High Court dismisses Quinns' application to remove receivers and solicitors due to alleged conflict of interest.

Neutral Citation Number: [2012] IEHC 507

THE HIGH COURT

COMMERCIAL

[2011 No. 5843 P]

[2012 No. 120 COM]

BETWEEN

IRISH BANK RESOLUTION CORPORATION LIMITED,

QUINN INVESTMENTS SWEDEN A.B. AND LEIF BAECKLUND

PLAINTIFFS

AND

SEÁN QUINN, CIARA QUINN, COLETTE QUINN, SEÁN QUINN JR., BRENDA QUINN, AOIFE QUINN, STEPHEN KELLY, PETER

DARRAGH QUINN, NIALL MCPARTLAND, INDIAN TRUST A.B., FORFAR OVERSEAS S.A., LOCKERBIE INVESTMENTS S.A.,

CLONMORE INVESTMENTS S.A., MARFINE INVESTMENTS LIMITED, BLANDUN ENTERPRISES LIMITED, MECON FZE, CJSC,

VNESHKONSALT, OOO STROITELNYE TEKHNOLOGII, OOO RLC-DEVELOPMENT AND KAREN WOODS

DEFENDANTS

JUDGMENT of Mr. Justice Kelly delivered on the 5th day of December, 2012

Introduction

1. These are my reasons for dismissing an application made by the second to seventh, ninth and twentieth defendants (the Quinns)

to remove receivers appointed by the court and to prohibit those receivers’ solicitors from acting for them. The receivers are Mr.

Declan Taite and Ms. Sharon Barrett. Mr. Taite was appointed as receiver over the assets of the second, third, fourth, fifth, sixth,

seventh and ninth defendants. Mr. Taite and Ms. Barrett were appointed as joint receivers over the assets of the twentieth

defendant. The solicitors who act for the receivers are Messrs. Arthur Cox.

2. Earlier in the litigation, the moving parties were professionally represented. That is no longer the case. For the most part it was the

defendant, Niall McPartland, who is legally qualified, who presented the case but I also heard from two other defendants.

3. The defendants presented their case in a competent and courteous fashion. It is clear that they have a deep-seated distrust of

the plaintiff bank (the bank), the receivers (the receivers) and the receivers’ solicitors (the solicitors).

4. The case that the Quinns make is that the receivers and the solicitors ought not to be permitted to continue in those roles

because of an alleged real or apparent conflict of interest and partiality.

5. In order to appreciate the basis for these contentions it is necessary to set out a short account of the proceedings to date.

The Proceedings

6. The bank contends that the defendants have conspired to wrongfully convert and have wrongfully converted and appropriated

assets which are defined in the first schedule to the plenary summons. In addition to the declaratory reliefs sought the bank also

seeks injunctions and orders requiring the defendants to account.

7. Before these proceedings were sought to be admitted to the Commercial List, interim and interlocutory orders were made in June

2011 and July 2011 by Clarke J. It was alleged that a number of the defendants were in breach of those orders and Dunne J. heard

and determined an application seeking committal to prison of three of the defendants on 29th June, 2012. She found that a contempt

of court had been committed and ordered the imprisonment of two of the defendants. (Subsequently a third defendant was directed

to be imprisoned.) She also made disclosure orders and granted injunctions in the proceedings. In addition, she appointed Mr. Taite as

receiver over the assets of Seán Quinn Jr. and Peter Darragh Quinn wheresoever situate. Her order also set out the powers of the

receiver. The appointment of the receiver was expressly stated to be in aid of the disclosure orders made against the relevant

defendants. Those disclosure orders require information to be furnished on affidavit of all assets of whatever nature or kind situate in

Ireland or worldwide and all documents relating to the material which was specified in the order of Dunne J.

8. Following the acceptance of the litigation into the Commercial List, an application was made to me for Mareva type injunctions

restraining the Quinns (except Karen Woods) from reducing their assets below the sum of €50m pending trial. I granted those orders

as well as disclosure orders. In addition, I appointed Mr. Taite as receiver over the assets of the Quinns (except Karen Woods) and

specified the powers which he would have. These powers permitted the receiver to take possession, control and to secure and collect

all assets in or out of the jurisdiction including but not limited to shareholdings of the Quinns and power to take steps to secure any

credit balances in any bank accounts in or out of the jurisdiction in the names of the Quinns or any aliases or bank accounts held on

their behalf. On 30th July, 2012, Dunne J. by consent granted similar and somewhat more extensive powers to Mr. Taite as receiver

over the assets of the fourth and eight defendants.

