trafalgar.
It is clear that at the time each action was begun, Trafalgar was a corporate trustee of the Trust. That all changed on 26 October 2011. Mr Jebb, as the Trust's appointor, at that time appointed himself as the new trustee of the Trust, replacing Trafalgar: see a Deed of Change of Trustee, annexure PGJ1 to Mr Jebb's affidavit of 27 October 2011.
The three actions
COR 59 of 2011 is a complicated statutory oppression action. It was commenced urgently, in the context of Trafalgar's pursuit of interim injunctive relief, on 24 March 2011.
The other corporations matters (COR 138 of 2010 and COR 76 of 2011) are said by Mr Jebb to concern some residual taxed costs outcomes still requiring resolution. Accordingly, it is the oppression action (COR 59 of 2011) that requires primary focus, as regards the still contested installation of Mr Jebb as a plaintiff, either in lieu of Trafalgar or, alternatively, by Mr Jebb's addition as the second plaintiff.
Basis of application
Mr Jebb has been explicit about his motives in seeking to become the plaintiff in the three actions. He believes becoming the, or a, plaintiff in the three actions will solve the problem Trafalgar currently faces: it cannot afford legal representation but, as a corporate litigant, it is required by RSC O 4 r 3(2) to have legal representation.
Trafalgar's solicitors of record, Karp Steedman Ross-Adjie, have unsuccessfully sought to be removed from the record. Their accounts have not been fully met by Trafalgar. Karp Steedman Ross-Adjie remain on the record for Trafalgar in the three actions, but now acts effectively as a 'post box' for service of documents upon Trafalgar.
On occasion I have given Mr Jebb leave to speak in chambers as a McKenzie friend on Trafalgar's behalf. He did so at this application and at his earlier unsuccessful application to be substituted for Trafalgar as the sole plaintiff. Mr Jebb also speaks in his own interest.
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Mr Jebb's conflict in acting as Trafalgar's legal representative
On 25 October 2011, I declined the application to replace Karp Steedman Ross-Adjie with Mr Jebb as solicitors of record for Trafalgar. Mr Jebb is a legal practitioner who holds a current practising certificate. My chief concern was that Mr Jebb has a clear conflict of interest in so acting. He would have a significant personal conflict of interest in acting as Trafalgar's legal representative. Mr Jebb is sole director and 50% shareholder (with his former wife) in Trafalgar.
Many affidavits already filed by Mr Jebb on behalf of Trafalgar in the oppression proceedings show that he is Trafalgar's significant material witness in the oppression action. The action raises over 40 alleged instances of oppressive conduct sought to be ventilated on behalf of Trafalgar as a 30% minority shareholder against the first defendant, Superior Lawns Australia Pty Ltd (Superior Lawns), plus five other defendants (essentially members of the Flugge family).
Mr Jebb's proposed substitution for Trafalgar as sole plaintiff in the action seeks to replace a corporate plaintiff with an individual. If that were to occur, the constraints which prevent corporate plaintiffs being represented in proceedings other than by a legal representative would be alleviated, at least in Mr Jebb's eyes. Mr Jebb then seeks, effectively, to act for himself in person as the substituted plaintiff but also, as he sees it, in the interests of the Trust, of which he is, by his hand, sole trustee as of 26 October 2011. It is this discretionary trust (see the copy of the Deed of Trust of 3 December 1991, annexure PGJ2 to Mr Jebb's affidavit of 11 November 2011) which Mr Jebb contends has held the beneficial interest in the 30% minority shareholding in Superior Lawns since June 2006.
Trafalgar faces a security for costs application brought by the defendants, which is deferred at present. Trafalgar's inability as a corporation, and Mr Jebb's correlative inability, as Trafalgar's sole director and 50% shareholder, to fund further independent legal representation for Trafalgar by Karp Steedman Ross-Adjie, suggests Trafalgar's and Mr Jebb's financial resources are heavily constrained. Yet the oppression action is very complex. The statement of claim filed for Trafalgar on 22 July 2011 runs to some 100 pages. The prospect of that action being run by a self-represented litigant (albeit a legal practitioner) is less than ideal.
I then refused that application - see [58] - [60] below:
I am of the view that the defendants' objections against Trafalgar's further pursuit of the oppression action must be accepted. Trafalgar is not a viable plaintiff at present. This difficulty has been brought about by Mr Jebb's tactical manoeuvres. They are a stark manifestation of the clear underlying conflict he faces, as between his own interests and Trafalgar's interests.
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Mr Jebb's tactical manoeuvres to circumvent an inconvenient outcome as regards the legal representation of Trafalgar have led to these problems. It is possible (the point has not yet been argued) that Trafalgar's present difficulty could be alleviated by a re-transfer back to it of the shares it once held in Superior Lawns.
