Dunn & Dunn
[2024] FedCFamC1F 139
•12 March 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Dunn & Dunn [2024] FedCFamC1F 139
File number(s): ADC 4306 of 2023 Judgment of: BERMAN J Date of judgment: 12 March 2024 Catchwords: FAMILY LAW – INJUNCTIONS – Where the husband seeks to restrain the wife’s solicitor – Where the wife’s solicitor’s firm previously conducted work for the husband’s business (in liquidation) – Where the business (in liquidation) is an asset likely to have a value – Consideration of the test in relation to an application to restrain a solicitor acting for a party – Where the husband failed to establish the nature of the confidential information – Where the Court considers the significance of the issue is minimal – No order made. Cases cited: D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118
Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404
Manner & Manner (2012) 46 Fam LR 424
McMillan & McMillan (2000) FLC 93-048
Pond & Thurga(No 2) [2007] FamCA 587
Rakusen v Ellis Munday & Clarke [1912] 1 Ch 831
Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 BR 501
Thevenaz & Thevenaz (1986) FLC 91-748
Division: Division 1 First Instance Number of paragraphs: 84 Date of hearing: 23 February 2024 Place: Adelaide Counsel for the Applicant: Mr Manetta Solicitor for the Applicant: Mills Oakley Lawyers Adelaide Counsel for the Respondent: Ms Walker SC Solicitor for the Respondent: A F Jordan Barrister & Solicitor ORDERS
ADC 4306 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS DUNN
Applicant
AND:
MR DUNN
First Respondent
ORDER MADE BY:
BERMAN J
DATE OF ORDER:
12 MARCH 2024
THE COURT ORDERS THAT:
1.The Response to an Application in a Proceeding filed 3 October 2023 is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Berman J
INTRODUCTION
Ms Dunn (“the wife”) and Mr Dunn (“the husband”) remain in dispute in respect of settlement of property.
The parent arrangements for the two children of the relationship were resolved by final orders made on 1 August 2022.
The financial proceedings in ADC 5380 of 2020 have been listed for final hearing to commence on 8 July 2024. The matter was further listed for trial directions on 25 January 2024.
The wife is to file and serve her trial material on or before 12 April 2024 with the husband to file his trial material on or before 3 July 2024.
The husband’s father, Mr A Dunn, is a second respondent in the substantive proceedings. For a significant period of time the wife appeared as a self-represented litigant. Whilst the husband appears in person, he is a professional currently holding a practicing certificate and operates his own business trading as “TT Company” which has filed a Notice of Address for Service.
The wife now instructs Mills Oakley Lawyers (Adelaide) to represent her in the proceedings and in particular, she seeks that Mr Jeremy Culshaw, a consultant lawyer with Mills Oakley Lawyers, have the care and conduct of the matter on her behalf with the intention that he will appear as counsel in the proceedings.
By Response to an Application in a Proceeding filed 3 October 2023, the husband seeks the following order:
1.That the Applicant (Wife) be restrained and there be an injunction granted restraining the Applicant (Wife) from engaging Messrs Culshaw Bishop [now Mills Oakley Lawyers] to act for her in these proceedings.
The application was supported by the following documents:
(1)Affidavit of husband in ADC4306/2023 filed 3 October 2023;
(2)Affidavit of husband in ADC4306/2023 filed 22 February 2024;
(3)Affidavit of the husband in ADC5380/2020 filed 22 February 2024; and
(4)Husband’s Outline of Case document filed 22 February 2024 in ADC4306/2023.
By her Amended Application in a Proceeding filed 21 February 2024, the wife seeks that the application to restrain Mills Oakley Lawyers from acting on behalf of the wife be dismissed and that the husband pay costs incidental to the interim application on an indemnity basis.
