Anton v PKB Veterinary Supplies Pty Ltd - [2004] WASC 107

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: ANTON -v- PKB VETERINARY SUPPLIES PTY LTD & ORS [2004] WASC 107

CORAM: SIMMONDS J

HEARD: 2 & 5 APRIL 2004

DELIVERED : 26 MAY 2004

FILE NO/S: CIV 2141 of 2003

BETWEEN: BERNARD OSADCZUK ANTON
Plaintiff
AND
PKB VETERINARY SUPPLIES PTY LTD
First Defendant
PKB INTENSIVE ANIMAL SERVICES PTY LTD
Second Defendant
ANTHONY JAMES FELS
Third Defendant

Catchwords:

Legal practitioners - Conflict of interest

Legislation:

Nil

Result:

Injunction granted

Category: B

Representation:

Counsel:

Plaintiff:     Mr M D Evans
First Defendant             :     No appearance
Second Defendant         :     No appearance
Third Defendant           :     Mr R J Nash

Solicitors:

Plaintiff:     Corser & Corser
First Defendant             :     No appearance
Second Defendant         :     No appearance
Third Defendant           :     Nash Clavey

Case(s) referred to in judgment(s):

D&J Constructions Pty Ltd v Head (1987) 9 NSWLR 118
Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 35
Newman v Phillips Fox (1999) 21 WAR 309
PhotoCure ASA v The Queen's University of Kingston [2002] FCA 905
Prince Jefrie Bolkiah v KPMG [1999] 2 AC 222
Rakusen v Ellis Monday and Clarke [1912] 1 Ch 831
Tottle Christensen v Westgold Resources NL [2003] WASCA 224

Case(s) also cited:

