New South Wales Supreme Court CITATION : Adler Mallach Holdings Pty Limited v Robert Samuel Robertson & Ors [2002] NSWSC 998 FILE NUMBER(S) : SC 2646/02 HEARING DATE(S) : 23/10/02 JUDGMENT DATE : 23 October 2002 Adler Mallach Holdings Pty Limited (Plaintiff) PARTIES : Robert Samuel Robertson (1st Defendant) Nenia Robertson (2nd Defendant)) Westpac Banking Corporation (3rd Defendant) JUDGMENT OF : Einstein J COUNSEL : Mr A Blank (Plaintiff) Mr G McGrath (2nd Defendant) SOLICITORS : Isho & Associates (2nd Defendant) CATCHWORDS : Practice and Procedure - Proceedings carried on by a corporation - Direct access to client - Plaintiff company seeking to be represented by a barrister without intervention of a solicitor - Effect of Part 4 Rule 4 of the Supreme Court Rules - Whether appropriate to dispense with rule Conveyancing Act 1990 (NSW) LEGISLATION CITED : Legal Profession Act 1987 (NSW) Supreme Court Act 1970 (NSW) Supreme Court Rules 1970 (NSW) Alsons Pty Ltd v Sunpost Pty Ltd (unreported, NSWCA, 3 April 1995, Meagher JA) CASES CITED : Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (1986) 8 NSWLR 104 Harman v Secretary of State for the Home Office [1983] 1 AC 280 Jiwira Pty Ltd v Primary Industry Bank of Australia Ltd (unreported, NSWSC, 17 February 1995, BC9504245). DECISION : Leave to corporate plaintiff to continue the proceedings otherwise than by a solicitor refused. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Einstein J Wednesday 23 October 2002 ex tempore Revised Thursday 24 October 2002 2646/02 Adler Mallach Holdings Pty Limited v Robert Samuel Robertson & 2 Ors JUDGMENT 1 On 20 August 2002 Brownie JA delivered judgment in proceedings 50004/2001 ["the first proceedings"] being proceedings in the Commercial List between Adler Mallach Holdings Pty Ltd as plaintiff, Mr Robert Samuel Robertson as first defendant, Ms Noaleen Anne Dennis as second defendant, the Registrar General of Land and Property Information (NSW) as third defendant and Westpac Banking Corporation as fifth defendant. 2 The first proceedings (which were originally commenced in the District Court), were brought in relation to the sale of the business from Mr Robertson to the plaintiff following which the plaintiff claimed and succeeded before Brownie a JA in establishing breaches by the vendor will of restraint of trade provisions in the agreement. 3 During the course of the final hearing the plaintiff sought and obtained, by orders of 30 July 2001 which were entered on the following day, injunctive relief by way of Mareva orders restraining the first and second defendants from dealing with or encumbering any real or personal property owned, controlled or held by either of them or benefiting either of them without first giving seven days written notice to the plaintiff's solicitors. The injunctive relief was conditioned upon a further order that each of the first and second defendants was entitled to have access to such funds as were required for his or her ordinary living expenses not exceeding $750 per week. 4 These proceedings 2646/2002 ["the second proceedings"] were commenced on 10 May 2002 upon the filing of a statement of claim. The plaintiff and the first defendant are the same parties as had been the plaintiff and the first defendant in the first proceedings. The second defendant is Mrs Nenia Robertson. The third defendant was Westpac Banking Corporation. 5 The plaintiff's solicitors were Steingold Abel. 6 A defence was filed for the second defendant on 3 July 2002 and a document which purports to be an affidavit but on examination appears to be a defence, was filed by the first defendant on 9 July 2002. 7 The plaintiff claims that on or about December 2001 it received notice from the second defendant that by an alleged transfer, the date of which appears to be uncertain and which may have been 18 October 2000 or 18 December 2000, Mr Robertson had transferred to Mrs Robertson a property in respect of which he had been the registered proprietor situate at Smithfield. The proceedings claim that this transfer constituted an alienation of the subject property with intent to defraud creditors within the meaning of section 37A of the Conveyancing Act 1990 on a number of bases including sale at undervalue, failure to pay the purported consideration and a disposition otherwise than in favour of Mrs Robertson as a creditor. 8 The proceedings seek to set aside the transfer by sundry orders and declarations. 9 Interlocutory orders and undertakings have now resulted in the subject property being sold and in the proceeds being held pending the determination of the second proceedings. 10 Some problems arose when the Registry apparently mislaid the file and in the result from time to time during directions hearings, the parties have had to assist the court in terms of understanding the content of the file. 11 A number of interlocutory matters have been raised: · the plaintiff's solicitors in the second proceedings have apparently given notice of intention to cease acting. That notice is not to be found in the Court file. During the course of the hearing on 23 October 2002, Mr Blank of counsel on behalf of the plaintiff and assisting the court in this regard, handed up a copy of a notice of intention to cease acting as solicitor which the plaintiff had received from Steingold Abel lawyers. The court is proceeding upon the assumption that such a notice was not only served but has been filed, it not presently being part of the court file possibly for reasons that the file had been mislaid from time to time. · In those circumstances a notice of motion was filed on 17 October 2002 seeking leave to the plaintiff to continue the second proceedings "without a solicitor (either through counsel alone or through duly authorised