Bansal & Mathai
[2023] FedCFamC2F 307
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Bansal & Mathai [2023] FedCFamC2F 307
File number: MLC 496 of 2021 Judgment of: JUDGE O'SHANNESSY Date of judgment: 21 March 2023 Catchwords: FAMILY LAW – application to restrain a solicitor – change in the legal test while the judgment reserved – test now is “might conclude” – refinement not revolution – application granted. Legislation: Evidence Act 1995 (Cth) s 38
Family Law Act 1975 (Cth) ss 78, 79
Federal Circuit and Family Court of Australia Rules 2021 (Cth) r 12.06
Legal Profession Uniform Law 2014 (NSW)
Legal Profession Uniform Law Application Act 2014 (Vic)
Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 r 27
Cases cited: ACN #164 Pty Ltd & Anor v Suckling [2018] VSC 620
Burns & Sellers [2018] FamCA 91
Calverley v Green (1984) FLC 91-565
Charisteas & Charisteas (2022) FLC 94-109
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353
County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193
Dugan and Others v Process Holdings Pty Ltd [2021] VSC 555
Dyer v Chrysathou(No2) (Injunction) [2012] FCA 641
Grieves and Tully [2011] FamCA 617
Grimwade v Meagher [1995] 1 VR 446
Harlen & Hellyar [2020] FamCA 21
Holborrow v McDonald Rudder [2002] WASC 265
Jones v Dunkel [1959] HCA 8; 101 CLR 298
Kallinicos v Hunt (2005) 64 NSWLR 561
Keskin & Kekin and Anor (2019) FLC 93-932
Kooky Garments Ltd v Charlton [1994] 1 NZLR 587
Kossatz & Kossatz (1993) FLC 92-386
Mitchell v Burrell [2008] NSWSC 772
Mumbin v Northern (No 1) [2020] FCA 475
Nash v Timbercorp Pty Ltd (in liq) [2019] FCA 957
Osferatu & Osferatu (2015) FLC 93-666
Porter v Dyer and Anor (2022) 402 ALR 659
Sellers and Burns and Anor [2019] FamCAFC 113
Yunghanns v Elfic Ltd (unreported Supreme Court of Victoria, Gillard J, 3 July 1998)
Division: Division 2 Family Law Number of paragraphs: 179 Date of last submissions: 2 December 2022 Date of hearing: 15 December 2021 Place: Melbourne Counsel for the Applicant: Mr A. Panna of senior counsel Solicitor for the Applicant: D Lawyers Counsel for the First Respondent: Mr C. Twidale Solicitor for the First Respondent: Vernon Da Gama And Associates Counsel for the Second and Third Respondents: Mr D. Mort ORDERS
MLC 496 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR BANSAL
Applicant
AND: MS MATHAI
First Respondent
MR MATHAI
Second Respondent
MS B MATHAI
Third Respondent
order made by:
JUDGE O'SHANNESSY
DATE OF ORDER:
21 March 2023
THE COURT ORDERS THAT:
1.D Lawyers (“the Solicitors”), by itself and its servants, employees or agents thereof, be restrained from acting for, working for, aiding or otherwise assisting the Applicant in relation to, or otherwise in connection with, this proceeding.
2.The Solicitors’ Principal, Ms D, be and is permitted to participate as a witness in these proceedings.
3.Further hearing of all extant applications is listed for directions on Monday 15 May 2023 at 9:30am.
AND THE COURT NOTES THAT:
A.If in any proceedings there are allegations of family violence and the provisions of section 102NA of the Family Law Act 1975 apply (see attached Family Violence Information Sheet), any unrepresented party will not be permitted to personally cross-examine the other party/parties.
B.Affected unrepresented parties may apply to the court and then to the Commonwealth Family Violence and Cross-Examination of Parties Scheme (“the Scheme”) for representation but any such application must be made at least 12 weeks prior to the final hearing.
C.Further information about the legislation and the Scheme can be found at Part 4 of the attached Family Violence Information Sheet.
D.If s102NA applies and a party becomes unrepresented after trial directions have been made, that party is required to promptly advise the Court.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Bansal & Mathai has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE O’SHANNESSY
The question I must decide is whether one party should be prevented from further retaining the solicitor of his choice after objection by other parties.
The question arises in a property dispute after the short marriage between the Applicant Husband, Mr Bansal (‘the Husband’), the First Respondent Wife, Ms Mathai (‘the Wife’) and the Second and Third Respondents, Mr Mathai (‘the Wife’s father’) and Ms B Mathai (‘the Wife’s mother’), to collectively be referred to as ‘the Wife’s Parents’. The Wife’s Parents were joined to these proceedings on 13 April 2021.
The matter came before me on 15 December 2021 listed as an Interim Defended Hearing on the Application in a Case filed by the Wife’s Parents on 17 August 2021 to restrain the Husband’s solicitors, D Lawyers (‘the Solicitors’), and their Principal Solicitor, Ms D, from acting on his behalf. The Wife filed a similar application on 6 September 2021.
The parties have competing versions of the arrangements around the purchase of a dwelling in Suburb C (‘the Property’), in the name of the Wife’s Parents, that was used for about 6 ½ months as the matrimonial home of the Husband and the Wife. The total purchase costs of the Property were $901,965 and it is common ground that, whatever was agreed, the Husband and Wife put in or contributed a total of $100,000 and the Wife’s parents contributed, by borrowing or directly, the balance. The parties also have competing accounts of a meeting held on 25 February 2020 between the Solicitors, the Husband, the Wife and the Wife’s father (‘the Meeting’). After the Meeting, a draft loan document (‘the draft agreement’) was prepared by the Solicitors.
The Property is now said to be worth about $960,000, more or less. The question of who is entitled to that increase has contributed to this litigation.
BACKGROUND
The Husband and the Wife were married in 2019, separated on 13 June 2020, and divorced on 16 September 2021. There are no children of the short marriage. The Property was purchased between marriage and separation. The Husband, the Husband’s father, the Wife and the Wife’s Parents at some point contributed money to the purchase of the Property and the Husband and the Wife lived in the Property.
