COLEY and DANAE
[2020] FCWA 169
•16 OCTOBER 2020
JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA
ACT: FAMILY COURT ACT 1997
LOCATION: PERTH
CITATION: COLEY and DANAE [2020] FCWA 169
CORAM: TYSON J
HEARD: 29 JULY 2020
DELIVERED : 16 OCTOBER 2020
FILE NO/S: PTW 1603 of 2014
BETWEEN: MS COLEY
Applicant
AND
MR DANAE
Respondent
Catchwords:
FAMILY LAW – LEGAL PRACTITIONERS - INJUNCTIONS – Where the de facto husband seeks an order that the de facto wife’s solicitors be restrained from acting for her – Where a solicitor who previously conducted work on behalf of the de facto husband has since joined the firm acting for the other party – Where the court finds that the de facto husband has waived his right to object – Where the application is declined – Case turns on its own facts
FAMILY LAW – PRACTICE AND PROCEDURE – Objections to evidence – Where the de facto wife seeks to rely on extracts of correspondence marked without prejudice – Where there is no equivalent s 131(2)(g) of the Evidence Act 1995 (Cth) in the Evidence Act 1906 (WA) – Consideration of whether the correspondence is admissible on the basis that if it is not permitted, the court is likely to be misled – Case turns on its own facts
Legislation:
Evidence Act 1906 (WA)
Evidence Act 1995 (Cth)
Family Court Act 1997 (WA)
Family Law Rules 2004 (Cth)
Category: Not Reportable
Representation:
Counsel:
| Applicant | : | Mr Berry SC |
| Respondent | : | Mrs Farmer |
Solicitors:
| Applicant | : | Law Firm A |
| Respondent | : | Law Firm B |
Case(s) referred to in decision(s):
Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd [2007] NSWSC 350
Billington & Billington (No 2) [2008] FamCA 409
Chancellor & McCoy (2016) FLC 93-752
Cottard v Crichton [2016] FamCA 819
Dalton & Dalton (2017) FLC 93-773
Field v Commissioner for Railways (NSW) (1957) 99 CLR 285
Foley and Foley [2016] FCWA 41
Holborow & Ors v Macdonald Rudder [2002] WASC 265
Kallinicos and Anor v Hunt and Ors [2005] NSWSC 1181
Karapataki & Karapataki [2011] FMCAfam 6
Korean Airlines Co Ltd v Australian Competition and Consumer Commission (No 3) [2008] FCA 701
Mancini v Mancini [1999] NSWSC 800
McGillivray v Mitchell (1998) FLC 92-818
Naczek & Dowler [2011] FamCAFC 179
Osferatu & Osferatu (2015) FLC 93-666
Phe & Leng (2019) FLC 93-887
Pitts v Adney [1961] NSWR 535
Rush & Tompkins Ltd v Greater London Council [1989] AC 1280
Sexton v Barton [2015] FCWA 38
State of Western Australia v Ward and Ors (1997) 145 ALR 512
Unilever Plc v Proctor & Gamble Co [2000] 1 WLR 2436
Walker v Wilsher (1889) 23 QBD 335
Zalfen & Anor v Gates & Anor [2006] WASC 296
TYSON J:
WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT – PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED
IT IS NOTED that publication of this judgment by this Court under the pseudonym Coley & Danae has been approved by the Family Court of Western Australia pursuant to s 243(8)(g) of the Family Court Act 1997 (WA).
1 [Mr Danae] seeks an injunction restraining [Ms Coley] from retaining or instructing [Law Firm A] from acting on her behalf in the current proceedings. He seeks a similar injunction against Law Firm A. Ms Coley opposes the orders sought. It is that discrete issue which requires determination.
WHAT IS THE EVIDENCE RELIED UPON?
2 Mr Danae relies upon his affidavit and the affidavit of [Ms R] filed on 23 April 2020. Ms Coley relies on her affidavit and the affidavits of [Ms K] and [Ms G] filed on 5 June 2020.
WHAT ARE THE BACKGROUND FACTS?
3 The parties were in a de facto relationship, which ended in 2012. In 2014 Ms Coley commenced proceedings, seeking orders by way of alteration of property interests. The proceedings culminated in a five day trial in 2017.
4 The parties did not agree on the composition of their property, or the approach to be taken to the assessment of contributions. They also disagreed on the division of their property. A significant issue at trial was Ms Coley’s claim that Mr Danae had held out a “false front” and that he was the owner of various entities, despite the legal ownership. On her case, the property of the parties was worth around $11 million.
5 Mr Danae denied there was any “false front”. His case was that the entities the subject of attack, were established well before the parties’ relationship, by him and his mother, [Mrs Fir].
6 On 24 January 2018 the trial judge delivered Reasons. In summary, the trial judge found the parties’ property was $5,736,024 and determined a just and equitable outcome would provide a division as to 47.5% to Ms Coley and 52.5% to Mr Danae. The trial judge was not satisfied that Mr Danae was the owner of entities, as asserted by Ms Coley. Final orders were pronounced on 2 February 2018.
7 Ms Coley appealed the final orders, which was the subject of a two day hearing before the Court of Appeal on 15 April and 28 August 2019. The appeal focused on the trial judge’s approach to two assets; a superannuation fund valued at $638,911 and a family trust worth $3,948,138. The trial judge found the superannuation fund was property of Ms Coley and 50% of the value of the family trust was property of Mr Danae.
8 Mr Danae resisted the grounds of appeal. He filed a Notice of Contention, seeking to rely upon further evidence not adduced at trial, including a Deed of Variation and Rectification of the family trust, executed by him on 6 November 2016. The Court of Appeal found that Deed was critical to the proper understanding and control of the trust.[1]
[1] Paragraph 9 of the Reasons delivered by the Court of Appeal on 31 January 2020.
9 On 31 January 2020 the Court of Appeal delivered Reasons. The Court upheld the appeal and remitted the matter for re-hearing, which it observed was a regrettable and deplorable outcome.[2] The necessity for a retrial was, in their view, largely brought about by Mr Danae’s conduct, including his failure to disclose relevant documents. While the Court found the trial judge had erred, it observed that “much of the responsibility for that error rests squarely with the parties”.[3]
[2] Paragraph 14 of the Reasons delivered by the Court of Appeal on 31 January 2020.
