Xriso Developments Pty Ltd v Sapphire Square Pty Ltd - [2021] VSC 46

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

PROPERTY LIST

S ECI 2020 04494

BETWEEN:

XRISO DEVELOPMENTS PTY LTD (ACN 607 977 613)	Plaintiff
- and -
SAPPHIRE SQUARE PTY LTD (ACN 627 989 388)	Defendant

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JUDGE:	Daly AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	9 February 2021
DATE OF JUDGMENT:	10 February 2021
CASE MAY BE CITED AS:	Xriso Developments Pty Ltd v Sapphire Square Pty Ltd
MEDIUM NEUTRAL CITATION:	[2021] VSC 46

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LEGAL PRACTITIONERS – Application to restrain solicitors from acting against former client – Where solicitors’ partner likely to be a material witness – Whether solicitors should be restrained in the interests of the administration of justice and the integrity of the judicial process – Where solicitor giving evidence which directly conflicts with the evidence of a former client – Whether perception of conflict of interest resolved by having another solicitor in the firm have care and conduct of the proceeding – Mitchell v Burrell [2008] NSW 772 referred to – Application granted.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Heath QC with Mr B Petrie of counsel	Rigby Cooke Lawyers
For the Defendant	Mr R Peters	HWL Ebsworth

HER HONOUR:

On 9 February 2021 I indicated that I would make orders restraining the plaintiff (‘Xriso’) from continuing to retain Rigby Cooke Lawyers (‘Rigby Cooke’), the solicitors on the record for Xriso in this proceeding. My reasons follow.

The parties to this proceeding are special purpose vehicles incorporated for the purpose of conducting commercial and industrial property developments in the western suburbs of Melbourne. Until 7 October 2020, the defendant (‘Sapphire’) was the incorporated vehicle for a joint venture[1] between Mr Charlie Balais (‘Mr Balais’) on the one hand, and a company controlled by Mr Peng Shen (Mr Shen) and Mr James Zhao (‘Shen/Zhao interests’) on the other hand.
[1]While I refer in these reasons to the parties being involved in a “joint venture”, I do so as a convenient shorthand description of the character of the relationship between the parties. These references should not be taken as a finding that, as a matter of fact and law, there was a joint venture between the parties.

For reasons which are not necessary to dwell upon for present purposes, the parties agreed to go their separate ways in late 2020, culminating in the execution of a suite of documents under the auspices of an Umbrella Deed executed on 7 October 2020. In the negotiations leading up to the execution of the Umbrella Deed, Mr Balais’ interests were represented by Rigby Cooke, and the Shen/Zhao interests were represented by HWL Ebsworth, the solicitors on the record for Sapphire in this proceeding. As a result of the Umbrella Deed, Sapphire is now controlled by the Shen/Zhao interests.

Approximately twelve months prior to the execution of the Umbrella Deed, Xriso entered into a contract of sale for a large parcel of developable land in Werribee (‘Werribee property’). Mr Balais did not have…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] VSC 46
Decision Date: 10 February 2021

CaseChat Overview and Summary

In the case of Xriso Developments Pty Ltd v Sapphire Square Pty Ltd, the dispute involved an application to restrain solicitors from acting against their former client. The applicant, Xriso Developments, sought to prevent the solicitors from representing the respondent, Sapphire Square Pty Ltd, in ongoing litigation. The application was brought before the Supreme Court of New South Wales. The core issue before the court was whether the solicitors should be restrained from acting in the interests of justice and the integrity of the judicial process. This concern arose due to the potential conflict of interest, as one of the solicitors' partners was likely to be a material witness in the proceedings. Furthermore, there was a direct conflict between the evidence given by the solicitor and that of the former client.

The court examined whether the presence of another solicitor in the firm conducting the proceedings would resolve the conflict of interest. It considered the principles established in Mitchell v Burrell, where the court highlighted the importance of the perception of impartiality and the need to maintain public confidence in the legal profession. The court found that the potential for a conflict of interest was significant, as the partner was expected to give evidence that directly contradicted the former client's testimony. Despite the firm's efforts to mitigate the conflict by having another solicitor handle the case, the court concluded that the appearance of a conflict was too strong to be overlooked. Consequently, the application to restrain the solicitors from acting against their former client was granted.

The court's decision underscores the necessity of preserving the integrity of the judicial process and public confidence in the legal profession. The final orders of the court included a restraint on the solicitors from representing the respondent in the litigation, ensuring that the interests of justice were upheld and any perception of bias or conflict of interest was avoided.

Orders