9. On 31st July, 2012, I granted injunctive relief against Karen Woods and appointed the receivers over her assets with similar powers

to those contained in my earlier order of 25th July, 2012.

10. It is not without significance that the orders made by me on 25th July and 31st July were grounded upon extensive affidavit

evidence setting out very serious allegations of wrongdoing on the part of the relevant defendants. Although a full opportunity was

provided for replying affidavit evidence to be sworn by those defendants, no such evidence was forthcoming. Neither did they object

to the making of the orders sought.

11. At a vacation sitting of the Commercial Court on 3rd September, 2012, application was made by the receivers to Charleton J. for a

series of orders requiring delivery up of identified material. The relevant defendants were given time to respond to that application and

on a further vacation sitting on 24th September, the matter came before me. The Quinns on that occasion intimated a desire to apply

for the reliefs with which I am dealing in this judgment. I fixed a date for the hearing of that application and affidavit evidence was

exchanged between the parties.

12. On 2nd November, 2012, I refused the reliefs sought.

The Application

13. This application is grounded upon a lengthy affidavit sworn by Nial McPartland. It runs to some 94 paragraphs (45 of which are

directed to this application) and sets out the factual background to this application. It also contains material in defence of the

application brought by the receiver which is the not the subject of this judgment.

14. The basis of the application for the removal of the receivers is an alleged demonstration of a lack of independence in the

performance of their duties and an alleged conflict of interest. Insofar as the receivers’ solicitors are concerned the allegation is that

they also have demonstrated a lack of independence and have a conflict of interest.

15. The Quinns contend that they have a full defence to this action. They assert that the security which the bank is relying on is

tainted with illegality and is unenforceable. They rely on allegations made in related proceedings where the Quinns are plaintiffs and

the bank defendant, bearing record No. 2011/4336 P. The Quinns say that the assets were purchased from Quinn family resources

and not as a result of any borrowing from the bank. In addition, they say that any purported security that the bank has over the

assets is as a result of lending made by it to support its own share price which is alleged to be in breach of s. 60 of Companies Act

1963 and the Market Abuse (Directive) 2003/6/EC Regulations 2005.

Events of 29th June, 2012

16. It is on this day that Dunne J. appointed Mr. Taite. The events giving rise to that appear to have caused considerable concern to

the Quinns. Mr. Taite was not the bank’s first nominee for appointment. Rather it sought to have Mr. Kieran Wallace of KPMG

appointed. That was objected to by the Quinns then counsel. Dunne J. appeared to have accepted that the objection raised was

valid.

17. The bank’s second nominee was Mr. Eamon Richardson also of KPMG. The judge rejected that nomination and stated that she did

not “want to impugn the reputation of any individual in any firm in any practice in any shape or form, be it solicitors, accountants or

whatever, and went on to say that she “was not a great believer in Chinese walls”. She indicated that the bank should nominate

somebody who was independent. Mr. Taite was nominated and appointed.

Subsequent Correspondence

18. On 13th July, 2012, the Quinns former solicitor wrote to Mr. Taite and asked for the identity of the legal advisers whom he was

proposing to retain. The letter pointed out that the legal adviser to Mr. Taite should not be Messrs. McCann Fitzgerald because that

firm already acted for the bank. The letter drew attention to the comments made by the judge concerning the appointment of the

receiver and the necessity for independence. Similar considerations ought to apply to the receiver’s legal adviser, it was stated.

