Temby & Anor v Chambers Investment Planners Pty Ltd & Anor
[2010] FMCA 783
•14 October 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TEMBY & ANOR v CHAMBERS INVESTMENT PLANNERS PTY LTD & ANOR | [2010] FMCA 783 |
| PRACTICE AND PROCEDURE – Applications to restrain each parties’ lawyers from acting – applicants’ solicitor their son – respondents’ solicitor acting as Counsel a former director of first respondent – grounds on which a lawyer might be restrained from acting for a party. |
| LAWYERS – Restraining lawyers from acting – grounds for restraint. |
| Australian Securities and Investments Commission Act 2001 (Cth), s.12DA, 12DF Corporations Act 2001 (Cth), ss.79, 786, 851, 945A, 995, 1041H Corporations Regulations 1990 (Cth), reg.7.3.02(1) Evidence Act 1995 (Cth), s.56(2) Federal Magistrates Act 1999 (Cth), ss.3, 15(a), 42 Federal Magistrates Court Rules 2001 (Cth), r.1.03 Fair Trading Act 1987 (WA), s.10 Trade Practices Act 1974 (Cth), ss.51AF, 52 |
| Bahonko v Nurses Board of Victoria (No 3) [2007] FCA 491 Black v Taylor [1993] 3 NZLR 403 Canberra Residential Developments Pty Ltd v Brendas [2009] FCA 1484 |
| G E Dal Pont, Lawyers’ Professional Responsibility (4th Edn), (Sydney: Thomson Reuters (Professional) Australia Limited, 2010) J D Heydon, Trade Practices Law, Vol. 2A (Sydney: Thomson Reuters, looseleaf) Y Ross, Ethics in Law: Lawyers’ Responsibility and Accountability in Australia (5th Edn) (Sydney: LexisNexis Butterworths, 2010) J Tarrant, Amending Final Judgments And Orders (Sydney: Federation Press, 2010) |
| First Applicant: | IAN ANTHONY TEMBY |
| Second Applicant: | JANICE ELLEN TEMBY |
| First Respondent: | CHAMBERS INVESTMENT PLANNERS PTY LTD |
| Second Respondent: | GEORGE KAMEL TAKLA |
| File Number: | PEG 106 of 2009 |
| Judgment of: | Lucev FM |
| Hearing date: | 15 July 2010 |
| Date of Last Submission: | 15 July 2010 |
| Delivered at: | Perth |
| Delivered on: | 14 October 2010 |
REPRESENTATION
| Counsel for the Applicants: | Ms C Dearing |
| Solicitors for the Applicants: | Norton Rose Australia |
| Counsel for the Respondents: | Mr A Metaxas |
| Solicitors for the Respondents: | Metaxas & Hager |
ORDERS
There be an injunction restraining Mr Metaxas from acting as Counsel in this matter.
There be an injunction restraining Mr Shaun Temby and the firm of Norton Rose Australia from acting in this matter.
The matter be adjourned to a directions hearing at 9.00am on
8 November 2010.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 106 of 2009
| IAN ANTHONY TEMBY |
First Applicant
| JANICE ELLEN TEMBY |
Second Applicant
And
| CHAMBERS INVESTMENT PLANNERS PTY LTD |
First Respondent
| GEORGE KAMEL TAKLA |
Second Respondent
REASONS FOR JUDGMENT
Introduction – competing applications to restrain lawyers from acting
In this case each party applies to the Court for lawyers for the other party to be restrained from acting in the substantive proceedings.
The substantive proceedings relate to an application by the applicants, Mr and Mrs Temby, seeking damages, interest and costs in relation to alleged misleading and deceptive conduct under:
a)section 52 of the Trade Practices Act 1974 (Cth);[1]
b)alternatively, section 10 of the Fair Trading Act 1987 (WA);[2]
c)alternatively, ss.995 (as it was) and 1041H of the Corporations Act 2001 (Cth);[3] and
d)sections 12DA and 12DF of the Australian Securities and Investments Commission Act 2001 (Cth),[4]
by the respondents, Chambers Investment Planners Pty Ltd[5] and Mr Takla.[6] Mr Takla is the managing director of Chambers Investment Planners. It is alleged that he was authorised and empowered to act on behalf of Chambers Investment Planners to provide financial investment advice, and was engaged in conduct in relation to financial services within the meaning of the ASIC Act. Mr Takla is alleged to be a person who aided, abetted, counselled or procured, or alternatively, was knowingly concerned in, Chambers Investment Planners’ alleged misleading and deceptive conduct under of the TP Act, FT Act, Corporations Act and ASIC Act.[7]
[1] “TP Act”.
