Victoria Supreme Court Justice John Dixon’s 696-page decision is not just a cautionary tale for class action firms and litigation funders, but also for defence lawyers in civil matters.

In addition to questions about their clients’ defence strategies, law firms Arnold Bloch Leibler, MinterEllison and Moray & Agnew, which represented litigation funder Australian Funding Partners Limited, senior barrister Norman O’Bryan and junior counsel Michael Symons, respectively, faced questions about oversight of their clients’ document discovery, which was found to be in “egregious non-compliance” with court orders.

Law firm Garland Hawthorn Brahe, which acts for solicitor Alex Elliott, the son of AFP’s deceased founder Mark Elliott, also faced a question about its client’s discovery compliance. 

Justice Dixon’s ruling on October 11 found AFP, O’Bryan, Symons and lawyer Anthony Zita breached their duties by engaging in conduct “in connection with a fraudulent scheme” to enrich themselves at the expense of class action members by inflating their fees, deceiving the court about no win, no fee arrangements and concealing major conflicts of interest. 

The case has been referred to the Director of Public Prosecutions for criminal investigation and O’Bryan and Symons have been struck from the roll of practitioners. Zita and Alex Elliott, who was found to have knowingly assisted his father in his fraudulent scheme, have been ordered to show cause why they too should not have their names removed from the roll. 

At least $21.7 million has been ordered to be paid in damages and costs to the group members in the class action, Banksia’s 16,000 debenture holders who lost tens of millions of dollars when the lender collapsed in 2012. But documents have revealed the contravenors may not have the funds to satisfy the judgment.

From the time the case was sent to Justice Dixon in November 2018 to consider AFP’s claim to $17.6 million from a $64 million settlement in the class action, to the end of trial in the case in August last year, the funder insisted on an entitlement to costs and some portion of its commission. In the end it told the court of its “remorse and regret” for its conduct and sought nothing but to avoid exemplary damages.

O’Bryan and Symons maintained their denials in the face of voluminous evidence backing professional misconduct allegations advanced by the court-appointed contradictor, Peter Jopling QC, until the trial, during which they both withdrew their defences.

As of June 2020, AFP had spent $3 million in legal fees billed by Arnold Bloch Leibler in challenging, among other things, the appointment of Jopling and the scope of his investigative powers. It is not known how much O’Bryan and Symons paid MinterEllison and Moray & Agnew to keep up a fight that was ultimately dropped, but there is no reason to believe the outlay was not considerable.

Justice Dixon said it was “undeniable” in hindsight that the funder and the barristers could not demonstrate a proper basis ”at any point” to argue that they had decent defences to the allegations.

“In the context of the probable detriment to debenture holders, in that they may not fully recover the judgment they will have, and assuming the lawyers acting for those contraveners were all paid, the detriment following on from possible further contraventions may be unfairly distributed. The absence of any explanation of whether independent forensic judgment was exercised appropriately is noted,” he said.

The serious, and apparently in some cases intentional, deficiencies in discovery of documents in the case on remitter — including deliberate document destruction by Mark Elliott — also provoked questions about the role of the law firms acting for the parties.

The judge noted that Jopling was rightly critical of AFP’s conduct in failing to discover documents recording O’Bryan and Symons no win, no fee arrangements with the funder in response to the court’s order from February 1, 2019. That order, he said, “explicitly” called for any cost agreements reached with O’Bryan or Symons and any communications they issued relating to their costs. 

Arnold Bloch Leibler suggested in correspondence with Corrs Chambers Westgarth, the firm acting for Jopling, that the delay in discovery resulted from an understanding that the no win, no fee agreements did not relate to the Banksia proceeding. 

“This understanding was incorrect,” Justice Dixon said. “The documents that ABL stated that it reviewed inferred that counsel were retained on a no win no fee arrangement in the [Banksia] proceeding and two other group proceedings. If left in any doubt, ABL should have sought clarification from AFP/Mark Elliott to ascertain whether the documents were discoverable, particularly after further documents concerning counsel’s fee arrangements were discovered.”

Two weeks before trial, AFP and Symons handed over emails between Symons and Mark Elliott from February and March 2018 that provided further evidence of a contingency fee arrangement in the Banksia case.

According to Justice Dixon, no explanation was ever given, “and none was apparent” for why these emails were not produced 18 months earlier but it was “probable” that the late discovery was intentional.