19. The response from the receiver was to the effect that he had indeed retained McCann Fitzgerald to act as his legal advisers. His

letter went on:-

“As you suggested, I have reviewed the transcript of the hearing before the High Court on 29 June 2012. The court did

not seek to impose any stipulations in relation to the proposed receiver’s professional advisers, but instead indicated a

position should be avoided whereby an adviser was required to put Chinese walls in place, in order to avoid a possible

conflict of interest. I am aware that McCann Fitzgerald also represent IBRC in this matter. I am however satisfied that

no conflict arises between McCann Fitzgerald’s role as advisers to the bank and advisers to me as court appointed

receiver and accordingly the concern expressed by the court does not arise in this case. Further, you’ll appreciate that

McCann Fitzgerald’s background knowledge of this matter will greatly facilitate the smooth and efficient operation of the

receivership, which will assist in minimising costs. This is clearly in the interest of the parties.”

20. This was not a view shared by the Quinns.

21. The matter was again before Dunne J. on 20th July, 2012 and the issue was raised before her. There was a debate before the

judge with views being expressed by counsel on behalf of the receiver, the Quinns and the bank. In the event, the judge expressed

herself as follows:-

“I think there should be a separate solicitor dealing with the matter. It may increase the costs and that is a matter to

be regretted, but having said that, I think that if the receiver is to retain his position as an independent individual it

should be dealt with by independent solicitors.”

22. Following that ruling, the receiver proposed Mr. William Day of Arthur Cox Solicitors to act for him. That was notified to the Quinns

then solicitors who replied on 23rd July, 2012 saying:-

“Given the extent of the receivers powers sought, the sensitive nature of this instruction for all concerned and the

consequent necessity for complete independence of appointees including legal advisers (as emphasised by Dunne J.) can

you confirm that Mr. Day, or indeed Arthur Cox, have not previously been involved in any aspect of the Quinns/IBRC

(Anglo) connections. Naturally, it would be inappropriate that any firm and/or individual would be instructed that

previously had any involvement whatsoever (be it through the giving of advice, agreeing to take

instructions/appointments or otherwise) with Anglo in the context of the Quinn enforcement (which for the avoidance of

doubt includes the enforcement against any company within the Quinn group/connection or against its ultimate

shareholders (the Quinn family)).”

23. The receiver responded to this communication stating:-

“in relation to your query regarding the receivers appointment of an alternative legal adviser for the purposes of this

assignment, Arthur Cox have confirmed that they have not acted for IBRC (Anglo) in relation to the Quinn/IBRC (Anglo)

connection, and they do not believe that they have any conflict in advising me as court appointed receiver of the assets

of the above named individuals.”

24. Mr. McPartland says that the Quinns and their then legal advisers accepted these assurances and did not contest the

appointment of Arthur Cox as solicitors to the receiver.

25. Information subsequently obtained by the Quinns, it is said, casts a different light on the alleged independence of the receivers

and their solicitors which would justify their removal.

26. It is appropriate that I should record here the receiver’s explanation of his initial attempt to appoint Messrs. McCann Fitzgerald as

his solicitors. His stated intention in so doing was to save costs and time because those solicitors were familiar with the asset position

of the Quinns. Mr. Taite points out that in any role involving the location and preservation of assets, it is always necessary to move

as quickly as possible to locate those assets and to secure them against dissipation. Because McCann Fitzgerald already had

substantial knowledge regarding the defendant’s assets and their location, he felt it was appropriate to make use of that information

in seeking to locate and secure the assets.

27. Mr. Taite points out the different role of the receiver as distinct from their legal advisers. It is the personal responsibility of the

receivers to locate and secure the assets. Legal advice is tendered by the solicitors but the decision is that of the receivers.

The Receivers

28. The allegations made against the receivers are to the effect that (a) they have not acted impartially and/or in a way which

demonstrates independence from the bank and (b) that employees of RSM Farrell Grant Sparks (Sparks), the firm to which the

receivers belong, have some connection with either the bank or Quinn finance. I will deal with these allegations in turn.

29. Mr. Taite points out that neither he nor his co-receiver was a party to the action in which the Quinn family have brought

proceedings against the bank nor is he a party to these proceedings. The receivers are disinterested as to the outcome of all of these

proceedings.

30. Mr. McPartland’s affidavit deals in great detail with various items which he contends are supportive of this application. Since I am

of opinion that this application misunderstands the independence which is required of the receivers it is not necessary to deal with

them in minute detail. Rather, I will deal with the major elements of the complaints made.