[2] “FT Act”.
[3] “Corporations Act”.
[4] “ASIC Act”.
[5] “Chambers Investment Planners”.
[6] Collectively, “the Respondents”.
[7] Corporations Act, s.79.
It is also alleged that inappropriate advice was given to Mr and Mrs Temby by Chambers Investment Planners in contravention of ss.851 (as it was) and 945A of the Corporations Act. Finally, and also in the alternative, negligence is pleaded.
The alleged conduct, contraventions and negligence relate to the provision of investment advice to Mr and Mrs Temby in the course of Chambers Investment Planners’ business, which is said to be a provider of financial investment advice to consumers.[8]
Mr and Mrs Temby’s application to restrain Mr Metaxas
[8] No issue was raised in these proceedings as to any possible effect of s.51AF of the TP Act, but as to which, see Cass v Kingston Capital Limited [2010] FMCA 762.
Order sought
Mr and Mrs Temby seek an order as follows:
That Arthur Metaxas be restrained from acting as Counsel for the respondents and removed from the record as Counsel for the respondents.
Relevant facts
The following facts arise from the affidavit evidence in this matter:
a)Mr Metaxas was a director of Chambers Investment Planners from 6 April 2001 to 28 October 2003;[9]
[9] Affidavit of Arthur Metaxas, sworn 16 June 2010, para.15 (“Mr Metaxas’ Affidavit”); Affidavit of Carolyn May Dearing, affirmed 24 May 2010, para.5 (“Ms Dearing’s Affidavit”).
b)the amended statement of claim in the matter concerns conduct of Chambers Investment Planners from about early 2001 to January 2005, which includes the period that Mr Metaxas was a director;[10]
[10] Ms Dearing’s Affidavit, para.6; Amended Statement of Claim, paras.1-10, 26, 29, 30 and 33.
c)Mr Metaxas received a verbal request from Mr Takla to become a director of Chambers Investment Planners;[11]
[11] Mr Metaxas’ Affidavit, para.14.
d)Mr Metaxas recalls Mr Takla saying words to the effect that Mr Metaxas being a director of Chambers Investment Planners would enhance Chambers Investment Planners’ profile;[12]
[12] Mr Metaxas’ Affidavit, para.16.
e)Mr Metaxas received financial documents from time to time which were management or year-end accounts, but does not appear to have otherwise had a role of any active type in Chambers Investment Planners;[13]
[13] Mr Metaxas’ Affidavit, para.18.
f)Mr Metaxas did not receive any director’s fees or any other reward to the best of his recollection;[14]
[14] Mr Metaxas’ Affidavit, para.21.
g)Mr Metaxas cannot confirm whether or not he obtained any assurance from Mr Takla to indemnify him in relation to any claims made against Chambers Investment Planners;[15]
[15] Mr Metaxas’ Affidavit, para.21.
h)Mr Metaxas never owned any shares in Chambers Investment Planners;[16]
[16] Mr Metaxas’ Affidavit, para.20.
i)Mr Takla became a 50% shareholder in Chambers Investment Planners in 2000;[17]
[17] Mr Metaxas’ Affidavit, para.9.
j)Mr Metaxas acted for Chambers Investment Planners from time to time in the 1990’s and thereafter;[18]
[18] Mr Metaxas’ Affidavit, para.4.
k)in the course of acting for Chambers Investment Planners Mr Metaxas met Mr Takla and his wife;[19]
[19] Mr Metaxas’ Affidavit, para.5.