The Husband is 30 years old and is an “entertainer”. The Wife is 28 years old and works in the Wife’s Parents’ business in the suburbs of Melbourne.
The Husband and the Wife married in a wedding in the cultural tradition of the parties. The Wife’s Parents say they contributed a large amount of money in jewellery, gifts and cash to the Husband and his family during various ceremonies around the time of the wedding. The Husband claims that he and his family also contributed very expensive jewellery at this time.
THIS HEARING
This matter was heard on the papers, on 15 December 2022, notwithstanding that the injunction sought was permanent in nature. At the conclusion of the hearing I reserved my decision. The parties were then to provide further authorities to me and they did so.
While the decision was reserved, the Full Court of the Federal Circuit and Family Court of Australia handed down the decision of Charisteas & Charisteas (2022) FLC 94-109, (‘Charisteas 2022’), delivered on 7 October 2022. On 11 November 2022 I made orders permitting the parties to make further submissions about that decision. The Wife and the Wife’s Parents declined to make further submissions and the Husband provided short written submissions via email on 2 December 2022.
I acknowledge that this ruling and these reasons significantly exceed the Court’s guideline that a decision should be delivered within 3 months of the conclusion of the hearing. Had I determined the matter before Charisteas 2022, there was the potential of error as to applicable law on one point of the dispute. Nonetheless, I apologise to the parties for the delay in determining the matter. I have read the parties’ affidavits, the transcript of the proceedings and the written submissions. I have a clear recollection of the evidence, the submissions and the issues.
Documents relied upon
The parties relied on multiple affidavits, case summary documents filed in the lead up to the hearing, oral submissions during the hearing and written submissions filed after the hearing.
The Husband relied upon the following documents:
·The Husband’s affidavit filed 1 December 2021;
·Ms D’s affidavit filed 1 December 2021;
·The Husband’s affidavit filed 23 November 2021;
·The Husband’s affidavit filed 17 November 2021;
·Ms D’s affidavit filed 17 November 2021;
·The Wife’s affidavit filed 6 September 2021;
·The Wife’s Parents’ affidavit filed 13 August 2021;
·The Husband’s statement of claim filed 20 August 2021;
·Written submissions of 18 pages and 130 paragraphs filed 8 December 2021 (before the hearing);
·A case outline filed 13 December 2021;
·Written submissions regarding Charisteas 2022 upon invitation from the Court, of 5 pages and 23 paragraphs filed 2 December 2022 (after the hearing); and
·Written submissions of 18 pages and 132 paragraphs filed 14 January 2022 pursuant to leave at the hearing and responding to the submissions of the Wife’s Parents filed 10 January 2022 (including those parts wider than the leave discussed).
The Wife relied upon the following additional documents:
·The Wife’s affidavit filed 6 September 2021;
·The Wife’s affidavit filed 24 November 2021;
·The Second Respondent’s affidavit filed 11 May 2021;
·The Wife’s Parents’ affidavit filed 13 August 2021;
·The Wife’s Parents’ affidavit filed 24 November 2021;
·An outline of case filed 9 December 2021 of 9 pages and 47 paragraphs;
·A supplementary outline of case filed 10 January 2022, pursuant to leave at the hearing, of 3 pages and 11 paragraphs;
·The Husband’s statement of claim filed 20 August 2021; and
·The Wife’s Parents’ defence to statement of claim filed 11 October 2021;
In addition to the documents referred to above, the Wife referred to all of the affidavits filed in the proceedings, not as to the truth of the contents, but as to the fact of what was stated therein at the time.
The Wife’s Parents relied upon the following additional documents:
·The Wife’s Parents’ response to final orders filed 11 May 2021;
·The Wife’s Parents’ affidavit filed 11 May 2021;
·The Wife’s Parents’ response to application in a case filed 14 July 2021;
·The Wife’s Parents’ affidavit filed 14 July 2021;
·The Wife’s Parents’ affidavit filed 19 July 2021;
·The Wife’s Parents’ application in a case filed 13 August 2021;
·The Wife’s Parents’ affidavit filed 13 August 2021;
·The Wife’s Parents’ affidavit filed 27 September 2021;
·The Wife’s Parents’ written submissions filed 27 September 2021;
·The Wife’s Parents’ defence to statement of claim filed 11 October 2021;
·The Wife’s Parents’ affidavit filed 24 November 2021;
·The Wife’s Parents’ case outline filed 8 December 2021 of 11 pages; and
·The Wife’s Parents’ supplementary submissions of 16 pages filed 10 January 2022, partly with leave at the hearing and partly wider than the leave discussed.
I take into account all of that evidence and all of the submissions.
Objections to material
On 14 December 2021, the Husband filed a “Summary of Argument” outlining objections to the Respondents’ affidavits. Those are reflected in the chart attached to these reasons at Appendix 1. The parties agreed I should deal with those in Chambers. No party requested detailed reasons on rulings on objections and a short reason is included alongside each objection in the appendix. A ruling of relevance covers the range of relevance from just relevant to highly relevant. Because an assertion in an affidavit in a hearing on the papers is admissible does not mean it has real weight. In this case I have made an exception because my rule of thumb is that the minimum requirement when taking objections is to have discussed objections in a timely manner with opposing counsel and to provide a copy of the relevant page/s of the affidavit marked up with the objection/s.
By and large the objections relate to statements of opinion or argument that were entirely consistent with contentions made in oral or written submissions and outlines of case that were responded to. Procedural fairness required I consider those submissions and opposing submissions. The material struck out made no material difference to the case.