But until that occurs, I am of the view that Trafalgar has been disenfranchised. As a consequence there must be at least a temporary stay of the oppression proceedings.
I also observed as regards not accepting Mr Jebb acting as a legal practitioner at [67] - [70]:
In weighing this alternative, I again take account of the fact that Mr Jebb is a solicitor holding a current practice certificate. He is of course tied, as sole director and 50% shareholder, to Trafalgar. He is also closely tied to the Trust: he is guardian, appointor and one of two primary beneficiaries (along with his ex-wife).
On the other hand, Mr Jebb's personal interests have proven, even in what has occurred to date, to be at odds with Trafalgar's distinct interests. Mr Jebb, in his capacity as a legal practitioner, has a conflict of interest acting for Trafalgar. I made that determination on 25 October 2011. My views have been reinforced by what has transpired since then. The present application is essentially Mr Jebb's undisguised manoeuvre to circumvent the perceived inconvenience of that ruling as to Trafalgar's legal representation. What is proposed does not sufficiently protect the distinct interests of a corporation whose rights of action against Superior Lawns are not Mr Jebb's.
Fundamentally, Mr Jebb presents to me as wanting to 'row his own boat' in the oppression action, apart from Trafalgar. He would, I have little doubt, do that by tactical decisions that may do damage, if they have not already, by ignoring Trafalgar's separate interest as a corporate party holding its own potential rights of action against Superior Lawns.
There is potential, accepted by the defendants in argument at the hearing, for these oppression proceedings to be discontinued by Trafalgar, then for Mr Jebb to commence his own proceedings as a present member under s 234. Mr Jebb would, upon commencement of a fresh action, be the relevant member of Superior Lawns. Were that to occur it may remove or regularise some concerns. Irrespective of that possibility, it remains clear that putting Trafalgar and Mr Jebb together as co-plaintiffs in COR 59 of 2011 carries with it the very concerning prospect of entrenching the present irreconcilable tensions between Mr Jebb's interests and those of Trafalgar.
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37 Subsequently, the Trafalgar shares were retransferred back to
Trafalgar. Eventually, Trafalgar obtained independent legal representation through Corrs, Chambers Westgarth.
That was until 7 December 2015. Since then the situation of Trafalgar's legal representation has become problematic once again.
Factors in play
39 I need to render six more observations concerning the extensive
written submission materials which I have attached. First, there is no challenge or argument that the court lacks the power to restrain Mr Jebb and Jebb Legal from acting in its present conflict circumstances. Second, it also appears to be fully accepted that the issue as to whether or not the court intervenes to stay Jebb Legal from acting for Trafalgar further is an issue requiring an exercise of the court's discretion. In the exercise of this discretion all underlying facts and circumstances need to be evaluated.
40 Third, in the overall assessment that presents, issues of access to
justice clearly arise as well, in circumstances where both this corporate plaintiff and Mr Jebb personally look to suffer from financial pressures suggesting their capacity to presently afford independent legal representation is heavily constrained. Clearly viable litigation funding is now not available to the plaintiff. Mr Jebb also indicates his personal liability to the ATO as large and unmet - see his affidavit sworn 24 March 2016 and Trafalgar v Superior Lawns [No 11] at [35].
41 Fourth, a further policy factor to be weighed is a significant and
generous offer of independent, ongoing pro bono assistance from counsel, as legal assistance to the plaintiff. This raises an extra consideration which presents as rather unique here - in a sense that it does not appear to have been a factor the subject of any evaluation in any other cases.
42 Fifth, the need to preserve the integrity of the justice system against
serious conflicts of interest suffered by its legal practitioners in litigation, is also a countervailing policy consideration to be weighed. This sentiment was captured in the observations of Marks J in Commissioner for Corporate Affairs v Harvey [1980] VR 699, 762, as they were applied by Templeman J in Clay v Karlson (1997) 17 WAR 493, 495, as follows:
What is important, however, is that the court sets its face against giving audience to legal representatives who are unable to assure the court of a singular interest. It is the purity of interest in the adversaries before the court that gives what fundamental utility and credence there is in the system.
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43 Sixth, both sides recognise the present position is less than optimal,
even with an input of pro bono counsel to assist on the part of this
plaintiff.44 So, the distilled question for resolution at the end, in my view,
becomes whether the pro bono counsel factor is enough here, to redress what is obviously a scenario of clear and serious conflict of interest that Mr Jebb and Jebb Legal suffer, and then, for how long this situation could be tolerated. That is for the existing circumstances, where pleadings in the litigation are closed, discovery has been completed and the essential steps prior to a trial being listed for hearing, basically appear to require a finalisation of witness statements, the gathering and exchange of expert evidence and then the entry of the matter for what is expected to be a lengthy commercial trial.