l)Mr Metaxas has attended various social events with Mr Takla including:
i)Mr Takla’s wife’s 50th birthday party in 1999 in the Fremantle Town Hall;
ii)a dinner at Mr Takla’s home in 2002; and
iii)Mr Takla’s daughter’s going-away party in 2008;[20]
m)Mr Metaxas has breakfast or lunch business meetings with Mr Takla two or three times a year;[21]
n)Mr Metaxas’ son was employed by Chambers Investment Planners from about August 2002 to about April 2004, and the employment arose from discussions between Mr Metaxas and Mr Takla at one of those business meetings, at which Mr Metaxas had indicated that his son was having difficulty finding employment;[22]
o)Mr Metaxas’ son’s employment came about as a consequence thereafter of contact between Mr Metaxas’ son and Mr Takla in which Mr Metaxas was not involved;[23]
p)Mr Takla joined Mr Metaxas at Fitness First in Floreat on two occasions about three years ago following a proposal from Mr Metaxas that Mr Takla share with him a personal trainer, but the arrangement did not proceed;[24]
q)Mr Metaxas says that his out-of-office contacts with Mr Takla are typical of relationships he enjoys with numerous long-standing clients;[25]
r)Mr Metaxas remained a director of Chambers Investment Planners until Mr Takla told him that he wished to appoint Mrs Takla as the second director, whereupon Mr Metaxas resigned;[26]
s)Mr Metaxas also says he has no interest in the subject matter of the proceedings (beyond the payment of his usual fees);[27] and
t)Mr Metaxas says that he is not a material witness, so far as is known to him, and that he has had no dealings with Mr and Mrs Temby, and did not know of them until the application was filed.[28]
[20] Mr Metaxas’ Affidavit, para.7.
[21] Mr Metaxas’ Affidavit, para.8.
[22] Mr Metaxas’ Affidavit, paras.25 and 27.
[23] Mr Metaxas’ Affidavit, para.26.
[24] Mr Metaxas’ Affidavit, para.28.
[25] Mr Metaxas’ Affidavit, para.11.
[26] Mr Metaxas’ Affidavit, para.19.
[27] Mr Metaxas’ Affidavit, para.24.
[28] Mr Metaxas’ Affidavit, para.23.
Mr and Mrs Temby submit that:
a)Mr Metaxas is Counsel for the Respondents and accordingly there is a higher standard expected from him in that capacity, compared to that of an instructing solicitor, in relation to his conduct and any potential conflict of interest;
b)Mr Metaxas has associations with the Respondents of a close kind which give rise to a fair and reasonable perception that he may not exercise the independent judgment necessary to properly carry out his duties as Counsel;
c)the subject matter of the litigation may involve the evaluation of Mr Metaxas’ conduct as a director of Chambers Investment Planners because:
i)the amended statement of claim alleges that the Respondents engaged in misleading and deceptive conduct in the provision of financial services; and
ii)section 786 (as it then was) of the Corporations Act and reg.7.3.02(1) of the Corporations Regulations 1990 (Cth)[29] require adequate supervision and sufficient training of all representatives of a holder of a securities dealer’s licence, and in this regard, it is possible that the adequacy of the supervision and sufficiency of training of licence holders by Chambers Investment Planners, and its directors, including Mr Metaxas, may be called in to question in the course of the proceedings; and
d)therefore, it is argued that Mr Metaxas has an interest in the success of the Respondents in these proceedings which conflicts with Counsel’s overriding duty to the Court because:
i)the subject matter of the litigation may involve an evaluation of Mr Metaxas’ conduct; and
ii)the acts or omissions of the law firm of which Mr Metaxas is a member may have to be defended by it in these proceedings,
and in those circumstances there is a danger that the Respondents will not be represented with the objectivity and independence to which they are entitled.
[29] “Corporations Regulations”.
The Respondent’s application to restrain Mr Temby and Norton Rose Australia
The Respondents seek an order that:
Shaun Michael Temby and Norton Rose Australia be restrained from acting for the applicants.
There is no dispute that Shaun Michael Temby[30] is:
a)the son of Mr and Mrs Temby;
b)a partner in the law firm, Norton Rose Australia, acting for Mr and Mrs Temby; and
c)the lawyer with the responsibility for this matter at Norton Rose Australia.
