Duncan and Hocking
[2009] FMCAfam 1066
•20 October 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DUNCAN & HOCKING | [2009] FMCAfam 1066 |
| FAMILY LAW – Costs – conflict of interest. |
| Family Law Act 1975, ss.117 (2A)(f), (g) |
| McMaster v Wilkie-Snow [2009] ACTSC 76 McMillan & McMillan [2000] FamCA 1046 Liatos & Silid(No.2) (2009) FamCA 716 |
| Applicant: | MR DUNCAN |
| Respondent: | MS HOCKING |
| File Number: | CSC 359 of 2007 |
| Judgment of: | Willis FM |
| Hearing date: | 15 September 2009 |
| Date of Last Submission: | 15 September 2009 |
| Delivered at: | Cairns |
| Delivered on: | 20 October 2009 |
REPRESENTATION
| Counsel for the Applicant: | Ms Wilson |
| Solicitors for the Applicant: | Farrellys Lawyers |
| Counsel for the Respondent: | Ms Martin |
| Solicitors for the Respondent: | Preston Law |
ORDERS
The application for costs is dismissed.
Each party be responsible for their own costs of and associated with the application filed on 21 August 2009.
IT IS NOTED that publication of this judgment under the pseudonym Duncan & Hocking is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CAIRNS |
CSC 359 of 2007
| MR DUNCAN |
Applicant
And
| MS HOCKING |
Respondent
REASONS FOR JUDGMENT
On 21st August 2009 the applicant father filed, served and then discontinued an application for an injunction to restrain the wife’s solicitors from continuing to act for the wife. The father in this matter now asks that the wife’s solicitors pay his legal costs incurred in filing his urgent application, on an indemnity basis, a sum of $5,704.17.
The father says that he is not only entitled to costs, but that those costs should be awarded on an indemnity basis, as the solicitor for the wife failed to cease acting for the wife at the first reasonable opportunity after being put on notice that a conflict existed. The father says he has he has been put to trouble and expense in filing the injunction unnecessarily.
The alleged conflict arose when a solicitor who worked with the firm acting for the husband, changed her employment to work for the firm who acted for the wife. That solicitor left Farrellys Lawyers and joined Preston Law, the second respondent, at the end of July or beginning of August 2009. [1]
[1] Affidavit of Mr Dobinson filed 11/9/09 paragraphs 7 and 10.
The second respondent opposes the costs application and seeks an order that each party pay their own costs.
Costs Application
At the hearing of this matter, I have had regard to the affidavits filed by each of the lawyers representing the parties and the oral and written submissions of Counsel and the exhibit tendered.
The application for an injunction was filed in relation to proceedings under the Family Law Act 1975 (“the Act”) and the relevant provision which covers costs is section 117 and sub-section 117 (2A) of the Act.
Although Counsel for the husband, Ms Wilson, indicated in her oral submissions on 15 September 2009 that the husband sought an Order that the wife pay his costs, the instructing solicitor Miss Hadley a partner of Farrellys Lawyers, advised the Court after her Counsel had been excused from the costs hearing to attend another commitment, that the husband did not seek an Order against the mother, rather he sought an Order for costs against the firm Preston Law.
Costs
The application for an injunction was filed was under the Family Law Act 1975 (Cth) and the relevant provision is therefore s.117. That section states that the starting point is that each party pay their own costs. If however the Court is of the opinion that there are circumstances the justify it doing so, the court may, subject to consideration of the matters set out in subjections (2A) make such orders for costs as it considers just.
Sub-section 117(2A) sets out the matters that the court shall have regard to in considering what, if any, order in relation to costs, should be made.
I note that the Counsel for the applicant referred me at page 3 of her written submissions to s.79 of the Federal Magistrates Act 1999 as being the relevant provision. This is even though the reproduced section in her submissions states at section 1 that the section does not apply to Family Law and the notation refers the reader instead to s.117 of the Family Law Act 1975. The written submissions of the respondent makes no reference to any statutory provisions.