[3] Paragraph 13 of the Reasons delivered by the Court of Appeal on 31 January 2020.
10 The matter is yet to be listed for a further trial, as a consequence of the current application and further interim issues, which Ms Coley seeks to agitate.
APPLICATION TO RESTRAIN LAW FIRM A
11 Ms Coley has been legally represented by Law Firm A since October 2015.
12 Mr Danae initially engaged [Law Firm C], and Ms R eventually had conduct of his file. Since that time, Ms R has continued to have carriage of Mr Danae’s matter. In July 2015 Ms R joined [Law Firm D] and Mr Danae retained the firm to act, until January 2017, when Ms R formed [Law Firm B]. While Mr Danae instructed Law Firm D, Ms R had primary conduct of his matter, with the assistance of other solicitors. One of those solicitors was Ms K.
13 On 19 July 2019 Law Firm A wrote to Law Firm B, alerting them to a potential conflict arising from the fact Ms K had commenced employment with Law Firm A on 1 July 2019. The letter stated the firm understood “[Ms K] assisted on [Mr Danae’s] matter while he was a client at [Law Firm D]”. It enclosed a draft undertaking to be signed by Ms K, once settled by Mr Danae.
14 The letter set out Law Firm A’s procedures, in the following terms:
2.All files in our office are managed electronically via a document management system called [System A].
3.The only paper files on the matter (sic) now the court briefs and disclosure. These are lever arch files containing documents filed in the court, handed up to judicial officers or exchanged between the parties by way of disclosure. In other words documents in these files are common to all parties.
4.For [Ms Coley’s] file, access is restricted to the lawyers with conduct of the file and the associated administration team. There is no ability for [Ms K] to access any aspect of this file.
5.In addition we have strict protocols that apply prohibiting any discussions in relation to this file with [Ms K] or in her presence.
6.Your client’s case will not be compromised following the joinder of [Ms K] with us.
It will be a matter for your client whether or not he wishes to file the undertaking with the Family Court - from our perspective there is no issue if the filing of this document is regarded as appropriate.
15 On 27 August 2019, Law Firm B responded, writing:
As matters presently stand, there is no matter pending before the Family Court of Western Australia so the undertaking at present should relate to the court of appeal matter. We are instructed that our client will accept it with respect to the court of appeal matter.
However, given the nature of [Ms K’s] involvement in the matter, such an undertaking is not accepted with respect to any continuation of the Family Court proceedings should the matter be remitted following appeal.
16 On 6 March 2020, Law Firm B wrote to Law Firm A, referring to the previous correspondence. They set out Ms K’s involvement on Mr Danae’s matter, which included:
•involvement with the issue of subpoena and attendance at Court for return of subpoena;
•communicating with other solicitors regarding witness affidavits and orders;
•telephone attendance on senior counsel;
•involvement in issues regarding valuations, and interactions with external accountants involved in Mr Danae’s affairs;
•involvement in draft preparation, witness lists, witness affidavits and conferring with solicitors;
•attending on Mr Danae’s business premises to finalise witness affidavits, and attending on Mr Danae and taking instructions for preparation of his affidavit of 11 May 2016;
•involvement in preparation for the readiness hearing;
•involvement with issues concerning the Swanbourne property and the estate of Mrs Fir;
•the appointment of, and issues relating to single expert witnesses and asset valuation disclosure; and
•internal discussions regarding settlement options and potential avenues to resolve matters.
17 The letter went on to state:
As such, [Ms K] has been provided with and had access to confidential information. The information and all other aspects of the case in which [Ms K] was involved remain relevant to the re-trial. [Ms K] has further been involved in and privy to what also been stated as “getting to know you” factors. The size and structure at [Law Firm A] means that [Ms K] will have daily contact with those people in [Law Firm A] handling the matter.
18 They asked Law Firm A to file a Notice Ceasing to Act, failing which Law Firm B advised they were instructed to file an application.
19 Following a telephone conversation between the parties’ solicitors and a further letter from Law Firm B on 18 March 2020, Law Firm A responded by letter dated 20 March 2020. The letter referred to the systems in place at Law Firm A, which continued to apply. The proposed undertaking by Ms K remained open, if required. The letter stated:
It is not clear why the matter is being raised now, particularly given:
1.the time which has elapsed since [Ms K’s] joinder;
2.we have continued to act for our client;
3.the negotiations which took place during the currency of the appeal; and
4.the content of those negotiations were not limited to our client’s appeal, but also substantive financial issues before the Family Court of Western Australia.
20 On 27 March 2020 the proceedings came before the Court for directions. Mr Danae foreshadowed the present application. Orders were made to program the application for hearing.
21 In summary, Mr Danae’s evidence is that:
(a)While Ms R has had primary conduct of his matter, he was aware that Ms K, while employed at Law Firm D, was involved and assisted with his case. When Ms R was on leave, Ms K had conduct of his case. He recalls communicating with Ms K, including by way of telephone, email and at least once meeting with her. Ms K was “heavily involved” with preparation of his witness affidavits. She attended his offices to undertake work in relation to the witness affidavits. She provided advice to him in relation to an interim application and affidavit. Ms R often mentioned to him Ms K’s involvement on his file.
(b)He also liaised with a paralegal. From his conversations with [the paralegal], he was aware that she would direct queries concerning his case to Ms K in the absence of Ms R.
(c)He felt uncomfortable and concerned about Ms K’s employment at Law Firm A, because he considered her to be one of his solicitors. At the time he received notice that Ms K had joined Law Firm A:
“… the Family Court matter had finished and the Appeal Proceedings were at a point where there had already been one day of hearing ... and the final day of the appeal hearing had been listed… so I did not view [Ms K’s] employment at [Law Firm A] as being detrimental to the appeal.
However… it was a very different matter if the appeal were remitted to the Family Court of Western Australia for a re-trial.”
(d)Between 30 July 2019 and 27 August 2019, when his solicitors replied to Law Firm A, he was overseas and his solicitors and counsel were on leave. Since the correspondence of 27 August 2019, no undertaking was provided and no response was received.
