Bateman and Bateman

[2014] FamCA 1051

FAMILY COURT OF AUSTRALIA

BATEMAN & BATEMAN [2014] FamCA 1051

FAMILY LAW – PROPERTY SETTLEMENT – Interlocutory Application – where the wife sought orders that the legal firm representing the husband, and in particular a certain solicitor, be restrained from further acting for the husband, in circumstances where that firm, and that solicitor, previously acted for both the wife and the parties jointly – where the firm has acquired knowledge of the wife through their dealings which could be seen to give the husband an unreasonable advantage – where that knowledge could also be used to the wife’s detriment in cross-examination – where although there is  undoubtedly prejudice to the husband in having to instruct separate legal representatives, the proceedings are not at this stage far advanced – where there is prejudice to the wife in the firm acting, which has acted for her for over 26 years and has continued to do so post-separation – orders made restraining the firm and said solicitor from acting on behalf of the husband in these proceedings

House v Altimas [2012] FamCA 625
Kallinicos v Hunt (2005) 64 NSWLR 561
McMillan & McMillan (2000) FLC 93-048
Thevenaz & Thevenaz (1986) FLC 91-748

APPLICANT: Ms Bateman

RESPONDENT: Mr Bateman

FILE NUMBER: (P)NCC 1893 of 2014

DATE DELIVERED: 12 November 2014
Ex tempore

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: Cleary J

HEARING DATE: 4 November 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Cook

SOLICITOR FOR THE APPLICANT: Beilby Poulden Costello

COUNSEL FOR THE RESPONDENT: Mr Cummings SC

SOLICITOR FOR THE RESPONDENT: B Lawyers

Orders

1. That B Lawyers (Mr B, Solicitor) and any firm of solicitors in which Mr B is employed, be restrained from acting on behalf of the Applicant Husband in these proceedings.

2. That the Amended Application in a Case filed 27 October 2014 in respect of the balance of Orders sought and the Response to an Application in a Case filed

   
   

   27 October 2014 is listed at 10.00 am on 9 December 2014 (Duty list).

IT IS NOTED that publication of this judgment by this Court under the pseudonym  Bateman & Bateman has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: NCC 1893 of 2014

Ms Bateman

Applicant

And

Mr Bateman

Respondent

REASONS FOR JUDGMENT

1. These proceedings were commenced by the husband filing an Initiating Application on 24 July 2014.  The wife filed her Response on 21 August 2014.  On that date, she also filed an Application in a Case raising an objection to the husband continuing to instruct his current solicitors, B Lawyers, which was subsequently amended by an application e-filed on 27 October 2014.

2. There are orders sought on two discrete issues.  Firstly, orders are sought restraining solicitors from continuing to act for the husband and with an individual order restraining Mr B from acting. Secondly, there are orders sought for periodic spousal maintenance, the use of a particular motor vehicle and orders relating to payment of insurance and outgoings on the family home where the wife is living. 

3. The wife pressed only for orders 1 and 2 in relation to restraining the solicitor and asked for the balance of the application to stand over pending the outcome of that matter.  The response of the husband to the application was for dismissal of the orders in relation to the solicitor, but not for the balance of the application. 

4. The matter came before me in a duty list on 4 November 2014.  The parties relied on the following material:

   a)Affidavits of wife filed 21 August 2014 and 4 November 2014; 

   b)Financial Statement of wife filed 21 August 2014;

   c)Affidavit of husband filed 27 October 2014; 

   d)Financial Statement of husband filed 24 July 2014;

   e)Amended Financial Statement of husband filed 27 October 2014;

   f)Affidavits of Mr C, Accountant, filed 27 October 2014 and 10 November 2014;

   g)Written and oral submissions on behalf of each party.

5. I reserved my decision. 

6. There is no dispute in this matter that:

   i)The Court has inherent jurisdiction to restrain a legal practitioner or firm of legal practitioners from representing a party after consideration of the facts of the particular case.

   ii)The wife is a former client of the solicitors acting for the husband, which I will refer to as “the firm”, in Family Law proceedings.  Until separation and, to some extent beyond that, in my view, the firm acted for both parties.

   iii)That there has been no delay by the wife in raising her objection to the solicitors continuing to act for the husband in these proceedings.

   iv)That the ruling sought and obtained by the wife from the Law Society of New South Wales, which is a guideline response and did not resolve the issue as between the parties, is not binding on this Court, and, at its highest, is evidence of the level of concern of the wife about the issue. 