Nil

SIMMONDS J: This matter is one by way of motion for an injunction to restrain a firm of solicitors, Corser & Corser, from acting for the plaintiff in an action against two corporations, the first defendant and the second defendant, through the medium of which corporations a joint venture was conducted between the plaintiff and the applicant for the injunction in this case, Mr Fels, the third defendant.
The underlying proceedings by the plaintiff against the three defendants sought accounting and related relief in respect of the way in which, amongst other things, Mr Fels was alleged to have conducted the financial affairs of the joint venture and a related trust.
The matters the subject of the statement of claim had, on the evidence before me, gone back to concerns expressed by the plaintiff, Mr Anton, to the third defendant as early as 1997. Those concerns had led to a meeting attended by Mr Anton, a Mr Bower from the firm of Corser & Corser, as well as an accountant who had provided services to the joint venture and Mr Fels. The purpose of that meeting was to address those concerns. The character of the meeting beyond that, and in particular the precise role played by Mr Bower at that meeting, as well as his relationship to the plaintiff, were all matters of dispute between the parties. I will have occasion to return to those matters shortly.
In late 1997, Mr Fels had approached the firm of Corser & Corser for advice in relation to the division of property between he and his ex‑wife. Corser & Corser had a family law practice at this point, and the third defendant's work was handled by a partner in the firm and a family law solicitor. Mr Bower was not part of the firm's family law practice, and his affidavit evidence is that he never had involvement in or knowledge of the firm's family law practice or its family law clients' names or details. This was save for rare and exceptional cases such as where the former firm's family lawyers were handling a client's family law business and a commercial litigation issue arose from that work. In such cases Mr Bower was asked by one of the family law practitioners to deal with it. Also, Mr Bower might have been involved where a large sum for fees became outstanding and arose as a topic in a partners' meeting with reference being made to the client's name, the file number and the sum outstanding.
Mr Bower indicates in his affidavit that he had no knowledge of this particular file, and that the firm's electronic conflict management system had not drawn the family law matter to his attention when he began to act for Mr Anton, at least for the purposes of the December 1997 meeting. Nor had that system or anything else subsequently drawn the matter to his attention until much later.
It remains to add that the firm's family law retainer ended in 1998 and sometime that year the family law partner and the family law solicitor left the firm.
Mr Bower has acted for Mr Anton in relation to the matters now the subject of the statement of claim since at least the December 1997 meeting to date.
Within one month after the statement of claim in this matter had been lodged, Mr Fels, in October 2003, through his then solicitor, objected to the firm of which Mr Bower was then partner, Corser & Corser, acting for the plaintiff in that matter.
Subsequently, following the filing of affidavits by Mr Fels on 9 December 2003, Mr Bower on 6 January 2004, Mr Anton on 30 January 2004 and Mr Fels again on 3 March 2004, the applicant ceased to have solicitors acting for him. However, for the purpose of the hearing before me, the solicitor formerly acting for Mr Fels agreed to appear once more, and no objection was taken to this manner of proceeding by the respondent to the application. In the event, I am grateful for the full and useful submissions made on the application by Mr Fels' solicitors and the plaintiff (nominally the respondent). I should note at the hearing it was taken that counsel for the respondent was appearing so as to represent the law firm Corser & Corser against whom the restraining order was directed, as well as Mr Bower of that firm. This order is in the terms of the motion for a permanent injunction to restrain the plaintiffs' solicitors from acting, dated 8 December 2003 and filed on 9 December 2003 by Mr Fels' former solicitors, who appeared again at the hearing before me as I have indicated.
There were two bases for the application in the written submissions prepared by Mr Fels' solicitors. The first rests on the partnership of Mr Bower in the firm of Corser & Corser as it then was in 1997 when the firm acted for Mr Fels in family court proceedings to which I have referred. The second basis for the application was in terms of the role it was submitted that Mr Bower had taken at the December 1997 meeting as a mediator between the plaintiff and the defendant in relation to issues that had arisen in respect of their business relationship. I deal with these bases in the order given.
As to the role of Mr Bower at the December 1997 meeting, it was the submission of counsel for the applicant that the affidavit evidence before me showed a concern by Mr Anton in relation to Mr Fels' management of the financial affairs of the joint venture, which ultimately issued in the statement of claim in this case, and which was the subject matter for the meeting. Prior to that meeting, Mr Anton had used solicitors other than Corser & Corser, to Mr Fels' knowledge. Mr Fels was asked by Mr Anton to attend the meeting, and Mr Anton informed Mr Fels that Mr Bower would be present at the meeting "as a mediator". Mr Fels had no third party representation of his own at that meeting. Further, the fee from Corser & Corser for Mr Bowers' attendance at that meeting was paid in February 1998 by a cheque drawn on the second defendant corporation. In these circumstances, it was submitted that, as the Law Society of Western Australia's Professional Conduct Rules, r 7A indicate, Mr Bower was performing the role of an impartial facilitator between Mr Anton and Mr Fels in relation to Mr Anton's concerns, to which I have made reference. Whether or not it was reasonable for Mr Fels to conclude that a partner of the firm which he had consulted with respect to his family law issues, issues that overlapped with those the subject of Mr Anton's concerns, was able to act impartially, it was said that Mr Fels was entitled to treat Mr Bower as an impartial person if he wished. In those circumstances, it would not be appropriate for Mr Bower or Mr Bower's firm to subsequently take a position representing Mr Anton adverse to Mr Fels' interests.