(e)After the appeal was determined, he instructed his solicitors to write again, repeating his concerns. No response was received. He understands a telephone conversation took place between the respective solicitors, at which time Law Firm A denied any conflict of interest.
(f)He says Ms K was part of his team of solicitors, she has intimate knowledge of his case and he is concerned that by joining the firm which act for Ms Coley, he is now disadvantaged, despite the offer of an undertaking (which had not been signed) and the procedures which Law Firm A have put in place.
22 Ms R’s evidence, in summary, is that:
(a)When Ms K was employed by Law Firm D, she had significant involvement in the preparation and planning of Mr Danae’s case for trial. Ms R considered herself and Ms K as the team of solicitors, acting on behalf of Mr Danae.
(b)From her review of Law Firm D’s itemised invoices, apart from Ms R, Ms K recorded the highest number of billable units on Mr Danae’s matter, between December 2015 and August 2016. Ms K had conduct of Mr Danae’s matter in mid-2016, when Ms R was on leave.
(c)From the invoices and her recollection, Ms K was involved in Mr Danae’s matter as stated in the 6 March 2020 letter and additionally, met with Ms R regarding his case, including for trial preparation, settlement and strategy, assisted in drafting a transcript of Mrs Fir’s evidence on commission, six witness affidavits and liaised with Mr Danae and his accountant. Ms K was involved in obtaining advice about provisions of the Corporations Act 2001 (Cth).
(d)Ms R discussed with Ms K, Mr Danae’s evidence and that of his witnesses, his instructions, the choice of counsel, strategy, and the merits and potential weaknesses in Mr Danae’s case.
(e)Other employees at Law Firm A were also involved with Mr Danae’s matter, when they worked at Law Firm D, but to a lesser extent than Ms K. They include:
a.[Ms Y], a solicitor, who attended court on one occasion in 2015, spoke with Mrs Fir’s solicitor, and discussed retaining counsel, given the issues and Mr Danae’ personality.
b.[A legal assistant] at Law Firm D, who occasionally assisted on Mr Danae’s matter when Ms R’s assistant was on leave, or not available.
23 Ms Coley’s evidence is that:
(a)She engaged Law Firm A in October 2015. Since July 2016, [Mr W] has had primary conduct of her matter, including during the trial and appeal.
(b)She has incurred costs in the substantive proceedings of $215,957.84. Her costs in relation to the appeal were $46,492.50. Mr Danae has been ordered to contribute $25,000 towards her costs associated with the appeal.
(c)The property proceedings are complex, compounded by Mr Danae’s failure to disclose. She makes complaints as to ongoing outstanding disclosure, and the potential need to join third parties to the proceedings.
(d)If she were required to instruct a new firm, she anticipates incurring substantial additional expense, given the lengthy history.
(e)She has not met or spoken with Ms K. To the best of her knowledge, Ms K has not undertaken any work on her behalf.
24 Ms K’s evidence, in summary, is that:
(a)She assisted in preparation of Mr Danae’s case for trial. She has little recollection of the matter. She does not recall having spoken directly to Mr Danae, but does recall discussing matters with Ms R while they were employed at Law Firm D, the preparation of the transcript of Mrs Fir’s deposition, proofing and preparing affidavits for Mr Danae’s employees, and in doing so, attending his workplace. That work ended in 2016 after Mr Danae moved his file to Ms R’s new firm.
(b)On joining Law Firm A, she identified any matter in which Law Firm D had acted or continue to act, in which there may be a conflict of interest.
(c)Mr Danae’s matter was identified. As part of the firm’s protocols she must not:
a.speak with Ms Coley or meet with her for any reason;
b.speak about the matter with any other person at the firm who is involved in the matter;
c.disclose, directly or indirectly, any information in her possession or control concerning Mr Danae or the matter;
d.have any involvement in or undertake any work on the matter; and
e.view any documents in relation to the matter, including correspondence, files, invoices, briefs and emails.
(d)She has attached the undertaking she signed on 27 August 2019, which reads as follows:
I [Ms K], care of [Law Firm A], [in] Perth, undertake to [Mr Danae] that I will not disclose any information that I am aware of concerning either [Mr Danae] or the proceedings before the Family Court of Western Australia and the Supreme Court of Western Australia between [Mr Danae] and [Ms Coley] (“the proceedings”) to any other person.
In that regard, I undertake not to:
1. speak with [Ms Coley] or any person at [Law Firm A] concerning any information I may have about [Mr Danae] or the proceedings;
2. disclose directly or indirectly any information that I may have in my possession or control concerning [Mr Danae] and the proceedings;
3. have any involvement with the proceedings for the duration of my employment at [ Law Firm A];
4. view any correspondence, files, tax invoices, briefs or emails either sent to [Law Firm A] or received by them for the duration of my employment at [Law Firm A]; and
5. convey to any person any information about the affairs of [Mr Danae] which I may have as a result of my employment with [Law Firm D].
(e)She has complied with the undertaking and with the firm’s protocols. She sets out what the protocols require of her, to ensure that she is not involved in any conversation regarding the matter.
(f)Early in 2020 she received an email forwarded by reception, which referred to “[Danae and Coley]” in the subject line. She immediately replied, stating the email should not have been forwarded to her on the basis of an undertaking, confirming she had not read the email, and had deleted it.
25 Ms G is the practice manager at Law Firm A. She deposes that:
(a)Part of her responsibility as the practice manager is to implement policies associated with conflict management, including where there is a risk of a conflict arising from a new solicitor joining the firm, and the implementation of information barriers.
(b)The firm has a number of mandatory protocols which apply to all staff.
(c)When staff join the firm, they work with her and other staff members to identify matters where there is a risk of a conflict, and where an information barrier may be required. That applies to all employees of the firm who have previously worked in family law, including agency temps and casuals. The firm’s practice is to require incoming staff members to provide written undertakings not to disclose information they have, which may be protected by privilege, belonging to an opposing party.
(d)The firm also conducts an internal search to identify any matters where the joining solicitors’ former firm is identified, as part of a potential conflict check.
