HARRISON & ORS v SCHIPP & ORS [1999] NSWCA 443

New South Wales Court of Appeal CITATION : HARRISON & ORS v SCHIPP & ORS [1999] NSWCA 443 revised - 06/12/99 FILE NUMBER(S) : CA 40728/98 HEARING DATE(S) : 1 November 1999 JUDGMENT DATE : 3 December 1999

PARTIES : GEORGE HARRISON & ORS v DELCIE JOAN SCHIPP & ORS JUDGMENT OF : Mason P at 1

LOWER COURT JURISDICTION : Supreme Court LOWER COURT FILE NUMBER(S) : EQ 6425/91 LOWER COURT JUDICIAL OFFICER : Einstein J

1st Claimant: C J Birch SC and M G Stubbs COUNSEL : 2nd Claimant: Mr Cameron in person Opponent: J Hennessy Intervener: M J Neil QC 1st Claimant: James Solicitors SOLICITORS : 2nd Claimant: D Cameron Opponent: Barker Gosling CATCHWORDS : Application for stay - examination summons - allegation that issued for improper purpose - open justice - solicitor's duties DECISION : Dismissed with costs

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40728/98 EQ 6425/91 MASON P

Friday 3 December 1999

GEORGE HARRISON & ORS v DELCIE JOAN SCHIPP & ORS

JUDGMENT 1 MASON P: Mrs Schipp brought proceedings in the Equity Division against seven defendants. They included Mr Cameron, a Wollongong estate agent and Mr Harrison, a Wollongong solicitor and two companies associated with them. Those four defendants (hereafter called "the claimants") are the claimants in the application before me. 2 Mrs Schipp had invested portion of a divorce settlement in business ventures with which the claimants were associated. She lost substantial sums of money. Following lengthy proceedings, Einstein J held that Mrs Schipp had established various breaches of fiduciary duty and also, in Mr Harrison's case, breaches of his duty as a solicitor as well as breaches of his common law duty of care. The principal judgment was given on 17 June 1998. It contains strong adverse findings as to the credibility of Messrs Cameron and Harrison. They were found to have engaged in conduct which took unfair and unconscionable advantage of Mrs Schipp's known weakness and vulnerability. It was also found that Mr Harrison had failed as a solicitor to take reasonable care in his dealings with Mrs Schipp's affairs. 3 After further hearings, Einstein J made final orders on 9 September 1998. He ordered that the claimants pay to the plaintiff $230,880 by way of equitable compensation plus $394,526 interest. The claimants were ordered to pay the plaintiff's costs of the proceedings on an indemnity basis. 4 Mrs Schipp had also sued, as seventh defendant, a group of insurers that were Mr Harrison's professional indemnity insurers. The lead defendant was Aegon Insurance Co (UK) Ltd. This claim failed and Mrs Schipp was ordered to pay the insurers' costs. Her application for a Bullock or Sanderson order against the claimants was rejected. 5 The claimants have appealed to this Court. In addition, Mrs Schipp has filed a summons seeking leave to cross-appeal against the claimants in relation to the refusal to make a Bullock or Sanderson costs order. She has also filed a cross-appeal relating to the dismissal of her claim against Mr Harrison's professional indemnity insurers. 6 Mr Harrison and Mr Cameron have indicated that they lack the means to satisfy the judgment. It appears likely that bankruptcy will follow if the principal appeals fail. There is also evidence that Mrs Schipp is virtually without any remaining assets. 7 On 3 July 1999 Mr Harrison won ALP pre-selection for Lord Mayor of Wollongong. He was elected to that office on 11 September 1999. He would forfeit that office if made bankrupt (see Local Government Act 1993, s234(e)). 8 No steps have been taken in execution of the judgment in Mrs Schipp's favour pending the determination of the appeal. The insurers have taken steps to quantify their costs but have agreed to refrain from enforcing the costs order against Mrs Schipp pending the determination of the appeal and any cross-appeal. 9 On 16 July 1999 Mrs Schipp filed examination summonses to have Messrs Harrison and Cameron attend before a Registrar to be questioned as to their financial dealings referable to their capacity to pay the judgment. In principle, this would be entirely appropriate, given the assertion by each defendant that he had no assets. Bankruptcy proceedings can be costly and they would be pointless if, in truth, there are no assets capable of being brought into the bankrupt's estate in the event of a sequestration order being made. 10 In the case of Mr Cameron, Mrs Schipp has a particular reason for wanting to investigate his financial affairs. Two days after Einstein J made final orders, Mr Cameron and his wife filed an application for dissolution of marriage. Earlier, but during the trial, he transferred property to his wife apparently pursuant to a property settlement under the Family Law Act. There is also evidence that Mr Harrison's company Emibarb Pty Ltd (one of the claimants) disposed of valuable assets during the proceedings. The propriety of this conduct (by exercise of a power of sale against a defaulting mortgagor) is vigorously defended by Mr Harrison. These dealings by the claimants may turn out to be entirely proper, but the judgment creditor is entitled to scrutinise them carefully. 11 On 18 October 1999 Fitzgerald JA heard applications related to security for costs of the appeal and stay of execution of the orders made by Einstein J. Part way through the hearing, the parties reached agreement which they embodied in the following short minutes of order: 1. Subject to the appellants' providing security as set out in paragraph 2 below, order that enforcement of the judgment and orders in proceedings No EQ 6425-91 (being the judgment and orders the subject of these appeals) be stayed until delivery of judgment in the appeals or any further order of the Court, whichever is the earlier. 2. Order that within 28 days, the appellants provide to the respondent security for the respondents' costs of the appeal in the sum of $50,000. The security is to be in a form agreed between the parties or, in default of agreement, in a form acceptable to the Registrar of the Court of Appeal. 3. In respect of the examination of the appellants commencing 21 October 1999, note that the appellants will apply that the examination be conducted in camera and that the respondent consents to that application. 4. Order that the costs of these applications be costs in the appeals.