[30] “Mr Shaun Temby”.
As long ago as August 2005 the solicitors for the Respondents suggested that Mr Shaun Temby, and Norton Rose Australia’s predecessor firm, ought not act in this matter.[31]
[31] Affidavit of Luke Hager, sworn 21 May 2010, annexure LH3.
The Respondents argue that Mr Shaun Temby cannot perform his primary duty to the Court if he might be affected by the relationship with his clients, who are his parents. The Respondents assert that Mr Shaun Temby cannot give objective and dispassionate advice to Mr and Mrs Temby because they are his parents.
The Respondents point to paragraph 17(d)(ii) of the amended statement of claim as a useful context in which to consider Mr Shaun Temby’s position. Paragraph 17(d)(ii) of the amended statement of claim asserts that Mr and Mrs Temby were told by the Respondents that they could retire debt free in no more than two years. It is said that for Mr and Mrs Temby to have retired debt free within two years they would have been required to repay their $53,000 home loan, and that in order to do so the investment strategy would have needed to generate in two years sufficient returns so that there was an after-tax profit of $53,000. The Respondents contend that evidence consistent with the plea in paragraph 17(d)(ii) of the amended statement of claim could not be believed, in the sense that it was simply not possible to generate the returns necessary to produce income sufficient to repay that amount in two years. Therefore, the Respondents argue that Mr Shaun Temby should have advised Mr and Mrs Temby accordingly.
The Respondents say that Mr Shaun Temby’s capacity to dispassionately advise Mr and Mrs Temby is compromised because they are his parents and so he:
a)would be less inclined to accept that the evidence proposed to be given by Mr and Mrs Temby might be untrue; and
b)would be less inclined to accept that the evidence proposed to be given by the Respondents might be true.
In response to the Respondents’ application to restrain Mr Shaun Temby from acting, Mr and Mrs Temby say that:
a)there is no authority for the proposition that a solicitor in a familial relationship with a party should not represent that party;
b)Mr Shaun Temby’s opinion of the believability or otherwise of the representations made is not relevant to these proceedings, because whether conduct is misleading or deceptive will not necessarily depend upon whether Mr and Mrs Temby acted reasonably in response to any representations made, and accordingly the believability of the representations is not relevant;[32]
c)an allegation of misleading and deceptive conduct brings into question the interpretation given to the representations made by the party or parties to whom that representation was directed, or allegedly directed, and in this case that was Mr and Mrs Temby, not Mr Shaun Temby;
d)a reasonable lawyer should not refuse to act for a client simply because the client has believed in the veracity of particularly outlandish statements due to commercial inexperience; and
e)to accept the Respondents’ submissions at this stage would amount to an inappropriate form of pre-judgment because it would require the Court to accept, as a matter of fact, that the representations were not made, in circumstances where there is a dispute as to whether they were made.
[32] Evidence Act 1995 (Cth), s.56(2).
Mr Shaun Temby has sworn an affidavit[33] in which he additionally says that:
a)he has no financial interest in the outcome of the matter;[34]
b)an external Counsel has been engaged to act in the matter and, “subject to his availability”, the external Counsel is to settle all pleadings and appear at the substantive hearing of the proceedings;[35] and
c)he does not believe his relationship with Mr and Mrs Temby has any effect on his ability to represent them in a manner consistent with his obligations as an officer of the Court.[36]
[33] Affidavit of Shaun Michael Temby, sworn 11 June 2010 (“Mr Shaun Temby’s Affidavit”).
[34] Mr Shaun Temby’s Affidavit, para.2.
[35] Mr Shaun Temby’s Affidavit, para.3.
[36] Mr Shaun Temby’s Affidavit, para.4.
Grounds on which lawyers might be restrained from acting for parties
The grounds on which a court might restrain a practitioner from acting have been “conveniently summarised”[37] by the Federal Court. They are as follows:
a)the danger of misuse of confidential information;
b)a breach of fiduciary duty of loyalty not to act against a client, or against a former client, in the same matter or a closely related matter; and
c)the inherent jurisdiction of the Court to control the conduct of legal practitioners as officers of the Court.[38]
[37] Canberra Residential Developments Pty Ltd v Brendas [2009] FCA 1484 at para.16 per Stone J (“Canberra Residential Developments”).