On 1 November 2023 orders were made in ADC 5380 of 2020 for the parties to file a schedule of assets and liabilities. The purpose of requiring a Balance Sheet to be prepared was to enable the parties to focus on the narrow parameters of the dispute in respect of an asset pool that may be fast dwindling. A balance sheet has been filed by the husband but not as yet by the wife. The explanation is likely to be that until the wife was able to secure representation, the preparation of a Balance Sheet would likely be difficult.
The balance sheet as prepared by the husband is not accepted, nonetheless it reveals that the asset pool is likely to be modest taking into account that the assets likely to be available for distribution comprise two properties at Town R and Town D, sale proceeds of the Suburb J property and some personal effects and other personalty of minimal value.
The husband’s former business titled M Pty Ltd was placed into voluntary liquidation by the husband in an attempt to crystalise what value, if any, might be attributed to outstanding debtors that are likely to be capable of collection.
The value of the husband’s current business is unresolved in circumstances where the parties are not able to agree a joint letter of instruction to Mr V, the single expert forensic accountant.
There is also complexity in determining the extent of the liabilities to be brought to account as set out in the husband’s balance sheet filed 24 January 2024.
Whilst it is uncontroversial that a mortgage registered to AA Bank should be considered as a liability of the parties, the registered mortgage to Mr Q which is the purported personal liability of each of the parties to M Pty Ltd, the husband’s liability to his father, Mr A Dunn (“the second respondent”) and the husband’s tax liability remain as matters of contention.
A relevant consideration is whether the current trial date listed for 8 July 2024 can be maintained given that there is little agreement between the parties as to the assets and liabilities to be considered, their inability to reach agreement as to a joint letter of instruction to Mr V and the potential for the wife to again be a self-represented litigant. It is readily apparent that if the wife was not able to retain or secure legal representation, in circumstances where the husband is a professional with the assistance of the resources of his business, the wife would be at a significant disadvantage.
THE APPLICATIONS OF THE PARTIES
By Response to Application in a Proceeding filed 3 October 2023 the husband seeks the following order:
1.That the Applicant (Wife) be restrained and there be an injunction restraining the Applicant (Wife) from engaging Messrs Culshaw Bishop [now Mills Oakley Lawyers] to act for her in these proceedings.
By Amended Application in a Proceeding filed 21 February 2024, the wife seeks the following orders:
(15)That the Husband pay the Wife’s Costs in relation and incidental to her defence of the Application on an indemnity basis;
(16)That the Application of the Husband to restrain Culshaw Bishop Lawyers and now Mills Oakley Lawyers from acting on behalf of the Wife in proceedings ADC 5380 of 2020 be dismissed.
The wife was aware of the potential for the husband to bring an application restraining her from instructing Culshaw Bishop Lawyers given that in an Amended Application in a Proceeding filed 12 September 2023 the wife sought the following orders:
12)That the remaining funds in Culshaw Bishop’s Trust be provided to the applicant wife as litigation funding.
13)That in the event that the Husband seeks to restrain Culshaw Bishop Lawyers from acting on behalf of the Wife such application be brought within 7 days of the date of the making of the Orders failing which the Husband is taken to acquiesce to the Wife’s continued representation by Culshaw Bishop Lawyers.
The husband’s contention is that he has had professional dealings with UU Lawyers over an extended period of time but in particular, following the incorporation of the business of M Pty Ltd in 2015 when the business used UU Lawyers for legal work in Perth.
The gravamen of the husband’s application centres upon the dealings with UU Lawyers who were instructed to undertake and/or assist in work involving a number of M Pty Ltd clients.
As a result of that engagement, the husband asserts that he collaborated with UU Lawyers and in particular that a professional relationship developed with Mr Jeremy Culshaw (“Mr Culshaw”) that was likely to have given Mr Culshaw a level of knowledge as to the manner in which M Pty Ltd conducted itself but with a particular focus on the husband.
It is also asserted that the matters in which UU Lawyers were engaged between 2015 and 2019 have relevance in circumstances where the issues raised by the wife in the proceedings include the following:[1]
5.1.The recoverability or otherwise of impaired WIP and debtors of [M Pty Ltd].
