Law firm sued after asking CBA to appoint receivers

Beware the company director who emerges restored to competency after a stint in a psychiatric institution. That’s the lesson one law firm is learning in the Supreme Court of Victoria.

Of course, said law firm is doing all it can to persuade the court that the lesson is not its to learn, and that the director seeking to impose it has no right to recompense for what he perceives as the law firm’s failure.

That decision however will have to be made by a judge at some point in 2024 assuming the proceedings aren’t stayed or settled beforehand.

Yesterday one of the defendant parties in this fraca was engaged in trying to make sure the plaintiff director and his companies learn a lesson if his case is found to be groundless, which is why the court yesterday was taken up with arguments about security for costs.

Inevitably, in seeking to make its case, the second defendant’s counsel revealed much of the background to this yarn, which for our purposes began in the second half of 2019 when TEX Group director Michael Kirwan was potentially indisposed for several months whilst receiving treatment for a psychiatric disorder.

During this period TEX Group second defendant Andrew Dugan is alleged to have had conversations with John Hutchings of law firm and first defendant Cornwalls.

Despite claims from sources that Dugan and Hutchings are mates, lawyers for Dugan told iNO that the relationship between the two men was professional only.

Dugan is also the plaintiff’s ex-brother-in-law which tells us something about Kirwan’s marital status.

Hutchings didn’t respond to our request for comment prior to publication but advised this afternoon that he “cannot comment on matters before the court – & certainly not about allegations apparently made in an interlocutory proceeding in which this firm was not represented”.

As a result of the conversations it’s alleged in Michael Kirwan’s amended statement of claim that Cornwalls then contacted the TEX Group’s lender CBA about appointing receivers.

Kerwin’s counsel Chris Hibbard of List G Barristers told the court yesterday that a letter dated October 18 from Cornwalls’ then partner Radhika Kanhai (now at Moray & Agnew) to CBA’s Sam Barbagallo was “virtually inviting the bank” to appoint particular receivers to TEX Onsite Pty Ltd.

CBA was the group’s senior secured lender and Cornwalls apparently sought particular receivers to be appointed – they being Sam Kaso and Barry Wight of Cor Cordis.

Further correspondence was exchanged as the bank sought more material, including a power of attorney obtained by the plaintiffs’ ex-wife that was referred to in a second letter sent to Barbagallo, also dated October 18.

That letter stated that: “Joanne Kirwan on behalf of the director as power of attorney requested that the CBA appoint Mr Kaso as receiver and manager of Tex Onsite, Tex Assets, Tex Employment, Tex High Voltage and Kirwan Training.”

At issue in this imbroglio is whether Kirwan was able to grant a valid power of attorney. According to his amended statement of claim that was impossible.

“At all relevant times between 14 September 2019 and late November 2019, Mr Kirwan was incapable of making decisions on his own behalf, and of appreciating the legal consequences of decisions he might make, including because of his psychiatric injury and the medication he took as treatment of that psychiatric injury.”

Dugan’s counsel Oren Bigos KC of List A Barristers however put it very differently, telling the court yesterday that the “Question is whether he (Kirwan) was incapacitated at all and whether he was incapacitated when he granted power of attorney”.

“The claims against our client include that our client made misleading representations in respect of power off attorney to give instructions to Cornwalls,” Bigos said.

These claims he said had to be weighed in light of the plaintiff’s own conduct, which Bigos said amounted to phoenix activity, a claim Hibbard challenged.

“This is an extraordinary allegation made by my learned friend that Mr Kirwan would run the assets into the ground and then start new companies,” Hibbard said.

“There’s no evidence he’s ever engaged in phoenixing behaviour which is effectively what is being referred to.”

Hibbard said that even if the proceedings were stayed against Dugan they would certainly continue against Cornwalls, which is facing a claim for almost $5 million for negligence for sending the letters to CBA before it had satisfied itself as to the incapacity or otherwise of the plaintiff at the relevant times.

Hibbard told the court that after Kaso and Wight sold assets sufficient to discharge the debts they were left with a considerable surplus but at the cost of a good business.