[38] Bahonko v Nurses Board of Victoria (No 3) [2007] FCA 491 at para.4 per Middleton J (“Bahonko”), summarising principles identified in Geelong School Supplies Pty Ltd v Dean (2006) 237 ALR 612 at 617-620 per Young J; [2006] FCA 1404 at paras.24-35 per Young J (“Geelong School Supplies”), both cases cited in Canberra Residential Developments at para.16 per Stone J.
In Canberra Residential Developments the Federal Court, having referred to the above grounds, went on to observe as follows:
20. Finally, the inherent jurisdiction of the Court to control its processes in aid of the administration of justice would only be evoked to restrain a legal practitioner from acting for its client if "a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice" warrants such restraint; Geelong School Supplies at [35]. It is a jurisdiction that "is to be regarded as exceptional and is to be exercised with caution"; Kallinicos v Hunt (2005) 64 NSWLR 561 at 582. In this case the emphasis must be on "reasonably informed".[39]
[39] Canberra Residential Developments at para.20 per Stone J.
Accepting that this Court has no inherent jurisdiction, but rather an implied incidental power to make orders necessarily incidental to express powers,[40] and substituting the concept of implied incidental power for inherent jurisdiction in the above summary and quotation, the grounds set out in Bahonko, Geelong School Supplies and Canberra Residential Developments are the grounds on which the Court might restrain a lawyer from acting for a party. In this case the Court deals with the matter on the basis of its power to control the conduct of legal practitioners as officers of the Court.
[40] Skipworth v State of Western Australia & Ors (No. 2) (2008) 218 FLR 16 at 27 per Lucev FM; [2008] FMCA 544 at para.34 per Lucev FM (“Skipworth (No. 2”), where it is also pointed out that the Federal Court and Family Court have no inherent jurisdiction, but an implied incidental power to make orders necessarily incidental to express power, for the reasons set out in detail in Skipworth (No. 2) FLR at 24-27 per Lucev FM; FMCA at paras.29-34 per Lucev FM, citing DJL v Central Authority (2000) 201 CLR 226; [2000] HCA 17, VTAG v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 141 FCR 291; [2005] FCAFC 91, and Re Read (2007) 164 FCR 237; [2007] FCA 1985. See also J Tarrant, Amending Final Judgments And Orders (Sydney: Federation Press 2010) pages 6-7.
In relation to lawyers acting for relatives there is a comparative dearth of authority. One reason for this, at least in modern times, might be that the potential conflict of interest is so obvious that modern lawyers refer matters involving their relatives to independent solicitors. Professor Dal Pont, however, puts the position as follows:
“Especial care should be taken where a lawyer proposes to act in a transaction for herself or himself and a family member or associate. In addition to potentially compromising a lawyer’s independent judgment, such a situation is fraught with potential for conflict of interest. The point is well illustrated by Woolley v Ritchie,[41] where a solicitor acted on his own behalf and for his de facto spouse in real estate transactions. Upon inquiring, the de facto spouse was told by the solicitor that it was unnecessary for her to seek independent legal advice. Salmon J held that the spouse was not fully informed as to the implications of the transactions, which included the transfer of property and a mortgage in her name to a trust. His Honour held that the solicitor was under a duty to ensure that his de facto spouse was fully informed and freely consented, and the solicitor’s conflict stemming from his interest in the transactions requiring securing for the spouse independent legal advice.
Prudent lawyers will not, therefore, act in transactions in which they are personally interested and that involve their spouses, other family members or business partners, unless the other party is separately represented or advised. The need for independent representation or advice in these cases is heightened by the likelihood that the relative or associate places greater trust in the lawyer than a client lacking that association, and that the lawyer may be less scrupulous in matters of full disclosure. The lawyer may be less inclined to advise the relative or associate of the risks of the deal, and the latter may simply assume without inquiring that the lawyer acts in her or his best interests.[42]”[43]
[41] [1999] ANZ Conv R 385.