Short history of relevant events

1. The parties now aged in their fifties, began living together in 1987 and married in 1990.  They have two adult children in their early twenties. 

2. The parties separated when the husband moved out of the family home in October 2013.  The wife remains living there.  Accordingly, the relevant relationship to date has been 26 years.  Over the course of that relationship, the husband has been the director of more than 30 companies which run retail dealerships.  He has also been a shareholder in several companies. 

3. The earliest of these referred to in the wife’s material is a company, D Pty Ltd.  He was appointed director of that company in August 1980.  The directorship ceased in 1997 and subsequently there were many more directorships for the husband, in some of which he continues. 

4. The wife asserts that businesses run by these companies are family businesses established by the husband’s father, and continued by her husband.  The husband concedes that his father employed him in the Bateman Group, commencing in 1989. 

5. The wife also asserts that B Lawyers or its predecessor, B & E, has undertaken legal work for the family businesses and that Mr B has had the carriage of those matters.  The husband in his material[1] says he has been a client of the firm “for many years”, which is not particularly helpful.  There is evidence that the firm was instructed by Bateman Group, owned by the husband’s father, since at least 1988 and almost certainly before then.  That entity was sold in August 2014. 

   [1]Affidavit of husband filed 27/10/2014, par 72

6. The husband refers to the wife having the use of a motor vehicle and petrol card provided by “my employer, F Pty Ltd (known as F Pty Ltd)”.[2]  ASIC records confirm that the husband has been a director of that company since 31 December 1998.  His parents and grandparents and others had been directors since 1986.  That company has employed not only the husband, but the wife.  The firm undertook the legal work for F Pty Ltd, presumably on the instructions of the husband as a director. 

   [2] Affidavit of husband filed 27/10/2014, par 17

7. The husband says, and I accept:[3]

   …the partners of that firm understand the nature and structure of my assets, liabilities and financial resources. 

   [3] Affidavit of husband filed 27/10/2014, par 72

8. F Pty Ltd owns and maintains the car which the wife uses; pays the bill for a credit card of the wife and pays for maintenance expenses in relation to the former matrimonial home. 

Legal services provided to the wife by the firm

Estate planning

1. The firm prepared a will for the wife on her instructions.  There were two conferences with Mr B. Both the wife and husband were present. 

2. As a result of the first conference, the wife signed a will, a power of attorney and an appointment of an enduring guardian. The firm continues to hold her will. 

3. After one of those conferences, the parties, the husband’s parents, and Mr B enjoyed a meal together, according to the wife.  The husband was unable to recollect this event but does not deny that it could have happened. 

4. Significantly, the husband says:[4]

   So far as I’m aware, [B Lawyers] have not acted for [the wife] in any transactions or matters apart from the preparation of our estate planning documents, the purchase of two properties within the [Mr Bateman] Superannuation Fund and  the execution of Real Property Act Transfers for the [Mr Bateman] Superannuation Fund consequent upon its change to a corporate trustee. 

   [4]Affidavit of husband filed 27/10/2014, par 75

5. No date is given for when there was a change of trustee, why it was done and whose instructions were given.  That evidence is given by the husband’s accountant, Mr C.  The timing of the change of trustee acquisition of assets by the self-managed superannuation fund may be significant in any final hearing. 

Superannuation

1. The husband has a self-managed superannuation fund with a disclosed balance of $2 million plus.[5]  The uncertainty expressed by the wife is of some significance.  She recalls being a trustee of one of the funds.  She thought there may have been two and believes that she was “a beneficiary”.  I take that to mean that the wife believes that there is or was a superannuation account in her name.  Further, she now believes, based on what her husband has told her, that she is no longer a “trustee or a beneficiary” of either of the superannuation funds.  She expresses concern about her removal and the reason for it. 