The Wife and the Wife’s Parents’ case
The Wife and the Wife’s Parents’ cases overlap and each supports the other. It is unnecessary to set out these cases separately. The Wife and the Wife’s Parents assert that at trial the Court will need to determine whether the parties entered into an agreement as each alleges (‘the Triable Question’). The Wife and her parents asserts that the Solicitors should not act for the Husband because:
·The Wife, the Husband and the Wife’s father met with the Solicitors on 25 February 2020 (‘the Meeting’), provided information and instructions to the Solicitors, relied upon the Solicitors to prepare an agreement and that meeting led to the draft agreement;
·The events of the Meeting will be relevant to the ultimate determination of the Triable Question. The Wife says that before the Meeting, on “about” 18 February 2020, the Husband and the Wife spoke to the Solicitors by telephone about what had been agreed. She alleges that the discussion on “about” 18 February 2022 was the precursor to the Meeting and that she relied upon the Solicitors as the lawyer for herself and the Husband;
·The Wife and the Wife’s father say they met with the Solicitors on 25 February 2020 (the Meeting) and relied upon the Solicitors to prepare an agreement on their instructions given at the Meeting and each understood the Solicitors were to act for them;
·The Wife and the Wife’s parents say the draft agreement does not reflect the agreement or the discussions at the Meeting with Ms D. The Wife says that because of that Ms D will be required to give evidence;
·There is a personal friendship between Ms D and the Husband;
·The Wife says there is a breach of the Solicitors’ equitable duty of loyalty owed to her by the Solicitors because of the Wife’s statements to her on “about” 18 February 2020 and the instructions and information provided at the Meeting from the Wife and the Wife’s father and their reliance upon the Solicitors arising from the Meeting;
·The Wife and her parents say these events also raise a potential conflict of interest between the interests of the Solicitors and the Husband; and
·The Wife and her parents say because of those matters the administration of justice requires that the Solicitors be restrained from acting in these proceedings.
The Wife’s submissions include:
27. There is a dispute as to the level of engagement between [Ms D] and the First and Second Respondents during the meeting, and whether [Ms D] took and examined documents (such as bank statements) presented by the Second Respondent. It is the First and Second Respondent's evidence that during the meeting [Ms D] discussed the parties' agreement at length and detailed instructions were provided by the Second Respondent. For example, the Second Respondent says the information contained in the document could not have been formulated without those instructions
…
The administration of justice requires [Ms D] to be restrained from acting
31. When the Court is being asked to determine the Triable Question (see paragraph 17, above), what occurred during the 25 February 2020 meeting will be very relevant. [Ms D], as a non-party to the alleged agreement, will give probative evidence about whether the parties had in fact reached an agreement and what those terms were.
32. A fair-minded, reasonably informed member of the public could only conclude that the proper administration of justice requires that [Ms D] be prevented from acting in the interests of the protection of the integrity of the judicial process and appearance of justice.
33. There is no doubt that [Ms D] cannot give impartial evidence about what happened during the meeting whilst at the same time acting as the advocate for her client.
34. Even if [Ms D’s] recollection of the meeting is ultimately accepted by the Court following the trial, for the same reasons stated, there can be no reason why she continue to act for the Applicant whilst the terms of the agreement remain in dispute .
35. The Court should find that it is in the administration of justice that [Ms D] be restrained from acting for the Applicant and the order described at paragraph 1 and 2, above.
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Duty of loyalty
36. The Court can restrain a solicitor from acting against a former client, not only on the grounds of the prevention of disclosure of confidential information and public pol icy; but also on the basis of the solicitor's duty of loyalty to the former client, which continued after termination of the retainer.
37. In Spincode Pty Ltd v Look Software Pty Ltd and Others (2001) 4 VR 501 Brooking JA at [53] opined that the duty of loyalty, which survived termination, was an independent ground for the jurisdiction and identified the following three possible sources of the relevant duty:
a. an equitable obligation of loyalty which forbids the holding of two successive inconsistent engagements
b. an equitable obligation of loyalty , which imposed 'an abiding negative obligation not to act against the former client in the same [or closely related] matter'.
c. an implied term of the contract of retainer that a solicitor would not act against a client in the dispute in relation to which the solicitor had been retained by it.
38. Brooking JA's formulation of the duty of loyalty has been endorsed by numerous decisions in Victoria, although the preponderance of authority throughout Australia has not been adopted throughout Australia, but we submit are consistent with the Full Court of the Family Court's ruling in Osferatu and Osferatu [2015] FamCAFC 177.
[Notations omitted]
It was also asserted, in the outline of case and at hearing, that I should regard the Solicitors’ evidence as “not convincing” and, notwithstanding disputed evidence and a hearing on the papers, that:
46. On the balance of probabilities, this Court can be satisfied the First Respondent did rely upon [Ms D] to prepare the document. The Applicants 9 April 2021 affidavit admits this to be the case. It will be a breach of that duty of loyalty for [Ms D] to continue to act for the Applicant having taken detailed instructions from the First Respondent.
In a thumbnail sketch the Wife’s counsel discussed her case as follows:
MR TWIDALE: …The genesis of this application is that firstly, there is a meeting on 25 February 2020. It is common ground that the three – the three defendants and the applicant met at the offices of the solicitor. It is a dispute as to what was discussed at length at that meeting, what documents were presented at that meeting, whether advice was given as alleged by either party. But it is common ground that there was a meeting. In relation to why this meeting is important, it’s important because the parties at least – on any ground – on any view of the world, discussed an agreement that had been reached by the parties.
The applicant says the parties had reached an agreement and says that agreement is encapsulated in a loan document, which your Honour will see in reading the material. It is a written loan document in draft form. My client however will say the agreement is of different terms and of a different nature. So the dispute for trial will be what are the terms of that agreement? The second case I will take you to … is the matter of County Securities. It’s a NSW Court of Appeal decision which says when you look at post-contract – post-contract conduct, you can infer from that conduct what the terms of that agreement were. You are entitled to say what did the parties do after the contract when determining whether there was an agreement reached as alleged and what those terms were.
And what will happen in this hearing of this trial is that …at least my client…will say that… [the] solicitor will be required to give evidence as to the substance of that conversation on 25 February because that will relate to what was in fact agreed between the parties. What was agreed on that day or what happened on that day will decide what the actual terms of the relationship was between the applicant on the one part and the respondents on the other. And if …the solicitor is required to give evidence about the substance of that meeting, she can’t at the same time continue to act for the applicant in this case. She is in fact restrained under the administration of justice grounds because she is essentially has two hats on. She is giving material evidence about a meeting and she is acting for the applicant at the same time.