directors or officers)"; · the plaintiff by motion also filed on 17 October 2002 has sought access to the Court file and any exhibits to affidavits filed or documents produced under notice to produce or subpoenas in the first proceedings and to be relieved from any implied undertaking in respect of such documents or information learned from an inspection of any of the documents-presumably from operation of the rule in Harman v Secretary of State for the Home Office [1983] 1 AC 280; · Mrs Robertson seeks orders for the funds now held to be paid out to her. Leave to the plaintiff to continue the second proceedings Supreme Court Rules, Part 4 Rule 4A 12 Part 4, Rule 4A of the Supreme Court Rules 1970 (NSW) relevantly provides: "(1) Except as provided by this rule or by or under any Act, a corporation (other than a solicitor corporation) may not commence or carry on any proceedings otherwise than by a solicitor.' 13 In Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (1986) 8 NSWLR 104, the Court dealt with a similar issue of whether or not a person, who was not a qualified legal practitioner, could appear on behalf of a company in proceedings. The rule as it then was, Part 4 Rule 4(2) read as follows: 'Except as provided by or under any Act, a corporation may not commence or carry on any proceedings otherwise than by a solicitor." 14 Kirby P, Samuels and Mahoney JJA each dealt with this issue in a different way. 15 Kirby P, who was in the minority on the final holding, recognised that Part 4 Rule 4(2) was subject to the Court's inherent power to control its own proceedings. He referred to Part 1 Rule 12 of the Rules which states, "The Court may dispense with compliance with any of the requirements of the rules, either before or after the occasion for compliance arises." As addressed by Kirby P at 108 - 09, Part 1 Rule 12 gives regulatory effect to this inherent right of a court to regulate its own proceedings. His Honour states: "It would be undesirable for that beneficial rule for dispensation [Pt 1 r 12] to be given a narrow construction. Its language, the history which preceded it in courts of equity, its position in the first part of the rules and the utility of such a provision to promote the interests of justice all suggest that a meaning should be given to the rule which permits the Court to dispense with the requirements, such as that which obliges a corporation to carry on proceedings by a solicitor. The Court has more than ample power, in the language of the rule and in the discretion which it confers, to protect itself and other parties before the Court, from any injustice or surprise which may be occasioned by dispensing with compliance with the rules and with the normal practice." ( at 109) 16 In the circumstances of the case, Kirby P saw such protective measures as including (at 109): · Sufficient means at the Court's disposal to require proof of the individual's authority to speak for the company; · Limiting the right of the individual to appear; · Control this right to appear by reference to such considerations as the protection of the respondent as to costs and an efficient disposal of the issues. 17 Such control, his Honour pointed out, was regularly exercised where the Court has before it a litigant in person, and his Honour could see no reason why similar control could not be exercised in the present case. 18 Samuels JA took a different view. In looking at the purpose of Pt 4 r 4(2), his Honour stated: "The reasons for the rule are many, amongst them that otherwise it might be open to an unqualified person to appear for a corporation without any authority, and as my brother Mahoney pointed out during the argument, to render it liable to large impositions for costs, again without authority." (at 110) 19 With respect to the effect of Part 1 Rule 12, Samuels JA held that it would be very difficult to apply the rule to Part 4 Rule 4(2), but that in any event, if it was to apply or assuming the Court possessed some general discretion to dispense with its own rules, such a discretion should be exercised "only with the most meticulous care". In the circumstances of the case, his Honour did not see sufficient reason to justify the invocation of Part 1 Rule 12. (see p. 111) 20 Mahoney JA based his decision on the ground that the individual had not been shown to have any authority, in fact, to act for the company. That said, his Honour went on to deal with the issue thrown up by Part 4 Rule 4(2), noting that prima facie, the rule would prevent the individual from acting for the company, even if the company had purported to authorise him so to do. Further, assuming the Court had the power to dispense with this rule, Mahoney JA held that he would not be prepared to dispense with it in this case. (see 113) 21 The decision in Bay Marine was dealt with by Master McLaughlin in Jiwira Pty Ltd v Primary Industry Bank of Australia Ltd (unreported, NSWSC, 17 February 1995). There, the summons was sought to be struck out so far as it concerned the first plaintiff Jiwira on the ground that Jiwira, being a corporation, did not have a solicitor involved in either the commencement or further conduct of its proceedings. The application was for leave to permit junior counsel to appear without the intervention of a solicitor 22 In Jiwira, it was submitted that the apparent prohibition against a corporation appearing without a solicitor is overridden by the 1994 amendments to the Legal Profession Act 1987 (NSW), in particular, section 38I(1) which states: "Barristers may accept any clients, subject to the barristers rules and the conditions of any relevant practicing certificate." 