Bazzely

31. Mr. McPartland alleges a lack of independence and partiality in favour of the bank on the part of the receivers, particularly in

relation to a Portuguese company called Bazzely. The receiver’s solicitors raised a series of detailed questions concerning this

company. It is alleged that this was inappropriate and furthermore that Arthur Cox have a conflict of interest in respect of it.

32. Insofar as the receiver is concerned, he points out that Bazzely was used by members of the Quinn family to purchase contracts

for difference in the bank. Bazzely is beneficially and legally owned by a number of the defendants in these proceedings. That being

so, it is incumbent on him as receiver of the Quinns’ assets to investigate their shareholding in it. That was why his solicitors wrote to

the defendants’ former solicitors seeking such details. The information was not requested because of any instruction issued to him by

the bank in a direct or indeed indirect form. The information, rather, was directly relevant to his investigation of the defendants’

assets. He does not share Mr. McPartland’s view that because Bazzely is allegedly valueless that it is not of any relevance to the

receiver’s inquiries. He makes a similar point concerning allegations made regarding information sought by him in respect of Quinn

Group (ROI) Limited. This was, he says, part and parcel of him doing his job of gathering information in furtherance of his work and not

because he was in any way influenced by the bank.

Sparks

33. Mr. McPartland alleges that Sparks “has already been instructed in matters in relation to the Quinn/Anglo dispute”. The receivers

accept that Sparks was instructed by Quinn Finance to prepare reports on certain transactions that had been entered into

concerning shares in and loans to certain Quinn Finance Group companies. It was asked to comment on whether, in its opinion,

certain transfers of shareholdings in and loans to various companies within the Quinn Finance Group to third parties would have taken

place for less than full value, and to comment on any commercial rationale for such transactions. That report was requested by Quinn

Finance when a court case was ongoing but no representative of Sparks was called to give evidence at the trial. The particular

engagement was not carried out by either of the receivers and neither they, nor any member of their team, were involved in the

engagement. It is the receiver’s belief that no conflict arises as a result of this and he reiterates that he has no knowledge of the

basis of an action by Quinn Finance’s against Mr. McPartland. Sparks have no involvement in that case. The fact that a former client

of Sparks has sued Mr. McPartland he says cannot prevent him from acting as receiver in this case.

34. Mr. McPartland also averred to having carried out a web search with a view to identifying employees of Sparks who might have

some connection to the bank. There are indeed persons who once worked for the bank and now work for Sparks and vice versa.

35. Two of the individuals named by Mr. McPartland are former employees of Sparks and now work for the bank. Four more once

worked for the bank and now work or have worked for Sparks. None of these individuals have any involvement in the current

engagement. Two of them ceased to be employees of the bank a number of years ago and a third, whilst formerly an employee of the

bank, subsequently became an employee of Irish Nationwide Building Society and moved from there to Sparks.

36. The receivers contend that there is no actual or apparent conflict of interest and that they have not acted in a manner

inconsistent with the duties imposed upon them by the court order. The receivers believe that having regard to the task imposed

upon them they have acted properly and independently and are objective in their approach to their work.

37. The Quinns also contend that the receivers ought not to pass onto the bank any information which they may acquire. The

intention to do so is alleged to be evidence of bias. The receivers say that in so doing in respect of relevant non-privileged

information they are merely carrying out their task.

The Solicitors

38. The allegations made against the solicitors are that they have conflicts of interest and have demonstrated a lack of impartiality

and independence and furthermore have attempted to mislead the Quinns.

39. Mr. William Day, a partner in Arthur Cox retained by the receivers has sworn a detailed affidavit dealing with these various

allegations.

40. When Mr. Taite first approached Mr. Day, he contacted his firms’ conflicts committee and discussed the assignment with members

of that committee in detail. He did this because he knew that his firm had acted in connection with and against the bank on many

occasions on separate and distinct assignments. However, he points out that the issue of client confidentiality is treated with utmost

seriousness by his firm and its members do not share information gained from instructions by third parties without client consent.

Because of that it is not possible for him to go into the specifics of the other instructions and activities of his firm on behalf of

different clients referred to in Mr. McPartland’s affidavit.