…
The Husband’s case
The Husband’s case is that for a party or the Court to interfere with a parties’ choice of solicitor is a most serious matter. He says that can only be done in certain proven circumstances. To restrain the Solicitors from acting for him in this case, he says, would work an injustice on him. He says that the solicitor, Ms D, will not be a witness because he does not propose to call Ms D at final hearing. The Husband says that in any event the fact that an acting solicitor is to give controversial evidence in the case at hand is, of itself, not a sufficient ground to restrain the Solicitors from acting.
The Husband and the Solicitors assert that the Solicitors never acted for, or took instructions from, the Wife or the Wife’s Parents and that the Wife’s Parents were advised by the Solicitors to get their own lawyers and they were told that Ms D would only take instructions from the Husband.
The Husband asserts that no information was provided by the Wife or the Wife’s Parents in the few minutes of the Meeting before, on Ms D’s initiative, it ended. The Husband asserts that in any event, the Meeting was very short, and if any information was provided in the Meeting, it was not ‘confidential,’ as it was said to be provided in the presence of the Husband and the Wife and the Wife’s father.
Senior counsel for the Husband asserts that the relevant inquiry is the agreement, or circumstances, of the basis upon which the former matrimonial home was purchased in 2019. He highlights that the controversial draft agreement was drawn by the Solicitors after the Meeting, but months after the purchase and the settlement of the purchase. He says it is common ground that the draft agreement was never agreed upon or adopted and hence the events of the Meeting are a distraction and not material to what will be the inquiry at final hearing.
In a thumbnail sketch the Husband’s senior counsel discussed his case as follows:
MR PANNA: Your Honour, this is a dispute primarily between the husband and the parents of the wife. So – and it’s a relatively simple dispute in the sense that what the court in the substantive proceeding will need to determine is what was the agreement between the parties back in October or November when they entered into the purchase of the property? What is not in dispute is the contributions made by the husband and the wife. What is not in dispute is the amount that the wife’s parents put into the property. So what was the agreement prior to the meeting of 25 February? Now, my learned friends have said that the meeting on 25 February is the – is a crucial meeting. We say, with respect, the agreement between the parties pre-dates that.
As far as the meeting on the 25th is concerned, we say the meeting, as alleged by the respondents, did not occur. It was a five minute meeting; it was not a 15 minutes. It seems to be the maximum that has been put by the respondents. There was no discussion about the terms that the respondents say was the agreement between the parties. What is not in dispute is that an agreement was in fact drawn up by the solicitor based upon his – the evidence from the husband and the solicitors, based upon his instructions. Now, what follows from that is that nobody – that is the respondents do not agree that that represents the terms of whatever was said to the solicitor. …
…
MR PANNA: …irrespective of how – what the evidence of the respondent [is] as to what was said, it’s quite clear that nobody agrees that …these are the terms. The evidence from the respondent says that this draft document did not represent the terms of the parties and this draft document does not represent what was said to the solicitor. Now, this meeting of the 25th has generated a great deal of heat in this matter because each side makes statements…where both can’t be right. Are we – and my submission would be that this is an overblown meeting where …it cannot determine the real issues between the parties.
The real issue between the parties is what was the agreement; not what was said to the solicitor but what was in fact a real agreement between the parties. Now, what is not in dispute is that the second and third respondents say in their defence to the statement of claim – now, your Honour will see that at paragraphs 4(f) of the defence to the statement of claim filed by the second and third defendants – that the agreement originally was conditional and it was a trust; that the property was going to be purchased on trust for the husband and wife.
However, what they then say is because of events that occurred after the purchase of the property, that original agreement was just to buy the property on trust for the husband and wife. It came to an end and …their contention is that the husband and the wife do not have an equitable interest in the property. Having said that however, if one looks at the affidavit filed by the second respondent on 14 July at paragraph 8, the second and third respondents say that the husband and wife have a beneficial interest in the property as to 11 per cent. Now we’re not arguing about whether it’s 11 per cent or not but it appears on the respondent – the second and third respondent’s own evidence there is a beneficial interest in the property. And what the court will have to determine is, what was that agreement? So when it comes to whatever was said apparently at the meeting, we say none of that can be confidential. It cannot be confidential because both the husband – the husband was present so whatever was said is information that can be used by the husband.
My learned friends said that [Ms D] will be required to give evidence. With respect to my learned friend, I – how can he call – unless he wants to call [Ms D] to give evidence, when her evidence is no such discussion took place, I can assure him, given the evidence that we have got before the court, the husband is not going to call her to give that evidence. So she is not going to be a witness in this case. So as far as the parties are concerned, the agreement that was drafted has not been executed and the court will have to determine what are the terms of the arrangement. That essentially – that will take us then to the submission I will be making that whatever was discussed was not confidential information. It cannot be relied upon as a basis for restraining the – [Ms D]. The authorities are quite clear as to what needs to be established.
As far as saying that there was a fiducial relationship, let’s just put this into context. The husband’s position is that these – the respondents – that the wife and her father turned up uninvited. There is a dispute about that. There was a five minute conversation where the solicitor said “I’m not going to advise you; I’m not going to act for you; I have got instructions from the husband”. The respondents’ position is the discussion took place on a longer basis; about 15 minutes where information was conveyed. Now, you – we say, well, what information was conveyed that can be confidential. And in my submissions I set out all the authorities as to why we say this just is not a proper basis for making a finding that anything that was said at that meeting could possibly be confidential information for the purposes of restraining a solicitor. When it comes to the administration of justice….
…
…As far as administration of justice is concerned, whilst there is jurisdiction of the court to do so, the courts have repeatedly said great caution must be exercised before restraining a solicitor. And if your Honour comes to a conclusion that there was no confidential information conveyed and the cursory meeting between the wife and second respondent and the solicitor is no more than that. We say there is no fiduciary duty owed in those circumstances, even if one can say there was a solicitor-client relationship. One asks rhetorically, even if there were a solicitor-client relationship, what is the alleged breach of duty? Merely continuing to act is not sufficient. The respondents must identify the alleged breach that would occur and if it’s confidential information or they’re stuck with the fact there is no confidential information and that’s the problem that they ultimately face.
