Ward v Westpac Banking Corporation Limited

The Court has before it two notices of motion whereby each moving party seeks orders that the legal advisors of their opponent be restrained from acting. Each application is based not on an attempt to preserve confidential information, but invokes the general supervisory jurisdiction of the Court over legal practitioners. For the reasons which follow, each of the applications will be dismissed.

The plaintiffs in these proceedings are Messrs Roger Ward and Peter Mahommed. Their solicitor is Mr Leonardus Smits. He appeared for them today.

The first defendant is Westpac Banking Corporation (Westpac), which appeared briefly by solicitor and then was excused because it had no part to play in today’s motions. It does have a motion for security for costs on foot which will be determined at a later date. The second defendant is the Registrar General, who also took no part in today’s proceedings.

The third defendant is Ms Karen Cox, as administrator of the deceased estate of the late David William Dixon, pursuant to letters of administration granted on 27 November 2020 (Ms Cox). Her solicitors are Messrs Jim Kekatos and Ben Thomas of Kekatos Lawyers, and Mr D Allen of Counsel (the Cox lawyers). Mr Allen appeared for Ms Cox and the Cox lawyers (including himself) today.

The amended statement of claim is not straightforward. There are 51 prayers for relief, and the pleading runs to 209 paragraphs over nearly 100 pages. I gratefully adopt the following brief summary of the litigation from Mr Allen’s written submissions.

Ms Cox is the registered proprietor of land known as the Lovedale Ranch (the land). The land is the main subject of these proceedings. The land is subject to a first registered mortgage to Westpac. Ms Cox’s interest in the proceedings is to defeat:

For Mr Ward to succeed in his claim for possession, Mr Mahommed must succeed in his claim against Westpac. Without Mr Mahommed succeeding, if Mr Ward has a right to possession, it is subordinate to Westpac’s right of possession, and may be worthless given the money secured and owing to Westpac is, or will be, greater than the value of the land.

Ms Cox submits:

By notice of motion filed on 12 July 2021, Ms Cox seeks this order:

The motion also contains orders for security for costs against Messrs Ward and Mohammed. As part of the case management of these proceedings, Ward CJ in Eq has ordered that Ms Cox’s application for security for costs will be heard later, together with Westpac’s application for security for costs, to which I referred earlier. The only matters before me today were the respective applications to restrain the legal advisers from acting.

As ultimately presented, Mr Allen’s argument depended on the findings of Williams J in a lengthy and detailed judgment in Overdean Developments Pty Ltd v Garslev Holdings Pty Ltd (No 3) [2021] NSWSC 1482 (Overdean). Mr Mahommed and Mr Smits were defendants in Overdean, and their conduct in acting under powers of attorney was an important issue in those proceedings. Her Honour made serious findings against both Mr Mahommed and Mr Smits, including:

Four affidavits of Mr Mahommed were read but were not referred to in argument, with one limited exception. That exception was evidence from Mr Mahommed that Mr Smits submitted demonstrated that Mr Mahommed would have difficulty finding and funding lawyers other than Mr Smits if Mr Smits were restrained from acting, and that the complexity of this litigation meant that a great deal of money would be wasted in having to brief new lawyers, when compared to Mr Smits’s familiarity with the facts of these proceedings.

Insofar as the findings in Overdean were concerned, Mr Smits informed the Court that the findings against him and Mr Mahommed would be strenuously contested in an appeal that was shortly to be filed (her Honour’s decision was delivered on 17 November 2021 and a notice of intention to appeal has been filed).

There was no dispute about the applicable legal principles. Mr Allen referred the Court to the fourth and fifth points of the well-known passage in the decision of Brereton J in Kallinicos v Hunt (2005) 64 NSWLR 561; [2005] NSWSC 1181 at [76]:

In Seng Hpa v Walker [2017] VSC 320 (references omitted) McMillan J said:

During the course of argument, Mr Allen abandoned a submission based on Mr Smits having to be restrained because he could be a material witness in the present proceedings. Mr Allen based his submissions solely on what he described as the relationship between Messrs Smits and Mahommed, and to a lesser extent, with the late Mr Dixon. Mr Allen submitted that the findings of Williams J in Overdean demonstrated that Mr Smits had enjoyed, for a long period of time, a close personal relationship with Mr Mahommed which went well beyond the professional relationship of solicitor and client.

Furthermore, he contended, it followed from her Honour’s findings that the nature of that relationship was such that they were prepared to commit fraud together. He drew attention to the fact that in Overdean, at least at some of the material times in which Mr Smits’ conduct was in question, Mr Smits was acting as a solicitor, as well as in a personal capacity as attorney. Mr Allen submitted that brought those circumstances closer to the present circumstances, where Mr Smits was acting as Mr Mahommed’s solicitor in these proceedings.

Mr Allen submitted that a fair-minded, reasonably informed member of the public would not have any confidence that Mr Smits would properly perform his duties as a solicitor and officer of the Court in representing Mr Mahommed in these proceedings in circumstances where their relationship was so close that it had extended to him being prepared to engage in dishonest conduct with Mr Mahommed.