5.2The extent to which the management (or alleged mismanagement) of [M Pty Ltd] by [the husband] constitutes grounds for wastage or other adjustment of property interests.
[1] Husband’s affidavit dated 3 October 2023, paragraph 5.
In particular, the husband considers that UU Lawyers would have knowledge of confidential information relating to management of M Pty Ltd. Of particular relevance is an allegation that the professional relationship between M Pty Ltd and UU Lawyers became problematic in 2018 when Mr Culshaw, in his capacity as Chief Executive Officer of UU Lawyers, asserted that M Pty Ltd owed UU Laywers the sum of $14,356.55 for unpaid invoices extending over a period of about six months.[2]
[2] Husband’s Affidavit 3.10.2023, annexure “MRD2”
The husband also states that he has discussed the involvement of Mills Oakley Lawyers (incorporating Culshaw Bishop) representing the wife and it is suggested that they are “not comfortable”.
The position of the husband has apparently become more firmly entrenched consequent upon recent developments involving direct communication between the husband and Mr Culshaw on 29 September 2023.
The concern of the husband is adequately summarised in the following paragraph of his affidavit filed 3 October 2023:
24.I received a response from Mr Culshaw to the communication referred to in paragraph [23] of this my affidavit at 6:42 pm saying “File sunshine. And more than happy for you to annexe my response”. Then I received a response from Ms Bishop at 9:42 pm saying “[Mr Culshaw's] response was not intended for you. Please disregard”. Then I received a further response from Mr Culshaw at 11:16 pm saying “Is that really it. The best you have?? FFS make your application. Your [sic] are very sad”. I received yet a further response from Mr Culshaw at 12:33 pm the following day stating, “Your email (I will not read the attachment) simply rehashes that which you have previously alleged” and advising that “[Culshaw Bishop] will continue to act”.
The husband says that he was “demeaned, bullied and abused” by the communication from Ms Bishop and Mr Culshaw.
The wife relies upon affidavits of Mr Culshaw filed 16 February 2024 and 20 February 2024. Mr Culshaw confirms that M Pty Ltd retained and instructed UU Lawyers (Perth) between 2015 and 2019.
Mr Culshaw denies that any conflict or potential for conflict has or could occur. It is stated that Mr Culshaw did not become aware of the nature of the purported legal basis for the assertion of conflict until he received an email from the husband on 29 September 2023 and then the further details as set out in the husband’s affidavit of 3 October 2023.
In broad terms, the opposition to the husband’s claim of conflict is to highlight that in the work conducted, M Pty Ltd was not a client of UU Lawyers.
In any event, Mr Culshaw asserts that neither he personally nor UU Lawyers were ever in a position of gaining or making use of confidential information. No confidential information was ever exchanged and it is also of some relevance that whilst UU Lawyers (Perth) conducted work, it was not Mr Culshaw that engaged in the conduct of the subject files.
Relevant to the proceedings is an explanation by Mr Culshaw of his involvement in what might be loosely described as the “[UU Lawyers] Legal Group”.
Mr Culshaw was the legal practice director of UU Lawyers (Perth) and UU Lawyers (SA) (Adelaide).
Mr Culshaw would spend his time between the Adelaide and Perth offices.
Mr Culshaw sold his interest in the Perth practice in 2021 and focussed on the running and management of the Adelaide practice which became Culshaw Bishop Lawyers eventually joining Mills Oakley Lawyers on 18 December 2023. Culshaw Bishop Lawyers has ceased to exist.
Mr Culshaw describes his current position as a consultant at the firm with Ms Bishop as his partner.
Of assistance is a concession by Mr Culshaw, and therefore of the wife, that if a conflict of interest is found to exist in respect of Culshaw Bishop Lawyers then that would apply to the wife’s current representation being Mills Oakley Lawyers.
