Federal Court: November 2025

LEGAL PRACTITIONERS

Application to annul bankruptcy – appellant’s legal representative had conflict of interest before primary judge – legal representative largest creditor in appellant’s bankrupt estate – implied jurisdiction of a court to restrain solicitors

Maclean v Brylewski, in the matter of Maclean [2025] FCAFC 133 (Jackson, Moore and Stellios JJ) was an appeal from Maclean v Brylewski, in the matter of Maclean [2024] FCA 1005, in which the appellant sought to annul the sequestration order made against her estate pursuant to section 153B of the Bankruptcy Act 1966 (Cth).

The trial judge refused the application and determined the appellant was insolvent. This was in circumstances where the appellant’s solicitor, who was her sole legal representative at the hearing, was also the appellant’s largest creditor. The solicitor claimed to be owed $391,000 secured by way of a caveat against real property in which the appellant’s share of equity was worth approximately $260,000. Without recourse to this asset, the appellant was unable to establish she was able to pay the remaining (unsecured) debts.

At all times during the trial, the solicitor conducted the proceedings on the basis the debt owed to him was not relevant to the trial judge’s determination because it was not a debt which would be provable in the bankruptcy, owing to its secured status. In addition, the solicitor conducted the proceedings in a chaotic and underprepared manner, citing health issues and a breakdown in the relationship with the appellant at various times.

Issues on appeal

On appeal the appellant sought to set aside the trial judge’s orders on a number of appeal grounds including ‘ground two’ by which she contended there was a denial of procedural fairness by reason of the Court:

1. not adequately considering whether and how it should exercise its implied jurisdiction to ensure the due administration of justice and protect the integrity of the judicial process in circumstances where the Court considered the solicitor was the principal debtor but was also acting as the sole advocate of the appellant; and
2. failing to exercise the Court’s powers to control its own processes to ensure these issues were dealt with by an adjournment and appropriate directions, or referral to pro bono independent legal assistance.

The Full Court determined it was appropriate to determine this ground first before the other grounds in keeping with established principles.

The decision

The Full Court, delivering two separate judgments, allowed the appeal based only on ground two.

The majority (Jackson and Moore JJ) noted that, had the appellant established in her annulment application that she was able to pay her debts out of her own money, the sequestration order should not have been made. Accordingly, the ground for the exercise of the discretion to annul the bankruptcy would have been established. In addition, the establishment of this fact would have weighed heavily in her favour as to the exercise of the discretion by the trial judge. In those circumstances, their Honours were satisfied the existence and quantum of the solicitor’s claim potentially made the difference between success and failure in the annulment application. Further, by the time of the final hearing, there was a serious question before the Court as to whether the solicitor’s debts were payable. Accordingly, it was objectively apparent that the solicitor was acting in circumstances amounting to a conflict of interest.

Given these matters, their Honours were satisfied the Court below had the jurisdiction (in the sense of power) to restrain the solicitor from acting. This arises from the broader principle that lawyers acting in proceedings should be impartial and independent and superior courts have the inherent jurisdiction to supervise the conduct of legal practitioners to ensure this occurs. Citing Porter v Dyer [2022] FCAFC 116 (at [113]-[114]), their Honours stated the exercise of this power requires:

‘[C]onsideration of whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a practitioner be prevented from acting in the interests of the protection of the integrity of the judicial process and the appearance of justice’ (at [24]).

While their Honours noted there has been some controversy as to whether the relevant standard was ‘would conclude’ or ‘might conclude’, nothing turned on the distinction in the present case because the higher standard had been met. Their Honours stressed that the discretion is only exercised in exceptional cases and, further, it concerns the public interest in the administration of justice which meant it was not open to the appellant to waive the conflict in the manner submitted by the respondents.

In this regard, the appellant was unlikely to have received a fair trial where the success of her annulment application may have turned on the validity, nature and quantum of a debt claimed by her solicitor. Accordingly, he could not be seen to represent his client’s interests independently when that may have required him to impugn the debt he claimed to be owed. The solicitor’s argument that he would not prove in the bankruptcy did not resolve this conflict and, instead, indicated he had not properly applied his mind to the issues.

Their Honours agreed with Stellios J who held it was not necessary to identify a specific step that the trial judge might have taken. All that was required was a determination the trial judge had power to eliminate this risk to the fairness of the hearing and that he should have exercised that power.

This finding necessarily meant the Court was required to remit the matter to be determined afresh by a new judge given the evidence adduced (or not adduced) was a product of the forensic decisions of the solicitor.

Stellios J’s approach was to consider whether the appellant was denied procedural fairness and whether that error resulted in a miscarriage of justice, rather than whether the primary judge was under any duty to take particular steps in the conduct of the proceeding. A combination of all of the circumstances—including the solicitor’s claimed debts, his apparent ill health, his lack of preparation and the apparent break down in the relationship with the appellant—led to the conclusion the appellant was denied the opportunity to scrutinise the solicitor’s claim and so was denied procedural fairness. In the circumstances, the Court’s power to order a new trial under section 28(1)(f) of the Federal Court of Australia Act 1976 (Cth) was enlivened and it was appropriate to exercise the discretion to do so.

Joanne Shepard SC is a barrister at 12th Floor Wentworth Selborne Chambers.