   [5] Amended Financial Statement of husband filed 27/10/2014

2. The wife makes no reference to the meeting with Mr C in March 2014 when he says that documents were executed by her causing her to cease being a trustee of the fund.  The wife recalls being asked to sign documents relating to “property transactions to which one of the self-managed funds was a party”.  Annexed to her affidavit, Annexure C, is a letter dated 22 June 2007 from B & E (Incorporating the Practice of Mr G) to both the parties referring to the purchase of a property in Suburb H by the Mr Bateman Superannuation Fund.[6]

   [6] Affidavit of wife filed 21/08/2014

3. It is apparent from Annexure D to the wife’s affidavit that the property acquired by that fund was leased to a company, Suburb H Group Proprietary Limited.  The husband became a director of that company on 17 January 2005. 

Real estate

1. There are transfers of two properties to the parties as joint tenants dated 13 July 2007, the superannuation fund acquisition, and 9 November 2011, where a licensed conveyancer, Mr I, signed on behalf of the parties as joint tenants.[7]

   [7] Affidavit of wife filed 21/08/2014, Annexure E

B Lawyers commencing acting for the husband in family law matters

1. On 3 March 2014, the wife received a letter from the firm advising her that the firm acted for her husband in relation to “property matters associated with the breakdown of your marriage”.[8]  This appears to be the first notice to the wife that the firm no longer acted for her, although it may not have been.  The letter raised an amicable property settlement.  The salutation was “[Ms Bateman’s Christian name]” and the husband was referred to as “[Mr Bateman’s Christian name]”.  On behalf of the wife, it is submitted that this familiarity of address is a reflection of the longstanding relationship between the wife and the firm.  I agree. 

   [8] Affidavit of wife filed 21/08/2014, Annexure F

2. There were further letters to the wife on 17 March 2014 forwarding a further copy of the first letter of 3 March 2014, which the wife had apparently not received, and on 20 March 2014, enclosing a draft balance sheet in relation to the assets and liabilities of the marriage so described.[9]  The joint balance sheet contained the husband’s value for all listed assets, liabilities and the superannuation fund.  On 25 March 2014, on his evidence, Mr C had the wife sign documents which removed her as a trustee of the superannuation fund.  Those documents, again on the evidence of Mr C, had been prepared by the firm on his instructions.[10] 

   [9] Affidavit of wife filed 21/08/2014, Annexure F

   [10] Affidavit of Mr C filed 27/10/2014, pars 17-18

3. On 8 April 2014, the firm sent to the wife a statement of assets and liabilities as at January 2014, prepared by C Partners Chartered Accountants. 

4. On 29 April 2014, the firm wrote to the wife enclosing certain listed documents with a reference to their having provided “more documents than are required under the Rules”. 

5. On 23 May 2014, the firm wrote to the wife requesting financial disclosure, in particular:

   …details of your assets and liabilities as at 31 December 2013 [and setting out the particulars sought]. 

6. This is somewhat ironic.  The evidence suggests to me that the firm was at least as well placed as the wife, if not better, to understand her own financial position. 

7. On 9 July 2014, solicitors were instructed by the wife.  In a letter dated 9 July 2014, an objection to the firm acting for the husband in the family law matters was raised. 

8. On 18 July 2014, the firm responded, denying any conflict of interest.  Two things were confirmed:

   a)the firm had taken instructions from both parties in respect of estate planning; and

   b)the firm had acted for the Mr Bateman Superannuation Fund in relation to two conveyancing transactions, at a time when  the parties were both trustees of the fund.

9. The response on behalf of the wife was apposite, but the removal of the wife as a trustee of the fund could well be an issue in any case in any final hearing in these proceedings.  Again, I agree. 

10. In this matter, the wife has, as the evidence suggests, regarded herself as a client of the firm for the 26 years of her relationship with the husband.  It is difficult to see all of the exchange of information that may have taken place over the course of that period where the firm was retained. 

11. The wife, through her counsel, expressed the view that she may have supplied confidential information to the firm.  In my view, she was entitled to consider herself as a client of the firm until at least the arrival of the first letter, where she was told that the firm was acting for the husband.

12. The significant factor for a client to succeed in restraining a solicitor from acting for a party is to give evidence that he or she has imparted information of a confidential nature to the practitioner in question and that there is at least a theoretical possibility that it could be used against that person.  On behalf of the wife, it was submitted that she could have given confidential information but did not refer to any specific information being given.  It is an unusual situation. 

13. Counsel for the husband submitted that it was a low bar test and that the wife had not overcome that hurdle through not having given evidence that she had definitely given confidential information, although without the necessity to spell it out. 