41. He admits that Cox’s were appointed to act for a syndicate of banks who are owed significant sums by Quinn Group Limited which

was the holding company of the group of companies commonly referred to as the Quinn manufacturing group. Subsidiaries of Quinn

Group Limited have provided guarantees in respect of the borrowings of that company. Neither Quinn Group Limited nor any of its

subsidiary guarantors within the Quinn manufacturing group formed part of the international property group which is a distinct

collection of companies established by the Quinn family that forms the subject matter of the proceedings which have resulted in the

appointment of the receivers.

42. Quinn Group Limited was the counter party with whom the bank syndicate was obliged to deal with on the restructuring of the

debts of the Quinn manufacturing group. Quinn Group Limited negotiated a consensual restructuring of the debt due by it to the

banking syndicate. Cox’s did not act for the bank in relation to that matter and it was at all times represented by separate Irish and

United Kingdom solicitors. The bank was not a creditor of Quinn Group Limited nor was it either an instigator or the instructing party in

relation to the creditor’s contingency planning.

43. Mr. Day says that his firm’s involvement on behalf of the banking syndicate to the Quinn manufacturing group was a matter of

public record and was known to both Seán Quinn Snr and Peter Darragh Quinn, both of whom were directors of Quinn Group Limited at

the relevant time. There was, therefore, no question of Arthur Cox having attempted to mislead the defendants or anyone else.

44. Insofar as the queries raised concerning Bazzely are concerned, he says that these were made with a view to ascertaining what

assets the defendants own so that the receiver could fulfil the duties imposed upon him by the court.

45. More generally, Mr. Day says that he believes that Mr. McPartland is of opinion is that if an individual or firm has acted for the

bank or its shareholder, the Department of Finance, at any time, such involvement conflicts that person or firm and precludes them

from acting for the receivers. He says that this proposition is incorrect and is not really believed by the Quinns because their former

solicitors have acted for the bank themselves on many occasions. That firm only ceased to act for the defendants due to funding

issues. Indeed, he points out that the profile of one member of Eversheds (the Quinns’ former solicitors) makes specific reference to

his role as adviser to the joint administrators of Quinn Insurance Limited on the sale of the general insurance business to a joint

venture entity.

46. Mr. Day swears that neither his firm nor himself have any conflict of interest in acting for the receivers. His firm upholds, he says,

the correct highest standards of professional conduct and that there is and will be no question of client confidentiality being

breached. He furthermore indicates that if the court is of opinion that he ought to, he is quite willing to withdraw and cease to act for

the receivers.

The Legal Position

47. I am of opinion that the Quinns in seeking the discharge of the receivers and their solicitors have done so on a misunderstanding

of the legal position coupled with a great distrust of the bank and its approach to them.

48. The receivers were appointed in aid of orders made by the court. Those orders required the defendants to disclose all of their

assets in circumstances where there was a finding by Dunne J. that the assets of the Quinns had been dealt with by them with a

view to placing them beyond the reach of the plaintiffs in these proceedings. The receivers’ role is an active rather than a passive

one. It is not merely to preserve such assets as the defendants have chosen to disclose. Rather, it is to collect in and preserve all of

the assets of the defendants in whatever jurisdiction they may be and whether they have chosen to disclose them or not.

49. The Quinns apprehend that information is going to be furnished by the receivers to the bank. They believe that this demonstrates

a lack of independence which justifies the receivers removal. I believe this to be an incorrect view.

50. Nobody could dispute the statement contained in Kerr and Hunter on Receivers and Administrators (19th Ed.) relied upon by Mr.

McPartland where at para. 12 it is said:-

“A receiver in a claim or other proceeding is an impartial person, appointed by the court to collect, protect and receive,

pending the proceedings, the rents, issues and profits of land, personal estate or any other kind of asset which it does

not seem reasonable to the court that either party should collect or receive, or for enabling the same to be distributed

among the persons in title.”

51. In chapter 4 of the same work which was also relied upon by Mr. McPartland, the authors state:-

“A receiver appointed in a claim should, as a general rule, be a person wholly disinterested in the subject matter.”

That particular passage goes on to point out that it is competent for the court in a proper case to appoint as receiver a person who

is interested in the subject matter of the claim if it is satisfied that the appointment will be attended with benefit to the estate.