(e)In any matter where there is a risk of conflict, the firm implements an information barrier. The joining solicitor must not meet with the relevant client, or speak with other people, disclose information available, undertake any work, or view any documents regarding the matter. Further, they must actively avoid becoming involved in any conversations relating to the matter, by ensuring the conversation is immediately terminated, or alternatively, leaving the conversation for the duration. The exception to that rule are the weekly court diary meetings and the weekly review of published information on the Commonwealth court portal, which does not include discussion about the substance of the matter.
(f)The information barrier also requires existing staff with knowledge or involvement in the matter, not to discuss it with the joining solicitor, and to immediately terminate conversations that might involve the relevant matter, if the joining solicitor comes within earshot.
(g)The firm maintain and store confidential information received by clients during the course of any retainer electronically, utilising System A. The system is used in conjunction with the information barrier, which includes adopting settings to only authorise specific staff members to have access to a file, effectively “locking” the file to any unauthorised staff.
(h)The ordinary process adopted by the firm, includes:
a.when a hard copy document is received, it is scanned and saved into System A, with the original then destroyed (unless there are circumstances why that should not occur), utilising legal recycling services;
b.electronic communications are distributed to solicitors with primary conduct of the file;
c.when hard copy communication is received, it is similarly scanned and distributed by email;
d.the only paper files which are retained are those comprised in the court brief, unless an original document must be retained for a specific purpose.
(i) The information barrier which has been implemented since Ms K joined Law Firm A on 1 July 2019, includes:
a.obtaining an undertaking from Ms K;
b.locking the electronic file in System A; and
c.no internal complaint has been raised that Ms K has breached her undertaking, or the firm’s protocols.
OBJECTIONS TO EVIDENCE
26 Ms Coley seeks to rely on extracts of correspondence from Mr Danae’s solicitors dated 13 August 2019, which is annexure A to her affidavit. The correspondence is marked without prejudice save as to costs. Portions of the correspondence are quoted in the affidavit. Portions of the correspondence have been redacted, including the terms of an offer of settlement.
27 Mr Danae seeks the correspondence and the portions quoted in Ms Coley’s affidavit be struck out, on the basis it is privileged, and there has been no waiver of the privilege. He says the privilege covers not only admissions, but also assertions[4] and aspects of the un-redacted parts of the letter include assertions. His counsel referred to the decision of Unilever Plc v Procter & Gamble Co [2000] 1 WLR 2436, where the Court found it was insufficient to simply redact parts of the correspondence as:
… to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the objective of giving protection to the parties.[5]
[4] Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 at 1299-1300 per Lord Griffiths.
[5] Unilever Plc v Procter & Gamble Co [2000] 1 WLR 2436 at 2448-9 (Robert Walter LJ).
28 The Court was also referred to the decision of the High Court of Australia in Field v Commissioner for Railways(NSW) (1957) 99 CLR 285, at [29] which states:
As a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them. The law relieves them of this embarrassment so that their negotiations to avoid litigation or to settle it may go unhampered. This form of privilege, however, is directed against the admission in evidence of express or implied admissions. It covers admissions by words or conduct. For example, neither party can use the readiness of the other to negotiate is an implied admission. It is not concerned with objective facts which may be ascertained during the course of negotiations. These may be proved by direct evidence. But it is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission.
29 Ms Coley submits the redacted letter and evidence as to its contents is admissible. Alternatively, she says the existence of the letter, without regard to its contents, is admissible.
30 She says the offer has been redacted, and accepts it was “without prejudice”. On her case, the balance of the correspondence sets out representations made by Mr Danae, in the event of a retrial. The correspondence was sent “without prejudice” to the proceedings before the Court of Appeal, and privilege does not attach in relation to other proceedings. She observes the authorities on which Mr Danae relies, in support of his claim of privilege, concern the admissibility of without prejudice communications in the same proceedings. That does not apply in the present case.
31 Finally, if privilege does apply, the common law recognises privilege cannot be relied upon, if to do so would mislead the Court.
32 Ms Coley’s Senior Counsel relies on the decision of the Supreme Court of New South Wales in Pitts v Adney [1961] NSWR 535 at [539]:
It is of importance that the rule protecting from disclosure, discussions taking place in an endeavour to put an end to pending litigation should, in general, be applied. But it is, after all, a rule based upon public policy. It cannot be permitted to put a party into the position of being able to cause a court to be deceived as to the facts, by shutting out evidence which would rebut inferences upon which that party seeks to rely. In McFadden v. Snow (1951), 69 W.N (N.S.W.) 8, evidence was given on behalf of one party that no reply had been received to a letter. Thus it was sought to establish an admission by silence as to a relevant fact. Kinsella J., admitted a letter headed “without prejudice” tendered in disproof of that evidence. He said: “The privilege that may arise from the cloak of ‘without prejudice’ must not be abused for the purpose of misleading the court”. With respect, I state my emphatic agreement with that observation.
33 Her Senior Counsel submits the principle is codified in s 131(2)(g) of the Evidence Act 1995 (Cth) (noting that the Act does not apply to the present case), which makes evidence of this nature otherwise admissible if:
… evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to quantify that evidence.
34 Ms Coley asserts the principle applies when two requirements are satisfied: firstly, other evidence must have already been adduced which would be likely to mislead the court, unless evidence of the “without prejudice” communication is adduced; secondly, the evidence of the “without prejudice” communication must contradict or qualify the evidence adduced.[6]
[6] See Korean Airlines Co Ltd v Australian Competition and Consumer Commission (No 3) [2008] FCA 701 at [76] to [77]
35 Ms Coley says the first limb is satisfied, on the basis Mr Danae’s evidence would likely mislead the court unless the correspondence is adduced, in circumstances where he has deposed:
(a)he was uncomfortable and concerned about Ms K joining Law Firm A, and his concern more generally about the risk of misuse of information;
(b)he reserved his rights on the conflict point, on the basis there were no matters pending before the Family Court of Western Australia;[7]
(c)the delay in responding to the alleged conflict from 19 July 2019 to 27 August 2019, was due to the fact he and his legal representatives were on leave. Implicit in his evidence, is the suggestion no earlier response could have been provided;[8]
(d)paragraph 16 and exhibit C to Mr Danae’s affidavit which is said to be an outline of previous correspondence on the topic of the alleged conflict.