Counsel for the respondent pressed on me the difficulty of determining that Mr Bower had in fact acted in any capacity other than solicitor for Mr Anton. Mr Anton indicated that Mr Salter, the accountant present at the meeting, had been handling accounting affairs of the joint venture. Mr Anton in his affidavit sworn 30 January 2004 also indicated that Mr Bower had said to Mr Fels and Mr Salter "things to the effect that he [Mr Bower] was at the meeting in his capacity as [Mr Anton's] solicitor". Mr Bower in his affidavit indicated his clear understanding that he was acting for Mr Anton throughout, and referred to his recollection of the meeting and his notes at the time as confirming that he was present as the solicitor representing Mr Anton and not as a mediator.
Mr Bower, in his affidavit of 6 January 2004 at par 15, quotes from the notes of the meeting in which he said Mr Fels had indicated the possible evaluation of the business by the Family Court, his interest in reducing his equity in the business and the family home by dealing in this way with accounts, a payment for AMP Super and personal drawings.
Counsel for the applicant argued strongly before me that these references to the notes, particularly the quotation from them, amounted to material from which I could infer a selective waiver of lawyer client privilege in respect of those notes. In the event, counsel for the applicant submitted, I should ignore those notes as shedding any light on what occurred at the meeting unless they were made available in full.
I do not believe much turns on this point. It appears to me that on the relevant principles that are employed in relation to the resolution of applications such as these, upon which there was little disagreement between the parties, I should approach the matter in terms of the perspective of a fair‑minded, reasonably well‑informed disinterested bystander: Tottle Christensen v Westgold Resources NL [2003] WASCA 224 at [4], [6] referred to in this connection in Seaman: Civil Procedure Western Australia [34.0.5]. From that perspective, the belief of the practitioner concerned, or of his client, while relevant, is not determinative. It is the reasonable appearance that matters.
In the circumstances of the case before me, I am not convinced that the bystander would have inferred that Mr Bower was performing a role of a mediator at the meeting in question. The question is, however, a close one on the factual materials; but I note that the burden of proof in relation to this issue rests on the applicant, whose motion it is.
This takes me to the second basis for the application. That basis is one resting on the fact that Mr Bower was a partner in the firm at the time it was acting in the family law matter. The applicant also relied upon the fact that there was a file from that matter which, in all likelihood, was still accessible to Mr Anton's solicitors. The applicant's submissions placed particularly heavy emphasis on Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357, especially at 374 ‑ 375, where his Honour Justice Ipp, in widely noted remarks, indicated that an injunction restraining a firm from acting in that case for a client with an interest adverse to that of a former client of the firm in respect of certain transactions on which the former client had sought the firm's advice, should issue. This was on the basis of the conflict of interest that was seen to arise from the imputation that should be made of the knowledge of the members of the firm whom the former had consulted to those members of the firm whom the then clients of the firm were consulting.
In that case, it had been pressed on Justice Ipp that the knowledge of the members of the firm which the former client had consulted should not be regarded as the knowledge of the members of the firm which the then client was consulting. His Honour distinguished the case referred to me in this connection, Rakusen v Ellis Monday and Clarke [1912] 1 Ch 831, involving a two‑partner firm. There, the party seeking the order had consulted one of the partners while the other was away and knew nothing of the consultations concerned. The applicant then changed solicitors and the other party to the litigation had retained the other partner as his solicitor. In Mallesons Stephen Jaques v KPMG Peat Marwick (supra) Justice Ipp distinguished that case on the basis that the Court concluded that the other partner was not intending to act as partner of the firm which had previously acted for the plaintiff, and cited the remarks of Bryson J in D&J Constructions Pty Ltd v Head (1987) 9 NSWLR 118 at 122 – 123 as "particularly apposite". Those remarks were also referred to by counsel for the applicant here. Those remarks in material part read:
"Where confidential information has been communicated by a client to a solicitor and is relevant to litigation in which that client is now engaged and is still available to the solicitor, the court should take a cautious approach to any proposal that it should allow the solicitor to act against that client: the considerations are much the same whether the information was communicated in the course of the litigation itself or in earlier business and whether or not the solicitor is a sole practitioner or is one of a number of partners or was employed by a principal. I would think that the court would not usually undertake attempts to build walls around information in the office of a partnership, even a very large partnership, by accepting undertakings or imposing injunctions as to who should be concerned in the conduct of the litigation or as to whether communications should be made among partners or their employees."
It was put to me that remarks made in Newman v Phillips Fox (1999) 21 WAR 309 by Steytler J, remarks rather more accommodating of the possibility of effective walls being built within law firms to prevent information flows, should not be interpreted as affecting the situation before the Court here. Rather, his Honour's remarks should be taken as relating only to the matter of "the knowledge of those joining the new firm" and whether in the case of such an addition to a firm their knowledge should "automatically be imputed or attributed to other lawyers at that firm" (at [29]).