I shall refer to each of the relevant matters in sub-section 117 (2A).
(a) The financial circumstances of each of the parties to the proceedings;
Neither party has chosen to put forward any evidence as to their own financial circumstances.
I do have an assurance from Mr Dobinson the partner who had conduct of the matter on behalf of the second respondent that his firm is not charging the wife any fee in relation to this matter, and that if an Order for costs is made, his firm will pay the costs order without any recourse to the wife whatsoever.
As far as the applicant is concerned, I have details of his costs agreement set out in the affidavit of Ms. Hadley and note that he is in a position to pay $425.00 per hour for his legal representation.
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
Neither party is legally aided.
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
This issue is in my view a significant factor in this application. This is particularly so in relation to the conduct of each party in light of circumstances that existed when the application was filed. In order to determine whether the applicant was compelled to bring this application, as was submitted, I will consider amongst other matters:
(a)Whether or not it was reasonable for the father to bring the application at the time he decided to file, given the correspondence that had been exchanged.
(b)The circumstances of the substantive litigation that existed at the time.
(c)Whether or not, as alleged by the applicant, the second respondent ought to have ceased acting any earlier than they did.
(d)Any other relevant matter.
Ms Hadley the partner at Farrelly’s who had conduct of the matter on behalf of the applicant, set out in her first affidavit the series of communications that were sent to the second respondent. This totals five letters over six working days. An email malfunction meant that one of the letters, dated 11 August 2009, was not received by the second respondent until it was re-sent on 14 August 2009.
Miss Hadley’s affidavit tells me that both she and her client were on holidays in July 2009 and her client was travelling around Australia and uncontactable[2]. The solicitor who left the employ of Farrellys appears to have left on 11 July 2009[3]. Miss Hadley is uncertain of the commencement date of the former Farrellys solicitor with the second respondent and suggests mid July. The second respondent refers to two dates, the end of July or beginning of August 2009.
[2] Affidavit of Miss Hadley filed 21 August 2009 para.6.
[3] Affidavit of Miss Hadley, filed 21 August 2009, paragraph 4.
The conflict is first raised – Friday 7 August 2009
The first letter raising the issue of conflict was sent during the morning of Friday 7 August 2009. The letter gave notice that there was objection to the second respondent continuing to act given that the former solicitor at Farrellys was now employed with the second respondent. Interestingly the letter expressed confidence that the second respondent had already referred the matter to another solicitor. The letter stated in part:
“we place you on notice that we do not consent to your firm continuing to act on behalf of the mother” and “we are confident that you were well aware of the issue of conflict prior to
Ms. Sweetlove taking up her position with your office and that you referred your client to another practitioner prior to the commencement of Miss Sweetlove’s employment with our office”.The letter then enquires “On that basis, kindly advise us of the name of the practitioner to whom you have referred Ms. Hocking.”
A reply was requested by return mail.
Prior to 11am that same morning 7 August 2009, the second respondent duly replied.
The writer Mr Dobinson, requested that the author of the letter provide clarification as to who the objection was coming from before he approached his client in relation to the matter. Mr Dobinson queried whether it was the father, or the firm Farrellys objecting, given the wording of the second paragraph. I underlined the wording which caused the confusion in the earlier quote. It states: we place you on notice that we do not consent. (emphasis added)
There was no further response from Miss Hadley on Friday 7th August 2009.
On Monday 10 August 2009 at 8.59am however, Ms Hadley responded in a strongly worded letter. It is clear from the contents and tone of the letter that Ms Hadley was highly indignant with the query. The reply reads in part:
“We hold instructions. To suggest otherwise is preposterous and offensive.
Your office is in the serious position of conflict. With respect, on a matter of ethics and professional conduct, this is not a matter on which you need to seek your client’s instructions but to give her advice.
You have had ample time to do both.