52. In the present case, the crucial thing to bear in mind is that the receivers have to be wholly disinterested in the subject matter of

this action. The receivers have no interest in the assets of the Quinns. That is not in dispute.

53. The receivers accept that they have important obligations to the court. These are summarised by Ferris J. in Mirror Group

Newspapers Plc v. Maxwell [1998] 1 BCL 638 where he said:-

“The essential point which requires constantly to be borne in mind is that office holders are fiduciaries charged with the

duty of protecting, getting in, realising and ultimately passing on to others assets and property which belong not to

themselves but to creditors or beneficiaries of one kind or another. They are appointed because of their professional

skills and experience and they are expected to exercise proper commercial judgment in the carrying out of their duties.

Their fundamental obligation is, however, a duty to account, both for the way in which they exercise their powers and

for the property which they deal with.”

54. Obviously, receivers are obliged not to place themselves in a position where their duties to the court are allowed to conflict with

some other interest. The position was summarised by Millet L.J. in Bristol and West Building Society v. Mothew [1998] Ch. 1 where he

said:-

“A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position

where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without

the informed consent of his principal.”

55. In the present case, there is no dispute but that the receivers have no interest in the property which they are charged to

preserve.

Onus of Proof – Receivers

56. It is trite law to state that he who asserts must prove. In the present case, the onus is on the Quinns to demonstrate grounds

which would justify the removal of the receivers. They have to produce specific evidence of partiality or real or perceived bias.

57. In Thomas v. Dawkin [1792] 1 Ves Jun 452, Thurlow L.C., held that where an applicant seeks to set aside the appointment of a

receiver on the grounds of bias there must be “some substantial objection to induce the court to overturn the appointment”.

58. Assistance as to the yardstick to be applied by the court on an application such as this can be gleaned from a number of more

recent English cases. The first dealt with an application seeking to remove trustees in bankruptcy from their office on the grounds

that they had colluded with a creditor of the bankrupt to work against the latter’s interest. The case is that of Doffman & Isaacs v.

Wood & Hellard [2011] EWHC 4008. Proudman J. had this to say:-

“It is common ground that cause must be shown for removal and that case law generally on the removal of office

holders is relevant. Section 298 uses similar wording to that of s. 172(2) relating to the removal of a liquidator on a

compulsory winding up. The question of whether to remove an insolvency practitioner of any kind must therefore be

measured by reference to the ‘real substantial honest interest’ of the process, and to the purpose for which the office

holder is appointed: See Adam Eyton Limited [1887] 36 Ch D. 299 per Bowen L.J. at 306 quoted with approval in Re

Edennote Limited [1996] 2 BCLC 389 at 398.”

59. An older English case in which such an application was successful was in Re Sir John Moore Gold Company [1879] 12 Ch D. 325.

The liquidator in that case was sought to be removed because of partiality in circumstances where he had to investigate whether

proceedings should be brought against the company’s former directors. He knew both of them. He expressed his support for one of

the directors in a letter and expressed the view that there would be no evidence to support the allegation that he had acted

improperly. Bacon V.C. held:-

“That is strong testimony in their favour, but it is also a proof that he takes their side very strongly. That being so, Mr.

Dicker having expressed a strong view against the applicant, having himself an interest adverse to the application, and

having according to his own view nothing of importance left to be done in the liquidation, I think that his continuing in

the office of liquidator can have no other effect than to impede Schlotel’s proceedings. Everybody knows the difference

which it makes in the conduct of such proceedings to have a liquidator who is hostile to them and disposed to put

obstacles in the way. It seems to me that the case is one in which Mr. Dicker ought not to be continued as liquidator.”

60. In my view, where the removal of a court appointed receiver is sought because of alleged partiality or bias, the court has to be

satisfied as to specific evidence of some improper conduct on the part of the receiver. It is not enough to suggest that the receiver

will not be capable of acting independently because of a former relationship with one of the parties to the dispute. The relationship

would have to be a subsisting one with evidence that the receiver will act improperly under the direction of one of the parties.

