Bosgard & Bosgard
[2013] FamCA 308
FAMILY COURT OF AUSTRALIA
| BOSGARD & BOSGARD | [2013] FamCA 308 |
| FAMILY LAW – PRACTICE AND PROCEDURE – Application to restrain a solicitor from acting – Solicitors’ overriding duty to the Court – Where the wife objects to the solicitor for the husband from further acting for the husband – Where the solicitor for the husband is in a de facto relationship with the husband – Where the solicitor for the husband is the sole director and sole shareholder of a company which is a creditor of the husband – Whether a solicitor in a de facto relationship with their client can act with objectivity and independence – Whether a solicitor with a pecuniary interest in the outcome of proceedings can act with objectivity and independence |
| Family Law Act 1975 (Cth) Revised Professional Conduct and Practice Rules 1995 (NSW) Australian Solicitors’ Conduct Rules 2011 |
| Bowen v Stott [2004] WASC 94 Giannarelli v Wraith (1988) 165 CLR 543 Grieves and Tully [2011] FamCA 617 Holborow and Ors v Macdonald Rudder [2002] WASC 265 |
| APPLICANT: | Ms Bosgard |
| RESPONDENT: | Mr Bosgard |
| FILE NUMBER: | SYC | 2964 | of | 2012 |
| DATE DELIVERED: | 8 May 2013 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Fowler J |
| HEARING DATE: | 3 May 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Othen |
| SOLICITOR FOR THE APPLICANT: | Walker Kissane & Plummer |
| COUNSEL FOR THE RESPONDENT: | Mr Gruzman |
| SOLICITOR FOR THE RESPONDENT: | C Law Firm |
Orders
The husband’s solicitor, Ms B of C Law Firm is to forthwith cease acting for the husband in these proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Bosgard and Bosgard 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 SYDNEY |
FILE NUMBER: SYC 2964 of 2012
| Ms Bosgard |
Applicant
And
| Mr Bosgard |
Respondent
REASONS FOR JUDGMENT
The proceedings before the Court are interim proceedings in which the wife by an application contained in her Response to an Application in a Case dated
24 April 2013 seeks an order restraining the husband’s solicitor,
Ms B (“the solicitor”), from further acting for the husband in the proceedings.
The wife objects to the solicitor acting for the husband in the following circumstances as set out in her affidavit filed on 24 April 2013:
a)[The solicitor] is in a relationship with [the husband] and it is my understanding that she has been in a relationship with him since some time in 2012.
b)[The solicitor] is the sole director, sole secretary and sole shareholder of [D Pty Ltd] which is the company that has allegedly lent funds to [the husband] pursuant to various loan agreements. [reference to annexure omitted]
c)[The solicitor] has acted for [the husband] with respect to the lease and other legal matters concerning [the husband’s] businesses and possibly other assets which now form part of the matrimonial pool of assets.
d)I am seeking an order that [D Pty Ltd] be joined as a party to these proceedings and as such [the solicitor] may be called as a witness in these proceedings.
e)[The solicitor] is not in a position to act independently of her relationship with [the husband] and the fact that she has now through her company [D Pty Ltd] lent funds to [the husband] to allegedly assist him with various debts of the [Suburb E] business and to set up the [Suburb F] business.
f)I instructed my solicitors to write to [the solicitor] in relation to the conflict of interest that she had and she refuses to acknowledge that a conflict exits. [reference to annexure omitted]
The facts appear to be much in agreement but there are some issues between the parties.
Two issues critical to this application on which the parties addressed the Court in oral submissions at the hearing of the application were the “relationship issue” and the “creditor issue”. In relation to either or both of these issues, the wife proposes that the solicitor give evidence in the proceedings.
The relationship issue
The parties were married in 1993. The husband asserts that they separated on a final basis on 12 December 2010 and were divorced in July 2012. The wife however asserts that the parties separated for a short period in around July 2010 and that they recommenced an intimate relationship on 12 December 2010 for approximately one year.
The wife’s evidence is that in December 2010 she became aware that the husband was engaging in an intimate relationship with a woman whom she named as G. Following the denial by the husband of any such association with G and after the giving of certain promises and undertakings by the husband, the wife says that she resumed a relationship with him in the matrimonial home until February 2012. The wife further asserts that she recommenced a relationship with the husband in August 2012 and that they separated on a final basis in December 2012.