Please confirm you ceased acting for Ms. Hocking and if
Ms. Hocking has instructed another firm, the name of her new practitioners.You will be aware of the cases and ramification which are likely to flow from your failure to terminate your retainer in the circumstances. Costs will be a significant issue.”
I fail to understand how the query from Mr Dobinson was either offensive or preposterous. The wording of Ms Hadley’s initial letter of 7 August 2009 very clearly states that we place you on notice that we do not consent. There is no mention of holding their client’s instructions to object. I consider the query was a legitimate inquiry. As to the contention that ample time had passed to advise and obtain his client’s instructions, that time being not even one business day since the first notification, I disagree.
The following morning Tuesday 11 August 2009 at 8.34am
Miss Hadley wrote a further email noting that she had not received any further reply yet (since the day before).In the email of Tuesday 11 August 2009 notice was given by
Miss Hadley, that if the second respondent did not confirm by “noon today” that they had ceased acting for the wife, Miss Hadley held instructions to seek injunctive relief against the wife and the second respondent, together with costs on an indemnity basis.This letter is sent, effectively on the second business day after the first notice on Friday 7th August 2009. Indemnity costs are threatened.
As events subsequently unfolded it seems that a technical glitch occurred in the sending of the email dated 11 August 2009 from
Miss Hadley’s Office and both parties agree that the letter did not reach Mr Dobinson until it was resent on Friday 14 August 2009 [4].[4] Affidavit of 21 August 2009, annexure SJH 1.
12th August 2009 was a lay day, with neither party corresponding with the other.
On the morning of Thursday 13 August 2009 Mr Dobinson, not having received the threatening email of the Tuesday 11 August 2009, responded to what he believed was the latest email from Miss Hadley being the email of Monday 10 August 2009 in which Ms Hadley chastised the second respondent for querying whether or not the objection came from her firm or her client.
Relevantly, Mr Dobinson sought clarification of the source of the objection, requesting reference to the particular section of the Legal Profession Act 2007, the Solicitors’ Rules or any other authority relied upon to assert that his firm was in a serious position of conflict as alleged. Mr Dobinson stated that upon receipt of your advices above, I will in turn be referring the matter to the QLS ethic committee for their advice”. It is submitted on behalf of the applicant that the second respondent ought to have known that a conflict existed. The second respondent submits that it is clear from the account submitted to support the costs application that Miss Hadley too sought advice from the Queensland Law Society.
Later during the day of 13 August 2009 having received
Mr Dobinson’s letter, Ms Hadley wrote again. Miss Hadley notes that there has been no response to her correspondence seeking a reply by 12 noon (which was not yet received by Mr Dobinson). In particular reference is made to Ms Hadley’s initial letter of 7 August 2009 and Ms Hadley confirms that she holds instructions specifically to object to the second respondent continuing to act for the wife. This is the first time that Miss Hadley has clarified who is seeking the injunctive relief.Ms Hadley’s letter notes that “it is not our position to advise another firm on the law, as you appear not to have a grasp on it, and you have requested specifically that we do so, we direct you to the Solicitors Rules, and in particular Rule 8 and Rule 4. Miss Hadley concluded “please respond by return facsimile”.
On Friday 14 August 2009 just after midday, Mr Dobinson responded as requested to the re-sent copy of the email of 11 August 2009 that morning by Ms Hadley. The time limit of 12 noon on 11 August 2009 imposed in the email had of course expired. Mr Dobinson replied:
“Thank you for your facsimile of this morning. I hadn’t received your E-mail.
I have contacted Mr Stafford Sheppard of the Queensland Law Society. I am forwarding your correspondence to him and seeking his advice in respect of the matter. I will respond to the substantive issues raised in your correspondence once Stafford has given me his advice which I expect will be some time next week.”
There was then no further correspondence from the applicant.
The next event that triggered any correspondence was the father filing an urgent application for injunctive relief on the morning 21 August 2009.
It is clear that the father filed without any further warning or notice to the wife or the second respondent, and at a time when the father’s lawyers knew that the second respondent was waiting to hear back from the Queensland Law Society as advised on 14 August 2009.