The law: restraints against legal practitioners in conflict
45 The parties' written submissions cite the usual case authorities
referred to upon applications such as these. I have already mentioned Templeman J's decision in Clay v Karlson, which itself collects a number of the earlier authorities.
46 A Queensland Court of Appeal decision, Chapman v Rogers [1984] 1 Qd R 542, is another decision frequently referred to in this context, particularly the observations of then Chief Justice Campbell. More recent reasons of McMeekin J in Hempseed v Ward [2013] QSC 348, commencing at [29], explain some qualifications which have emerged since 1984 in Queensland.
47 The present situation goes beyond Mr Jebb just being the main
witness at trial. Not only is Mr Jebb to be Trafalgar's principal material trial witness, he also holds a significant financial stake in the trial outcome from the relief sought by the plaintiff corporation, if successful.
48 At [43] of his reasons in Hempseed McMeekin J conveniently assembles contemporary principles from a number of the authorities. I refer to pars (a) through (i) of his Honour's reasons at [43]. It is convenient to set them out, since they are of assistance and guidance to the present discretionary exercise:
(a)
the exercise of the court's jurisdiction is exceptional and must be exercised with caution: Grimwade v Meagher [1995] Vic Rp 28; [1995] 1 VR 446, 450, 452 (Mandie J); Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561, 582 (Brereton J); Bowen v Stott [2004] WASC 94, [54] (Hasluck J);
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(b)
The jurisdiction to restrain a practitioner from acting for a client in judicial proceedings is an incident of the court's inherent jurisdiction over its officers to control its process in aid of the administration of justice: Grimwade v Meagher (supra) at 455-6 (Mandie J); Garde-Wilson v Corrs Chambers Westgarth [2007] VSC 235; (2007) 27 VAR 271, 277-8 (Bell J); Bowen v Stott [2004] WASC 94, [47] (Hasluck J); Kallinicos v Hunt (supra) at 582 (Brereton J); Clay v Karlson (1997) 17 WAR 493, 497 (Templeman J); Newman v Phillips Fox (1999) 21 WAR 309, 315 (Steytler J).
(c)
An important consideration against the exercise of the jurisdiction is that a litigant should not be deprived of his or her choice of lawyer without good cause: Bowen v Stott (supra) at [51] (Hasluck J); Garde-Wilson v Corrs Chambers Westgarth (supra); (2007) 27 VAR 271, 278 (Bell J); Grimwade v Meagher (supra) at 452 (Mandie J).
(d)
Applications by opposing parties for the removal of their opponent's lawyers should not be made lightly and need scrutiny. The applicant who has no personal interest to protect (such as in the preservation of confidential information from a previous retainer) needs to show that the removal is necessary.
(e)
A party seeking the removal of an opponent's legal practitioner is not seeking to exercise a right but moving the court to exercise its power over its own officers (compare Michael v Freehill Hollingdale & Page; (1990) 3 WAR 223, 233 (Seaman J)) but doing so against the wishes of the opponent in adversarial proceedings and in a context in which a successful application may cause inconvenience to the opponent and a forensic advantage to the moving party.
(f)
An applicant may have obligations to the court when making such applications to satisfy the court that the application is necessary and not made for collateral advantage. Care must be taken to ensure that applications for removal of practitioners do not become a means by which opposing parties obtain forensic advantages which detract from, rather than advance, the policy for which the jurisdiction is properly to be exercised.
(g)
It is, therefore, essential that an injunction to restrain a practitioner from acting on behalf of a client be firmly based upon the need for that to occur in the administration of justice: Grimwade v Meagher (supra) at 455 (Mandie J).
(h)
The test to be applied in the exercise of this jurisdiction was: 'The objective test to be applied … is whether a fair-minded reasonably informed member of the public would conclude that the proper administration of justice required that [the lawyer] be … prevented
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from acting, at all times giving due weight to the public interest that a litigant should not be deprived of his or her choice of [lawyer] without good cause': Grimwade v Meagher ibid 452 (Mandie J); Garde-Wilson v Corrs Chambers Westgarth (supra) at 278 (Bell J); Bufalo Corporation Pty Ltd (rec & mgr apptd) (in liq) v Lendlease Primelife Ltd (formerly Primelife Corp Ltd) [2010] VSC 672, [6] - [7] (Judd J).
(i) In application of the test, sight should not be lost of the severity of the consequence of such an order for the client. The conclusion to be reached is that justice 'requires' a client to be deprived of his or her choice of lawyer and that has been said by one writer to require the court's inquiry into whether the fair-minded reasonably informed person 'would find it subversive to the administration of justice to allow the representation to continue': GE Dal Pont, Lawyers' Professional Responsibility (Thomson Reuters, 5th ed, 2012 at [17.20]).