[7] Paragraph 12 of Mr Danae’s affidavit
[8] Paragraph 13 of Mr Danae’s affidavit
36 She says the second limb is also satisfied, given the contents of the correspondence dated 13 August 2019, contradicts Mr Danae’s representations in evidence:
(a)about his discomfort and concern with Ms K joining Law Firm A and the general tenor of his evidence. To the contrary, it demonstrates a preparedness on his behalf to engage in substantive property matters, after being on notice as to Ms K’s joinder of the firm.
(b)that there was no matter pending before the Family Court of Western Australia. The correspondence specifically refers to the parties’ outstanding costs applications in those proceedings.
(c)that Mr Danae, despite being abroad and notwithstanding his solicitors were on leave, was able to provide detailed instructions for correspondence to be sent. By extension, he had the ability to take the point of the conflict on 13 August 2019.
(d)qualifies paragraph 16 and exhibit C, as to the correspondence, which omits any reference to the question of joinder.
37 In Cottard v Crichton [2016] FamCA 819 Watts J considered an objection to the admission of without prejudice correspondence, where a party sought to rely on the exception contained in ss 131(2)(g) of the Evidence Act 1995 (Cth).
38 His Honour noted that judicial thinking on the interpretation of s 131(2)(g) was divided, between a broad and narrow construction[9] and reviewed the relevant authorities.[10] His Honour preferred the broad interpretation and in doing so, observed, at [52]:
In Pitts v Adney, Walsh J explains at 539 that the common law rule was based upon public policy and he referred to an example where evidence had been given that there had been no reply to a letter and a letter in reply, headed “without prejudice” was admitted to disprove that evidence.
and the language of s 131 (2)(g):
… allows for the court to address a mischief which in my view the statute intended to remedy, namely a circumstance where a party could hide behind privileged communications to avoid being tested about the fact they said something was white in a privileged communication in circumstances where now in sworn evidence they say it was black.
[9] At [42].
[10] At [42] – [51].
39 More recently, in Phe & Leng (2019) FLC 93-887, the Full Court, found the broader interpretation applied.[11]
[11] At [48].
40 There is no equivalent s 131 of the Commonwealth Evidence Act in the State Evidence Act.
41 Subsection 240(1) of the Family Court Act1997 (WA) states:
If —
(a) a party to proceedings to which this section applies makes an offer to the other party to the proceedings to settle the proceedings; and
(b) the offer is made in accordance with any relevant rules, the fact that the offer has been made, or the terms of the offer, must not be disclosed to a court in which the proceedings are being heard except for the purposes of the consideration by the court of whether it should make an order as to costs under section 237(2) and the terms of any such order.
42 The Family Law Rules2004 (Cth) provide, in r 10.02(2), that a party must not mention the fact that a without prejudice offer has been made, or the terms of the offer, in any filed document.
43The offer was expressed to be in resolution of “the above appeal (together with all matters arising in connection with the appeal and the Family Court of Western Australia proceedings PTW 1603 of 2014 between our client and your client, which for the avoidance of doubt includes [Mr Danae’s] application for costs against your client in connection with the Family Court of Western Australia proceedings” (the terms of which were redacted).
44 Privilege only attaches to proceedings between parties by and whom the communications have been made and which are connected with the same subject matter. The offer was clearly made with respect to both proceedings. Accordingly, it is not admissible and the letter together with the extracts should be struck. The question is then whether any exceptions apply.
45 In Unilever (supra), the Court referred to the exceptions, including evidence of negotiations, “in order to explain delay or apparent acquiescence. Lindley LJ in Walker v Wilsher (1889) 23 QBD 335 at 338 noted this exception but regarded it as limited to ‘the fact that such letters have been written and the dates at which they were written’”.[12]
[12] Unilever (supra) at 2444-2445.
46 In the present circumstances, I am satisfied the fact without correspondence was sent in relation to both sets of proceedings and the date of the correspondence only, is admissible. To not allow the admission of those facts, would allow the privilege to be abused and risk misleading the court. In adopting the language of the Supreme Court of New South Wales in Pitts v Adney (supra), it cannot be permissible for Mr Danae to be in a position of causing the court to be deceived as to the facts, by shutting out evidence which would rebut inferences on which he seeks to rely.
47 Those facts and inferences include that Mr Danae was able to provide instructions to make an offer, while both he and his solicitors were on leave, yet that was proffered by way of his explanation in terms of the delay in him taking the point in correspondence of the conflict. Further, the correspondence contradicts Mr Danae’s evidence that he did not consider there were pending proceedings before the Family Court of Western Australia.
48 For these Reasons, the date and fact the offer was made are admissible only. The correspondence as attached and the extracts of the correspondence will be struck.
WHAT IS THE LAW?
49 There was no dispute as to the law to be applied, which was helpfully summarised by each parties’ written submissions. The basis upon which a solicitor, or firm, may be prevented from acting in proceedings are well settled, and conveniently set out by the Full Court in Osferatu & Osferatu (2015) FLC 93-666.[13]
[13] Which was subsequently approved by the Full Court in Dalton & Dalton (2017) FLC 93-773.
50 There are three established categories, upon which a solicitor may be restrained from acting against their client or former client namely:
(a)breach of confidence;
(b)breach of fiduciary duty; and
(c)the inherent jurisdiction of the court over its officers and to control its processes.
51 The Full Court observed at [20], “the third category may be involved in conjunction with either of the first two so that there is clearly an overlap”.
52 The principles to be applied were identified in the following passages of Osferatu (supra):
34.We agree with Goldberg J in PhotoCure ASA v Queen’s University at Kingston [2002] FCA 905 where he said at [50] and [51]:
50.It is apparent from Lord Millet’s judgment that there are three stages which need to be considered:
•whether the firm is in possession of information which is confidential to the former client;
•whether that information is, or may be, relevant to a matter in which the firm is proposing to act for another party with an interest adverse to the former client;
•whether there is any risk that the information will come into the possession of those persons in the firm working for the other party.