Having obtained an urgent listing from the Cairns Registry which was for later that day, the applicant’s solicitors served their documents on the second respondent on or around 2.30pm on 21 August 2009[5] and also advised the second respondent of the urgent listing for mention that day.
[5] Annexure TMD 02, affidavit of Mr Dobinson filed 11 September 2009.
At 3.07 pm the second respondent forwarded an email to the applicant’s lawyers essentially advising that they had now received advice from the Queensland Law Society regarding the alleged conflict, and having had their attention drawn to an unreported decision in July 2009 of McMaster v Wilkie & Snow, Preston Law, now agree that it is appropriate to withdraw and that this had been conveyed to their client that afternoon[6].
[6] Exhibit 1.
At 4 pm Farrellys Lawyers appeared in the Federal Magistrates Court in Cairns on behalf of the applicant father and the second respondent appeared.
The second respondent tendered to the Court a copy of the email correspondence[7] which was sent to Farrelly’s approximately an hour earlier, at seven minutes past 3 pm on the afternoon 21 August 2009, before the first mention.
[7] Exhibit 1.
Farrelly’s Lawyers confirmed at the mention on 21 of August 2009 that given the contents of the email sent earlier, and that the second respondent were no longer intending acting, the father’s application would be discontinued.
I note that the written submissions of the applicant state that the second respondent withdrew on 31 August 2009, ten days after the first mention. The second respondent first agreed to withdraw prior to the mention of the matter as recorded in the email of 21 August 2009 sent at 3.07[8] and also advised the Court at the first mention when the email was tendered.
[8] Exhibit 1.
The applicant submits that they were put to the expense of issuing proceedings that they ought not to have had to instigate and that the reason they had to instigate proceedings at the time they did was due to the second respondent failing to discontinue acting at the first opportunity. The applicant contends that by the second respondent withdrawing some 14 days after they were initially put on notice by Farrellys he was compelled to instigate proceedings for injunctive relief.
What was the urgency surrounding this application?
The history of the legal representation of the parties is that the second respondent had been retained in November 2008 on behalf of the mother and Farrellys Lawyers were retained in January 2009 on behalf of the father. Upon receiving notice of a probable conflict, I consider that the second respondent was entitled to obtain their own advice and then advise their client if they concluded that their representation must cease. As to the appropriate time frame, I consider that the circumstances of each case needs to be taken into account.
On looking at the context in which notice was given in this matter, I note that the family law matter was active in March 2009 when an attempt was made between the solicitors to put in place arrangements for a two week visit by the father proposed for June 2009. Since that time a total of two letters were exchanged between the solicitors, the mothers letter of 26 May 2009 being the final letter. Nothing further had happened on the file between the solicitors since that time and
Mr Dobinson states that had not heard from his client since that time.The applicant himself was on holidays in July 2009 in Australia and had been out of touch with his solicitor. Miss Hadley was on holidays. I note that the initiating application of the father for the urgent injunction was witnessed on 12 August 2009 in Mazar, Afghanistan.
It is agreed between the parties that there is no litigation at all currently on foot between the applicant and the respondent (save for this costs application). There was no current correspondence being exchanged between the law firms in June, July or August 2009 and none since the two letters exchanged May 2009. There was no litigation in relation to parenting orders filed. The parties had a mediation in May 2009 and nothing further was being agitated between parties through either law firm.
There were no court events such as a conciliation or child dispute conference or mediation approaching. There was simply nothing happening in relation to the parenting matters between the parties.
At the time the application was instigated the father was not even in the country. Apart from this costs application, there is no application on foot.I am mindful of the authorities such as McMillan & McMillan [2000] FamCA 1046 in which the concept of delay is discussed. On my reading of that case the delay refers to the obligation of the applicant who has a genuine concern about a former legal advisor subsequently acting for the other side, to raise the issue at the earliest possible opportunity. It is not appropriate to raise it at a later time in order to gain a strategic advantage. There is no suggestion in this matter that the applicant failed to raise the issue at the earliest possible time.