An important aspect relied upon by the wife is that whilst the husband raised an issue of potential conflict in February 2023, it was without particulars and did not seem to impact on the ability of Culshaw Bishop (and by implication Mr Culshaw) from assisting the wife in her capacity as self-represented litigant in circumstances where it would have been apparent to the husband that the wife had received legal advice and assistance from UU Lawyers.
If the history of engagement as set out by Mr Culshaw is accurate, UU Lawyers were involved in the conveyance of the Suburb J property, negotiations for the sale by the second respondent of the Suburb N property, two substantial attempts at negotiating a settlement and Ms Bishop appearing as counsel for the wife on 14 September 2023, 1 November 2023 and 25 January 2024 with Mr Culshaw appearing as counsel on 18 December 2023.
It is also likely that significant communication was exchanged between the husband and initially Culshaw Bishop and then more latterly Mills Oakley Lawyers.
I also accept that the wife has incurred legal fees of almost $50,000 arising from her engagement with Culshaw Bishop and Mills Oakley Lawyers.
Of greater importance is a concession by the husband that having had an opportunity to consider Mr Culshaw’s affidavit he is now satisfied that lawyers other than Mr Culshaw at Mills Oakley Lawyers would not have been exposed to confidential information. It is therefore the continued involvement of Mr Culshaw that appears to be the focus of the husband’s application.
LEGAL PRINCIPLES
In McMillan & McMillan (2000) FLC 93-048 (“McMillan”) the Full Court comprising Finn, Kay and Moore JJ considered the test to be applied in an application to restrain a solicitor acting for a party. The Full Court was faced with two competing tests; “the narrow” English approach (see Rakusen v Ellis Munday & Clarke [1912] 1 Ch 831 (“Rakusen”)) or the “broader approach” as adopted by Frederico J in the earlier decision of Thevenaz & Thevenaz (1986) FLC 91-748 (“Thevenaz”). The “broader approach” requires that for a party to succeed they need only give evidence that they have “imparted information of a confidential nature to the practitioner in question and that there is at least a theoretical possibility that it could be used against him or her” (see McMillan (supra) at [42]). The narrow or English approach requires a party to establish “real mischief” or “real prejudice” to a party before a Court could or should intervene.
The Full Court undertook an extensive review of the authorities and concluded at [54] that the test adopted by Frederico J in Thevenaz (supra) was the correct approach “for the reasons related to the sensitive nature of the jurisdiction which were referred to by Bryson J in D & J Constructions”.
In D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118 at 112-123, Bryson J considered Thevenaz (supra) but drew a distinction between Family Law and other jurisdictions:-
…It seems natural that a particularly careful view would be taken in family law business, as such litigation tends to be about highly confidential facts and a very wide range of facts and circumstances can conceivably be relevant; …
In Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 BR 501 at 52-58 Brooking JA considered that there were three rounds for restraining a solicitor or counsel from continuing to represent a party:-
·The ability to misuse confidential information
·The breach of fiduciary duty not to act against a client
·That solicitors and counsel are Officers of the Court.
Following a consideration of the authorities, O’Ryan J in Pond & Thurga(No 2) [2007] FamCA 587 (“Pond & Thurga”), considered the circumstances in which the Court may invoke its inherent jurisdiction to restrain a legal practitioner. At [218], his Honour referred to the consideration of Young J in Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404 wherein Young J said as follows:-
31.In the course of his examination of the authorities, Brereton J referred to the observations of Bergin J in Mitchell v Pattern Holdings Pty Ltd [2000] NSWSC 1015 (‘Mitchell’), Heenan J in Holborow v MacDonald Rudder [2002] WASC 265 (‘Holborow’) and Hasluck J in Bowen v Stott. In Mitchell, Bergin J stated that, as an incident of its inherent jurisdiction, the court may decide upon the propriety of a legal practitioner representing a party in a particular case to ensure justice and the appearance of justice: at [34]. In Holborow, Heenan J said that this power had been invoked in cases where there was a potential that the legal practitioner might be a witness; where the subject matter of the litigation was likely to involve an evaluation of the conduct of the solicitor; and where the efficacy of documents prepared by the solicitor was likely to be in issue: at [23]. In Bowen v Stott, Hasluck J said that it may be appropriate to invoke the inherent power in cases where the solicitor had some direct pecuniary interest in the outcome of the case, where the solicitor might feel impelled to justify or defend his conduct in representing a client, or where the practitioners credibility is at stake as a potential witness: at [47], [53] and [55].