23 The New South Wales Barristers Rules relevantly provide: "74. A barrister must confine the barrister's professional work to: (a) appearing as an advocate; (b) preparing to appear as an advocate; (c) negotiating for the client with the opponent to compromise the case; (d) representing the client in a mediation; (e) giving legal advice; (f) advising on documents to be used in the client's affairs; (g) acting as a referee, arbitrator or mediator; and (h) carrying out work properly incidental to the kinds of work referred to in (a)-(g). 75. A barrister must not, in the barrister's professional work: (a) commence proceedings or file process in any court on behalf of the client in the barrister's name; (b) serve any process of any court; (c) make any demand, by letter or otherwise, on behalf of the client in the barrister's name, except for the purposes of work under Rule 74(c) and (d); and (d) conduct correspondence on behalf of the client in the barrister's name or deal on behalf of the client with any other person, unless: (i) the correspondence is to seek information from a potential witness; or (ii) the dealing is a conference with a potential witness; or (iii it is for the purposes of work under Rule 74." … 78. A barrister who is asked by any person to do work or engage in conduct which is not barristers' work, or which appears likely to require work to be done which is not barristers' work, must promptly inform that person: (a) of the effect of Rules 74 and 75 as they relevantly apply in the circumstances; and (b) that, if it be the case, solicitors are capable of providing those services to that person." 24 The effect of section 38I(1), it was submitted, was to allow Jiwira to have counsel appear for them in the proceedings without the intervention of a solicitor. 25 After reviewing the decision in Bay Marine, Master McLaughlin made the following findings on the issue of whether s 38I had effectively overridden Part 4 Rule 4(2): · It is not without significance that since the date of the commencement of section 38I, the Supreme Court Rules have been amended on five separate occasions, and the Supreme Court Act has been amended on one occasion. · Any apparent inconsistency therefore between the effect of s 38I and the Rules should not be regarded as resulting from some inadvertent omission on the part of either the Rule Committee of the Supreme Court of the Legislature of NSW. · There was a clear intention manifest in the Legal Profession Act to maintain a distinction between barristers and solicitors. · The effect of the 1994 amendments to the Legal Profession Act is to enable a barrister to act as a barrister, that is, essentially in the role of an advocate, without the intervention of a solicitor between himself and his client. It does not enable a barrister to act as a solicitor. 26 Hence, Master McLaughlin rejected Jiwira's submission. In so doing, the Master made two crucial findings: the first dealt with a distinction between the entitlement of Jiwira to commence proceedings without a solicitor and its now entitlement to continue proceedings having a barrister appearing without the intervention of a solicitor; the second dealt with maintaining the distinction between the roles of barristers and solicitors when appearing/acting in proceedings: "In either event the question of the entitlement of the first plaintiff to commence the proceedings without the intervention of a solicitor cannot in any way be affected by the entitlement, as it has been submitted, of the first plaintiff now to have a barrister appearing for it without the intervention of a solicitor. I consider that, at its inception, the commencement of these proceedings by the first plaintiff was on behalf of the first plaintiff otherwise than by a solicitor, thus in contravention of the provisions of Pt4, R4(2) of the Supreme Court Rules; and for that reason the proceedings were not properly commenced and should be struck out. Further, I consider that the fact that Mr Kearney has been involved in his role as an advocate for the plaintiffs in the proceedings, does not entitle him to act as a solicitor for the plaintiffs, and does not entitle the first plaintiff to carry on the proceedings otherwise than by a solicitor. For that reason also I am of the view that the proceedings by the first plaintiff should be struck out." 27 In Alsons Pty Ltd v Sunpost Pty Ltd, 3 April 1995, heard by Meagher JA, an order was made striking out an appeal on the basis that the notice of appeal had been filed by a barrister. Reference was made in the short judgment to the strictness with which the rule then provided for in Part 4 Rule 4 (2) of the Supreme Court Rules was to be applied by the Court as illustrated in Bay Marine. Reference was also made to Jiwira and in particular to the holding by Master McLachlan that the effect of the 1994 amendments to the Legal Profession Act was to enable a barrister to act as a barrister, that is essentially in the role of an advocate, without the intervention of a solicitor between himself and his client, the rule not going so far as to enable a barrister to act as a solicitor. The holding was that the barrister who had filed the notice of appeal had plainly sought to act as a solicitor. 28 The evidence in support of the subject application presently under consideration is set out in the affidavit of Mr Mallach made on 16 October 2002 a copy of which is appended to this judgment. 