EPAS Ltd v James[2007] QSC 47

SUPREME COURT OF QUEENSLAND

1. Wilson J:  There are three related proceedings on the Supervised Case List – Trust Company Superannuation Services Limited v James & Ors (S3543 of 2000), EPAS Limited v James & Ors (S3544 of 2000) and Parker v AMP General Insurance Limited (S7919 of 2006). They were reviewed on 7 December 2006. The same solicitors and counsel were acting for EPAS as plaintiff in S3544 of 2000 and TCSSL as plaintiff in S3543 of 2000 (in which EPAS is a defendant).

2. Senior counsel for those plaintiffs foreshadowed an application to strike out a paragraph in the defence of AMP in each of S3543 of 2000 and S3544 of 2000.

3. Senior counsel for AMP mentioned that his client had ongoing concerns that the same solicitors and counsel were acting for EPAS as plaintiff in S3544 of 2000 and TCSSL as plaintiff in S3543 of 2000 in which EPAS was a defendant. That and matters arising out of notices to admit and expert evidence were foreshadowed as possibly requiring resolution by interlocutory applications.

4. In each of S3543 of 2000 and S3544 of 2000 the Court gave the following directions (inter alia) –

“5.  The Plaintiff file and serve any application to strike out paragraph 88(b)(iii) of the Eighth Defendant’s Further Amended Defence by Friday 9 February 2007.

6. The time for responding to the Plaintiff’s three Notices to Admit Facts dated 6 December 2006 be extended to Friday 9 February 2007.”

5. The possibility of setting aside two days in my Civil sittings in the week commencing 19 February 2007 was raised with counsel. They were amenable to this. Further, the Court suggested to the parties that any applications in relation to the matters referred to in para 3 of these reasons should if possible be brought at the same time.

6. A few days later the parties were informed that Wednesday 21 and Thursday 22 February 2007 had been allocated for hearing interlocutory applications in the three proceedings.

7. On 9 February 2007 the solicitors for the plaintiffs in S3543 of 2000 and S3544 of 2000 (“Corrs”) filed applications returnable on 21 February 2007 for orders striking out para 88(b)(iii) of the Further Amended Defence of the eighth defendant in each of those proceedings.

8. On 12 February 2007 the Supervised Case List Manager communicated with the parties by email advising them inter alia of directions I had given for the filing of material and production of written outlines of submissions in relation to these applications. The email continued –

“There were several other matters canvassed at the last review, possibly to be dealt with at the next court hearing:

a) matters arising out of notices to admit (transcript pp 8, 25);

b) expert evidence (transcript pp 15-16, 25);

c)the position of EPAS as plaintiff in one proceeding and a defendant in another (transcript p 31).

Please give some consideration to these matters and notify me (the SCL Manager) by 12 noon Tuesday 13 February 2007 if they are to be raised on 21-22 February 2007. Her Honour may be minded to give further directions, or to include these matters in the above timetable for submissions.”

9. On 13 February 2007 the solicitors for AMP responded to the Supervised Case List Manager that the position of the legal representatives for the plaintiffs in the proceedings commenced by TCSSL and EPAS remained in issue, and whether it would be raised on 21 and 22 February 2007 would depend on an exchange of correspondence.

10. On 13 February 2007 Corrs filed applications in S3543 of 2000 and S3544 of 2000 for orders dispensing with rules of evidence in relation to matters not really in issue.

11. On 15 February 2007 the solicitors for AMP wrote to the solicitors for the plaintiffs in S3543 of 2000 and S3544 of 2000. They observed that the proceedings had been instigated by ASIC. They said (inter alia) –

“Young J in Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404 at [24] referred to three possible grounds upon which a Court might restrain a solicitor or counsel from acting for a particular party in litigation: the danger of misuse of confidential information, a breach of a fiduciary duty of loyalty not to act against a client in the same matter or a closely related matter, and the inherent jurisdiction of the Court to control the conduct of solicitors and counsel as officers of the Court. It seems to our client that all three grounds are made out in the present case. (emphasis added)

Can ASIC and its legal team act in the interests of both TCSSL and EPAS in the conduct of the proceedings? It appears to us that they cannot and that ‘a fair minded reasonably informed person would conclude that proper administration of justice requires the conflict be avoided’: Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404.

Contrary to what appears to be ASIC’s present view, the Eighth Defendant does not wish to delay or obstruct the present proceedings but this is a matter which is becoming of increasing concern in light of the way the two proceedings are being and are intended to be conducted, without apparently taking into account the different interests of TCSSL and EPAS. 

We invite your clarification of your client’s position, and hope that it will allay those concerns.”

12. Corrs provided a detailed response the next day denying any conflict of interest. Not having received any reply, they wrote again on 20 February 2007, challenging AMP to serve any application by 4.00 pm that day.

13. The eighth defendant (“AMP”) filed applications in S3544 of 2000 seeking to restrain Corrs, Roger Marc Derrington (senior counsel), Margaret Hoch (counsel) and Michael Burnett (counsel) from acting on behalf of the plaintiff in that proceeding (EPAS) on 20 February 2007, returnable the next day 21 February 2007 (“the disqualification applications”).

14. At 3.49 pm that day, the solicitors for AMP sent draft copies of the disqualification applications and a supporting affidavit of Simon John Alroe by email to Corrs. Later that evening Corrs advised AMP’s solicitors that a different counsel, Ms Dalton SC, would represent the respondents to the applications.

15. Shortly before 10 am the next day counsel for AMP provided Ms Dalton with a copy of the written submissions they proposed providing to the Court on the disqualification applications.

