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. 12 At around this time the appellate proceedings were expedited. They are now set down for hearing on 15 May 2000. 13 Paragraph 3 of the short minutes of order appeared to resolve what was shaping up to be a lengthy contest in the proceedings before Fitzgerald JA. Indeed, in one sense it did. That is Mrs Schipp's present submission, in the sense that order 3 states the outer limit of her duties in respect of the matter in issue. Nevertheless, she accepts that the orders (being interlocutory) are not beyond variation or recall. It is the unravelling of the parties' expectations as embodied in par 3 of the short minutes that has led to the application before me which was, in effect, the renewal and/or continuation of the dispute apparently settled on satisfactory terms on 18 October 1999. 14 It was and remains the contention of Mr Harrison that the examination summons filed against him was an abuse of process brought for the purpose of placing improper pressure upon him. The pressure was said to be the threat of the publicity attendant upon his public examination. Mr Cameron has belatedly adopted a similar stance. Alternatively, it is submitted by the claimants that the examination proceedings are so lacking in utility that they should be stayed pending the determination of the appeal. 15 In one sense, the present dispute is within a small compass. The appeal has been expedited and a hearing date fixed. Security for costs has been provided; and execution, including the enforcement of costs orders, has been generally stayed. 16 The particular dispute relates to Mrs Schipp's application to press for that aspect of "discovery in aid of enforcement" (cf Supreme Court Rules Pt 43) that involves the public examination of Mr Harrison and Mr Cameron on what are referred to in Pt 43 r1(2) as "the material questions", ie (i) whether any and, if so, what debts are owing to the person bound; and (ii) whether the person bound has any and, if so, what other property or means of satisfying the judgment or order; … Mrs Schipp presses to have this examination take place as soon as practicable. The claimants seek to have it deferred until after the dismissal of their appeals (if that turns out to be their fate). 17 The facts relevant to the particular dispute are: (i) On 12 April Mrs Schipp's solicitors wrote to Mr Harrison's solicitors, noting that no stay had been sought. The letter indicated that a stay would be opposed, at the very least unless the "compensation component" of the judgment was paid or secured. (ii) On 6 July 1999 Mr Harrison's pre-selection as the ALP candidate for Mayor of Wollongong was announced. (iii) On 16 July 1999 Mrs Schipp's solicitors, Barker Gosling, sought orders for examination and production of documents against Mr Harrison and Mr Cameron. The application was made ex parte, as contemplated by the Supreme Court Rules (cf Pt 43 r3). (iv) On 28 July 1999 the Registrar of the Equity Division issued an order in relation to Mr Harrison. It required him to attend before the Registrar on 2 and 3 September and to produce certain financial records. I infer that Mr Cameron's order was to similar effect and that it issued on the same day. (v) On about 30 July 1999 Mr Harrison had a conversation with Ms Lisa Carty. Ms Carty is a journalist employed by the Illawarra Mercury, a newspaper circulating in Wollongong. During a conversation relating to the mayoral election (fixed for 11 September 1999) the following ensued (according to par 15 of Mr Harrison's affidavit of 11 August 1999, which is unchallenged): Carty: George do you have any comment to make about your court appearance on an examination summons in the Schipp Case ? Harrison : I don't know what you are talking about. Carty: I received a telephone call from a man who identified himself as a solicitor from Barker Gosling in Sydney who was Mrs Schipp's lawyer. Harrison : What do you mean he telephoned you? Ms Carty : He said that they have issued a summons out of the Supreme Court to examine you on your assets and that this was timed to happen just before the election. Mr Harrison expressed outrage and effectively declined to comment further beyond asserting confidence in his pending appeal. (vi) On 12 August 1999 the examination order was served on Mr Harrison's solicitors. (vii) On 12 August Mr Harrison filed a notice of motion, supported by an affidavit, seeking orders that the hearing date for his examination summons be vacated and that the examination summons not be re-listed prior to 15 September 1999. In the alternative, orders were sought that publication of any information relating to the examination summons be prohibited until 15 September 1999. (viii) The notice of motion and supporting affidavit were served under cover of a letter of 12 August 1999 from Mr Harrison's solicitors (James, Solicitors). The letter asserted: We are at a loss to understand what purpose your firm could hope to achieve in communicating the information about the Examination Summons to the Illawarra Mercury Newspaper. The objective sought by filing the Examination summons on 16 July 1999, and advising the newspaper prior to serving the Summons on our client, raises real concerns about the objectives of your client and gives rise to a reasonable inference that an improper objective is sought which goes beyond the proper conduct of the proceedings. Even greater force is given to this conclusion considering the time that has elapsed since your firm filed the Summons and have failed to serve it … (ix) On 26 August Barker Gosling responded by letter. There was an emphatic denial that the examination summons was an abuse of process. Mr Harrison's solicitors were reminded that the judgment debt remained unsatisfied despite demands for payment. The delay in serving the examination summons was said to be brought about largely by delay in the Supreme Court Registry (the examination summons had been filed on 16 July, it was not listed for hearing until 28 July and was not returned to Barker Gosling until 2 August). The letter did not deny the allegation that a male solicitor from Barker Gosling had contacted the Illawarra Mercury, nor did it explain why (if it be the fact) the journalist was told about the