Chinese Australian Services Society Co-operative Limited v Helen Sham-Ho [2011] NSWSC 829 (4 August 2011)

Last Updated: 8 August 2011

Supreme Court New South Wales

Case Title:	Chinese Australian Services Society Co-operative Limited v Helen Sham-Ho
Medium Neutral Citation:	[2011] NSWSC 829
Hearing Date(s):	2 August 2011
Decision Date:	04 August 2011
Jurisdiction:
Before:	Harrison AsJ
Decision:	(1) Order that Proctor Phair Lawyers and Russell Phair cease to act as solicitors for the defendants in these proceedings. (2) Order that Proctor Phair Lawyers and Russell Phair pay the plaintiffs' costs of this application.
Catchwords:	PROCEDURE - civil - interlocutory issues - application to restrain a solicitor from acting for defendant is sought by a former client of the solicitor on grounds of conflict of interest or breach of fiduciary duty or confidentiality.
Legislation Cited:
Cases Cited:	Kallinicos v Hunt [2005] NSWSC 1181 Luong v Chinese Australian Services Society Co-operative Limited [2008] NSWSC 71
Texts Cited:
Category:	Procedural and other rulings
Parties:	Chinese Australian Services Society Co-operative Limited - First Plaintiff Henry Pan - Second Plaintiff Helen Sham-Ho - First Defendant Andrew Lau - Second Defendant Theresa Kwong - Third Defendant Simon Ho - Fourth Defendant Joseph Leung - Fifth Defendant
Representation
- Counsel:	J Levick - Plaintiffs
- Solicitors:	Australegal - Plaintiffs Proctor Phair Lawyers - Defendants
File number(s):	2011/120802
Publication Restriction:

Judgment

1. HER HONOUR : By notice of motion filed 10 June 2011, the plaintiffs seek an order that Proctor Phair Lawyers and Mr Russell Phair cease acting against their former clients on the grounds of conflict of interest or a breach of fiduciary duties or confidentiality. He is currently acting for Mr Lay in these proceedings. These reasons are brief as these proceedings are listed for an imputation hearing very shortly. It is common ground that Mr Russell Phair acted for Mr Pan in earlier equity proceedings.
   
2. The first plaintiff is Chinese Australian Services Society Co-operative Limited ("CASS"). CASS is a charitable non-profitable organisation receiving government funding to assist persons who are in need of help in the Chinese community. The second plaintiff is Henry Pan ("Mr Pan"). The first defendant is Helen Sham-Ho. The second defendant is Andrew Lau. The third defendant is Theresa Kwong. The fourth defendant is Simon Ho. The fifth defendant is Joseph Leung ("the defendants"). Mr Russell Phair acts for all of these defendants.
   

The earlier equity proceedings

3. In November 2006, Mr Pan, William Luong and Peter Fong commenced proceedings 6016/2006 in the equity division of this court ("the equity proceedings") against CASS and four directors of the Board of CASS, namely, Say-Choon Teoh, Brian Wong, Peter Leong and Peter Yee ("the directors"). Mr Russell Phair of Proctor Phair Lawyers acted for the plaintiffs in the equity proceedings.
   
4. These equity proceedings involved a dispute between the Pan faction and the opposing faction of CASS, as to numerous differences over the control and affairs of CASS, but particularly in respect of eligibility for active membership, which conferred voting rights. The matter was mediated, by the Hon T R Morling QC, on 5 October 2007 and again on 25 October 2007, in anticipation of a hearing which had been fixed for late November 2007. As a result of the mediation, there was prepared and executed a document entitled "Issues Agreed Upon at the Mediation on 5 October 2007 and 25 October 2007" ("the Mediation Agreement").
   
5. The Mediation Agreement recorded that the plaintiffs and CASS had agreed upon a proposed new Rule 14, to be implemented and to take effect by 9 December 2007 or as soon as practicable, by means either of obtaining a consent order in the proceedings, or the passage of a special resolution at a Special General Meeting ("SGM") by 21 November 2007, if the Court declined to make a consent order. The Court made the consent order.
   
6. On 8 November 2007, the registrar of the Co-operative approved Rule 14 ( as set out in paragraph 7 of judgment of Brereton J, Luong v Chinese Australian Services Society Co-operative Limited [2008] NSWSC 71). On 27 November 2007, the new Rule 14 (b) took effect.
   
7. Dispute then arose as to the operation of the new Rule 14(b) in respect of the AGM to be held on 9 December 2007. Three issues arose for determination. First, what was the proper construction of the new Rule 14(b), the second was whether rectification could be granted and the third was whether Mr Leong was an active member.
   
8. On 7 December 2007, Brereton J made the following orders:
   

"(1) Order that the plaintiff's Notice of Motion filed on 3 December 2007 be dismissed.