51.The burden of establishing the first two propositions is upon the former client but the burden of establishing the third proposition moves to the firm proposing to act once the first two propositions are satisfied…
35.A balancing of the nature of the information against a consideration of the person to whom the information was given, when the information was given, the relevance of that information to the current proceedings, the risk of disclosure and any proposed protective measures is required before any determination can be made as to whether any relief is required and, if so, what is the appropriate relief.
53 The Full Court in Dalton & Dalton (2017) FLC 93-773 observed at [14]:
…the jurisdiction to restrain a solicitor from acting is exceptional and is to be exercised with caution, having regard to the totality of the evidence.[14] Due weight is to be given to the public interest in a client not being deprived of their lawyer of choice, without due cause. The public interest is also predicated on a client knowing that confidential information imparted to a lawyer will not be given to an opposing party, unless the law requires its production. These public interests lie at the heart of the system of justice.[15]
[14] Billington & Billington (No 2) [2008] FamCA 409 and Naczek & Dowler [2011] FamCAFC 179 at [65].
[15] Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd [2007] NSWSC 350 at [42].
54 Mr Danae seeks to restrain Law Firm A on two basis, namely the confidential information ground and the supervision and control ground.
Breach of Confidence
55 In relation to the confidential information ground, the Full Court in Osferatu (supra) quoted with approval, the following passage from Bryson J in Mancini v Mancini [1999] NSWSC 800 at [7]:
It is of importance to observe that information generally is not protected; the protection available relates to confidential information, and is available to the person entitled to the confidence. No circumstances were put forward in which Mrs Mancini herself is entitled to the protection of the law against the use of any particular information by Mr Mancini or by the lawyers whom he has chosen to retain. It is not possible to address in any clear way and to come to a decision on protection of any alleged confidential information without identifying what the confidential information is in a sufficiently specific way to enable it to be identified. Without doing that it is not possible to come to a conclusion on whether the information truly is confidential, to consider and appraise the circumstances in which it came into existence and was communicated, to come to any conclusion about whether protection is appropriate, or to make any enforceable order. A case about confidential information cannot be nebulous. Confidential information which once existed may no longer be confidential; it may no longer be available although it was communicated in the past; it may not be material to any use which might now be proposed to be made of information. Without specificity a claim to protection cannot be defended or decided on any fair procedural basis, and a general allegation of the kind put forward here to the effect that from the nature of the past legal business confidential information must have been communicated should not in my opinion be upheld.
(Emphasis added)
56 The law requires an applicant seeking to restrain a solicitor from acting, must adduce evidence which establishes the confidential information and the risk of the misuse of that information, in the circumstances. The weight and persuasiveness of any evidence, depends upon the precision of the evidence, the nature of the confidential information and the nature of the risk of disclosure.
Inherent Jurisdiction
57 In relation to the supervision and control ground, the authorities establish that:
•The Court “always has inherent jurisdiction to restrain solicitors from acting, in a particular case, as an incident of its inherent jurisdiction, over its officers and to control its process in aid of the administration of justice”.[16]
[16] Naczek & Dowler [2011] FamCAFC 179, at [16].
•The test to be applied, is “whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting – in the interests of the protection of the integrity of the judicial process and the due administration of justice including the appearance of justice”.[17]
[17] Kallinicos and Anor v Hunt and Ors [2005] NSWSC 1181 at [43].
•The requirements of natural justice do not involve an “absolute right to the legal advisor of a party’s choice”.[18]
[18] State of Western Australia v Ward and Ors (1997) 145 ALR 512 at [518], Full Court of the Federal Court.
•A legal practitioner’s duty to the Court is paramount. It overrides a practitioner’s duty to their client. 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 judgment, a court may conclude that the lawyer should be restrained from acting, even for a client who desires to continue his service.[19]
[19] Holborow & Ors v Macdonald Rudder [2002] WASC 265 at [28].
(Citations omitted)
•Where an applicant seeks to restrain a legal practitioner, from continuing to act, it is “necessary for a clear case to be made that the practitioner concerned is in a position where he is fixed with an interest which conflicts with his duty to the court and that that interest is one of such a nature that the solicitor or counsel may fail in his overriding duty to the Court”.[20]
[20] Holborow v Macdonald Rudder (supra) at [31].
•It is important to identify, with precision, what obligation may be breached. The conflict must be actual, or sufficiently material.[21]
•Examples of situations in which courts have prevented chosen counsel or solicitors from acting, include where:
•There has been misconduct, the potential use of confidential information, and a “real risk of lack of objectivity and of conflict of interest and duty”.[22]
•There was potential that a legal practitioner might become a witness in the proceedings, and where the litigation was likely to involve an evaluation of the legal practitioner’s conduct.[23]
•The legal practitioner has a substantial personal stake in the litigation, for example, by virtue of being a partner in a firm which was a party to the litigation.[24]
•The practitioner might feel compelled to justify or defend his conduct in representing a client.[25]
Waiver
[21] Holborow v Macdonald Rudder (supra) at [29].
[22] State of Western Australia v Ward and Ors (supra) at [519].
[23] Holborow v Macdonald Rudder (supra) at [23] and [29].
[24] Holborow v Macdonald Rudder (supra) at [29].
[25] Holborow v Macdonald Rudder (supra) at [23] and Karapataki& Karapataki [2011] FMCAfam 6, at [35].
58 Ms Coley says Mr Danae has waived his right to object. Mr Danae has not expressly done so. The question is whether he has acted in a manner inconsistent with that right, and ultimately impliedly waived that right.
59 Mr Danae denies waiving his right to object. His counsel relied on the decision of McGillivray v Mitchell (1998) FLC 92-818 where the Full Court observed that when a litigant becomes aware of a conflict:
…the litigant must take the point at least in correspondence with the other side at the earliest possible opportunity. If he or she does not do so, then he or she is possessed of a weapon which can later be used as a delaying tactic at some point in the proceedings convenient to his or her position. Furthermore a failure to take the point initially must also cast doubt on the bona fides of any later complaint…[26]
[26] McGillivray v Mitchell (1998) FLC 92-818 at [36].
