It's hard to imagine a world where lawyers don't
act to uphold justice... but a recent case in Victoria might have
just touched on the Lionel Hutz perception of the
In 2012, Mark Elliot, a solicitor in Victoria, created a company
called Melbourne City Investments (MCI), of which
he was the sole director and shareholder. Mr Elliot incorporated
MCI so that it could:
purchase tiny amounts of shares in public listed companies like
Treasury Wine Estates Ltd; and
bring class actions against those companies for breaches of the
Corporations Act on behalf of itself and all other
And here's the clincher. The class actions would then allow
Mr Elliot to act as the lawyer for MCI and, when the proceedings
concluded, get a favourable costs order for his fees. MCI's own
claim against Treasury was worth only $700.
Effectively the whole process undertaken by Mr Elliot was to
create a revenue stream from his legal services. Quite the
entrepreneur you could say.
When the matter was first brought before the court, Treasury
said that the proceedings were an abuse of process and tried to
send the matter to its legal doom. The Judge said nope, because
despite Mr Elliot wanting all of the fees, MCI's purpose was
still to obtain damages which would naturally lead to an award for
costs and that was totes legit.
But! Treasury appealed and the Court of Appeal found that
MCI's claim was indeed an abuse of process because MCI had no
interest in actually recovering the damages of $700; MCI's sole
purpose was to create a vessel that would encourage Treasury to pay
Mr Elliot's fees.
Looks like Mr Elliot's business model might not be so
profitable after all. MCI has sought special leave to appeal to the
High Court so it isn't quite over yet. In our opinion, it's
kind of hard not to agree with the Court of Appeal on this one.
We do not disclaim anything about this article. We're
quite proud of it really.
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Peter Sise explores how your contractual clause for recovery of legal costs might not do what you think it does.
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