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Looks Dubious – The Third Ground to Restrain a Lawyer from Acting

The following piece was contributed by Valerie Blacker, commercial litigator focusing on funded litigation, and Amelia Atkinson, litigation and dispute resolution lawyer at Piper Alderman.

Strata Voting Pty Ltd (In Liq) v Axios IT Pty Ltd and Anor[1] is a funded single plaintiff action. It involved a recent examination of the Court’s power to prevent a lawyer from acting in proceedings for a conflict of interest. The authors represented Strata Voting in its successful defense of the restraint application.

The Third Ground

Less frequently invoked than the first and second grounds (misuse of confidential information and breach of fiduciary duty), the third category upon which to restrain a lawyer in a position of conflict from acting in a matter is known as the “inherent jurisdiction” ground. The Court can restrain lawyers from acting in a particular case as an incident of its inherent jurisdiction over its officers and control of its processes.[2]

The jurisdiction is enlivened where there is an objective perception that a lawyer lacks independence such that the Court is compelled to interfere and remove the lawyer from acting in the matter. In other words, the position of the lawyer makes the Court uneasy.

The test for intervention is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice, including the appearance of justice, requires that a legal practitioner should be prevented from acting.[3]

Axios’ failed application

The jurisdiction to enjoin a solicitor from acting is to be regarded as exceptional, and to be exercised by the court with caution. That was the basis on which his Honour Judge Dart of the South Australian Supreme Court dismissed the application brought to restrain Piper Alderman from acting for the liquidators.

Here, Piper Alderman is acting for the company in relation to a dispute which was in existence before the winding up commenced.  The liquidator retained Piper Alderman to continue acting for the company for the purpose of the litigation, the subject of the existing dispute.

The supposed conflict was said to have arisen from a proof of debt which Piper Alderman lodged for about $47,000 in fees incurred prior to the administration. The argument was that Piper Alderman’s impartiality was impaired by the fact that unless the litigation is successful, Piper Alderman will not be paid its outstanding fees because there will be no funds in the winding up to do so. Axios contended that “the conduct of the solicitor was so offensive to common notions of fairness and justice that they should, as officers of the Court, be restrained from acting”.

However, his Honour considered the firm’s status as creditor to be unremarkable. Even in a case where a substantial sum (over $830,000) was owed to lawyers by their insolvent client,[4] there was no risk to the proper administration of justice.

As everyone knows, solicitors routinely act in matters where they are owed money including conditional costs agreements, risk share arrangements, contingency fee arrangements and agreements that include uplift fees, to name a few.

The restraint application in Strata Voting was unsurprisingly and swiftly[5] dismissed with costs.

Conclusion

If an opposing party asserts that a lawyer should be restrained from acting for the opponent, it is necessary for a clear case to be made that the lawyer is in a position where he is fixed with an interest of such a nature that he may fail in his overriding duty to the court. It requires proof of facts, and not mere speculation as to motive.

The risk to the due administration of justice has to be a real one. Otherwise, a litigant ought not to be deprived of the lawyer of his choice.

—

About the Authors:

Valerie Blacker is a commercial litigator focusing on funded litigation. Valerie has been with Piper Alderman for over 12 years. With a background in class actions, Valerie also prosecutes funded commercial litigation claims.

Amelia Atkinson is a litigation and dispute resolution lawyer at Piper Alderman with a primary focus on corporate and commercial disputes. Amelia is involved in a number of large, complex matters in jurisdictions across Australia.

For queries or comments in relation to this article please contact Amelia Atkinson | T: +61 7 3220 7767 | E:  aatkinson@piperalderman.com.au

[1] Unreported, Supreme Court of South Australia, Dart J, 23 January 2023 (Strata Voting).

[2] Kallinicos & Anor v Hunt [2005] NSWSC 118 at [76] (Kallinicos).

[3] Ibid.

[4] Naczek & Dowler [2011] FamCAFC 179, [84].

[5] In a 5-page judgment.

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Case Developments Commercial

CAT Finds in Favour of Professor Andreas Stephan in Amazon Claims

By Harry Moran |

Whilst last week saw a flurry of activity in the Competition Appeal Tribunal (CAT) as trials began in multiple collective proceedings, this week has seen the Tribunal hand down a ruling in a carriage dispute between two claims both targeting Amazon for allegations of anticompetitive behaviour.