The Full Court in McMillan (supra) has resolved what might be considered the tension between the approach adopted by Frederico J in Thevenaz (supra) namely, that justice must be seen to be done even if the risk is more theoretical and practical and the decision in Rakusen (supra) where what is required is the anticipation of mischief and not the theoretical breach of confidence.
The issue is one of theoretical risk of prejudice rather than proof of actual prejudice. As his Honour said in Pond & Thurga (supra) at [213] and distilled to its essence:-
All that is necessary is that the wife swears that she has conveyed confidential information to the solicitors and that she believes, not unreasonably, that the information may be used against her, or at least to her disadvantage, in these current proceedings.
This was recently affirmed by May J in Manner & Manner (2012) 46 Fam LR 424 at [49] in which her Honour applied the “broader approach”. At [53] her Honour stressed that an order restraining a party from instructing a particular solicitor is “…not based on a possible conflict of interest but rather the possibility of a disadvantage to the husband because of the holding of confidential information and the relationship between solicitor and client”.
CONCLUSION
The wife argues that there did not exist a solicitor/client relationship between UU Lawyers and M Pty Ltd. UU Lawyers conducted work for M Pty Ltd and as such, could not have been considered in a fiduciary relationship.
The contention is that UU Lawyers were not privy to any confidential information.
It is acknowledged that M Pty Ltd (in liquidation) is considered by the wife to be an asset that is likely to have a value attributed to it. It is currently the subject of an initial report by a single expert and whilst the parties are as yet unable to agree a joint letter of instruction for the valuation of M Pty Ltd (in liquidation) to be updated, its potential as being an asset of value is not controversial.
As discussed, the husband concedes that he placed M Pty Ltd into voluntary liquidation in order to potentially short circuit and narrow the parameters of the dispute as to the value of M Pty Ltd with the expectation that the completion of the liquidation would crystallise a value consequent upon the reasonable likelihood of outstanding work in progress being capable of efficient collection.
It is asserted that a certain number of the files that UU Lawyers, in the conducting of work for M Pty Ltd sought to pursue, are still potential debtors of M Pty Ltd (in liquidation). It is not asserted that any solicitor in the employ of UU Lawyers, and in particular Mr Culshaw personally, gained some information about the client debtors which in some way could provide an unfair advantage to the wife.
The husband is under a positive obligation to make full and frank disclosure of all matters that would be relevant firstly to the liquidation process but also to assist Mr V in the discharge of his obligation as a single expert appointed under the Family Law Rules.
In this regard, the husband, the wife and her solicitors are not in competition in a “tug of war” but rather are both pulling the same end of the rope with the common purpose of seeking to ascertain and more likely than not, to maximise the property of the parties available for division.
I am not satisfied that the husband has established the nature of the confidential information and if so, why it is not already disclosed to the liquidator or will ultimately be so once the liquidator has prepared a report for consideration by the creditors.
There is merit in the argument that the particular client files as identified by the husband are limited in their value and have been unresolved and outstanding for at least seven years.