61. I am of the view that there is no basis established for removing the receivers because of their firm’s former involvement in the

manner already described with aspects of Quinn Finance. Neither is there any case established by reference to employees who were

or are employees of the bank.

62. I of the opinion that Mr. Taite did not act inappropriately in initially seeking the appointment of McCann Fitzgerald as his solicitors.

While Dunne J. did not accede to that application she made no suggestion express or implied that he had acted inappropriately in

seeking to do so. I have already dealt with his motivation for seeking to appoint McCann Fitzgerald and his belief that that course of

action would save considerably on costs and time. Indeed, such occasionally occurs in official liquidations where liquidators have

sought to instruct the solicitor who acted for a creditor which originally presented the petition. Whilst that does not happen

frequently it nonetheless has had judicial approval as, for example, in Re Schuppan [1996] 2 All E.R. 664 where Robert-Walker J.

held:-

“In a case where the real difficulties that are foreseen are in connection with the identification, tracing and recovery of

assets for the bankrupt’s estate, the retainer of solicitors who already had a good grasp of these difficulties can be of

great advantage to all the creditors, not just the petitioning creditor.”

63. A similar view was expressed by Pumfrey J. in Re Barron Investments (Holdings) Limited (In Liquidation) [2000] 1 BCLC 272, where

he accepted that whilst it was unusual for a liquidator to seek to instruct the solicitor who had acted for the petitioning creditor, it

would not be prohibited simply because of a theoretical possibility of conflict. He said:-

“I think that it is necessary to analyse the particular facts of the particular case in order accurately to identify the

manner in which the conflict arising by reason of dual employment is said to occur. Then I think it is necessary to be

satisfied that there is a genuine dual employment. It seems to me that if the apprehended conflict is a mere theoretical

possibility, it will not always be necessary for the court to take steps to deal with it unless and until the actual conflict

arises.”

64. Much emphasis was placed upon the receivers’ original decision to instruct McCann Fitzgerald. It created suspicion and soured the

Quinn’s view thereafter. As I have shown there was nothing necessarily wrong with that decision, given the particular circumstances

of this case. In any event, that appointment did not proceed. I am satisfied that the onus of proof to warrant the order sought has

not been discharged by the applicants.

65. Likewise, I am of the view that there is no demonstration of partiality or bias by reference to the receivers’ activities concerning

Bazzely. The Quinns seem to believe that the receivers are not obliged to carry out any investigative work. That is not so. In order to

secure and preserve the assets, they must first locate them. I do not perceive any impropriety on the receivers’ part in this regard.

Indeed, the receivers could be criticised for not pursuing this line of enquiry.

66. In due course the receivers will be entitled to disclose to the bank all relevant non-privileged information obtained by them

pertaining to the assets. An intention to do so is not indicative of bias or partiality.

Onus of Proof - Solicitors

67. The onus of proof on somebody seeking to remove a solicitor is no less than that in respect of a receiver.

68. One begins with the proposition that parties are free to chose their own legal advisers. There is, nonetheless, a jurisdiction to

intervene so as to ensure that a solicitor does not remain on record for any party where his doing so would not be in the interests of

justice. The jurisdiction to remove a solicitor is, however, exercised sparingly. In Re Recover Limited [2003] 2 BC LC, Pumfrey J. said:-

“That jurisdiction must, in my view, be exercised with caution, as in general parties to litigation are entitled to the

advisers they have chosen.”

69. It is not the law that a solicitor or a firm of solicitors can never act for and against a client, even in the same matter. In Re

Schuppan [1996] 2 All E.R. 664, Robert Walker J. said:-

“It is not the law that a solicitor or firm of solicitors can never act for and against a client, even in the same matter.

The law and practice in England is less inflexible that in (for instance) the United States (see Re a Firm of Solicitors

[1995] 3 All E.R. 482 at 488 – 489 where Lightman J. said:-

‘The basis of the courts' intervention is not a possible perception of impropriety: it is the protection of confidential

information’.”