16. When the Court convened, Ms Dalton submitted that the disqualification applications involved serious allegations against the solicitors and counsel, and that they ought to be heard before the other applications. She asked the Court for time to deal with the applications, but raised some preliminary points. She referred to the three grounds raised in the letter written by AMP’s solicitors on 15 February 2007, and sought –

1. particulars of the allegation of misuse of confidential information;

2. particulars of any matter relied on to illustrate the breach of duty of loyalty other than non-reliance on certain provisions of the trust deed as a defence; and

3. particulars of any other matter relied on to invoke the inherent jurisdiction of the Court to control the conduct of solicitors and counsel.

Mr O'Shea SC for AMP told the Court that his client did not press the danger of misuse of confidential information as a ground for relief. He made it clear that his client’s applications were based on the Court’s inherent jurisdiction to ensure the due administration of justice and the integrity of the judicial process, and that there were two matters of concern – beach of fiduciary duty of loyalty and the wider proposition that it is inconsistent with the integrity of justice for the same practitioners to act for and against a client in closely intertwined proceedings. He submitted there was no obstacle to the Court’s proceeding first with the other applications where the plaintiffs could be represented by Mr Derrington SC and Ms Hoch. I rejected that submission.

17. The Court adjourned shortly before 11.00 am, and resumed at about 2.30 pm. Ms Dalton sought more time to prepare her response to the disqualification applications. They were heard on the morning of 22 February 2007, and dismissed on 27 February 2007.^[1]

18. Ms Dalton sought the following orders:

1. in S3544 of 2000, that the applicant eighth defendant pay the costs of and incidental to the four applications filed on 20 February 2007 (the disqualification applications) to be assessed on the indemnity basis;

2. that the applications filed by the plaintiff TCSSL in S3543 of 2000 and by the plaintiff EPAS in S3544 of 2000 on 9 February 2007 and 13 February 2007 be adjourned to a date to be fixed;

3. that in each of those two proceedings the eighth defendant pay the costs thrown away by reason of the applications filed on 9 February 2007 and 13 February 2007 not proceeding on 21 and 22 February 2007 to be assessed on the indemnity basis.

19. Mr O'Shea submitted –

1. that the costs of the disqualification applications should not be awarded on the indemnity basis; and

2. that there should be no order with respect to costs thrown away by TCSSL and EPAS in relation to the applications filed on 9 and 13 February 2007.

20. Costs are within the discretion of the Court. AMP should pay the respondents’ costs of the unsuccessful disqualification applications – but assessed on which basis?

21. In the absence of an order to the contrary, the Registrar must assess them on the standard basis.^[2] In Di Carlo v Dubois^[3] White J (with whom Williams JA and I agreed) said:

“There are numerous authorities which discuss the circumstances in which a court will be justified in making an order for indemnity costs. Two are regularly cited – Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, a decision of Woodward J, and Colgate-Palmolive.^[4] From his review of the cases Sheppard J was able to derive a number of principles or guidelines. At pp 232-4 his Honour recognised that the categories in which the discretion may be exercised are not closed. Woodward J at 637 in Fountain said that there needs to be some special or unusual feature in the case to justify a court departing from the ordinary practice. Sheppard J instanced the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud; misconduct that causes loss of time to the court and the other parties; the fact that the proceedings were commenced at or continued for some ulterior motive; or in wilful disregard of known facts; or clearly established law; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; the imprudent refusal of an offer to compromise; and costs against a contemnor.”

22. The allegations made in AMP’s solicitors’ letter of 15 February 2007 were very serious ones. While, as Mr O'Shea submitted, that letter was cast in terms of an invitation to allay concerns, Corrs responded promptly and at some length justifying their position and that of counsel. There was no substantive response to Corrs’ letter until shortly before the Court convened on 21 February 2007 when a copy of AMP’s written submissions was given to Ms Dalton. Only then was it revealed that AMP would desist from relying on misuse of confidential information, and that while there would not be an argument based on actual breach of the fiduciary duty of loyalty, the perception of there being such a breach if the legal practitioners continued to act for EPAS as well as TCSSL in closely intertwined proceedings would be relied on as relevant to the exercise of the Court’s discretion.

23. Given the seriousness of the allegations raised initially and of those ultimately relied upon, and the substantial nature of the other pending applications, it would have been quite inappropriate for the practitioners to have represented TCSSL and EPAS in those other applications until the disqualification applications had been heard and determined. I reject Mr O'Shea’s submission that it was the choice of the legal practitioners to seek to have the disqualification applications heard first.

24. The disqualification applications cannot be characterised as totally groundless, although they were ultimately unsuccessful. But that is only one factor in the exercise of the Court’s discretion whether to award costs on the indemnity basis. They were made so late and they involved such serious allegations that Ms Dalton properly asked for time to prepared her submissions on behalf of the respondents. This resulted in loss of Court time and prolongation of the time taken by the hearing these applications, and the adjournment of the other applications.

25. In all these circumstances I consider it a proper exercise of the Court’s discretion to order in S3544 of 2000 that the applicant eighth defendant pay the respondents’ costs of and incidental to the 4 disqualification applications to be assessed on the indemnity basis.

26. Further, I consider that the eighth defendant should pay the costs thrown away by reason of the applications filed on 9 February 2007 and 13 February 2007 not proceeding on 21 and 22 February 2007 to be assessed on the standard basis.

27. Those applications filed on 9 February 2007 and 13 February 2007, as well as cross applications for leave to withdraw admissions filed by the eighth defendant in S3543 of 2000 and S3544 of 2000 on 19 February 2007 should be adjourned to 23 April 2007 at 10.00 am.

28. I make orders accordingly.