The likely significance, in terms of the overall settlement as between the parties and in particular the assets remaining, is minimal. The potential for the identified client files to be of limited value also goes to the consideration that whatever relationship existed between UU Lawyers and M Pty Ltd, it did not extend to the husband. UU Lawyers did not gain any information, confidential or otherwise, in respect of the husband save as to what might be considered a nebulous concept that in some way, UU Lawyers and in particular Mr Culshaw personally, gained knowledge of how the husband may use strategy to conduct litigation.
Whilst I do not consider that the application pursued by the husband can be explained by him having an ulterior motive or improper purpose, I am satisfied that even were there to be some evidence of the husband’s litigation strategy, it would not be sufficient to support an application restraining the wife from instructing Mills Oakley Lawyers.
Acquiescence and waiver
There is some uncertainty as to the basis upon which Culshaw Bishop and now Mills Oakley Lawyers represented the wife from 2023 to the present.
It is not controversial that Ms Bishop appeared in court for the wife without objection.
I also accept that the husband was aware of Mr Culshaw’s involvement both in terms of attempts at a round table settlement negotiation and also in respect of the mechanics and conveyancing of a sale of one of the properties.
There is evidence presented by each of the parties that casts some doubt as to the extent of the husband’s objection to the continued involvement of Culshaw Bishop and then Mills Oakley Lawyers and the extent to which more could have been done to establish the nature and level of any objection to the wife continuing to instruct her current solicitors.
It is more likely than not that the husband was content for the wife’s current solicitors to assist her in seeking a resolution to the litigation but to maintain an objection should the matter proceed to a final hearing.
What is of concern, however, is what appears to be a long standing and inherently personal dispute between Mr Culshaw and the husband that is disconnected from the proceedings.
It is apparent that M Pty Ltd was indebted to UU Lawyers and that Mr Culshaw intervened personally in order to seek payment of the outstanding invoice.
Whilst the relevant correspondence does not appear to be overly acrimonious, it is likely that some level of animus continued as between them.
The end result is the unedifying exchanged of communication between Mr Culshaw and the husband.
The communication from Mr Culshaw to the husband, as discussed, is not the subject of ready explanation. Whilst I do not necessarily accept that the husband felt either bullied or in some way intimidated by the colourful language of Mr Culshaw forwarded late at night, it could not be said that his conduct in some way assisted the wife. It was entirely unnecessary and inappropriate communication.
I do not ignore the allegation made by Mr Culshaw that other correspondence directed to him by the husband was redolent with profanities.
Whilst the process of litigation is adversarial, regrettably it appears that the husband and Mr Culshaw adopted a gladiatorial approach.
The entirety of the exchange was unnecessary and not befitting of two professionals focussed on conduct that exemplifies a high standard and indicative of their professional standing and expertise.
Concession by the husband
The husband concedes that but for the involvement of Mr Culshaw, there is no objection to the wife continuing to instruct Mills Oakley Lawyers. Mr Culshaw is not the only legal practitioner skilled in the area of matrimonial law however, and for reasons that are not easily understood, Mr Culshaw indicated in open court that he had a particular skill set that brought together expertise in matrimonial law but also in matters relating to corporation law.
In addition, Mr Culshaw unnecessarily advised the Court that his hourly rate was in the sum of $825 per hour.
Given the husband’s concession, I propose to dismiss his application seeking that the wife be restrained from instructing Mills Oakley Lawyers.
It is a matter for Mr Culshaw to consider his position and whether he would continue to be personally involved in the wife’s legal representation.
Taking into account the charge out rate as indicated by Mr Culshaw, it should not be difficult to instruct independent counsel to assist the wife.
If the wife seeks to have Mr Culshaw assist her then it is a matter for the husband as to whether he pursues a further application in that regard.
It is unfortunate that the focus of the parties is not upon a proper consideration of exploring a settlement, or if not, then seeking to narrow the issues to enable the litigation to be conducted efficiently.
As discussed with counsel and the parties, the current trial date of 8 July 2024 is precarious.
I make orders as appear at the commencement of these reasons.
I certify that the preceding eighty-four (84) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 12 March 2024
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