49 In this State there have relevantly been, decided, beyond the decision
of Templeman J to which I have referred, the decision of E M Heenan J in Holborow v MacDonald Rudder [2002] WASC 265; the decision of Simmonds J in Powell v In de Braekt [2007] WASC 4; and most recently, Le Miere J's observations in Frigger v Mervyn Jonathon Kitay in his capacity as liquidator of Computer Accounting & Tax Pty Ltd (in liq) [No 10] [2016] WASC 63 [23].
Evaluation and decision
50 The present conflict position with Jebb Legal is unacceptable. The
rules of court expressly prohibit a corporation proceeding as a plaintiff in litigation without legal representation: see RSC O 4 r 3(2). The rules no doubt reflect an underlying assumption as to a corporate plaintiff being represented by an independent legal representative, not a heavily conflicted lawyer. Mr Jebb is an admitted legal practitioner who holds a practice certificate in this State. He operates, in effect, under the business name, Jebb Legal.
51 The conflict position is stark, undisputed and ongoing. It is a conflict
that would constantly bear upon the ordinary day-to-day running of this action by any similarly placed legal practice - where a need for a competent, dispassionate, disinterested, trustworthy professional lawyer of record is indispensable. Such a requirement is necessary to ensure the integrity of essential processes of conferral, discovery, and pleadings. It is also indispensable to the ethical and efficient running of a trial. Clearly very significant ethical constraints govern the conduct of the legal practitioners acting in a high level commercial trial.
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52 In present circumstances, were it not for the generous offer of
pro bono assistance from independent counsel, the position as I assess it, would be untenable and overwhelmingly towards the restraining of Mr Jebb and Jebb Legal. That is by reason of the present unacceptable conflict of interest scenario.
53 The only seriously countervailing consideration then, is whether
what is offered from counsel as ongoing pro bono assistance is sufficient to redress the underlying problem. The question is difficult. The defendants' reply submissions as seen, strongly contend to the contrary.
54 On my assessment as case manager of this action for some five years
now, I must at the end accept the defendants' submissions that such an arrangement still would not 'provide a sufficient "check and balance"'. Undoubtedly, as I have witnessed, there have been unnecessary problems in the past with Mr Jebb attempting to involve himself as a legal practitioner for Trafalgar. The problems of Mr Jebb's proximity to the dispute will not be sufficiently met by what is proposed.
55 What looms for this litigation (as it resumes following what has been
a most unsatisfactory six month hiatus, caused by the plaintiff), will be the concluding trial preparations towards the assembly and exchange of witness statements and an engagement and exchange of expert evidence for trial. There must be ironclad and transparent integrity for those processes. They cannot be allowed to be tainted by an unseen involvement of Trafalgar's main witness, Mr Jebb. Mr Jebb's personal interest has the potential to colour the integrity of those processes. Briefing of an expert or experts calls for dispassionate, ethical, professional integrity by the legal practitioner(s) concerned. Furthermore, for modern heavy commercial litigation like this, there can arise a need for almost daily contact as between the opposing parties' lawyers in the lead up to and during the trial. This is an intense process. The present situation is not even one of Jebb Legal acting through an independent lawyer that is unconnected to Mr Jebb with a 'Chinese wall' of some kind. There is no wall at all. Jebb Legal is just a business name for Mr Jebb to act through.
56 I assess there to be no safety or integrity in Jebb Legal acting here.
Rather there is on my assessment, a great deal of danger such as in any attempted conferral process involving the plaintiff's principal witness.
57 Although what is offered as the input of independent pro bono
counsel is a generous and helpful offer of assistance, in the end pro bono
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counsel do not perform, nor should he be expected to perform, the day-to-day solicitor 'grunt' work necessarily required to advance a very complex commercial action to trial and then to run it at the trial.
58 The offer of assistance does not on my assessment provide enough
protection, as the defendants submit. It does not measure up for this particular case to ameliorate against fundamental underlying problems of conflict and personal interest. They are problems which, with respect to Mr Jebb, will be a constant and impossible challenge for him as the legal practitioner of record. They will stare him in the face daily as this matter progresses over more months until a trial, perhaps 18 months to two years away. What is proposed leaves Mr Jebb heavily exposed at his inevitable cross-examination about events in this crucial lead up period to the trial.
59 In all the circumstances, I must at the end accede to the defendants'
application to restrain Mr Jebb and Jebb Legal from further acting on the part of the plaintiff in this action. However, I shall defer implementing any restraint orders for a period of 30 days to allow some further time for Mr Jebb to exhaust all opportunities to secure, if possible, independent representation for this plaintiff. I have not been fully satisfied yet that such an independent outcome position is totally beyond the reach of this plaintiff.
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Annexure B
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Annexure C
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