[42] Woolley v Ritchie [1999] ANZ Conv R 385 at 388.
[43] G E Dal Pont, Lawyers’ Professional Responsibility (4th Edn) (Sydney: Thomson Reuters (Professional) Australia Limited, 2010) pages 147-148 (“Lawyers’ Professional Responsibility”). The two preceding footnotes reproduce the footnotes to the quoted text. See also page 377 which provides as follows: “Lawyers should also be wary of the dangers of representing friends or relatives. In addition to the issues of independence and objectivity, lawyers who do so may be tempted to cut corners, accept work beyond their competence, or be less exact with issues of professional responsibility (for instance, the duty of confidentiality)”.
The Court accepts the above as an accurate summation of the law with respect to lawyers acting for immediate family members.
Consideration
Consideration – Mr and Mrs Temby’s application to restrain Mr Metaxas
In relation to Mr and Mrs Temby’s application to restrain Mr Metaxas, the Court considers that Mr Metaxas ought to be restrained because:
a)as a director of Chambers Investment Planners at times relevant to the alleged misleading and deceptive conduct, his conduct and actions, or perhaps lack of conduct or action, may be called into question;
b)Mr Metaxas’ conduct and actions, or lack thereof, as a director of Chambers Investment Planners, might particularly be called into question with respect to the obligation of Chambers Investment Planners under the Corporations Regulations to ensure the adequate supervision and sufficient training of representatives of the holder of the securities dealer’s licence, and any impact of any failure to ensure compliance with the Corporations Regulations might have had in relation to the conduct of representatives of the licence holder working for Chambers Investment Planners;
c)it is quite possible, especially by reason of the involvement in contraventions provisions of s.79 of the Corporations Act, that at any stage in the hearing Mr Metaxas’ conduct and actions, or lack thereof, as a director of Chambers Investment Planners at the relevant times might become an issue, either as to the substance of the claims, any mitigating circumstances, or questions as to whether Mr Takla was a person who aided, abetted, counselled or procured, alternatively, was knowingly involved in, the misleading and deceptive conduct which is alleged;
d)Mr Metaxas’ assertion that he is not a material witness is qualified by the words “so far as is known to him”, but all that will be required to enmesh Mr Metaxas in these proceedings is for Mr Takla to give evidence that he recalls his fellow director, Mr Metaxas, giving certain advice, or that Mr Metaxas acted in a particular manner – whether Mr Metaxas did so or not – for a perception of conflict to arguably become actual conflict, and for Mr Metaxas to be a potential witness; and
e)Mr Metaxas, as Counsel, and a former director of Chambers Investment Planners may be examining Mr Takla, who was a director at the same time as Mr Metaxas, in relation to events at a time when they were both directors of Chambers Investment Planners.
In the circumstances, the Court has concluded that Mr Metaxas, because he was a director at the relevant times, may have an interest in the outcome of the proceedings. There is also significant potential for conflict to arise if evidence of the type set out above were to be given by Mr Takla and, in those circumstances, for Mr Metaxas to be a witness on issues of substance, which is generally a good reason to restrain a lawyer from appearing as Counsel.[44] Further, if Mr Metaxas were allowed to continue to appear as Counsel, and such evidence was given, there would be a substantial question as to whether or not the proceedings ought to continue thereafter. In that regard, it is appropriate for the Court to have cognisance of, and consider, the objects of the Federal Magistrates Act 1999 (Cth)[45] and Federal Magistrates Court Rules 2001 (Cth)[46] which require that the Court resolve proceedings justly, efficiently and economically and that avoid undue delay and expense, and protraction of its proceedings.[47] Those objects would not be met were a hearing to be abandoned part heard. The Court has reached the view that a fair-minded, reasonably informed member of the public would consider it appropriate in the interests of justice to restrain Mr Metaxas from acting as Counsel because of the actual, and if not actual, then perceived or likely conflict of interest between his personal interests as a former director of Chambers Investment Planners and his role as Counsel.[48]
[44] Geelong School Supplies ALR at 622-623 per Young J; FCA at paras.44-45 per Young J; and, see generally, Holborow v Macdonald Rudder [2002] WASC 265, and Y Ross, Ethics in Law: Lawyers’ Responsibility and Accountability in Australia (5th Edn) (Sydney: LexisNexis Butterworths, 2010), page 463 (“Ethics in Law”).