The applicant in this matter however, goes further and submits that the obligation on an applicant of raising an issue of potential conflict at the first opportunity and not at a later time as referred to in McMillan & McMillan [2000] FamCA 1046 applies also to the respondent and contends that the second respondent is under a duty to withdraw at the first opportunity. The argument is advanced that the second respondent in this matter took too long to cease acting. The applicant asserted to the second respondent, less than 24 business hours after the first notice on Friday 7 August, in the letter of
10 August 2009 that sufficient time had passed to enable the second respondent to consider their own position, and advise their client and withdraw.
The applicant submits that it was the further delay on the part of the second respondent and the failure to withdraw at the first opportunity that ultimately led to the trigger for the application for an injunction.
Having reviewed the sequence of events as they unfolded, and having had regard to each of the letters that were sent by either party and the circumstances, I do not agree that delay by the second respondent should have been regarded as a catalyst to commence proceedings.
At the time that the applicant commenced proceedings the second respondent was seeking advice from the Queensland Law Society ethics division. The applicant knew this as it was outlined in the letter of the second respondent of 14 August 2009.
There is no explanation at all offered by the applicant as to the reason for the sudden necessity to file an urgent application and the request to the Cairns Registry to abridge all time limits and list the matter urgently.
The applicant chose not to contact the second respondent to advise that notwithstanding the advice was being sought from the Queensland Law Society, the time had come when their client was no longer prepared wait for the second respondent to withdraw.
The application was filed and served and later that same day, the applicant received advice from the second respondent that the Queensland Law Society had recommended they withdraw.
I consider that the applicant ought to have at least given the second respondent the courtesy of notice that the father would not or could not wait any longer for the anticipated advice from the Queensland Law Society and that the applicant was about to file an application. Had this occurred it may have been unnecessary to file any application.
Even now I do not understand what the urgency could have been.
I am informed by Mr Dobinson that when the mother was advised that the second respondent can no longer act for the mother, she has chosen not to re-engage any lawyers at the present time.Perhaps the conflict issue could have been dealt with by a notice to the second respondent to the effect that if the matter is ever
re-enlivened objection will be taken to the second respondent continuing to act.In my view the application for an urgent injunction was premature and handled differently, was probably not even required. I consider it is unnecessary to have contested applications of this kind ventilated in court, unless it is becomes unavoidable.
It would have been preferable for these well intentioned Family Lawyers involved to each step back from this looming dispute, pick up the phone and talk to each other and work out in a more conciliatory manner, the appropriate arrangements
Section 117 (2A) (e) whether any party to the proceedings proceedings has been wholly unsuccessful in the proceedings;
In this matter, the respondent agreed to withdraw after being served and prior to the first mention of the application. There was no hearing and the applicant was not put to the expense of conducting a contested hearing. The matter was resolved prior to the first mention albeit the mention was only about an hour and half after the material had been served.
No material was filed opposing the application for an injunction, and to this extent, this case is distinguishable from cases such as Liatos & Silid(No.2) FamCA 716 to which I was referred by the applicant. In Liatos & Silid the respondent opposed an application seeking to restrain the respondent from acting. The matter proceeded to a contested application and the respondent was unsuccessful. Costs were ordered against the respondent. The circumstances in the leading authority of McMillan & McMillan [2000] FamCA 1046 also involved an application to restrain the wife’s solicitors from continuing to act and a failed contested hearing
The issue of the alleged conflict in this matter did not proceed to a contested hearing. The second respondent acquiesced once they received advice from the Queensland Law Society when they were advised of an unreported decision of McMaster v Wilkie–Snow a decision of Master Harper of the Supreme Court of the ACT in July 2009. That decision also referred to the leading Family Law authorities.
The second respondent has acquiesced in relation to the request that they ought to cease acting for the respondent wife. In that sense, the applicant was successful in having the second respondent cease acting for the wife.