As to the Ms D as a witness issue, the Husband also relied on written submissions filed 8 December 2021, that included:
37. The Husband deposes that on the 25th February 2020, at about 9.30 am, he was conferring with [Ms D] about his understanding of the agreement or understanding with the Respondents when his Wife and the Second Respondent came to the solicitor’s offices unannounced and uninvited.
38. There is a dispute between the parties as to the circumstances in which the meeting at the solicitors offices occurred and what discussions ensued after the Wife and the Second Respondent attended the office of [Ms D].
39. The evidence of the Husband and [Ms D] is to the effect that the Second Respondent began to say to [Ms D] that he wanted a loan agreement to be prepared and he produced a document from his own lawyers that he said was a draft of the loan agreement which he wanted her to read.
40. [Ms D] refused to discuss the matter with the Second Respondent and told him that she was already receiving instructions from her client, the Husband, and she would not discuss the matter with the Second Respondent who should get his own legal advice.
…
53. This alleged telephone conversation is denied by the Husband and [Ms D] in their said 1 December 2021 affidavits. They depose that no such telephone conversation occurred.
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60. The draft agreement as far as the Respondents are concerned does not represent whatever they contend was the agreement or understanding. It is common ground that the draft agreement was not executed by the Respondents as they did not agree with the terms expressed therein.
61. It is also clear that whatever was discussed between the parties on the 25th February 2020 or any other time, and whatever information was allegedly given by the First and Second Respondent to [Ms D] about the agreement that the Respondents allegedly had with the Husband, that information was not accurately contained in the draft agreement provided by the Husband’s solicitors to them.
62. It is unclear what the Respondents contend was the agreement or understanding between the parties in respect of the property.
…
91. The third point to make about this issue is that even if, contrary to the Husband’s and the solicitor’s evidence, there was discussion on the 25th February 2020 as alleged by the Wife and Second Respondent, that information was not and could not be confidential.
92. It is a misconception to assert that the information about the terms of the agreement or understanding about the property, conveyed in the presence of the Husband, could be classed as “confidential” and that the Husband and the solicitor could be restrained from disclosing or using it in future.
…
103. The first point to make on this issue is that there is no plausible basis for the assertion that the solicitor will be a witness for the Husband.
104. It is clear on the evidence filed by the Husband and [Ms D] that they contend that she did not have any discussions with the Wife and Second Respondent about the terms of the agreement or understanding whatsoever and that she only took instructions from the Husband and the draft agreement was based solely upon his instructions.
105. The central issue in this proceeding between the parties is the terms of the agreement or understanding entered into by the parties in order to purchase the property in October 2019. That agreement or understandings predate the meeting with [Ms D] in February 2020.
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107. It is implausible that the Respondents would call [Ms D] to give evidence in this proceeding in respect of any issue given what she and the Husband have deposed to in their affidavits.
…
109. However, as it was pointed out in Incentive Dynamics, at page 9 of 10 by Justice North:
“Although it may be unwise for a solicitor to continue to act in the circumstances, it does not follow that the Court will restrain the continued engagement: Yamaji v. Westpac Banking Corporation (No. 1) (1993) 115 ALR 235, at 237. An applicant for an injunction must establish more than that the solicitor may be called as a witness in the case. Such applicant must show a real and sensible possibility of the misuse of confidential information. As I have already found, the applicants have not done so in this case.”
Law as to fact finding on hearing on the papers
At the hearing, counsel for the Husband was pressed whether I could, at the hearing on the papers, prefer the Husband’s (and Ms D’s evidence) to the parties and I inferred that this was sought from [66] and [106] as follows:
66. It is submitted that the issues for determination by the Court in this application are:
(a) What, if any, information was provided to the Husband’s solicitors by the Respondents on the 25th February 2020 or some other time;
(b) whether any such information was confidential or could be classed as confidential or is now confidential;
(c) whether there any risk that such confidential information could be misused to the detriment of the Respondents;
(d) whether the solicitors were acting for all parties in drawing up the draft agreement;
(e) whether there is any identifiable conflict of interest in the solicitors continuing to act for the Husband;
(f) whether there is any breach of duty owed to the Respondents in the solicitors continuing to act for the Husband;
(g) whether there is any basis to restrain the solicitors from continuing to act for the Husband on the basis of “public policy”.
…
106. It must, therefore, follow that [Ms D] is not a material witness on behalf of the Husband in respect of the central issue about the parties arrangements or understanding because she has deposed to, as has the Husband, that there was no discussion with the Respondents about those arrangements or understandings and that the draft agreement was only based on the instructions from the Husband.
In his first written submissions, the Husband had argued his case on the basis that I would accept (on a hearing on the papers) his version and Ms D’s version of the Meeting, and not the Wife’s version or the Wife’s father’s version[1]. The Wife had contended that inconsistencies in the accounts of the Husband and of Ms D meant I should prefer her and her parents account.
[1] See paragraphs 8 and 9 of the Wife's affidavit filed 6 September 2021.
I raised with senior counsel for the Husband what the law was about findings of fact, on a hearing on the papers, on an application to restrain a solicitor. The point being on a hearing on the papers, evidence is not tested in the usual method of cross-examination. At the request of the parties, I permitted the parties to provide further written submissions and authorities on that point after the hearing.
In those supplementary submissions filed 14 January 2022, the Husband asserted, on that issue, as follows:
No findings of fact on untested evidence
4. It is submitted that the Court should reject the submissions and invitation by the Second and Third Respondent to draw adverse inferences against the Husband or the solicitor on untested evidence and on submissions that were never put to the Husband and the Solicitor.
5. In Grattan and Grattan (No. 3) [2014] FamCA 839, Justice Cronin was asked by the Applicant /Wife seeking to restrain a solicitor from continuing to act and to draw adverse inferences against him. His Honour, at [22], said:
“In my view, that is an inference I would not be prepared to draw on the untested evidence. I am not in a position to make a finding of fact about untested evidence. The affidavit of [Mr E], late as it was, remains silent on the issue. I do not draw an adverse inference based upon that silence.”
