Michael Wilson & Partners Ltd v Nicholls

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: Gummow ACJ,Hayne,Crennan,Bell JJ
• Judgment Date: 01 December 2011
• Neutral Citation: [2011] HCA 48,2011-1201 HCA A
• Docket Number: S67/2011
• Date: 01 December 2011

[2011] HCA 48

HIGH COURT OF AUSTRALIA

Gummow ACJ, Hayne, Heydon, Crennan And Bell JJ

S67/2011

Michael Wilson & Partners Limited

Appellant

and

Robert Colin Nicholls & Ors

Respondents

Representation

B W Walker SC with M Walton SC and D F C Thomas for the appellant (instructed by Clayton Utz Lawyers)

G C Lindsay SC with G W McGrath SC and A D B Fox for the respondents (instructed by Henry Davis York)

Michael Wilson & Partners Limited v Nicholls

Courts and judges — Bias — Apprehended bias — Appellant successfully applied ex parte to use respondents' affidavits for foreign proceedings and criminal investigations on several occasions — Judge relied on appellant's unchallenged affidavit evidence — Applications heard in closed court and orders made preventing respondents knowing about applications — Whether fair-minded lay observer might reasonably apprehend judge might not bring impartial and unprejudiced mind to resolution of issues at trial of action.

Practice and procedure — Appeal — Trial judge refused respondents' pre-trial disqualification applications — Trial judge offered to make orders facilitating urgent appeal — Whether order on disqualification application capable of appeal — Respondents did not seek leave to appeal — Whether respondents permitted to raise disqualification on appeal from final judgment.

Abuse of process — Multiple proceedings — Appellant commenced arbitration proceeding against solicitor in London for breach of fiduciary duty then proceeding against respondents in Supreme Court of New South Wales for knowingly assisting solicitor's breach and in tort — Loss from substantially same breaches of fiduciary duty alleged in both proceedings — Proceedings could not be brought in one venue — Supreme Court delivered judgment before arbitrators delivered award on liability — Findings about appellant's loss differed — Whether Supreme Court proceeding abuse of process.

Equity — Remedies — Solicitor liable to appellant for breach of fiduciary duty — Respondents liable to appellant for knowingly assisting solicitor's breach — Whether respondents' liability ancillary to, coordinate with or necessarily limited by solicitor's liability — Equity against double recovery — Whether respondents have equity to prevent appellant enforcing Supreme Court judgment against them where particular loss satisfied pursuant to arbitral award against solicitor.

Words and phrases — ‘abuse of process’, ‘appeal’, ‘apprehended bias’, ‘arbitration’, ‘disqualification’, ‘double recovery’, ‘ex parte application’, ‘multiple proceedings’, ‘order’.

ORDER

1. Appeal allowed with costs.

2. Set aside paragraphs 3, 4, 5, 6 and 7 of the orders of the Court of Appeal of the Supreme Court of New South Wales made on 15 September 2010.

3. Remit the matter to the Court of Appeal for further consideration of:

• (a) grounds 5(b) to (c), 6 to 15, 17(b) to (d), 18, 20 and 21 of the Amended Notice of Appeal dated 7 May 2010; and

• (b) the Notice of Cross-Appeal dated 29 January 2010.

4. Costs of the appeal to the Court of Appeal, including the costs of the hearing on remitter, be in the discretion of that Court.

5. Money paid into Court by the appellant, in satisfaction of a condition of the grant of special leave, be paid out to or at the direction of the appellant.

Gummow ACJ, Hayne, Crennan And Bell JJ

The issues

1 This appeal raised three issues.

2 First, should the judgment entered for the appellant at trial in the Supreme Court of New South Wales have been set aside (as it was by the Court of Appeal) because a fair-minded lay observer might reasonably have apprehended, from what had occurred in several interlocutory applications made before trial by the appellant without notice to the respondents, that the judge might not bring an impartial and unprejudiced mind to the resolution of the issues in the trial?

3 Second, were the respondents (the parties that alleged there was a reasonable apprehension of bias) prevented from making that complaint in an appeal against the final judgment given at trial because they did not seek, before the trial began, to appeal against the trial judge's refusal to recuse himself?