29 The submissions of the plaintiff are inter alia: · The purpose of this litigation is to attempt to enlarge the asset base upon which the plaintiff may levy execution on an indemnity costs judgement (already handed down) and a damages judgement (yet to be handed down) obtained in 50004/01. · The preceding litigation and to some extent the present litigation, has taken a heavy toll on the plaintiff and it makes no pretence that it is now devoid of any funds with which to pursue its claims. · In Jiwira Pty Ltd & Ors v Primary Industry Bank of Australia Ltd (unreported NSWSC, McLaughlin M, 172/95 BC9504245), Master McLaughlin held that the changes to the Legal Profession Act, allowing for barristers to take briefs on a direct access basis, did not oust the provisions of the rule. · In that same decision, however, he held that the Court of Appeal was of the view that there may be inherent power in the Court to permit a corporation to carry on proceedings otherwise than by solicitor, but there must be exceptional circumstances to justify the exercise of any such power. He was referring to the judgement of Mr Justice Kirby in Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (1986) 8 NSWLR 104 at107. · The plaintiff submits that the above proposition should be accepted. The plaintiff then submits that its case is one of exceptional circumstances. · The plaintiff has until recently, had solicitors acting for it. To this end, it is in a different position to the parties in the Jiwira and Bay Marine (supra). The plaintiff has spent vast amounts to successfully bring a claim against the present first defendant. That claim has been converted into a judgement against the first defendant for indemnity costs and an as yet undetermined amount for damages. In obtaining the judgements, the plaintiff has exhausted its funds. The judgement will, however, be meaningless unless it can be further converted to money. · The present proceedings are brought for that very purpose. The plaintiff submits it would be gravely unjust if it were denied the opportunity to secure the funds in these proceedings as part of the asset base upon which it is entitled to levy execution. The plaintiff points out that the credit findings, imposition of an indemnity costs order and a Mareva injunction against the first defendant, in proceedings 50004/01 should be some indication that the first defendant has not conducted himself in an exemplary way to date. · Moreover, the plaintiff submits that the present proceedings being based upon an alleged fraud to deny the plaintiff an opportunity to prosecute its claim, exacerbates the injustice. · The plaintiff submits further that if part of the rational for the rule is to ensure that parties who appear in court on behalf of a corporation have authority to bind the corporation (see Bay Marine supra at 105G - 106B), then (and notwithstanding what was held in Jiwira), that concern falls away if counsel appears. If, as sought, the corporation wishes to pursue the claim through its officers at a later time, the question of their capacity can be established at that time. · In summary, the plaintiff relies on the following suggested exceptional circumstances: (a) The plaintiff did not commence proceedings without solicitor as in Jiwira . (b) It is as a result of having to use solicitors, that the plaintiff does not have the funds to continue; (c ) The nature of these proceedings are such that it represents one of very few opportunities for the plaintiff to convert its judgements into money; (d) The nature of the allegations against the defendants are serious and every effort should be made for those issues to be heard on their merits. 30 In my view none of the circumstances amount to exceptional circumstances justifying the exercise of the power of the Court to grant leave to continue the proceedings without a solicitor. 31 Part 4 Rule 4A permits a corporation which complies with that rule to commence or carry on proceedings by a director. Such a director requires to also be a plaintiff in the proceedings and it is permissible for the authorised director to join as a plaintiff with the corporation for the purpose of permitting the corporation to take advantage of the rule. No such approach has been taken by the plaintiff so that the application for the plaintiff to be granted leave to continue the proceedings through duly authorised directors or officers must also fail. Had such an approach been taken the Court would likely have granted leave to the plaintiffs to continue the second proceedings without a solicitor, that is to say counsel might appear in the role of advocate without the intervention of a solicitor between himself and his clients. 32 An additional reason may well concern the further motion for leave to inspect in the second proceedings, documents produced under discovery or subpoena in the first proceedings and to be released from usually implied undertakings attaching to documents so produced. There is a special significance in the conduct of litigation concerning the ethical obligations of a solicitor on the record particularly in relation to the constraints upon the use to which documents created for or obtained in the course of the proceedings may be used. Those obligations of course exist where leave is granted to a party to one set of proceedings to utilise in the course of those proceedings, materials which had been produced in altogether another set of proceedings. The matter may well add a parameter to the application relating to the leave to continue the proceedings now under consideration. 33 In my view there is no occasion for the Court to permit this plaintiff to carry on these proceedings otherwise than by solicitor. The fact that the plaintiff is devoid of funds with which to pursue its claims says nothing in relation to why the plaintiff should be permitted to carry on the proceedings as presently constituted through counsel. I certify that paragraphs 1 - 33 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on Wednesday 23October 2002 ex tempore and revised 24 October 2002 ___________________ Susan Piggott Associate 24 October 2002 Last Modified: 10/30/2002 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.