6. At [24] His Honour said,
“There was considerable evidence about the conduct and behaviour as between the Husband and [Mr E] but in my view, it would be inappropriate for the Court to draw any adverse inference on the untested evidence. [Mr E] and the Husband (like the Wife) had known each other for many years and just what inferences could be drawn, I am unsure.”
7. [Mr E] was a solicitor who had extensive dealings with the Wife and the Husband, both socially and professionally. See, [13]-14], [16]-[17].
8. Despite the fact that the solicitor had acted for and advised the Wife and was well known socially to both the Wife and the Husband, his Honour dismissed the application to restrain the solicitor.
9. To a similar effect, that it is inappropriate to make adverse findings on untested evidence, see, Craig Duggan v. Process Holdings Pty Ltd [2021] VSC 555, [139], per Justice Lyons.
10. For the purpose of determining this application to restraint the solicitor it is not necessary or desirable to resolve all issues about the circumstances in which the meeting of the 25 February 2020 came to be organised as they are peripheral to the substantive dispute and issues between the parties.
…
20. The Husband’s claim against the Respondents is set out in his statement of claim. The issues for trial will turn on the matters raised by the parties in their pleadings and not on the disputed events about the circumstances of this meeting or the alleged conflicting allegations about the Respondents’ intentions and discussions at the meeting.
…
22. It is necessary to clearly identify what was allegedly discussed at the meeting on 25 February 2020 in order to establish the factual context in which this application is made by the Respondents.
…
50. The Respondents invite the Court to make adverse findings and inferences from the alleged conflicting evidence filed on behalf of the Husband. For the reasons outlined above it is inappropriate for the Court to make findings of fact on untested evidence. See, Grattan & Grattan, above.
…
52. The central issue in this application is an objective consideration of what was discussed, and more particularly, what information was allegedly conveyed by the Second Respondent to the solicitor in the presence of the Husband and the Wife, and what follows as a matter of law from that meeting.
…
105. As the Respondents did not seek to cross examine the Husband or the solicitor the Court should not make findings about the veracity or integrity of the Husband or the solicitor on the disputed matters in the affidavits.
No party sought to cross-examine anyone. The parties prepared for, and advanced, a hearing on the papers.
Hence the Husband changed his position to assert that findings could not be made on the conflicting and untested evidence. The Husband’s supplementary submissions also asserted as follows:
61. Even if the Court were to accept that the Second Respondent did say and do what he has deposed in his affidavits, all that demonstrates is that he desired the solicitor to draw up an agreement that reflected what he believed was the agreement with the Husband. It can go no higher than to identify his belief about the terms of the agreement or understanding that he had or wanted to have with the Husband.
62. His belief as to the terms of the agreement or understanding was clearly not agreed to by the Husband and the draft reflected the Husband’s instructions to the solicitor about the terms of the agreement to be draw up.
63. Whether the Second Respondent gave the alleged instructions to the solicitor or not about what he wanted in the draft agreement, it is not in dispute that the draft produced by the solicitor did not reflect the Second Respondent’s view of the agreement or understanding he had with the Husband.
64. In those circumstances, it is difficult to identify in what way or to what issue the solicitor is a “material witness” in the substantive trial.
65. Even assuming that there was a discussion as alleged by the Respondents on that date, the question still remains: what is the relevance of that discussion to the substantive dispute. It is submitted that there is no relevance identified by the Respondents as to the material evidence that she can give.
66. It is submitted the assertion by the Respondents that the solicitor is a “material witness” who will be cross examined is untenable and misconceived.
…
68. In the recent case of Craig Duggan v. Process Holdings Pty Ltd [2021] VSC 555, Justice Lyons, at [61]-[65], helpfully summarised the relevant legal principles and at [66] to [71] the relevant solicitors rules in respect of an application to restrain a solicitor from continuing to act for the plaintiff.
…
82. At [20], his Honour[2] said:
“I do not accept that the mere circumstance that a solicitor will be a material witness, even on a controversial matter, of itself justifies restraining the solicitor from continuing to act. As Windeyer J pointed out in Scallan v Scallan [2001] NSWSC 1078, it is, for example, not unusual for instructing solicitors in contested probate proceedings to give evidence of facts relevant to instructions for and execution of a Will. Similarly, in contested conveyancing proceedings, it is not unusual for solicitors who have acted on the conveyance to continue to act in the proceedings for specific performance or rescission and to give evidence in those proceedings.
Accordingly, despite Rule 19 of The Law Society of New South Wales Professional Conduct and Practice Rules, which imposes a professional obligation (as distinct from a private right), I do not accept that in every case where a solicitor acting for a party is a material witness even on a controversial matter, the Court will restrain the solicitor from continuing to act.”
[2] Brereton J in Mitchell v Burrell cited at [36] of these reasons.
The supplementary submissions also asserted as follows:
77. The first point is that the Husband does not intend to call the solicitor as he contends that there is no material evidence that can be given by the solicitor in respect of the substantive dispute between the parties.
78. In those circumstances it is unclear how the Respondents intend to call the solicitor to be cross examined by them.
79. It is highly improbable that the Respondents will call the solicitor to give evidence about matters in which she has said and the Husband has confirmed were not discussed and that the draft agreement was on the instructions of the Husband.
80. In Mitchell v. Burrell [2008] NSWSC 772 the solicitor was restrained because he was likely to be a material witness on a controversial matter whose conduct and credit may be in issue in the proceedings and therefore may be unable to bring a proper professional and objective detachment to the proceedings.
81. What was critical in that decision was that the solicitor had previously given advice to the plaintiff about a matter in issue and his evidence potentially went to the central is issue in that case about what if any arrangements were agreed between the parties. See, [2], [4]-[5], [15], [16], [17], [18] and [19].