14. Given the evidence of the willingness of the wife to execute documents as directed and to give instructions to the firm about personal matters in estate planning with other events over the course of the relationship, I accept that she does not remember every transaction and was likely not focused on confidentiality at times when she spoke to the lawyers in the firm.  For the wife, in my view, this was the family firm.  

15. There are two affidavits, as stated, filed by Mr C, a partner of C Partners Chartered Accountants.  That firm has performed accounting functions for F Pty Ltd, the company of which the husband is a director.  The firm previously acted for the Bateman Group, the husband’s father’s group of companies, which is the umbrella company of F Pty Ltd.  Bateman Group was controlled by the husband’s father.  Mr C states that the husband’s father has retained the company, F Pty Ltd, post sale of the Bateman Group in August 2014. 

16. Mr C also gives evidence of the parties having been trustees of the superannuation fund.  His firm is the accountant and auditor of that fund.  The husband instructed Mr C to substitute a corporate trustee for the parties, who had previously been the trustees. 

17. Post-separation, in early 2014, Mr C’s firm became aware that the documents for the change of trustee and “modernisation of the trust deed” had not been signed and returned.  Mr C’s firm instructed the firm B Lawyers to prepare land transfers.  Apparently, they did. 

18. On 25 March 2014, Mr C met with the wife and “explained the outstanding documents … and she executed [them]”.[11]

    [11] Affidavit of Mr C filed 27/10/2014, par 18

19. Such was the confidence of the wife reposed in the solicitors who had prepared the documents that, at the request of Mr C and in an informal setting she signed them, without independent advice.  At that point, the wife may have reasonably considered that the firm still represented her, despite the fact that there had already been the beginning of correspondence on behalf of the husband. 

20. In oral submissions on behalf of the husband, it was said that the change of trustee was in the nature of a routine transactional manner with no requirement for instructions.  That may have been so during the course of the relationship, but was certainly not the case post-separation, when the wife’s interests had separated from those of the husband.

The change of control of the husband’s company F Pty Ltd

1. The sale of the husband’s father’s group of companies, with its implications for the husband becoming unemployed[12], are all possible issues in the property dispute between the parties, especially as the husband refers to not only being unemployed as a result of the sale of that group of companies, but being “restrained from working in the motor vehicle industry for the next three years”. 

   [12]Affidavit of husband filed 27/10/2014, par 42

2. A subsequent affidavit by Mr C corrected an earlier error identified by him in his own first affidavit, that is, he said that both parties had, in fact, been directors and shareholders of a company called Mr Bateman Investments Proprietary Limited until June 2012.  It must be the case that documents were signed and perhaps given by the firm at the time when the wife became a director and shareholder of that company and when she ceased to be one.  This is one of the transactions not particularly referred to by either party. 

3. It illustrates the extent to which the solicitors who have acted for the parties and the father’s family over the whole of the marriage, may have acquired information about the wife which could be used to her disadvantage in these current proceedings.  No advice as to obtaining independent advice was offered at the time B Lawyers instructed Mr C to have the wife execute the documents, which gave rise to her ceasing to be a trustee of the fund.  At that point, knowing of separation six months prior, the parties had adverse interests, although, of course, they had not yet engaged in litigation.

Issue of confidential information

1. The Court has the power to make orders restraining a firm of solicitors from continuing to act for one of the parties to proceedings if it is of the view that it would be likely that those solicitors may have confidential information relating to the other party to the proceeding, arising out of former relationship of solicitor and client with that party, which could be used to the advantage of the present client or to the disadvantage of the former client in the current proceedings.[13]

   [13]McMillan & McMillan (2000) FLC 93-048

2. In McMillan, a law clerk who had previously been employed by the solicitors for the husband and who had worked on the husband’s case and taken instructions, moved to work as a secretary with the wife’s solicitor.  The solicitor for the wife was restrained from acting.  His Honour at first instance identified the more narrow test, that a Court would have to be convinced that a confidence had been reposed in a lawyer and that it was probable that confidence would be used to that person’s disadvantage. 