The husband denies the wife’s allegations as to his relationship with G and periods of reconciliation with the wife. He asserts that he met G in December 2010 and that she was a female friend with whom he went out in the company of other friends. The husband denies that he was in an intimate relationship with G.
The husband asserts that he commenced dating the solicitor in February 2012, after the wife and children had left the former matrimonial home. The husband asserts that from that point in time he did not have an intimate relationship with the wife. He does however concede that attempts were made with the wife to reconcile in March/April 2012, August 2012, September 2012 and October 2012.
In September and October 2012, the husband resided infrequently (one to two nights per week) at the wife’s unit in Suburb H, where the children also resided. Despite spending time at the wife’s residence, the husband claims that his relationship with her was not intimate at this time and that he slept on the lounge. He maintained contact with the solicitor during this period and returned to live with her in December 2012.
The husband and wife did not thereafter reconcile.
The husband’s evidence is that he retained the solicitor to act for him as his lawyer in around March 2012 after he commenced a relationship with her.
On 28 October 2012, the solicitor informed the wife by text message that she was in a relationship with the husband and had been for the preceding eight months. The message in part read as follows:
We love each other still. We have not stopped seeing each other. When I started dating [the husband] in Feb 2012 your marriage with him was already over. I did not break your marriage. Contra, you knew that [the husband] was happy with me and was living with me, and in total disregard of our relationship or my feelings as a human being you attempted to destroy our love. I don’t harbour any ill feeling toward you, but please know that you have hurt me a great deal.
The solicitor went on to express a view that, for the children’s sake, she and the wife should have a cordial relationship. She then proposed that the wife meet up with her to share a coffee together.
Of this communication, Counsel for the husband submitted that it was measured, non-inflammatory and simply relayed the facts as they were.
The Court takes the view that the communication demonstrates the solicitors’ view that she has been hurt and suffered because of the actions of the wife, whom the solicitor believes has attempted to destroy her relationship with the husband.
It appears to be the case that the solicitor and the husband are currently cohabiting in a de facto marriage relationship.
The creditor issue
The second issue in this application concerns the funds said to be owing to
D Pty Ltd, a company of which the solicitor is the sole shareholder and director.
On the husband’s evidence, D Pty Ltd made advances to him up to
March 2013 in the sum of $184,821.88. These funds were said to be for “the set up and operational costs of the [Suburb E] business, my personal debts and for the set up and operational costs of the [Suburb F] business”.
The husband submitted that his financial situation is parlous and that he will not be able to engage another solicitor on a deferred payment basis, as he apparently has done with his present solicitor. There is no evidence before the Court that the husband has made any inquiry as to the availability of representation on those terms.
The wife asserts that she will require the husband’s solicitor to give evidence.
In the circumstances of this case, it is clear that the financial circumstances of the cohabitation between the solicitor and her client will be a relevant matter for the Court to consider in the primary property proceedings, as would the nature of the loan, the circumstances of its making, the application of the funds and whether or not repayment is likely to be demanded.
Relevant law
The New South Wales (NSW) Revised Professional Conduct and Practice Rules 1995 (“the NSW Solicitors’ Rules”) apply to legal practitioners practising in NSW.
The NSW Solicitors’ Rules are made by the Law Society of NSW under
s 703 of the Legal Profession Act 2004 (NSW) (“LPA”) and are binding in nature upon legal practitioners to whom they apply: s 711 LPA.
Rule 19 of the NSW Solicitors’ Rules states as follows:
19. Practitioner a material witness in client's case
A practitioner must not appear as an advocate and, unless there are exceptional circumstances justifying the practitioner's continuing retainer by the practitioner's client, the practitioner must not act, or continue to act, in a case in which it is known, or becomes apparent, that the practitioner will be required to give evidence material to the determination of contested issues before the court.
The above rule makes it clear that a solicitor should withdraw from proceedings in the event that he or she is required to give material evidence.
Rule 27 of the Australian Solicitors’ Conduct Rules 2011 (which, it is noted, operate as a code of practice) provide a similar rule to that found in the
NSW Solicitors’ Rules. It reads as follows:
27 Solicitor as material witness in client’s case
27.1 In a case in which it is known, or becomes apparent, that a solicitor will be required to give evidence material to the determination of contested issues before the court, the solicitor may not appear as advocate for the client in the hearing.
27.2 In a case in which it is known, or becomes apparent, that a solicitor will be required to give evidence material to the determination of contested issues before the court the solicitor, an associate of the solicitor or a law practice of which the solicitor is a member may act or continue to act for the client unless doing so would prejudice the administration of justice.