70. In Farrington v. Rowe McBride and Partners [1985] 1 NZLR 83, Richardson J. said:-

“A solicitor’s loyalty to his client must be undivided. He cannot properly discharge his duties to one whose interests are

in opposition to those of another client. If there is a conflict in his responsibilities to one or both he must ensure that he

fully discloses the material facts to both clients and obtains their informed consent to his so acting: no agent who has

accepted an employment from one principal can in law accept an engagement inconsistent with his duty to the first

principal from the second principal, unless he makes the fullest disclosure to each principal of his interest, and obtains

the consent of each principal to the double employment. And there will be some circumstances in which it is impossible,

notwithstanding such disclosure, for any solicitor to act fairly and adequately for both.”

71. That view was cited with approval by Sapolu C.J. in Apia Quality Meats Limited v. Westfield Holdings Limited [2007] 3 LRC 172.

72. Sometimes it is a former client who takes exception to his erstwhile solicitor acting against him. This has been considered on a

number of occasions by the English courts.

73. In Prince Jeffri Bolkiah v. KPMG (A Firm) [1999] 2 AC 222, Lord Millett said this:-

“In Rakusen’s case the Court of Appeal founded the jurisdiction on the right of the former client to the protection of his

confidential information. This was challenged by counsel for Prince Jefri, who contended for an absolute rule, such as

that adopted in the United States, which precludes a solicitor or his firm altogether from acting for a client with an

interest adverse to that of the former client in the same or a connected matter. In the course of argument, however,

he modified his position, accepting that there was no ground on which the court could properly intervene unless two

conditions were satisfied: (i) that the solicitor was in possession of information which was confidential to the former

client and (ii) that such information was or might be relevant to the matter on which he was instructed by the second

client. This makes the possession of relevant confidential information the test of what is comprehended within the

expression ‘the same or a connected matter.’ On this footing the court’s intervention is founded not on the avoidance of

any perception of possible impropriety but on the protection of confidential information.

My Lords, I would affirm this as the basis of the court’s jurisdiction to intervene on behalf of a former client. It is

otherwise where the court's intervention is sought by an existing client, for a fiduciary cannot act at the same time both

for and against the same client, and his firm is in no better position. A man cannot without the consent of both clients

act for one client while his partner is acting for another in the opposite interest. His disqualification has nothing to do

with the confidentiality of client information. It is based on the inescapable conflict of interest which is inherent in the

situation.”

74. In dealing with the position where a former client objects to a solicitor acting for a new client, Lord Millett said:-

“Where the court's intervention is sought by a former client, however, the position is entirely different. The court’s

jurisdiction cannot be based on any conflict of interest, real or perceived, for there is none. The fiduciary relationship

which subsists between solicitor and client comes to an end with the termination of the retainer. Thereafter the solicitor

has no obligation to defend and advance the interests of his former client. The only duty to the former client which

survives the termination of the client relationship is a continuing duty to preserve the confidentiality of information

imparted during its subsistence.”

75. Returning to the decision of Pumfrey J. in Re Barron Investments, he said:-

“I think that it is necessary to analyse the particular facts of the particular case in order accurately to identify the

manner in which the conflict arising by reason of dual employment is said to occur. Then I think it is necessary to be

satisfied that there is a genuine dual employment. It seems to me that if the apprehended conflict is a mere theoretical

possibility, it will not always be necessary for the court to take steps to deal with it unless and until the actual conflict

arises.”

76. The Quinns do not allege that Arthur Cox is in breach of the prohibition against dual employment. It is not alleged that the firm is

currently acting for two clients whose interests are adverse to each other. Neither is it alleged that Arthur Cox may be in possession

of information that is confidential to a former client and which is relevant to the matters on which Mr. Day has been instructed by the

receivers.

77. What the Quinns contend is that because of the identity of some of its former clients, Arthur Cox may give biased evidence to the

receivers or part with information confidential to the receivers. But in this regard, there is no evidence of any particular incidents of

improper advice being given or of any apprehended or actual disclosure of confidential information. Merely because Cox’s have in the

past acted for clients whose interests may be perceived by the Quinns to be adverse to theirs is not evidence of bias.

78. I do not find any evidence of any form of wrongdoing, conflict of interest or impropriety on the part of Mr. Day or Arthur Cox to

warrant the making of the order sought.

Conclusion

79. It is for the above reasons that I dismissed the application to remove both the receivers and the solicitors.