1. His Honour also identified the broader approach, more appropriate to family law proceedings, of a reasonable apprehension that confidential information has been given to a lawyer by a former client and that there is at least a theoretical possibility that this information might be used to the disadvantage of the client.  In my view, there is that theoretical possibility in this case.  My impression of the evidence is that the wife did not seek personal independent advice very often.  There is certainly no evidence of that other than in relation to estate planning.  Rather, she relied on the advice of the firm to her husband and assumed that the firm would act in the best interests of him, herself and the corporate entities that they, and more often he, controlled. 

2. In the decision in Thevenaz & Thevenaz (1986) FLC 91-748, the husband sought orders to prevent the wife’s solicitors from acting for her in relation to the husband’s application for a property settlement. A former partner of the wife’s solicitors had previously acted for both husband and wife, and files were still held. His Honour said this at 75-447 :

   It was of the utmost importance that justice should not only be done but should appear to be done. 

3. In that case, there was a risk, maybe theoretical, that justice might not appear to be done. The husband raised the possibility of confidences having been exchanged during real estate transactions, that is, the giving of instructions in conveyancing.  The knowledge acquired by the wife’s solicitor as to the husband’s personality and his financial position could be seen to give the wife an unreasonable advantage in opposing his claims. 

4. There is some relevance to this comment in this matter.  The firm has acquired knowledge of the wife, her personality; her aspirations for her own life and for her children after her death and no doubt, her approach to conflict and financial matters, which could be seen to give the husband an unreasonable advantage in pressing for an early amicable settlement and for the sale of the former matrimonial home. 

5. There was also a reference in Thevenaz to knowledge in possession of the wife’s solicitor which might be used to the husband’s detriment in cross-examination.  In this matter, knowledge obtained by the solicitors through their long association with the wife as their client, and as the partner undoubtedly less well-informed than the husband in his business dealings and as an employee of the husband’s main corporate entity.  That knowledge could be used to her detriment in cross-examination.  Her level of knowledge of the various commercial matters is relevant.  A matter could foreseeably come up arising from past transactions especially in relation to the change in structure of the superannuation fund post-separation. 

6. In the decision of House v Altimas [2012] FamCA 625, a first instance decision of Ryan J, the applicant husband failed to establish the communication of confidential material by him to the respondent’s solicitor. This is the test refined in the Full Court decision in McMillan previously referred to.  As a result, the applicant was unsuccessful in restraining the solicitor for the wife, who had acted previously for both husband and wife in a personal injury claim, from continuing to act for the wife. 

7. The facts of that case, in my view, are sufficiently different to distinguish the situation here.  The parties had both been advised and represented 14 years previously in personal injury and a related traffic offence.  Her Honour at [18] was far from satisfied that the respondent solicitor was:

   …the repository of confidential information the disclosure of which might even theoretically be disadvantageous to the applicant.

8. In this matter the wife says she may have conveyed confidential information.  This is not looking back on a past period when both she and the husband were the clients of the firm.  Rather, it is a reflection of the length of the continuing relationship between the wife and the firm and the willingness the wife has had to act on their advice and on the advice and direction of the chartered accountants instructed by the firm.  That she cannot remember all encounters and what was said is not surprising. 

9. There is undoubtedly prejudice to the husband in having to instruct separate legal representatives in family law proceedings.  Although, it has to be said the proceedings are not at this stage far advanced.  However, there is prejudice to the wife in the firm acting, which has acted for her for over 26 years and continued to do so post-separation, at least in relation to the change of trustee of the parties’ superannuation fund.  It cannot be the case that she was only a client over that period at those times when she was actually required to sign documents. 

10. There have been many occasions, including but not limited to, the wife becoming a director and shareholder of a company, ceasing to hold those roles in 2012, becoming a trustee of the superannuation fund and ceasing to be a trustee of the superannuation fund in 2014, when confidential information could have been given by the wife and information about the wife accumulated by the firm. 

11. The wider test identified in the decision of Brereton J in Kallinicos v Hunt (2005) 64 NSWLR 561 is satisfied here. I am satisfied that a fair-minded, reasonably informed member of the public in the position of the applicant, a person with a long and satisfactory relationship with the family firm, would conclude that the proper administration of justice requires that the applicant’s solicitor be restrained from continuing to represent him in these proceedings.

12. For that reason, I consider that the solicitors for the husband should be restrained from representing the husband and orders are made accordingly.

I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cleary delivered ex parte on 12 November 2014.

Associate:

Date:  26 November 2014