(2) On the defendants' Motion filed on 4 December 2007, order that the second and third plaintiffs and Clifton Wong be restrained from by themselves, their servants and agents excluding or otherwise interfering with the second defendant's attendance at the Annual General Meeting of the first defendant be held on 9 December 2007, or any adjourned date of that meeting.

..."

9. Mr Pan, Mr Luong and Mr Fong, were ordered to pay the costs of both motions.
   
10. It is common ground that Mr Phair acted in those earlier proceedings for Mr Pan, William Luong and Peter Fong. Mr Phair rendered three memorandum of costs and disbursements addressed to CASS, including one dated 31 December 2007 in the sum of $27,438 for acting in the notice of motion relating to the interpretation of Rule 14 of Chinese Australian Society Co-operative Limited. CASS paid those memorandums. Strictly speaking, it was Messrs Pan, Luong and Fong who were ordered to pay those costs not CASS.
    

The current proceedings

11. It is the payment of these fees that are the subject of complaint in the statement of claim in these current proceedings. It is alleged that on 19 May 2010, the defendants wrote and published in the Chinese language a defamatory statement that was signed, distributed and circulated by them to representatives of the media, which included "News Express", "Sing Tao" and "Australian Chinese Daily". They are set out in paragraphs [5] and [8] of the statement of claim are relevant. They plead:
    

"5 The matter complained of and referred to in paragraphs 3 and 4 above in its natural and ordinary meaning conveyed or was understood to have conveyed the following defamatory imputations:

(a) The First Plaintiff [CASS] sent out an incomplete and inaccurate memorandum which would mislead the public (paragraph 2).

(b) The First Plaintiff wrongly paid out the sum of $91,680 in 2008 (7).

(c) The Second Plaintiff [Mr Pan] caused the First Plaintiff to send out a memorandum which was incomplete and inaccurate and which would mislead the public (2, 3).

(d) The Second Plaintiff knowingly provided false information to ASIC that the Defendants were the directors of a subsidiary company of the First Plaintiff (CASS Care Ltd) (2, 3).

(e) The Second Plaintiff caused the First Plaintiff to wrongly pay out $91,680 in 2008 (7).

...

8 The matter complained of and referred to in paragraphs 6 and 7 above in its natural and ordinary meaning conveyed or was understood to have conveyed the following imputations:

(a) The First Plaintiff wrongfully paid in 2000 an amount of $91,680 for legal expenses without proving the Defendants with any related invoices or documents and with verification or seeking their approval (6, 7).

(b) The First Plaintiff attempted to conceal from the Defendants inter-company credits (8).

(c) The Second Plaintiff knowingly made a false statement to ASIC that the Defendants were directors of CASS subsidiary CASS Care Ltd (9)."

12. In Kallinicos v Hunt [2005] NSWSC 1181, Brereton J discussed the authorities as to when a court should restrain solicitors from acting in particular cases. His Honour stated at [76]:
    

"[76] The foregoing authorities establish the following:

• During the subsistence of a retainer, where the another is sought by an existing client of the solicitor, the foundation of the court's jurisdiction is the fiduciary obligation of a solicitor, and the inescapable conflict of duty which is inherent in the situation of acting for clients with competing interests [ Prince Jefri ].
  
• Once the retainer is at an end, however, the court's jurisdiction is not based on any conflict of duty or interest, but on the protection of the confidences of the former client (unless there is no real risk of disclosure) [ Prince Jefri ].
  
• After termination of the retainer, there is no continuing (equitable or contractual) duty of loyalty to provide a basis for the court's intervention, such duty having come to an end with the retainer [ Prince Jefri ; Belan v Casey ; Photocure ; British American Tobacco ; Asia Pacific Telecommunications ; contra Spincode ; McVeigh ; Sent ].
  
• However, the court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice [ Everingham v Ontario ; Black v Taylor ; Grimwade v Meagher ; Newman v Phillips Fox ; Mitchell v Pattern Holdings ; Spincode ; Holborow; Williamson v Nilant ; Bowen v Stott ; Law Society v Holt ]. Prince Jefri does not address this jurisdiction at all. Belan v Casey and British American Tobacco are not to be read as supposing that Prince Jefri excludes it. Asia Pacific Telecommunications appears to acknowledge its continued existence.
  
• The test to be applied in this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice [ Everingham v Ontario ; Black v Taylor ; Grimwade v Meagher ; Holborow ; Bowen v Stott ; Asia Pacific Telecommunications ].
  
• The jurisdiction is to be regarded as exceptional and is to be exercised with caution [ Black v Taylor; Grimwade v Meagher; Bowen v Stott ].
  
• Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause [ Black v Taylor; Grimwade v Meagher; Williamson v Nilant; Bowen v Stott ].
  
• The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief [ Black v Taylor ; Bowen v Stott ].
  

