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White Industries v Flower & Hart: unfounded allegations of fraud

This post is a case note of Justice Goldberg’s famous decision in White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169; [1998] FCA 806 as well as of associated decisions and surrounding controversy.  Because it is what I am working on at the moment, it concentrates on that part of the case which relates to the unjustified pleading settled by Ian Callinan QC and signed by his instructor Michael Meadows, alleging that the builder lied to the developer in relation to the cost of building a shopping centre just north of Brisbane.  It’s a big post, to kick off the year.

Facts (not all drawn from the judgments)

George Herscu died just before Christmas, aged 85. He was the alter ego of a property development group headed up by the Hersfield Development Corporation. According to 4 Corners, he was the biggest property developer in the country. According to The Australian, he lived in a Toorak mansion, owned a Melbourne Cup winner, and was once the third richest man in Australia after Robert Holmes a Court and Kerry Packer, one place ahead of Alan Bond.  He was a millionnaire by 30, and made and lost a fortune of $500 million.  He left Australia for California in 1997 and rebuilt substantial wealth.  Towards the end of his life, he was engaged in bitter litigation with his son, who described him as ready to spend whatever is needed to “crush anyone that stands in his way”.  Ironically, given what follows, Mr Herscu’s lawyers accused the son of mis-using the deposition process.  According to The Australian, they said:

‘Your clients’ continued insistence on trying to push an 80-year-old man with hypertension, a heart condition, failing hearing and many other health problems into a deposition room – having already deposed him for 27 hours – is shocking and wrong.  The only conclusion one can reasonably draw from your clients’ posture is that their litigation strategy involves attempting to subject George Herscu to so much stress and pressure he simply dies. To use the tools of discovery for this purpose is reprehensible, and indeed revolting.’

Very alarmingly, he was asked in those depositions about allegations that he had watered down the beer in a pub. Continue reading “White Industries v Flower & Hart: unfounded allegations of fraud”

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The civil and disciplinary consequences of making an allegation of serious wrongdoing without a proper foundation

Friends, I need your help, again.  Certain promises I made to write about and present on the civil and disciplinary consequences of making allegations of serious wrongdoing (e.g. fraud) without a proper foundation are coming home to roost.  I’m looking at:

  • disciplinary sanction of lawyers via Legal Services Commissioner, etc. prosecution;
  • personal costs orders against lawyers;
  • costs consequences for parties (common law in relation to exercise of the unfettered discretion re solicitor-client rather than party-party costs and displacing the presumption that costs follow the event where allegations of fraud are not made out, and Civil Procedure Act 2010 (Vic.)); and
  • what is a ‘proper foundation’?

My miserable situation in this season of sun, frivolity and child-minding is a need to work out what these consequences are so that I can provide learned disquisition.  In the process I have learnt something about Dr Peter Clyne, the protagonist of Clyne v NSW Bar Association (1960) 104 CLR 186; [1960] HCA 40.  What a wonderful addition to my knowledge of the rogues’ gallery of which I consider myself a connoisseur; I even bought his autobiography on eBay today but his ‘How Not to Pay Your Debts’ is still available.  The Hikers described his conduct during the course of an ‘orgy of litigation’ between his client, the husband, and the wife as ‘irresponsible’, ‘mischievous’, ‘objectionable’, indefensible, ‘inexcusable’, and, rather wonderfully I think, ‘monstrous’.  A unanimous Dixon Court confirmed the good doctor’s striking off.  You can read about his life afterwards, including as a Magistrate in Zambia, here, and possibly less reliably, here.

So here is a general call-out for good authorities on these questions, especially decisions which really assist in understanding what a ‘proper factual foundation’ is, since many authorities relate to allegations which are so obviously unsustainable that they do not really illuminate where the line lies between the merely poor and the truly discreditable argument (Clyne), or proceed on the basis of admissions (AM v Legal Practitioners Disciplinary Authority [2010] NTSC 02), or are fantastically complicated (the case just referred to and Victorian Bar Inc v CEM QC [2006] VCAT 1417).  I would also be very grateful for any detailed commentaries on this aspect of the conduct rules for solicitors and barristers alike, and Australian decisions in relation to costs (since many of those cited by Dal Pont are Canadian or English).

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Baby murderers

Believe it or not, my costs law practice once saw me act for a toddler murderer.  Annie Cossins, a NSW academic, has written a book about Sarah & John Makin which reveals that many a small child has been murdered in Australia: The Baby Farmers (Allen & Unwin, 2013).  The Makins’  back gardens had 12 dead babies buried in them.  She and her husband were tried for murder of one of them before a jury and the case went to the Privy Council on a tendency and coincidence evidence point which is still cited in evidence texts, e.g. Jeremy Gans and Andrew Palmer’s excellent Uniform Evidence (OUP, 2010) at [12.1.4].  Cossins analyses the fairness of the trial, concluding that the judge was out of his depth, and analyses in a layman-friendly way how the evidentiary issues in the case (in which the Makins sat mum) would be dealt with today.  The Makins were wretchedly poor.  One of them was hanged.  There is a chapter entitled ‘Was Sarah Makin Really an Evil, Deadly Woman?’  Interesting stuff; as the blurb says the trial ‘exposed a shocking underworld of desperate mothers, drugged and starving babies, and a black market in the sale and murder of children … only a century ago’.