The mother had been a client of Preston Law for 9 months and the second respondent were entitled to have the opportunity to fully explore the options available to them and their client. The cases that I have been referred to by the second respondent cover a variety of jurisdictions in which the conflict issue has been ventilated. I note also that other judicial officers in the Federal Magistrates Court have followed the principles set down in McMillan v McMillan (supra) whilst at the same time expressing disagreement with that decision[9].
I accept the submission of the respondent that it behoves a solicitors firm to undertaken their own enquiries when deciding on the proper course of an objection such as that raised by the applicant.[9] Lakey v Lakey [2008] FMCAfam 827
In light of all the circumstances in existence at the time I do not consider the time taken by the second respondent to be unduly lengthy. Within 5 working days of receiving the notification, the second respondent contacted their professional body to seek their assistance. To await that advice, a period of a further 5 working days, is, in light of all the circumstances, not an unreasonable delay.
I am not satisfied that the threatened injunction was necessary and I find that it was filed prematurely and without notice to the second respondent, who was entitled to accept that the applicant had agreed to also await the outcome of the advice from the Queensland Law Society.
The alleged delay should, as I have already stated, also be seen in the context of the circumstances surrounding the alleged necessity for an urgent injunction.
Section 117 (2A) (f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer.
There were no offers exchanged between the parties to settle the matter of the conflict.
There were offers exchanged in relation to the costs application. I have had regard to these offers but they are not relevant to the settlement of the substantive application.
Section 117 ( 2A)g such other matters as the court considers relevant.
I accept the submission of the applicant that prima facie, the second respondent appeared to have a conflict if it is accepted that the solicitor in question acted for the wife, changed firms and worked for the second respondent who acted for the husband.
Mr Dobinson stated that he intended to create a “Chinese wall” within his office in relation to this matter which would involve protocols being developed to preclude the former Farrelly’s solicitor from having any contact with the applicant’s file. He said that the former Farrelly’s solicitor had no involvement at all with the applicant’s file.
The case of McMaster v Wilkie-Snow refers to the Law Society of New South Wales in consultation with the Law Institute of Victoria preparing a document entitled “Information Barrier Guidelines” which is described as a document to assist law practices to guard against the risk of a beach of the duty of confidentiality owed to former clients. That document, a copy of which was tendered, has apparently been adopted by the Law Society of the ACT.[10]
[10] McMaster v Wilkie-Snow Supreme Court of the ACT - SC 758 of 2007, paragraph 17.
The authorities in Family Law are to my mind most relevant and make reference to a feature of the accepted approach being that the applicant need only give evidence that information of a confidential nature has been imparted to the solicitor in question and that there is at least a theoretical possibility that it could be used against the client. I am not aware that the current authorities make provision for “Chinese walls” or “information barriers”. I accept, though, that the second respondent was entitled to have sufficient time to contemplate these issues before taking the decision to cease acting.
To that end, I consider that an arbitrary time limit of a decision having to be made on the second working day after being given notice, issued by the applicant in their letter of 11 August 2009, to be unreasonable.
Having been informed that the second respondent were consulting with the Queensland Law Society on Friday 14th 2009, and that the reply was expected within a week, I consider that the filing of an application without further notice to the second respondent, was pre-emptive and unnecessary.
Having considered all of the relevant matters which I am directed to under s.117 (2A) I do not accept that this is a matter which justifies an order being made for costs in favour of the applicant.
Accordingly I dismiss the application for costs.
I order that each party be responsible for their own costs of and associated with the application filed on 21 August 2009 and the costs application.
I note that the second respondent informed that Court that they will not be seeking any contribution to the legal costs from their former client in relation to this application. I would like to think that the solicitors for the applicant would adopt the same attitude towards costs incurred by their client in relation to this application. That is of course though, a matter for them.
I certify that the preceding eighty- three (83) paragraphs are a true copy of the reasons for judgment of Willis FM
Associate: Megan Cunnane
Date: 20 October 2009
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