On February 10, 2020, Mark Elliott and Alex Elliott had a meeting with ABL, during which Mark Elliott instructed the law firm that AFP had limited documents to discover in response to Justice Dixon’s December 2019 discovery order because he had deleted most of his emails as part of a longstanding practice. ABL notified Corrs of these instructions and produced just 197 documents, of which just six were emails between Mark Elliott and Alex Elliott.

Jopling sought an affidavit from Mark Elliott relating to the claims of a habitual email deleting practice, but Mark Elliott died two days later in an accident on his Victorian farm, having sworn no affidavit.

Justice Dixon said he was satisfied the document destruction practice described by ABL on instructions, was “a fiction” and that Alex Elliott knew it to be a lie. He said he was “troubled” that at no point did the court receive an explanation for why, when the document destruction was revealed, earlier searches on other devices were not conducted.

“I am left in no doubt that the deficiencies in discovery identified throughout these reasons are blatant examples of unacceptable litigation culture,” he said. 

The judge said no explanation had been forthcoming about how the legal representatives for AFP, O’Bryan, Symons and Alex Elliott had discharged their duty to ensure their clients complied with the court’s discovery orders. 

“When I reflect on the egregious non-compliance by AFP and Alex Elliott with court orders and the principles of discovery exposed in my reasons, there is an unanswered question: How could that conduct have gone unnoticed by their legal representatives, particularly in the context of section 13 of the Civil Procedure Act?,” he said.

Section 13 of the CPA states that a legal practitioner or a law practice must comply with the overarching obligations in a civil matter despite any obligation they have to act in accordance with the instructions or wishes of their client.

The judge acknowledged that the lawyers were not asked to offer an explanation for the discovery failures and said he made no finding as to whether they complied with their obligations. But, he said, “an explanation might have enabled me to affirmatively state that no adverse finding of that sort was warranted”.

“There is an elephant in the room,” Justice Dixon said.

“What is clear is that there was serious dishonest conduct that was ultimately not defended. Probative documents, readily identifiable by reference to the [contradictor’s] revised list of issues, were not discovered when they ought to have been. A practice of document destruction emerged. What is also possible is that scarce financial resources, that ought to be available to compensate the debenture holders may have been used to pay lawyers, who may have advised their clients that their claims/defences were untenable and ought to be abandoned at a much later point in time than is acceptable to the court in the context of the proper administration of justice,” he said.

When asked whether the firm discharged its obligations under section 13, ABL’s managing partner Henry Lanzer said: “Of course the firm discharged its obligations”.

ABL declined to make any further comment.

Garland Hawthorn Brahe principal John Price denied Alex Elliott’s discovery was deficient and said his firm complied with its overarching obligations.

“To the extent there is any assertion that Alex didn’t complete his discovery obligations that’s factually incorrect. My firm complied with our obligations. Alex completed his discovery,” Price said.

Moray & Agnew declined to comment. MinterEllison did not respond to questions put by Lawyerly. 

The case will return to Justice Dixon on the remaining issues of costs on November 8. It is not known whether any party intends to file an appeal. Price said Alex Elliott had not yet made a decision to appeal.

Clarification: An earlier version of this story may have been taken by readers as suggesting that the conduct of lawyers for all defendants was questioned by Justice Dixon. This was not correct and was not intended to relate to the legal team for Anthony Zita. Any such suggestion is withdrawn.

AFP is represented by Samuel Horgan QC and Christopher Tran, instructed by Arnold Bloch Leibler. Banksia’s special purpose receivers John Lindholm and Peter McCluskey of KPMG are represented by Robert Dick SC and Jonathon Redwood SC, instructed by Maddocks. Contradictors Peter Jopling QC and Jennifer Collins are instructed by Corrs Chambers Westgarth. Portfolio Law and Anthony Zita are represented by Christian Juebner and Georgia Berlic, instructed by Colin Biggers & Paisley. Alex Elliott is represented by Andrew Palmer QC and Angel Aleksov, instructed by Garland Hawthorn Brahe. Norman O’Bryan was represented by MinterEllison. Michael Symons was represented by Moray & Agnew.

The case is Laurence John Bolitho v Banksia Securities Limited (receivers and managers appointed) (in liquidation) & Ors.

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