At [82] of his submissions, on the face of that paragraph, the Husband goes on to recite Brereton J in Mitchell v Burrell [2008] NSWSC 772 (‘Mitchell v Burrell’) at [20]. However, the passage, recited at [82] of the Husband’s submissions stops half-way through the actual [20] and that is not acknowledged[3]. I expect this was simple inadvertence but the omitted second half of the passage is significant and is recited at [39] of Charisteas 2022. The point is the omitted part (“… line is crossed only when the solicitor has a personal stake in the outcome…but involves the personal or reputational interest of the solicitor…”) when read with the “might conclude” test is significant and was so observed by the Full Court in Charisteas 2022.
[3] See recital of all of paragraph [20] of Mitchell v Burell later in these reasons under the heading “Legal Principles of the Authorities”.
The Husband’s submissions relied upon Holborrow v McDonald Rudder [2002] WASC 265 (Holborrow) to draw attention to the requirement of the clarity of evidence required to restrain a solicitor and that while credibility being at stake may constitute a personal interest inconsistent with the practitioners duty to the court and to the client, it was not every conflict of interest between solicitor and client that will give rise to a concurrent conflict of interest between the practitioner and his or her duty to the court. The Husband made the point that a mere allegation that the Solicitors may breach their duty to the Court is not a proper basis for a contention or finding that there is a real risk that they would breach their duty to the Court.
The point is made that the Husband asserts the Solicitors are not a material witness. That point is made in the context of the repeated assertion that the events of the Meeting are a distraction and will not be a material consideration at trial.
Chronology of significant events
It is not disputed that at marriage the Wife moved into the Husband’s parents’ home to live with the Husband. After a few months, the Husband and the Wife asked the Wife’s Parents to assist them with acquiring a home. The Husband and the Wife visited a bank but were told that they did not qualify for a loan. It does not appear disputed that there was serious conflict between the Husband’s parents and the Wife during the short time she lived with the Husband and his parents at the Husband’s parent’s home which resulted in the Wife leaving that home.
The parties agree that shortly after the request to assist there were further discussions about the purchase of a house by, or for, the Husband and the Wife.
The Wife and the Wife’s Parents allege all had inspected and reached an agreement to bid at auction on the Property, and that they would not bid above $780,000. They say they agreed that the Husband and the Wife would each contribute $50,000, the Husband’s parents would contribute $100,000, and the Wife’s Parents would contribute another $100,000, take out a loan for the remaining amount (up to $580,000), and have the title kept in their names.
On 26 October 2019, the parties and the Husband’s parents all attended the auction for the Property and the Husband’s father did the bidding. It is alleged that when the bidding moved past the agreed maximum price, the Wife’s Parents implored the Husband’s father to stop bidding but he did not and he made a winning bid of $851,000, being $71,000 more than their alleged agreed maximum bid.
It is alleged that after complaint about bidding $71,000 more than the agreement, the Husband’s father promised to himself contribute not only his agreed $100,000 but the additional $71,000 as well. It is alleged that relying on that promise, the Wife’s Parents signed the contract of sale. It is alleged that substantial disagreements and arguments followed thereafter, including proceedings for an intervention order between the Wife and the Husband’s parents. It is alleged that the Husband’s parents ended up backing out of any financial contribution, both the initially agreed $100,000 and the additional $71,000, and demanded a return of the $85,000 deposit they paid on the date of the auction. It is common ground that the $85,000 was paid on the auction day by the Husband’s father and that the Wife’s Parents signed the contract of sale on the auction day. It is not disputed that after settlement of the purchase, on 22 December 2019, the Wife’s Parents paid the Husband’s father, or refunded, the $85,000 paid on the auction day as the deposit.
The Husband’s submissions assert the relevant agreement was made in October or November 2019. The settlement occurred on 2 December 2019 for a total of $901,965, including the purchase price, stamp duty and other fees and expenses. The purchase was funded in the following breakdown, which is agreed:
·The Husband’s contribution of $50,000;
·The Wife’s contribution of $50,000;
·The Wife’s Parents’ contribution of $221,965; and
·A bank loan for $580,000 in the sole names of the Wife’s Parent’s (that is, borrowed solely by the Wife’s Parents).
There are now different versions of what the parties say they agreed about as the basis for that purchase and the settlement of the purchase. The consequence to that difference is whether the Husband and Wife or the Wife’s parents, should retain the increase in value of the Property from the total cost of $901,965, to the predicted level of about $960,000, and on one view half of that increase. According to the Wife’s and the Wife’s parents cost notices they have spent a lot of money on legal fees to deal with that dispute. The Husband has not filed a cost notice. I am troubled at the proportionality between the expenditure on costs and amount of money in dispute in this case.
It is not disputed that after settlement the parties either disagreed about the legal basis and consequences of respective contributions and/or sought that the arrangement and the consequences of it be recorded it a written agreement. It is not disputed that the Wife’s father, the Husband, the Wife and Ms D had attended the Meeting for a least a short time, where the issue of a written agreement was at least raised. It is common ground that following the Meeting a document was produced by the Solicitors that purported to record or be the agreement between the all the parties.
The Wife and the Wife’s father maintain they attended the Meeting on the understanding that the Solicitors was to draw a document on behalf of all the parties and that the Husband knew this and that he had joined with the Wife in arranging for their attendance at the Meeting. The Wife’s Parents dispute that the document subsequently produced by the Solicitors accurately represents the actual agreement or fairly represented the discussions between the parties, including those during the Meeting.
The Solicitors and the Husband maintain that early in the Meeting, Ms D advised the Wife and Wife’s father to the affect that she did not and would not act for them and that they should get their own legal advice and that the Wife and her father left the Meeting at that point and that she continued to confer with only the Husband. The Wife and the Wife’s father insist that after the consultation, the Husband, the Wife and her father left the Meeting together and at the same time.
All parties rely on text messages that, on their face, demonstrate communications between the Husband and the Wife about the proposed date of such meeting and on the day communications about the Wife and/or the Wife and the Wife’s father being on their way to the Ms D’s office for the Meeting. Those messages are not conclusive, but may corroborate the proposition that the Husband arranged for, or at least knew that, the Wife and the Wife’s father would attend the Meeting.