[citations omitted]

13. The basis upon which the plaintiffs seek to restrain Mr Phair from acting is the protection of confidences of a former client, Mr Pan.
    
14. The plaintiffs assert that the information that was acquired by Mr Phair in the course of acting for CASS and Henry Pan include the following information:
    

(a) Details of conversations between Henry Pan, Clifton Wong and other Organising Committee members relating to the interlocutory proceedings (including advice given in relation to those proceedings).

(b) The contents of the Mediation Agreement.

(c) Details of conversations between Henry Pan, Clifton Wong and other Organising Committee members relating to the costs associated with the interlocutory proceedings (including advice given in connection therewith).

15. Mr Nigel Hill, the solicitor acting for CASS and Mr Pan's solicitor, deposed that the information acquired Mr Phair is material to the present proceedings because the defendant have made statements which the plaintiffs have pleaded gave rise to defamatory imputations against them and those statements are directly relate to the costs associated with the interlocutory proceedings, the outcome of those proceedings and the mediation agreement. Mr Hill also says that there is a strong likelihood that the plaintiffs in these proceedings will call Mr Phair as a witness.
    
16. Mr Andrew Lau, for whom Mr Phair acts in these proceedings, says that Mr Phair has been his solicitor for over 20 years and they have had a continuous association. Mr Phair has assisted Mr Lau in all his legal matters and Mr Lau has faith in Mr Phair acting in his legal matters. Mr Lau says that Mr Phair and Proctor Phair Lawyers continue to act for him in these proceedings and the other defendants inform him that they would also like Russell Phair and Proctor Phair Lawyers to continue to act for them in these proceedings.
    
17. Since the commencement of these proceedings the defendants have incurred approximately $25,000 in legal fees. Mr Lau says that he has limited financial resources and has a limited budget for this court action. Since he had a long association with Russell Phair and Proctor Phair Lawyers, Mr Phair has agreed to financially assist Mr Lau and the other defendants by allowing an agreed payment plan for legal costs that is affordable to Mr Lau and the other defendants. Mr Lau cannot be certain if he can afford another legal representative if no payment plan for legal costs is in place. The imputation hearing is less than two weeks away.
    
18. Mr Phair deposed that since early 2009, Proctor Phair Lawyers have not provided any legal services to CASS, or Mr Pan, nor have they received any instructions to act from CASS, or Mr Pan. Proctor Phair Lawyers have only acted for Mr Pan in matters relating to his assault and the prior equity proceedings.
    
19. Mr Phair says he did not act for Mr Pan or CASS in about May 2010 when the alleged defamation issues arose. He was not aware nor has he advised any of the parties on the alleged defamation issues until after these proceedings had commenced.
    
20. Mr Phair is of the view that the only matter that Proctor Phair Lawyers may have a concern in, in these proceedings, as alleged by the plaintiffs, is a payment of $91,680 in 2008 (some of this amount is for Counsel's fees and do not involve Mr Phair). Mr Phair says that there has been no assertion or reference in the statement of claim as to whether the payee, being Proctor Phair Lawyers, should be paid or not and that neither the plaintiff nor the defendants have raised any issues to Proctor Phair Lawyers relating to the amount paid or the payee's invoices or the services provided for as set out in the invoices. Mr Phair is not aware of the composition or breakdown of the alleged legal expenses of $91,680 nor has he been provided with the relevant information.
    
21. I have taken into account that the inherent jurisdiction to restrain a solicitor from acting is to be regarded as exceptional and to be exercised with caution. I have also taken into account that the hearing is less than two weeks away, although Mr Phair was put on notice of this foreshadowed application on 10 May 2011.
    
22. Nevertheless, I am of the view that Mr Phair is most likely to possess information as to how he came to address his memorandum to CASS and not Messrs Pan, Luong and Fong. Mr Pan says he had a telephone conversation with Mr Pan in relation as to who the invoice should be addressed and this information is relevant to the matters in issue in these current proceedings. I accept that Mr Phair may be called to give evidence as to what was said to him and by whom in relation to his fees.
    
23. It is my view that in these circumstances a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that Mr Phair should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice.
    
24. As the jurisdiction invoked involves the Court's supervisory jurisdiction over its solicitors, the appropriate costs order is one directed to Proctor Phair Lawyers and Mr Phair and as they appeared by counsel to oppose the application, it is them who should bear the costs.
    
25. I make an order that Proctor Phair Lawyers and Russell Phair cease acting as solicitors for the defendants in these proceedings.
    
26. I make the following orders:
    

(1) Order that Proctor Phair Lawyers and Russell Phair cease to act as solicitors for the defendants in these proceedings.

(2) Order that Proctor Phair Lawyers and Russell Phair pay the plaintiffs' costs of this application.

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Associate