Litigation Lawyers Ditch Marketeering Clients

[Author – Tim ODwyer]

Two marketeering law suits have been dismissed because of irregularities and want of prosecution. Solicitor TIM O’DWYER reports on how the plaintiffs’ lawyers warned other clients about the risks of litigation. 

Off the hook!
Prior to the dismissal on 10th March this year of two District Court actions on behalf of over-priced property marketeering victims, Brisbane litigation lawyers Carter Capner reviewed all their other real estate actions. Most claims related to losses on Gold Coast properties sold to out-of-town investors more than 5 years ago.

On 9th March Carter Capner partner Harry Dignan, who conducted the review, wrote to all clients whose claims had not been served on defendants. Dignan now sought instructions on serving those claims.

This prophetic letter made no mention that Carter Capner had recently defended dismissal applications made by two belatedly served solicitor defendants on the grounds of irregularities and want of prosecution.

An initial issue for Carter Capner clients was whether properties, which they had been sold over-priced, might have since gone up in value. Dignan’s letter advised of conflicting precedents in Australian Courts concerning financial losses in such circumstances, and suggested any claim where there had been an increase in value would involve a significant risk. “If your property is worth more than when it was purchased,” he wrote, “you must now consider whether you are prepared to take this risk.”

Dignan then referred to a disastrously unsuccessful Federal Court action initiated by the Australian Competition and Consumer Commission against a number of alleged perpetrators of marketeering schemes. Although he described these schemes as slick, perfected, carefully structured and contrived to maximize pressure, Dignan wrote that the salutary lesson from the ACCC’s expensive failure was that “a finding of connectivity of deceptive conduct across all the actors, such that each is found culpable, could not be made.” Carter Capner clients were then bluntly told: “Careful thought must be given to whether you wish to take the risk of proceeding with your claim.” These litigation lawyers now wanted to make sure clients who gave instructions to serve and proceed with their matters were “apprised of the risk and the benefit”.

The letter ominously continued: “The time has arrived in your matter and your instructions must be given to progress your cases through the District Court. The first step is to serve the claim. All parties to litigation have an obligation to proceed expeditiously and the Court rules require the law suit, once brought, be prosecuted. A claim cannot be left in abeyance. We have obtained the Court’s order to renew your claim whilst evidence was gathered. That situation cannot persist indefinitely. The claim must be served.”

Then came this even more ominous revelation: “The strength of an individual claim is enhanced by its location within the group … Participation in a group can also increase the prospect of a group result and decrease individual risk. Your claim has not been identified as one that enjoys those advantages; it stands alone and must be thought of that way. Proof of all requisite matters would be required against the target defendant in full. We do not say this to alarm you – that is the way with all litigation.”

Carter Capner clients, whose targeted defendants had not been served, now learned that their claims were “best described as speculative.”

“Candidly,” Dignan wrote, “my instinct is that a trial in your matter will probably be needed.” Clients were reassured that they had not been exposed to adverse costs orders but this would change once claims were served. The risk of serving was liability for the other party’s cost if the claim failed. “The worst outcome,” Dignan continued, “is that you proceed to trial and fail, in which case those costs are unlikely to be less than $30,000.00. If multiple defendants are involved the costs could be $50,000.00 (or higher if there are appeals).”

The letter concluded: “In summary, I seek from you an indication as to whether you are prepared to accept the risk of an adverse outcome … That risk will only materialize if you give me instructions to serve your claim.”

Three weeks later Dignan sent a second more disturbing letter. This began: “While we remain of the view expressed in our last correspondence about the likelihood of success in your claim, Carter Capner is now in a position of conflict of interest and is no longer able to act for you even if you were minded to proceed. The conflict has arisen following … decisions in the District Court at Brisbane in which two claims were struck out and the plaintiffs were ordered to pay costs. Clients now discovered that, because of this conflict of interest, they needed to obtain advice from another lawyer about the “viability” of their claim and any “a potential claim against Carter Capner.”

Clients had to read between the lines to fully appreciate that their prospects of success may have been undermined by their own solicitors’ handling of their matters. Clearly the legal advice to be sought from new solicitors was whether to continue claims against the marketeering villains or to sue Carter Capner for negligence.

This letter proceeded to list other “setbacks” incurred by Carter Capner in the process of recovering losses incurred by their marketeering victim clients:

  • Claims commenced through the Property Agents and Motor Dealers Fund were “blocked by the Queensland government” which retrospectively changed the law so investor-owners could no longer claim on the fund.
  • The ACCC’s marketeering suit was “largely unsuccessful” while its later appeal was dismissed unaminously.
  • Queensland Law Society prosecutions against some marketeering solicitors were dismissed. Although Carter Capner tried negotiating with various banks, only Westpac made compensation offers.
  • Like the marketeers themselves many solicitor defendants were uninsured, had gone bankrupt and were “unlikely to be able to pay any judgment ordered against them”.

Having declared its conflict of interest Carter Capner asked clients to tick one of two boxes. Firstly claims could be terminated with no charge for work done to date. Alternately clients could retain new solicitors to whom Carter Capner would onforward their files.

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