A press release from Geradin Partners highlights the judgment from the CAT in a carriage dispute, which saw the Tribunal find in favour of Professor Andreas Stephan in collective proceedings being brought against Amazon. The carriage dispute related to the parallel claims brought by Professor Stephan and by the British Independent Retailers Association (BIRA), over allegations that Amazon engaged in anticompetitive practices that harmed third-party sellers on the online marketplace. Professor Stephan’s proceedings had instructed Geradin Partners and secured litigation funding from Innsworth, whilst BIRA had instructed Willkie Farr & Gallagher and agreed to funding from Litigation Capital Management (LCM).

In its ruling, the CAT found that whilst BIRA had an advantage in its suitability to act as the class representative, “this was clearly outweighed by the factors which favour Prof Stephan”, which it identified as “the scope of the claims and the expert methodology.” Although the CAT highlighted that the breadth of Professor Stephan’s claims “would no doubt enlarge the scope of a trial and therefore make it more complicated”, the ruling cited case law in emphasising that his claims “more consistent with the goals of access to justice by capturing more viable claims”.

The published judgment also shed light on the details of the funding arrangements in the claims. Professor Stephan’s litigation funding agreement (LFA) with Innsworth committed a maximum of £32.9 million to cover costs and expenses, with an additional commitment “to pay adverse costs of £5 million until the grant or refusal of a CPO and of £20 million thereafter.” As to the returns outlined in the funding agreement, Professor Stephan’s LFA with Innsworth “provides for a total multiple rising from 4 up to 10 (if the recovery is after the commencement of the substantive trial).” The CAT noted that the returns from Professor Stephan’s LFA were higher than for the funder in the BIRA claim, in the conclusion of its examination the Tribunal noted that “the funding arrangements of the two applications are a neutral factor in choosing between them.”

The CAT’s full judgment in the carriage dispute can be read here.

Additional analysis of the CAT’s ruling and its implications for future carriage disputes for funded proceedings can be found in a LinkedIn post from Matthew Lo, director at Exton Advisors.

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By Harry Moran |

Ayse Yazir has started a new position as Managing Director at Bench Walk Advisors. This latest promotion comes in the seventh year of Yazir’s tenure at the market-leading litigation funder, having joined the firm in 2018 as a Vice President and most recently having served as Global Head of Origination.

In a post on LinkedIn, Yazir reveals that her work at Bench Walk Advisors incorporates a wide range of matters across the litigation funding industry including international and commercial arbitration, insolvency, class actions and global litigation matters as well as law firm and corporate portfolio arrangements and defense funding.

Yazir also expressed her delight at starting the new role and thanked her fellow Bench Walk Advisors’ managing directors Stuart Grant and Adrian Chopin for the opportunity.

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Judge Preska Orders Argentina to Comply with Burford Discovery Request

By Harry Moran |

As we enter yet another year in the story of the $16.1 billion award in the case funded by Burford Capital against the YPF oil and gas company, a US judge has ordered the Argentine government to provide additional information about the country’s financial assets to the funder as part of its efforts to collect on the award.

An article in the Buenos Aires Herald provides an update on the ongoing fight to recover the $16.1 billion award in the YPF lawsuit, as a New York judge ordered Argentina to comply with a discovery request for information around the Argentine Central Bank’s gold reserves. The order handed down by Judge Loretta Preska followed the request made by Burford Capital in October of last year, with the litigation funder citing media reports that Argentina’s Central Bank had moved a portion of its gold reserves overseas.

Lawyers for Argentina’s government had submitted a letter last week arguing against the discovery request on the grounds that the Argentine Republic and Central Bank are legally separate entities, and that any such gold reserves have “special protection from execution under [United States’ Foreign Sovereign Immunities Act] and UK law.” Responding to these arguments in her order, Judge Preska stated plainly that “regardless of whether the gold reserves are held by [the Central Bank], the Republic shall produce its own documents concerning the reserves.”

Judge Preska also ordered the Argentine government to provide additional information concerning its SWIFT data on its overseas accounts and for documents from another lawsuit brought against the Republic, saying that all this information could “lead to other executable assets.”