This is a case where the solicitor, on at least two counts, might well be required to give material evidence at a later stage in the proceedings. Counsel for the wife submitted that the wife intends to require the solicitor to give evidence, so it seems probable that in this case the solicitor will be called as a witness.
Counsel for the husband submitted that the withdrawal of the solicitor should have to abide the event of her being called. One could readily imagine, however, that if the proceedings advanced to the final hearing stage it would be argued that the prejudice caused to the husband by the withdrawal or restraint of the solicitor at that stage would be greater.
It is clear that a solicitor owes two duties: one to the client and one to the Court.
In Holborow and Ors v Macdonald Rudder [2002] WASC 265 (“Holborow”) at [27] his Honour EM Heenan J stated as follows:
Concurrently with the obligations to the client will be the practitioner’s obligations to the court which have been described as an “overriding duty” - per Mason J [sic] in Giannarelli v Wraith (1988) 165 CLR 543 at 555, where the Chief Justice cited a passage from the judgement of Pollock CB in Swinfen v Lord Chelmsford (1860) 5 H & M 890 at 921; 157 ER 1436 at 1499. Mason CJ went on to expound the nature of counsel’s obligation to the court in a manner which is germane in the present case, not only because it identifies the duties owed by a legal practitioner conducting litigation but because it also emphasises how the forensic conduct of litigation must necessarily be left to the discretion of the legal practitioners representing them largely, if not completely, free of simultaneous supervision by the court itself.
His Honour then quoted a passage from the judgment in Giannarelli v Wraith (1988) 165 CLR 543 at 556 (“Giannarelli”), where Mason CJ opined:
The performance by counsel of his paramount duty to the court will require him to act in a variety of ways to the possible disadvantage of his client. Counsel must not mislead the court, cast unjustifiable aspersions on any party or witness or withhold documents or authorities which detract from his client’s case. And, if he notes an irregularity in the conduct of a criminal trial, he must take the point so that it can be remedied instead of keeping the point up his sleeve and using it as a ground of appeal.
It is not that a barrister’s duty to the Court creates such a conflict with his duty to his client that the dividing line between the two is unclear. The duty to the court is paramount and must be performed even if the client gives instructions to the contrary.
His Honour further quoted the Chief Justice, who at page 556-57 in Giannarelli stated as follows:
This is why our system of justice as administered by the courts has proceeded on the footing that, in general, the litigant will be represented by a lawyer who, not being the mere agent for the litigant, exercises an independent judgement in the interests of the court.
His Honour Heenan J in Holborow at [28] went on to say:
If there are circumstances which are likely to imperil the discharge of these duties to a court by a legal practitioner acting in a cause, whether because of some prior association with one or more of the parties against whom the practitioner is then to act, or because of some conduct by the practitioner, whether arising from associations with the client or a close interest which gives rise to the fair and reasonable perception that the practitioner may not exercise the necessary independent judgement, a court may conclude that the lawyer should be restrained from acting, even for a client who desires to continue his service [citations omitted].
The authorities make it clear that the priority, in any conflict of fulfilment of duties owed by a solicitor, must be the fulfilment by the solicitor of their duty to the Court.
Given the history of the relationship between the husband and the solicitor and the proclamation of the love attendant upon it, is not hard to see how that priority might well be reversed and the solicitor place the love she has for her partner above the duty that she owes to the Court.
In relation to the solicitor’s duty to her client, it might likewise suffer from a lack of objectivity, independence and calm rationality in relation to the issues which arise in the proceedings.
The wife also asserts that there is a problem for her in dealing in this case with the woman who became her successful rival for her husband’s affections who is now acting for him.
The Court is never assisted by litigation riding on a wave of the emotions which might be engendered by such events; the reality of the Court’s task is not to punish vice and reward virtue, but to make decisions pursuant to its powers under the Family Law Act (Cth), in this case as to property.
The Court is assisted in the administration of justice where the litigants and legal practitioners focus on the issues of importance to that process. It is assisted where there is a focus on objectivity among legal practitioners and a capacity for them to be independent of their clients in the fulfilment of both their duty to the Court and their duty to clients. A lack of such focus and objectivity gives rise to the possibility of the integrity of the justice system being undermined.
In considering any relief of the type sought, the Court has to consider the prejudice caused to the parties. The proceedings are at an early stage and on that basis it is not considered that significant prejudice could be caused to the husband by a change in representation. There is no evidence that he cannot gain other representation.