60 He says within a very short period of time, he put Ms Coley on notice of his objection. He adopted a prudent position, to allow the appeal to be completed, which does not amount to a waiver.
61 His counsel referred to Sexton v Barton[27], in which the wife sought to restrain the husband’s solicitors from acting. The solicitor in question, Mr M, of Law Firm A, had been engaged by both parties during the relationship, and prepared a Deed of Appointment of a New Trustee, signed by the wife shortly before separation. Law Firm A continued to act for the husband after separation and instituted proceedings on his behalf.
[27] [2015] FCWA 38.
62 The wife considered both Mr M and Law Firm A, to have acted for both parties and accordingly, she had not sought independent advice about the Deed. After separation, Law Firm A corresponded with the wife’s solicitors, with the intention of engaging in mediation. Around 18 months later, a month prior to the husband initiating proceedings, the wife first raised the potential conflict.
63 Crisford J did not consider there had been an unacceptable delay. Her Honour found it was reasonable for the wife to attempt negotiation and mediation, prior to making her complaint. Crisford J highlighted the Court was dealing with this matter very early in the proceedings, and was not drawn to any particular prejudice, save for the husband having the solicitor of his choice.
64 The question of waiver has since been considered by the Full Court in Dalton (supra), where they summarised the law in relation to waiver as follows:
17.In Expense Reduction Analysts Group Pty Ltd and Ors v Armstrong Strategic Management and Marketing Pty Limited and Ors (2013) 250 CLR 303 the High Court explained the nature of waiver at 315-316 thus:
30.According to its strict legal connotation, waiver is an intentional act done with knowledge whereby a person abandons a right (or privilege) by acting in a manner inconsistent with that right (or privilege). It may be express or implied. In most cases concerning waiver, the area of dispute is whether it is to be implied. In some cases waiver will be imputed by the law with the consequence that a privilege is lost, even though that consequence was not intended by the party losing the privilege. The courts will impute an intention where the actions of a party are plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect.
31.In Craine v Colonial Mutual Fire Insurance Co Ltd, it was explained that“‘[w]aiver’ is a doctrine of some arbitrariness introduced by the law to prevent a man in certain circumstances from taking up to inconsistent positions… It is a conclusion of law when the necessary facts are established. It looks, however, chiefly to the conduct in position of the person who is said to have waived, in order to see whether he has ‘approbated’ so as to prevent him from ‘reprobating’”…
(Citations omitted)
…
19.The point of implied waiver is that even though the holder of the privilege (or right) does not intend to give it up, intention to waive is imputed. In Mann v Carnell (1999) 201 CLR 1 at 13, the plurality of the High Court summarise the position as follows:
29.… This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege… What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.
20.Invariably, the question of implied waiver requires a fact based enquiry. It is unlikely that the facts as found in other cases will be of assistance in a different case…
65 I observe that Sexton v Barton (supra) was a decision in first instance only, which preceded Dalton (supra). The Full Court has expressed reservations about the utility of any analysis seeking to identify factual similarities and differences between the case under consideration, and other cases decided at first instance, noting that “no single case is ever the same as another, and each must be dealt with on its own facts and merits”.[28]
[28] Chancellor & McCoy (2016) FLC 93-752, [48].
66 In my view, the circumstances of the present case, taken as a whole, establish that Mr Danae has effectively waived his right to object. Accordingly, there is no basis to restrain Law Firm A from continuing to act.
67 I have reached that finding for the following Reasons:
(a)From 19 July 2019 Mr Danae was aware that Ms K had joined Law Firm A. He did not make an application seeking to restrain the firm from acting until 23 April 2020, some nine months later.
(b)I am not satisfied the delay from 19 July until 27 August 2019 is fatal, on the basis it is reasonably explained and is not a significant period, even acknowledging he instructed his solicitors to engage in settlement negotiations on 13 August 2019.
(c)While Mr Danae expressed his objection to Law Firm A continuing to act in any Family Court proceedings on 27 August 2019, stating he was “reserving his right to object” he then took no further action. He did not object to the firm continuing to act for Ms Coley in the ongoing appeal proceedings.
(d)Mr Danae engaged in negotiations with Law Firm A, in relation to the resolution of all proceedings between the parties, when he was aware that Ms K had joined the firm.
(e)Contrary to Mr Danae’s assertion, there were pending proceedings before the Family Court of Western Australia throughout the time of the appeal proceedings. The estate of Mrs Fir filed an application on 27 March 2017, seeking costs. In addition, there were competing costs applications by the parties, which were adjourned pending the Court of Appeal proceedings. The costs applications related to the conduct of both Mr Danae and Mrs Fir, during the period of Ms K’s involvement. It concerned representations as to the ownership of entities and whether, if Ms Coley is ordered to pay any of the costs of Mrs Fir’s estate, he will indemnify her. The costs issues also encompass issues of disclosure, which were ongoing during the period Ms K was involved.
(f)Mr Danae was aware if Ms Coley’s appeal was successful, there was a risk the matter would be remitted for re-hearing before the Family Court of Western Australia. That was expressly raised by the Court of Appeal on 28 August 2019.
(g)The Court of Appeal’s decision was handed down on 31 January 2020. Mr Danae then took no further steps until 6 March 2020 when he caused correspondence to be sent, repeating his objection. The proceedings were listed for directions on 27 March 2020, at which time Mr Danae had still not filed any application to restrain the firm from acting.
68 In the circumstances, I am satisfied Mr Danae waived his right to object. From August 2019, Mr Danae was on notice of the fact Ms K had joined Law Firm A. Despite raising an objection, he failed to make an application for many months, while being aware that Ms Coley retained the firm. Inconsistent with his objection, Mr Danae took steps in relation to the dispute with Ms Coley, while Law Firm A continue to act on her behalf.
69 Further, between 30 January 2020 and 6 March 2020, Mr Danae had the opportunity to not simply “take the point” but to file an application. He did not do so, despite the fact Ms Coley sought to re-engage in the substantive issues. I am satisfied that Mr Danae’s actions were inconsistent with his stated objection.
70 However, if I am wrong in that conclusion, for completeness, I intend to proceed to consider the balance of Mr Danae’s application.