[45] “FM Act”.
[46] “FMC Rules”.
[47] FM Act, ss.3 and 42; FMC Rules, r.1.03.
[48] The “proscription against conflict between interest and duty serves a prophylactic function …[and] is directed at avoiding a position where a lawyer may even be tempted to favour self-interest, thus avoiding even the appearance of conflict”: Lawyers’ Professional Responsibility, page 144. See also Spector v Ageda [1973] Ch 30 at 47 per Megarry J; Black v Taylor [1993] 3 NZLR 403 at 406 per Cooke P; 408 per Richardson J; and 418 per McKay J; Ethics in Law, page 441: “The appearance of impropriety has still played a role in stopping legal representation.”
The application to restrain Mr Metaxas goes no further than seeking to restrain him from acting as Counsel. That was said to be because it is his conduct as a director which gives rise to the potential for a conflict of interest, and there could not be any reasonable imputation of his knowledge as a director to any other member of the firm Metaxas & Hager, who are acting for the Respondents. It is not Mr Metaxas’ conduct as a partner of Metaxas & Hager which is said to give rise to the potential conflict of interest.[49] That is, in the Court’s view, a correct summation of the position.
[49] Transcript at page 21.
In all of the circumstances, the Court has reached the view that Mr Metaxas ought to be restrained from acting as Counsel in these proceedings by reason of his role as a former director of Chambers Investment Planners, and his being a potential witness in relation to his, and Mr Takla’s, conduct as directors of Chambers Investment Planners. There will therefore be an order, in the nature of an injunction,[50] restraining Mr Metaxas from acting as Counsel for the Respondents in this matter.
[50] FM Act, s.15(a) provides power for the Court to make such orders, including interlocutory orders, as the Court thinks appropriate, which includes the power to grant injunctions: Kelair Holdings Pty Ltd v Archer Consolidated Equities Pty Ltd [2009] FMCA 1127 at para.19 per Lucev FM; Mather v Luttrell Limited & Ors [2003] FMCA 62 at para.26 per McInnis FM.
Consideration – Respondents’ application to restrain Mr Shaun Temby and Norton Rose Australia
The application to restrain Mr Shaun Temby and Norton Rose Australia from acting is put on the basis of general principle, and also a specific claim by reference to the amended statement of claim, namely paragraph 17(d)(ii) referred to above,[51] which is said to be an example of why, or how, it is that Mr Shaun Temby has not given independent and fearless advice in relation to this matter.
[51] See para.12 above.
In the Court’s view the assertion that Mr Shaun Temby and Norton Rose Australia ought to be restrained because they have not advised Mr and Mrs Temby as to the improbability of the alleged representations in paragraph 17(d)(ii) of the amended statement of claim being true, and therefore it being improbable that they were made, cannot succeed. Ultimately, the question of whether a representation was made or not is a question of fact for the Court to determine. In misleading and deceptive conduct cases under s.52 of the TP Act, even “remarkable imprudence”[52] may not break the chain of causation. As one very learned author has observed:
“Thus the chain of causation is not broken by a failure by the victim to take reasonable care of his own interests in failing to make proper inquiry (for example in failing to examine carefully the accounting records of a motel sold), anymore than it is broken when the plaintiff in deceit could have discovered the falsity by the exercise of care.”[53]
[52] Nella v Kingia Pty Ltd (1989) ATPR (Digest) 46-046 at 53,140 per French J.
[53] J D Heydon, Trade Practices Law, Vol. 2A (Thomson Reuters: Sydney) para.18.1738.6.