I indicated in argument that I was not convinced that the true position in this State is one quite as preclusive of the possibility of sequential representation as this submission of the applicant indicated. I indicated that it appeared to me more consistent with the discretionary basis upon which jurisdiction to make these orders rested that the court would likely intervene unless it was satisfied that there is no actual or apparent risk of disclosure; and the risk must be one that is real and not merely fanciful or theoretical: Seaman at [34.0.5B] and the authorities there referred to. However, I take the dicta in Mallesons (supra) to indicate to me that when the partners concerned had been in partnership during the period or a significant part of the period first one client then another had been taken on, I should be particularly alive to the appearance of a conflict of interest arising from sharing of confidential information, advertently or inadvertently. This would be even more strongly the case here, when there was a period when the firm acted for both clients, and the firm's conflict management system had not revealed the matter. This is absent peculiar circumstances like those in Rakusen (supra), above.
Counsel for the respondent laid heavy emphasis on the need for me to find a real and sensible possibility of conflict. He laid heavy emphasis on what was submitted to be a fundamental problem at the heart of the applicant's case. This problem had to do with whether the confidential information in the Family Court matter was in fact capable of giving rise to a reasonable concern about a conflict of interest if it were disclosed to the solicitors acting for the plaintiff in the present litigation. It was suggested to me that the family law matter was one in respect of which, on the material before me, I could not be satisfied that the issues involved, or at least some of them, were sufficiently closely related to the ones in issue in the underlying proceedings. Here heavy emphasis was laid on the fact that the precise nature of the information provided to the firm in the family law matter had not been rehearsed in the affidavit evidence in this case from the third defendant applicant for the injunction. Nor for that matter was there any evidence that any information provided in the family law matter was of a confidential nature.
In this case I have been guided in approaching this issue by dicta from the judgment of Lord Millett in Prince Jefrie Bolkiah v KPMG [1999] 2 AC 222 at 235. Bolkiah is referred to as setting the correct approach in the case involving an application by a former client of a firm for an injunction of the sort sought before me herein of PhotoCure ASA v The Queen's University of Kingston [2002] FCA 905, at [48]. Lord Millett said in the passage quoted in material part:
"Accordingly, it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious."
Later in PhotoCure at [51] Lord Millett is quoted in material part as follows:
"Once the former client has established that the defendant firm is in possession of information which was imparted in confidence and that the firm is proposing to act for another party with an interest adverse to his in a matter to which the information is or may be relevant, the evidential burden shifts to the defendant firm to show that even so there is no risk that the information will come into possession of those now acting for the other party … But the starting point must be that, unless special measures are taken, information moves within a firm."
In these circumstances, I do not believe it is necessary for the applicant to go in detail into the information provided to the firm of solicitors in the family law matter. Consistently with the approach in PhotoCure, it appears to me that it is reasonable to suppose information was provided relevant to, as Mr Fels indicated in his affidavit sworn 9 December 2003, at par 6, his "business relationship with the Plaintiff and my understanding and interpretation of the terms of my business relationship with him [through the corporate joint venture arrangements and trust]", including, "information concerning my understanding of the Plaintiff's and my respective financial rights, claims, entitlements and obligations in respect of [the venture] and in respect of each other". I have been fortified in this by reference to the notes of the December 1997 meeting of Bower to which I referred earlier. Although the case is closer to the line than the others upon which the applicant heavily relied, it appears to me consistently with the approach in the Bolkiah case that the applicant has discharged its burden in this respect.
From this it would follow that the matter then becomes one of whether the respondent has met the evidential onus to which the Bolkiah case referred. Here, in addition to the matters to which I referred when I indicated what I took from the Malleson case, there is the concern arising out of the fact that a file does indeed exist to which the firm has access. There is the countervailing consideration that those lawyers who were associated with the file left the firm in 1998, and any exchanges that they may have had with Mr Bower or other members of the firm who may be involved with Mr Bower in working on the present case likely last occurred approximately six years ago. There is also the matter of the indication from Mr Bower that he has no intention of accessing the file, and that instructions have been given in the firm not to access the file. There is, finally, the emphasis laid in the Newman case on the desirability of the court determining on a real and sensible possibility of conflict, in this case arising out of the perception that confidential information might well flow, or that confidential information previously exchanged but now forgotten might subsequently be recalled: on recall as a consideration, see Seaman at [34.05.5A].

In this case, despite the several removes of the information in question from Mr Bower, I have concluded that an injunction should issue on the basis of the jurisdiction resting in the protection of confidential information.
This makes it unnecessary for me to consider the further bases for jurisdiction in this area referred to by Steytler J in Newman at [18]:
"Those bases are … restraint from a breach of fiduciary duties in the context of a conflict of interest and the court's control over the conduct of solicitors as its officers."
I note that these bases might be capable of grounding jurisdiction to make an order where protection of confidential information is not at stake. Here I am assisted by PhotoCure where at [57] Goldberg J makes plain that there is no room for the operation of those two bases where none of the persons who were involved in the receipt, in this case of family law instructions and the giving of advice on them, are involved in acting in the present proceedings represented by the statement of claim of September 2003.
The order will be as asked, except that the costs in this matter will not be awarded on an indemnity basis. I do not discern in this matter any of the bases upon which an indemnity award has usually been rested: Seaman [66.1.6A] and following.