examination summons before the judgment debtor. However, it was indicated that Mrs Schipp was prepared to consent to the examination summons being stood over until a date after the mayoral election. (x) On 2 September 1999, the return date of the examination orders, the public examination was, by consent, stood over to 22 October 1999. In effect Mrs Schipp acceded to the orders sought in the notice of motion. (xi) On 11 September 1999 Mr Harrison was elected Mayor of Wollongong. There is evidence that his political opponents had sought to make political capital from the credibility findings made by Einstein J in the principal judgment. (xii) On 18 October 1999 Fitzgerald JA made the orders referred to in par 11, above. (xiii) On 21 October 1999 Mr Harrison's examination summons was returnable before Deputy Registrar Howe for the purpose of seeking the hearing in camera contemplated in par 3 of the short minutes. This was the day before that to which the summons had previously been adjourned. Counsel appeared for the Illawarra Mercury and Fairfax interests. The evidence does not disclose how those interests learnt about the application that day. Counsel sought and was granted leave to oppose the making of consent orders that Mr Harrison's examination be conducted in the absence of the public. Deputy Registrar Howe declined to make those orders, notwithstanding Mrs Schipp's consent to them as contemplated by Fitzgerald JA's orders. The Deputy Registrar stood the examination summons over generally, with liberty to apply on three days notice. The expressed purpose of that order was to enable Mr Harrison to move the Court of Appeal for further orders in the nature of a stay. (xiv) Mr Cameron represented himself before the Deputy Registrar. He did not seek to have his examination summons further stood over. Accordingly, his examination proceeded and Mr Cameron was questioned generally about his financial affairs. It was suggested to him that the divorce settlement entered into in the course of the proceedings before Einstein J was a sham. (xv) On Saturday 23 October 1999 the Illawarra Mercury published a front page article referring to Mr Cameron's examination. The headline was: Wollongong property developer tells court: divorce deal "not a sham" (xvi) The publication would have been an embarrassment to Mr Cameron and to Mr Harrison, whose link with Mr Cameron was commented upon. 18 On 22 October 1999 Mr Harrison moved this Court for orders varying those made by Fitzgerald JA on 18 October 1999. He sought the stay of the examination summons until disposal of the appeal. Alternatively, he sought orders that proceedings upon the examination summons be permitted on condition that any hearing be conducted in the absence of the public and that Mrs Schipp keep confidential to herself and her legal advisers the proceedings conducted on the order for examination. 19 Mr Harrison's motion came before me on 1 November 1999. On that day Mr Cameron was given leave to file in court a notice of motion seeking identical relief. 20 Counsel for the Illawarra Mercury also sought leave to appear, in order to oppose the making of any order that would have the effect of prohibiting public access to any adjourned proceedings on the examination summons. 21 Both Mr Harrison and Mr Cameron base their applications upon the fear of public humiliation and embarrassment stemming from the high probability that the renewed public examinations would receive extensive media coverage, especially in the Wollongong area. They argue that there is little or no utility in having the examinations take place in advance of the determination of the appeals, set down for May 2000. Each judgment debtor has (I assume) produced to the Court the documents called for in the Schedule to the examination orders. And each man has provided detailed information about his financial affairs in affidavits filed in support of the current applications. Each has also indicated his willingness to submit to written interrogatories should Mrs Schipp require further information. Mr Harrison has also proffered undertakings to the Court that there will be no disposal of assets other than in the normal course of business by himself or Emibarb Pty Ltd. 22 Mr Harrison contends that the filing of the examination summons and Mrs Schipp's continued prosecution of it is an abuse of process (cf Williams v Spautz (1992) 174 CLR 509). It is submitted that Mrs Schipp's predominant purpose was and is his public humiliation. Mr Harrison relies upon: • the delay of 10 months between judgment and filing of the summons; • the delay that elapsed between the filing of the examination summons and its service; • the fact that the summons was filed shortly after Mr Harrison's pre-selection and made returnable shortly before the mayoral elections; • the evidence that Mrs Schipp's solicitor contacted the media and solicited coverage of the examination; • the lack of utility in the examination being pressed at this stage, particularly now that Mr Harrison has provided affidavit evidence as to his assets. This evidence also addresses the suggestion that there were dealings with assets that might otherwise have been thought improper or intended to prejudice Mrs Schipp's interests as judgment debtor. 23 Mr Cameron effectively adopted these submissions. He contends that he is an innocent victim caught in politically-motivated cross-fire directed at Mr Harrison. 24 The claimants do not confine themselves to the submission that the examination summonses represent abuse of process. They also press the general submission that a full stay is appropriate, principally because the prosecution of the examination proceedings lacks utility. 25 I find the issue of abuse of process to be most troubling. The facts are far from black and white. As indicated above, there were demands for payment before the examination order was taken out. There is material appropriate to be investigated touching the judgment debtors' capacity to pay the debt in whole or part. There were dealings with assets while the proceedings before Einstein J were pending or shortly after their determination which Mrs Schipp is entitled to investigate. At the time the examination orders were taken out, Mrs Schipp was not privy to the explanations now offered in affidavits filed by the judgment debtors in the proceedings before me. There is some explanation for the delay in serving the examination order. 