It is part of the underlying rationale of the misleading and deceptive conduct laws that they are intended to afford protection to both gullible and unsuspecting persons.[54] The Court is therefore not prepared to find that Mr Shaun Temby ought to have advised Mr and Mrs Temby that their version of the facts contained in the amended statement of claim is improbable, as that is a matter which must be determined at hearing. Even then it may not affect the Respondents’ liability, in the event that they are to be found liable for a contravention of s.52 of the TP Act.[55] There is therefore no basis on this account to restrain Mr Shaun Temby from acting for Mr and Mrs Temby.
[54] Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202 per Deane and Fitzgerald JJ.
[55] Swevenings Pty Ltd v Ferguson Consolidated Holdings Pty Ltd & Anor (No. 5) [2010] FMCA 63 at para.96 per Lucev FM
The question of whether Mr Shaun Temby and Norton Rose Australia ought to be restrained from acting for Mr and Mrs Temby must be determined on general principles. On general principles the Court considers that it is appropriate to restrain Mr Shaun Temby and Norton Rose Australia from acting for Mr and Mrs Temby because:
a)Mr Shaun Temby has a personal interest of the closest kind in the client, namely the familial blood relationship between parent and child, and Counsel for Mr and Mrs Temby conceded that such matters entailed “…prospective danger, that a legal representative in that familial relationship may not have the objectivity and independence in respect of advising their clients independently…”;[56]
b)a personal interest may be pivotal when a lawyer comes to advise of:
i)the risks of litigation; or
ii)the desirability or otherwise of a settlement; or
iii)the exercise of discretion in relation to certain aspects of the case (such as what evidence is or is not included in an affidavit sent to Counsel or filed in the Court, or what information is relayed to Counsel in the heat of forensic battle);[57]
c)although the cases concerning familial relationships cited by Professor Dal Pont appear to arise from transactions relating to real estate or loan sureties, the principles apply equally as strongly, and if not more so, to litigation, and in particular the discretionary judgments that must be made by a lawyer in the course of litigation; and
d)although independent Counsel has apparently been retained, that retainer is “subject to availability”. Therefore, it may be the case that Mr Shaun Temby, and others in Norton Rose Australia, will be required to make decisions in relation to the litigation without the assistance of independent Counsel. In any event, independent Counsel will only be able to act in accordance with his retainer and brief, and Counsel’s role would not ordinarily displace the usual solicitor/client relationship. Although the primary conduct of the matter appears as if it will fall to others within Norton Rose Australia there is no evidence of steps taken to isolate Mr Shaun Temby, or of undertakings given by him or other partners of Norton Rose Australia, or by Mr and Mrs Temby, as to the future conduct of the matter, and, in those circumstances, the Court cannot be sure that action will be taken, and decisions made, by Mr Shaun Temby and Norton Rose Australia which are in the objective best interests of Mr and Mrs Temby.
[56] Transcript at page 9.
[57] See, for example, Guss v Law Institute of Victoria Ltd [2006] VSCA 88 (solicitor acting for spouse in Supreme Court of Victoria knowingly and deliberately failing to discover a relevant document).
The Court has reached the view that a fair-minded, reasonably informed member of the public would consider it appropriate in the interests of justice to restrain Mr Shaun Temby from acting as a lawyer because of the actual or likely conflict of interest arising from him acting for his parents, Mr and Mrs Temby. The Court is therefore of the view that Mr Shaun Temby ought to be restrained from acting in this matter. The application seeks to restrain Norton Rose Australia from acting as well, and in accordance with ordinary principles,[58] it follows that Norton Rose Australia ought to also be restrained from acting for Mr and Mrs Temby. There will be an order, in the nature of an injunction, restraining both Mr Shaun Temby and Norton Rose Australia from acting for Mr and Mrs Temby.
[58] Lawyers’ Professional Responsibility at page 144.
Conclusion
The Court has concluded that:
a)Mr Metaxas ought to be restrained from acting as Counsel for the Respondents; and.
b)Mr Shaun Temby and Norton Rose Australia ought to be restrained from acting as lawyers for Mr and Mrs Temby.
There will be orders, in the nature of injunctions, to give effect to the above conclusions.
The matter is otherwise adjourned to a directions hearing at 9.00am on 8 November 2010.
The Court will hear the parties as to costs.
I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate:
Date: 14 October 2010
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