Mr Allen also drew attention to the fact that, in the present proceedings, it was clear that there had been a relationship between Mr Mohammed and Mr Smits which pre-existed the current litigation and that both gentlemen had dealings with the late Mr Dixon. The amended statement of claim disclosed that in these proceedings Mr Smits had engaged in one particular transaction in favour of Mr Ward on behalf of Mr Dixon acting as Mr Dixon's attorney.

Mr Allen submitted that the jurisdiction which was being invoked was a jurisdiction protective of the proper administration of justice. It was one where on the authorities, in particular referring to the observations of McMillan J set out in [15] above, a person in a close personal relationship with another should not be permitted to act for that latter person. In this case it was said the need to restrain Mr Smits was even greater because, on the evidence, the nature of the relationship which was one which included a willingness to engage in fraudulent conduct.

For his part, Mr Smits drew attention to these matters:

In reply, Mr Allen submitted:

There can be no doubt that the findings against Mr Mahommed and Mr Smits in Overdean are serious. Mr Smits, correctly with respect, accepted that only if and until they are overturned, the Court must proceed on the basis that those findings stand. However, the jurisdiction to restrain a lawyer from acting is an exceptional one, which the authorities make clear is to be exercised with caution and with due regard for the public interest in not interfering with a party’s choice of legal representative.

I have given anxious consideration to the arguments raised by Mr Allen and accept that there is much to be said for them. They certainly have a strong initial attraction. However, the matters which I have identified in [21] above as having been raised by Mr Smits provide the reasons why I am not satisfied that, in this case, the hypothetical fair-minded, reasonably informed member of the public would conclude that the proper administration of justice required Mr Smits to be restrained from acting for the plaintiffs in these proceedings.

While for at least some of the time considered in the Overdean proceedings, Mr Smits was acting as a solicitor, a consideration of her Honour’s reasons makes it clear that Mr Smits and Mr Mahommed were, in effect, acting as two people in their own right (albeit as attorneys) and were treated as such in the proceedings.

The circumstances of this case, and Mr Smits’ role in them, are sufficiently different from Overdean to lead me to the conclusion that the fair-minded observer, while perhaps initially troubled at the appearance of Mr Smits acting for Mr Mahommed, would, by reason of the matters referred to by Mr Smits, not be so troubled as to reach the conclusion that public confidence in the administration of justice would require Mr Smits to be restrained from acting. This is because Mr Smits’ role in these proceedings is sufficiently distinct in both character and capacity to neutralise any initial concern that may be raised by the findings in Overdean.

For these reasons, prayer 1 of Ms Cox’s motion will be dismissed.

By notice of motion dated 26 August 2021, Mr Mahommed sought orders including:

Mr Smits accepted that orders 2, 3 and 4 could only be made if the Court made the order restraining the Cox lawyers from continuing to represent Ms Cox.

I can deal with Mr Mahommed’s motion much more briefly. Mr Smits sought to contend that the order should be made because the Cox lawyers had a serious conflict of interest. With respect to Mr Smits, and despite his lengthy written submissions, he was unable to explain to me what exactly the conflict was. It appeared to be a concern based around the role of an entity not a party to these proceedings, Greenhills Securities Pty Ltd (Greenhills).

It appears that an issue in these proceedings is that Westpac claims to be subrogated to rights that Greenhills is said to have had in the land. Mr Smits, on behalf of his clients, was exercised by the fact that Ms Cox, in her capacity as administrator of the late Mr Dixon’s estate, has admitted Westpac’s claim to be subrogated to Greenhills’ rights. Mr Smits submitted that in circumstances where the Cox lawyers had acted for Greenhills in other proceedings, and were now acting for Ms Cox, the admission by Ms Cox of Westpac’s claim to be subrogated to Greenhills evidenced a conflict in the Cox lawyers.

The Court accepts Mr Allen’s submission that Mr Smits has confused the notion of a conflict with the disagreement on the part of the plaintiffs in these proceedings with the position taken by Ms Cox. Just because Mr Smits’ clients disagree with a position where Ms Cox has agreed with Westpac’s claim in relation to subrogation, does not mean that the Cox lawyers have a conflict of interest in that regard in these proceedings by reason of having acted or, if they still do, acting for Greenhills.

In any event, as Mr Smits acknowledged, his client’s disagreement with the position taken by Ms Cox on that issue will be fully litigated in these proceedings with the respective contentions being argued by each side of the record.

In those circumstances, and with respect to Mr Smits, I am quite unable to identify any basis upon which the Court would exercise its general supervisory jurisdiction to restrain the Cox lawyers from acting for Ms Cox in these proceedings.

The Court’s orders are:

After I announced this result the parties were agreed that there should be no order as to costs. I therefore note that the Court makes no order as to any party’s costs of and incidental to today’s hearing.