4 Third, did the institution or prosecution (or both institution and prosecution) in the Supreme Court of New South Wales of the appellant's proceedings against the respondents constitute an abuse of the process of the Supreme Court? One of the claims made by the appellant against the respondents in the New South Wales proceedings was that the respondents had knowingly assisted a person not a party to those proceedings in that person's breaches of fiduciary duties to the appellant. The appellant had commenced an arbitration in London against that other person seeking relief for substantially the same breaches of fiduciary duties as the appellant alleged in the New South Wales proceedings. As events turned out, different conclusions were reached in the London arbitration from those reached in the New South Wales proceedings about the loss the appellant suffered as a result of the breaches of fiduciary duty.

5 The three issues raised in this Court should be resolved as follows. There was not a reasonable apprehension that the trial judge was biased. The question of waiver need not be decided. There was not an abuse of process. The appeal should be allowed and consequential orders made.

The parties

6 The appellant, Michael Wilson & Partners Limited (‘MWP’), was incorporated in the British Virgin Islands. MWP was controlled by Michael Earl Wilson, who described himself as a ‘corporate transaction lawyer’. At the times relevant to this matter, MWP practised as a law firm and a business consultancy in the Commonwealth of Independent States 1 from offices in Kazakhstan.

7 In December 2001, MWP made an agreement with John Forster Emmott, an English and Australian solicitor, that Mr Emmott would join MWP as a director and shareholder with effect from January 2002. They agreed that ‘in effect’ MWP would ‘operate as a quasi-[p]artnership between them’. The agreement provided that each party should have and would observe ‘the usual partnership obligations and duties to each other’.

8 From 24 April 2004 until 1 March 2006, the first respondent (Mr Nicholls, an Australian barrister) was employed by MWP as a senior associate or, as he described himself, a ‘senior expatriate lawyer’. From 1 September 2005 to 9 January 2006, the second respondent (Mr Slater, an Australian solicitor) was employed by MWP as an associate.

9 By the end of June 2006, Messrs Nicholls, Slater and Emmott had all left MWP. Mr Slater did not return to work from annual leave he took from 21 December 2005; Mr Nicholls left employment on 1 March 2006; by letter dated 30 June 2006, Mr Emmott gave notice terminating his agreement with MWP with immediate effect.

10 The third, fourth and fifth respondents (‘the Temujin companies’) are companies that, at the relevant times, were associated directly or indirectly with some or all of Messrs Nicholls, Slater and Emmott. The exact nature of that association need not be explored. The fourth respondent (Temujin International Ltd — ‘TIL’) operated as a business adviser, agent and arranger, and provided legal services. Two of the Temujin companies (TIL and the third respondent — Temujin Services Ltd) were incorporated in the British Virgin Islands; the third (Temujin International FZE — the fifth respondent) was incorporated in a Free Trade Zone in the United Arab Emirates. Another Temujin company (Temujin Holdings Ltd) and a Kazakhstani limited liability company called Shaikenov & Partners LLP were named as defendants in the New South Wales proceedings, but neither took any active part at first instance, and neither was a party to the subsequent proceedings in the Court of Appeal or this Court.

11 MWP alleged that each of Messrs Nicholls, Slater and Emmott, separately and together, furthered his or their own interests at the expense of MWP. A

central allegation was that Messrs Nicholls, Slater and Emmott had conspired together to divert, and had in fact diverted, clients and business opportunities away from MWP to their own benefit by having one or more of the Temujin companies act for the clients in question or by taking advantage of business opportunities that would otherwise have gone to MWP.

Arbitration and action

12 MWP sought relief in several different jurisdictions. The persons and entities MWP sued were located in different places. The principal proceedings brought by MWP were an arbitration in London against Mr Emmott and the proceedings in the Supreme Court of New South Wales against Messrs Nicholls and Slater, the Temujin companies and the other defendants mentioned earlier in these reasons. Other litigation in other jurisdictions can conveniently be described as satellite litigation and, although some reference must be made to some of those satellite proceedings, chief focus must fall upon the London arbitration and the New South Wales proceedings.

13 MWP served a notice of arbitration on Mr Emmott in August 2006; it commenced the New South Wales proceedings against Messrs Nicholls and Slater and others in October 2006. It will be necessary to describe the course of events in both proceedings. But before doing that it is desirable to say a little more about why there was both an arbitration and an action and the nature of the claims that were made in each.

14 The London arbitration between MWP and Mr Emmott was instituted in accordance with an arbitration clause contained in the agreement those parties had made. Because Messrs Nicholls and Slater and the other defendants in the New South Wales proceedings were not parties to that (or any other) arbitration agreement with MWP they could not be added as parties to the arbitration between MWP and Mr Emmott.

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