Respondents involved in a case brought by investment adviser Deep Investments over alleged share trading losses, including a solicitor who was sued for allegedly failing to inform the company of exchanges with ASIC, are appealing a decision to allow the case to continue.
The appeal, which is likely to go to the Full Court in November, also asks for a stay of the proceedings currently before Justice Jacqueline Gleeson who allowed the case to proceed in a judgment last May.
The case was filed by Deep Investments in Federal Court in December 2016 against two former accountants, their firm CBC Partners, his solicitor, a former financial advisor and two companies that provided a managed discretionary account (MDA) on its behalf, including Wilson HTM investment group, alleging it suffered share trading losses because the respondents failed to follow instructions on managing its investment portfolio.
Deep Investments alleges the solicitor, Kevin Emanuel, which it hired to represent it in a contract termination fee dispute with Wilson, breached his duties and engaged in misleading or deceptive conduct by failing to inform it of an exchange he knew about between Wilson and the Australian Securities and Investments Commission concerning inappropriate and potentially deceptive conduct by Wilson employee Mr Robinson, who worked with Deep Investments.
In 2016, following a four-day hearing, Deep Investments settled an earlier case it brought in the New South Wales Supreme Court against the financial adviser and the providers of the MDA over the alleged losses.
In bringing the Federal Court action, Deep Investments said it had not known about the exchange between ASIC and Wilson during the trial in NSW Supreme Court.
In a May 4 ruling, Judge Gleeson allowed the Federal Court case to proceed but struck down some of the claims on the basis that they should have been pursued in the earlier case.
The respondents argued the case was an abuse of process because the issues had already been litigated.
On Wednesday, Deep Investment’s barrister Peter Dunning, QC, told Justice Nye Perram that it was ironic the appeal was about abuse of process.
“That [the appeal] would [also] be an abuse of process,” he said.
Judge Perram commented on the “sideshow” nature of the stay application. “Staying the whole of the proceedings seems like a hammer to break a nut,” he said.
He suggested postponing the stay applications until after a case management hearing scheduled before Justice Jacqueline Gleeson was held on Thursday. A later case management hearing will be held on July 4 before Judge Perram with a two-day Full Court hearing to be held at a date set in November.
Judge Gleeson in her May 4 ruling also dismissed claims that Emanuel had breached his contractual and duty of care obligations by not informing Deep Investments of the ASIC correspondence. The judge agreed with Emanuel that he had fulfilled his duty by informing CBA of the of the correspondence between Wilson and ASIC regarding Robinson.
“The statement of claim does not plead any matter that might support a conclusion that provision of the Wilson documents to the CBC respondents, in the manner pleaded, was insufficient to comply with the contractual obligations and discharge the duty of care pleaded in the statement of claim,” Judge Gleeson said.
The judge also found Deep Investments had not pleaded facts to support its argument that Emanuel owed duties in contract and tort arising out of its retainers in relation to any matter that could pose a risk to the company and that could cause financial loss.
In a later order in May, Judge Gleeson declined Emanuel’s request for a summary order dismissing the misleading conduct claims against him, saying Section 12DAb of the Australian Securities and Investments Commission Act 2001 was not necessarily limited to conduct that occurred in the provision of financial services and that the phrase “in relation to” should be interpreted in the context of each case.
Counsel for Emanuel had argued he could not be targeted for misleading and deceptive conduct under Section 12DAbbecause a a lawyer providing legal services in relation to financial services was not himself engaging in conduct in relation to financial services.
Deep Investments alleges it would not have continued to work with Robinson had it known of the correspondence with ASIC and therefore would not have suffered trading losses it was exposed to through Robinson’s buying and selling of shares of NAB, Billabong and Boart Longyear.
At the time the NSW Supreme Court case was brought, Deep Investments said it had an investments portfolio worth about $40 million.
Also listed as respondents in the Federal Court case are two accountants who worked for CBC, Kevin Casey and Paul Clarke and two companies owned by Robinson, Raven Capital and QWL.
Kevin Casey, Paul Clarke and CBC Partners are represented by MinterEllison; Kevin Emanuel is represented by K&L Gates; Simon Robinson, Raven Capital and QWL are represented by Moray & Agnew; and Deep Investments is represented by K2 Law.
The appeals are Simon Robinson & Ors v Deep Investments Pty Ltd ACN 000 339 319, Kevin Emanuel v Deep Investments Pty Ltd ACN 000 339 319, and Kevin Casey & Ors v Deep Investments Pty Ltd ACN 000 339 319.
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