The solicitor has a clear direct stake in the proceedings as the sole director and shareholder of a creditor of the husband. The extent of the debt due, its purpose and by whom it should be borne are all potentially live issues in the proceedings, particularly where the husband alleges that the property available for division is small and the debt is significant.
It was suggested by Counsel for the husband that the stake of the solicitor in the proceedings is no different to that of a solicitor acting on the basis that they have a lien over the fruits of the litigation as security for payment.
That however is in the Court’s view quite different. The position of lien holder does not necessarily entitle its holder to apply the fruits of the litigation to the payment of an alleged debt. All it does is entitle the holder of the lien to a charge over those fruits until paid.
In this case it is asserted that the solicitor has a present debt. Her interests as a creditor in procuring a favourable result for her client could well conflict with her duty as advisor to her client on settlement and, perhaps, impede her ability to independently act in the matter and fulfil her duty to the Court.
Relevantly the NSW Solicitors’ Rules contain a rule in relation to solicitors “conducting another business”, namely Rule 37, which reads as follows:
37. Conducting another business
37.1 A practitioner who engages in the conduct of another business concurrently, but not directly in association, with the conduct of the practitioner's legal practice must ensure that the other business is not of such a nature that the practitioner's involvement in it would be likely to impair, or conflict with, the practitioner's duties to clients in the conduct of the practice, and the practitioner must —
37.1.1 maintain separate and independent files, records and accounts in respect of the legal practice, and the other business;
37.1.2 disclose to any client of the practitioner, who, in the course of dealing with the practitioner, deals with the other business, the practitioner's financial or other interest in that business; and
37.1.3 cease to act for the client if the practitioner's independent service of the client's interest is reasonably likely to be affected by the practitioner's interest in the other business.
In this case the Court concludes that it is reasonably likely that the solicitor’s interest in the recovery of her company’s debt may well affect her ability to independently service her client’s interest and also to discharge her duty to the Court.
In Grieves and Tully [2011] FamCA 617 at [94]–[95], his Honour Young J said as follows:
94. In circumstances where a court doubts the solicitor’s capacity to exercise independent judgement the court may restrain a practitioner from acting (see Holborow …) as the integrity of the judicial process is undermined if solicitors lack the objectivity and independence that their duty to the court requires (see Bowen v Scott [sic] [2004] WASC 94 at 52).
95. In circumstances where a solicitor has a personal or business relationship with a client, and the solicitor would find it difficult to maintain professional independence and objectivity, the solicitor should not act (see Bar Association (Qld) v Lamb (1972) 45 ALJR 712).
In Bowen v Stott [2004] WASC 94 at [52]–[53], his Honour Hasluck J said:
52. … the rationale for intervention upon the third ground (that the Court may intervene where restraining the solicitor is in the interests of the Court exercising proper control over the conduct of an officer of the Court) [parenthesis added] is a recognition that the integrity of the legal process and of the Court function might be undermined if it were thought that solicitors or counsel did not possess the objectivity and independence which their professional responsibilities and obligations to the Court require of them.
53. The most obvious case in that regard would be a situation in which a solicitor had some direct pecuniary interest in the outcome. It might seem to an independent observer that a solicitor, notwithstanding his best efforts to be impartial and objective, might adjust his evidence in some way to procure a result that suited his interest. The decided cases suggest also that the same principles apply in circumstances where a solicitor might feel impelled to justify or defend his conduct in representing a client, notwithstanding that the solicitor did not have any specific pecuniary interest in the outcome other than the obtaining of professional fees.
Whilst the power of the Court to restrain a solicitor from acting is one in which it should exercise with caution, the Court in this case, having regard to the several matters referred to above, is satisfied that this is a clear case for the exercise of its power. In the interests of maintaining the integrity of the justice system it is inappropriate for this solicitor to continue to act for the husband. The Court is satisfied that a fair-minded lay observer would conclude that the proper administration of justice and the appearance of justice requires the practitioner to be prevented from acting.
The practitioner has potential for a number of conflicts between her interests and the obligations she has to the Court. The application has been brought in a timely fashion. The Court is not satisfied that, having regard to the length of time to the hearing, alternate arrangements cannot be made for the husband’s representation.
Orders will be made accordingly.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Fowler delivered on 8 May 2013.
Associate:
Date: 8 May 2013
6
4
0