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Sir Terence O'Rort
4 August, 2009  
Redchip off the old block

“Experienced” Queensland litigation solicitor found to be in serious dereliction of his duty … Indemnity costs awarded against law firm in Mareva lapse … Sir Terence O’Rort has the details


imageIt wasn’t so long ago that Brisbane solicitors used to import rather snooty Sydney counsel to appear in difficult contested applications in the Supreme Court.

Maybe it was because most Brisvegas lawyers thought that “equity” had something to do with a home loan.

Not any more.

Under the baton of maestro Daphnis de Jersey Brisvegas has developed its own brand of equity lawyers who are quite capable of mixing it with the best and depriving the hated Mexicans of interstate fee notes.

There’s no better example of this than the aptly named redchip lawyers (note the groovy lower case).

Leaving aside the obvious question – why aren’t they bluechip lawyers? – a quick geek at the redchip website tells us more than enough.

The firm’s virtues include, “Commercial Creations … Commercial Battles and … Commercial Conclusions”.

“Welcome to redchip.

As an independent thinker you have made autonomous, well-calculated decisions and you have reaped the rewards of independent thought. As such, you need a law firm with an equally individualistic approach to effective problem solving and success.

We’re glad you’ve made it here.”

Actually, the only decision I made was to type “Brisbane lawyer” into my search engine and scroll through the results.

The website expeditiously explains the “Commercial Battles” concept:

“When things go wrong or look like going wrong, redchip lawyers offers practical, timely and cost effective commercial litigation, debt recovery and insolvency services.”

imageThe firm’s commercial litigation team is led by Darrell Kake (pronounced Car-Kay) (snap), who has been treading the boards since 2003.

Don’t be put off by his relative youthfulness. We’re assured he has …

“broad experience in the law, including litigation, but has found a niche and particular capability in high end litigious matters… [He has] the benefit of being able to bring a variety of perspectives to complex disputes and then drive through to an understanding of the make or break issues.”

The panorama of his legal skills was on display in Heartwood Architectural Timber & Joinery Pty Ltd [2009] QSC 195.

Kake decided that his clients were entitled to what used to be called a Mareva injunction against two companies and an individual.

The modern expression is “Mareva Orders” or “Asset Preservation Orders”.

In Queensland Daphis has left nothing to chance and has issued another of his royal decrees, Practice Direction No 1 of 2007 aka a dummies’ guide to Mareva injunctions.

The practice direction specifies the type of evidence that should be led by an applicant, the form of the freezing order and a schedule of undertakings that ordinarily will be given by an applicant.

All that needs doing is filing in the blanks.

Prominent among the undertakings specified in the schedule are the following:

(1). The applicant undertakes to submit to such order (if any) as the court may consider just for the payment of compensation (to be assessed by the court or as it may direct) to any person (whether or not a party) affected by the operation of this order … and

(8). The applicant will:

(a) on or before [date] cause an irrevocable undertaking to pay in the sum of $[blank] to be issued by a bank with a place of business within Australia, in respect of any order the court may make pursuant to undertaking (1) above; and

(b) immediately upon issue of the irrevocable undertaking, cause a copy of it to be served on the respondent.

In simple terms, the price of disrupting your opponent’s business is an undertaking to pay damages, supported by a bank guarantee, should the order turn out to be wrongly made.

The problem was that Kake’s client told him:

“I am happy to give the undertaking concerning compensation but I do not want to get a bank guarantee because funds are tight at the moment and my financial situation is tight. I believe that the financial situation in my business will soon improve.”

This was no problem for Darrell, who simply omitted the undertaking about a bank guarantee from the form of order.

Not only that, he failed to tell the barrister he instructed, Lindsay Bowden, that contrary to the practice direction his draft order had deleted the requirement.

imageJustice Peter Applegarth (pic) was quite charming about it all:

“It was unfortunate that Mr Bowden was not alerted by Mr Kake to the deliberate omission of undertaking 8, and that Mr Bowden did not independently compare the undertaking being offered with those contained in the pro-forma freezing order. In Memory Corporation Plc v Sidhu (No.2) where Mummery LJ stated:

‘Applications of this kind should never be treated by the advocate and those instructing him as involving routine pieces of paper work containing common form orders to be printed out from a computer and rubber stamped by the court. The urgency of the application and the absence of the other side necessarily mean that the court is even more reliant than it normally is on the scrupulous and meticulous assistance of the advocate in deciding whether or not to make extreme orders of this kind in the circumstances of this particular case’.”

The embarrassment is heightened by the fact that Bowden is a member of the Legal Practice Tribunal, Queensland’s Bureau de Spank.

However, Justice Apples found that Bowden himself did not know that the draft order did not contain the pro-forma undertakings because prior to appearing he’d asked Kake whether “the usual undertakings had been given” to which the solicitor replied, “yes”.

Kake appeared instructing Bowden on an application heard by Justice Margaret White on the afternoon of July 30, 2008. When the time came to consider the form of the order Bowden told the judge:

“Your Honour will note that there are the usual undertakings in schedule A. My instructing solicitor has been through them with my clients…

Her Honour: Alright, well, there is rather more than is needed in these draft orders but it follows the form.

Bowden: Yes, your Honour.”

imageWhite (seen here) made the orders in the form tendered with the result that Kake’s punter got a Mareva order without having to secure the undertaking as to damages.

The matter came before the court again on August 6 and 18 last year, but Kake remained silent about the omission of the bank guarantee.

Counsel for Heartwood raised concerns with Bowden about the state of the undertaking and on September 11 Daphnis ordered that a statement of claim be filed by September 25 and that a bank guarantee for $150,000 be provided by Kake’s client.

Dazza was not finished yet.

His client not only failed to file a statement of claim in defiance of Daphnis’ order but also failed to come up with the bank guarantee.

Understandably, Heartwood had had enough and brought an application for the discharge of the Mareva order which was heard before Apples on November 7 last.

He discharged the freezing order and ordered Kake’s punter to pay the costs of the Mareva application to Heartwood on an indemnity basis.

Predictably the client companies went into administration and liquidation and searches indicated that Kake’s individual client, Mr Southern, did not own any real property.

Heartwood applied to the court for redchip lawyers to pay the costs that Applegarth earlier had ordered to be paid by Kake’s client and, further, that redchip pay the costs of the new application on an indemnity basis.

Kake swore an affidavit opposing this application and in the process came up with an ingenious defence.

According to the leader of the redchip commercial litigation team he did not disclose the omission of the bank guarantee undertaking because in his opinion Mareva orders were similar to security for costs applications.

He said in his affidavit:

“In my mind this is akin to an application for security for costs where an individual is not normally required to give security.”

Brilliant. No wonder he has a “particular capability in high end litigation matters”.

However, Applegarth wasn’t completely convinced:

“Mr Kake’s understanding that an application for a freezing order and an application for security for costs are akin to each other in that way is misplaced.

An application for a freezing order is not analogous to an application for security for costs against an individual.”

He found that Kake made a conscious decision not to disclose the omission of the bank guarantee undertaking to the court, but that this was because he did not have a proper understanding of the importance of the undertaking as to security.

The judge said that Kake’s conduct in not disclosing the omission was a “serious dereliction of duty”.

Redchip was ordered to pay Heartwood’s costs of the application to discharge the Mareva order on an indemnity basis.

As redchip’s website says:

“Contact us now and get the upper hand…”

Sir Terence O’Rort reporting