There are now very different versions of what was agreed about the purchase of the Property and what was said at the Meeting. The different versions are untested. The parties, more or less, now point to authorities that contend that I cannot determine which, or any, version occurred on this hearing. Save for excluding obviously fanciful or impossible events, I accept that I cannot do so because the evidence is untested.
Events
Following settlement on 2 December 2019, the Husband and the Wife moved into the Property and together paid the mortgage repayments, utilities and outgoings until they separated on 13 June 2020. The last mortgage payment was alleged to have been made by them on 16 June 2020. Thereafter the Wife’s Parents paid all mortgage payments, rates, taxes and insurance. After the Property was vacant for 2 months they arranged for tenants and collected the rent. The outgoings on the Property are said to exceed the rent.
The Meeting was on 25 February 2020. On 2 March 2020 the Solicitors (by Mr F, not Ms D, but cc’d to Ms D) sent the Husband an email that includes:
Dear [the Husband],
[Ms D] has passed on your details, and I have prepared a draft Loan Agreement (see attached) based on your initial instructions. Please have a look through the draft and advise if any issues at this stage.
Query: should there be a …..? I believe this should be accounted for in the Agreement, see paragraph 9 of the draft and please provide instructions about this issue.
Also if you could please provide contact details/email address for the Lenders so that once finalised we can forward the agreement to them to obtain their own independent legal advice, and have the agreement signed.
[Emphasis in original]
It is clear enough that Mr F drew the draft agreement and that on 2 March 2020 Mr F communicated with the Husband on the apparent basis that he was the only client of the Solicitors.
That email from Mr F was apparently replied to on 16 June 2020, 3 months later and 3 days after separation. In that reply email the Husband sent the Solicitors the unsigned and noted up version of the draft agreement in an email to the Solicitors (but to Ms D, not Mr F). That email, dated 16 June 2020, asserts:
Hi [Ms D],
Attached are the changes her dad wrote for the agreement and the [bank] loan document for the house.
Thanks
[The Husband]
The consequences of that chain of unhappy events and allegations have confounded the parties since.
The parties’ positions in the substantive proceedings
Senior counsel for the Husband argued that the Meeting, the drawing of the draft agreement and the draft agreement itself are distractions because the real issue is what was agreed to, or what agreement existed, at or prior to the time of purchase. At first brush, those submissions have some attraction. I understood this to be a reference to the principles recited in Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353. The principle was stated by Gibb CJ in Calverley v Green (1984) FLC 91-565 (‘Calverley v Green’) as follows (at 79569):
The evidentiary material from which the court might have drawn an inference as to the intention of the parties included their acts and declarations before or at the time of the purchase, also immediately after it as to constitute a part of the transaction. Evidence of those acts and declarations were admissible either for or against the party did the act or made the declaration, but any subsequent declarations would have been admissible only as admissions against interest (Shepherd v Cartwright (1955) A.C. 431, at 445; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353, at 365.
That point must be looked at in light of the manner in which the Husband, with the Solicitors acting at all times, has put his case or claim.
Counsel for the Wife points to authority where post-contract conduct is relevant and admissible to assist determination of subject matter or terms of a contract and hence an agreement. The Wife’s counsel relied on County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193:
18 The cases referred to in pars [14] and [15] all had regard to pre-contractual negotiations to determine the subject matter of the contract. There is significant debate about the admissibility of post contractual conduct for purposes of interpreting a contract. This Court has maintained the traditional refusal to take such conduct into account, save in certain established respects. (See Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [26].)
19 It is by no means clear to me that this principle is applicable in the case of conduct that occurs at the time of settlement. However, this case can be determined without deciding whether or not such conduct is post contractual within the principle.
20 Where what is in issue is the identification of the subject matter of the contract, or the identification of necessary terms which were not the subject of express provision in a contract not reduced to writing, then consideration of post contractual conduct does not contravene the reasons underlying the principle.
On 29 June 2020, 16 days after the Husband and Wife’s separation, and 13 days after receiving the noted up version, the Solicitors wrote to the Wife’s Parents[4] and among other things said,
I confirm that [the Property] was settled utilising joint funds and in accordance with the loan agreement drafted on 2 March 2020[5]. This agreement contains a charging clause which allows my client to secure the property up to the value of his contribution and any interest.
…
My client has instructed that I seek the return of his contribution of $50,000 within 14 days, failing which he will have no choice but to lodge a caveat on the property pursuant to his beneficial interest…
[Emphasis added]
[4] Letter annexed to Husband’s affidavit filed 12 April 2021 as annexure -6 at 29/29 and annexure -6 to the affidavit of the Wife’s father filed 11 May 2021 and annexure -1 to the wife’s affidavit of30 march 2021 and referred to in written submission without objection.
[5] This is the “draft agreement”.
The Husband says that he had been prevented from making the mortgage payments after separation. However, the Wife’s father alleges[6] that on 13 July 2020, a mere month after separation when the Husband had moved out of the Property, an officer of the bank that had lent the Wife’s Parents the $580,000 sent the Husband an email which stated as follows:
Hi [the Husband],
I hope this email finds you well.
We have had a request to cancel two scheduled payments from … account ending […]27 on the 28th of every month to pay a [bank name] home loan for the amounts of $1295 and $1272. As this scheduled payment was set up via your internet banking, you will need to log in and cancel the payment.
If this could be processed within seven working days, it would be highly appreciated
Kindest regards
[Customer Service Advisor]
[6] See affidavit of Ms Mathai filed 19 July 2021
The Wife’s father alleges that six minutes after receiving that email the Husband replied,
Hi [Customer Service Advisor]
The scheduled payment have already been cancelled few days ago.
Thanks,
[the Husband]
The Wife alleges that on 14 July 2020, being a month after the Husband had moved out of the Property, he sent her an email (‘the security door email’) that stated as follows;
Hi [the Wife],
The security doors that were ordered are ready to be installed.
The company should have been in contact with you.
I paid them $1200 cash as a deposit in front of you to [Mr G].
I have taken $1200 from our joint bank account to pay the deposit back to myself.
Thanks,
[The Husband]
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