26 Nevertheless, the unchallenged (hearsay) evidence as to what passed between Mrs Schipp's solicitor and Ms Carty of the Illawarra Mercury is capable of supporting the conclusion that the examination order was obtained, when it was obtained, for a purpose foreign to the purpose for which Pt 43 of the Supreme Court Rules is designed. Barker Gosling's letter of 26 August arguably admits the primary facts. During the course of argument, I indicated to counsel for Mrs Schipp that I regarded most seriously the suggestion that a solicitor might have acted in the manner suggested by Ms Carty, according to Mr Harrison's account of what she said. No application was made for an adjournment to put on further evidence, especially from Mrs Schipp's solicitor. 27 For a litigant and/or a solicitor to take steps (including the use or threat of publicity) motivated by spite or which have the purpose or effect of subjecting a litigant to improper pressure to discontinue proceedings or compromise them constitutes a serious contempt of court (Harkianakis v Skalkos (1997) 42 NSWLR 22). Furthermore, it is no part of a solicitor's proper function in acting for a litigant to organise a media attendance at proceedings in order to inflict political damage upon the opposite party, even political damage flowing as the natural and appropriate consequence of the proceedings taking place in public. There is evidence raising serious questions as to whether either or both of these principles (necessarily expressed compendiously) have been breached. In expressing myself this way I am not to be taken to be expressing any higher conclusion about the facts in the present case. Rather, I am seeking to explain why the matter is important and cannot be brushed aside. 28 As will appear, I intend to leave the parties with whatever rights they may have inter se. But, subject to giving the solicitor concerned an opportunity over the next 14 days to make further representations, I am minded to refer to the proper authorities a matter of professional conduct of an officer of the court which, on the unchallenged evidence, raises a serious question for investigation. 29 I return to the issue between the parties. I have not overlooked Mr Harrison's submission that the continuance of the examination proceedings (in public) would itself represent an abuse of process. However, I have concluded that it would not be appropriate for me to exercise the power to stay proceedings pending an appeal on the basis of a finding that the examination orders were procured in circumstances involving an abuse of process. That is a matter that should be raised and determined on a substantive motion before the Registrar if any party was so minded. It may be relevant to any such inquiry that the hearings before the Registrar were adjourned by consent until after the mayoral election, this being at the time the only relief sought by Mr Harrison in his earlier notice of motion. 30 I have also concluded that it would be inappropriate to determine a contested application to stay the examination proceedings by reference to the contention of Mr Harrison and Mr Cameron that the continuation of those proceedings in public would be a source of embarrassment to the judgment debtors. Deputy Registrar Howe has decided that there is no basis for conducting the examination in camera. That decision has not been challenged. Indeed it strikes me as entirely correct having regard to the purpose of the particular proceedings and well-established principles relating to the open administration of justice (Russell v Russell (1976) 134 CLR 495 at 520, John Fairfax Group Limited v Local Court of New South Wales (1991) 26 NSWLR 131). 31 I am not satisfied that the continuation of the examination proceedings lacks utility. Mrs Schipp is not obliged to abandon the right conferred by Pt 43 of the Supreme Court Rules simply because the judgment debtors offer undertakings and submit affidavit evidence providing details of their financial affairs. In saying this, I am not suggesting that the officer of the court before whom the examination takes place is not entitled to have regard to this material in limiting the scope of the examinations. That officer will also be in a position to ensure that questioning takes place in a proper manner and for proper purposes. 32 I do not consider that Mr Harrison's concerns about personal embarrassment provide a basis for exercising the power to stay the examination proceedings. He holds an important civic office, but there is no suggestion that this provides any immunity or reason in itself for deferral of the examination (cf Clinton v Jones 520 US 681 (1987)). Nor is there any suggestion or threat at this stage by Mrs Schipp to initiate bankruptcy proceedings that might lead to loss of civic office. The stay ordered by Fitzgerald JA prevents this in any case. But I see no reason why Mrs Schipp should be prevented from arming herself with information necessary to make an informed decision whether or not to embark upon such a course after the dismissal of the appeals or further order. 33 The orders made by Einstein J are based substantially upon adverse credibility findings. This will present a very significant hurdle for the appellants in the substantive appeals, one which they and their lawyers would be well advised to consider carefully in the further prosecution of the appeal (see Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479). 34 Having regard to my general assessment of the appellant's prospects of success and taking account of the material which (unless explained satisfactorily) indicates that the judgment debtors' asset position may have changed for the worse over the last year or so, I cannot conclude that the examination proceedings lack utility or that it is otherwise appropriate that the judgment creditor should be prevented from pursuing them at this stage in the proceedings if minded to do so. 35 The applications by the claimants are dismissed with costs. The prospective intervener should pay its own costs. ******** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.