Discussions and Conclusions
71 The law makes it plain that the need to grant relief of the kind sought by Mr Danae is to be exercised with extreme caution, and is a matter requiring a serious and weighty consideration of the facts.
72 Ms Coley has a right not to be deprived, without due cause, to retain solicitors of her choice and to avoid potentially incurring additional cost and inconvenience associated with retaining alternative solicitors. She articulates concern about these matters, in circumstances where the parties have already been to a trial, an appeal, and have now been remitted for re-hearing.
73 Mr Danae is entitled to ensure any confidential information is not in the hands of his former partner or her legal advisers.
74 Parties should not be able to obtain the restraint of legal representatives lightly, and other than when the interests of justice require it to occur.
75 There was no serious suggestion that Ms Y or the legal assistant were in receipt of any confidential information.
76 I am satisfied Ms K is in possession of confidential information, based on the unchallenged evidence of Ms R and Mr Danae. Ms K directly assisted with the conduct of Mr Danae’s matter. She was privy to discussions relating to the merits, strengths, weaknesses and strategy adopted on behalf of Mr Danae, in the Family Court proceedings.
77 I reject the submission that the evidence was vague. In my view, it was both cogent and clear, while not divulging the content of the confidential information.
78 Ms K may have little or no recollection of the confidential information, or discussions or impressions. That is of limited relevance. As Newnes M said in Zalfen & Anor v Gates& Anor [2006] WASC 296:
It is a matter of common experience that recollection of something thought to have been completely forgotten may at a later time be triggered by some comment or event or simply come to mind. The fact that [a lawyer] currently has no recollection of [a relevant matter] is a factor to be taken into account that cannot be regarded as establishing that any relevant information about the matter is lost to him forever
79 The fact the confidential information was conveyed between four to five years ago, does not mean it is no longer confidential. The simple passage of time does not render the information no longer material or confidential. A further trial is required. The very matters which Ms K has direct knowledge of, some time ago, may now be amongst the matters that will be re-litigated.
80 In reaching that conclusion, not all of the work which Ms K conducted on behalf of Mr Danae is likely to remain confidential. For example, the taking of instructions from witnesses, whose evidence is now in affidavits, is no longer confidential and is within the public domain.
81 I accept that if the confidential information were to be made available to Ms Coley, it could be used to the disadvantage of Mr Danae.
82 However, I am not satisfied there is a real risk that any confidential information will come into the possession of Law Firm A, in light of the evidence as to the information barrier and protocols which the firm has in place, coupled with the signed undertaking of Ms K.
83 There is no allegation or any suggestion of impropriety on behalf of Ms K. Ms K is an officer of the court. I accept her unchallenged evidence that she has complied with the undertaking and she will continue to do so, together with adhering to the firm’s protocols.
84 The evidence from the firm’s practice manager, Ms G satisfies me that effective communication barriers have been established to protect any confidential information. That includes the steps taken to immediately identify any potential conflicts arising on Ms K joining Law Firm A; the restriction of Ms K from having any access to Ms Coley’s file; the undisputed evidence of Ms K, as an officer of the court, not to discuss the matter; and Ms K’s signed undertaking.
85 The protocols and the undertaking do not simply seek to prevent the possibility of staff at Law Firm A or Ms Coley from communicating her confidential information to Ms K, or Ms K having access to it. They also specifically canvass the need for Ms K to quarantine her knowledge, from the firm.
86 I do not accept the submissions that the size of Law Firm A renders any information barrier ineffective or illusory. In my view, the incident in which reception circulated an email relating to the matter and the response of Ms K demonstrate the effectiveness of the protocols, together with Ms K’s clear understanding of what is required.
87 Further, it was Law Firm A who raised the potential conflict at the earliest available opportunity. Contrary to Mr Danae’s submissions, the firm has acknowledged that Ms K potentially holds confidential information. It was on that basis the decision was made to require an undertaking from Ms K.
88 The evidence satisfies me that appropriate arrangements have been put in place by Law Firm A, designed to address and extinguish the risk of disclosure or misuse.
89 In my view, the present circumstances are distinguishable from the facts in Foley and Foley [2016] FCWA 41, where his Honour questioned the practicalities of the protections offered by the firm, for the following reasons; firstly, he considered the primary purpose of the information barrier in that case, was to ensure that confidential information in the possession of the firm did not fall into the hands of the solicitor in question;[29] secondly, his Honour placed weight on the perceived shortcomings of the information barrier;[30] and thirdly, his Honour’s view that the firm failed to acknowledge the solicitor in question was in possession of confidential information, and in those circumstances, raised questions about how effective the information barrier was.[31]
[29] At [25].
[30] At [26].
[31] At [44].
90 In the present case, I am satisfied that Law Firm A have an effective information barrier in place, in terms detailed by Ms G, which acknowledge that Ms K is in receipt of confidential information, a fact they identified and promptly raised. The barrier and the firm’s protocols are extensive and comprehensive. They are supported by the firm’s electronic storage system. The barrier seeks to protect both the confidential information of Ms Coley, together with the confidential information of Mr Danae, which is the possession of Ms K.
91 I accept that Ms Coley wishes to continue to instruct Law Firm A. They have acted for her for some time. Regrettably, the proceedings appear destined for a further trial. I accept, given the lengthy history of this matter, the complexity of the issues in dispute, and the costs she has already incurred, it is likely Ms Coley would incur significant additional costs in having to instruct another firm, in the event Law Firm A were restrained from acting.
92 I am not satisfied that a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice would require Law Firm A be restrained from continuing to act.
93 For these reasons, I intend to dismiss Mr Danae’s application.
ORDERS
94 Subject to hearing from the parties as to the form of the orders, I intend to make the following orders:
1.Annexure A of, together with extracts of the without prejudice correspondence contained in paragraph 20 of the Affidavit of [Ms Coley] filed 5 June 2020 be struck out.
2.The Form 2 Application of the de facto husband filed 23 April 2020 and the Form 2A Response of the de facto wife filed 5 June 2020 be dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Family Court of Western Australia.
CD
Secretary
16 OCTOBER 2020
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