Dunwell and Dunwell and Ors (Indemnity Costs Against A Lawyer)
[2012] FamCA 337
•11 May 2012
FAMILY COURT OF AUSTRALIA
| DUNWELL & DUNWELL AND ORS (INDEMNITY COSTS AGAINST A LAWYER) | [2012] FamCA 337 |
| FAMILY LAW – COSTS – Indemnity costs – Conduct of Solicitor – Where particular assurances were made to a party regarding confidentiality of a third party – Where a solicitor contacted the legal representative of a person in conflict with the third party – Whether the solicitor passed on confidential information – Whether the solicitor acted improperly – Whether the wife acted on the advice of her solicitor in resisting the husband’s application – Whether the Solicitor ought to have withdrawn from the matter when the husband made the application for him to do so. |
| Family Law Act 1975(Cth) Family Law Rules 2004(Cth) |
| Anstis & Anstis and Anor (No 2) (2000) FLC 93-014 Botany Municipal Council v Secretary, Department of Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412 Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Cassidy & Murray (1995) 19 Fam LR 492 Giannarelli v Wraith (1988) 165 CLR 545 In the Marriage of Kohan (1992) 16 Fam LR 245 In the Marriage of Munday and Bowman (1997) 22 Fam LR 321 JEL v DDF (Repayment on Appeal, and Costs)(2001) 28 Fam LR 119 Lemoto v Able Technical Pty Ltd & Ors (2005) 63 NSWLR 300 NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480 Starkey v Starkey(2009) 41 Fam LR 177 Stephens v Stephens(2010) 44 Fam LR 117 |
| APPLICANT: | Mr Dunwell |
| RESPONDENT: | Ms Dunwell |
| SECOND RESPONDENT: | X Firm |
| THIRD RESPONDENT | Mr Volker |
| FILE NUMBER: | SYC | 8682 | of | 2007 |
| DATE DELIVERED: | 11 May 2012 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Le Poer Trench J |
| HEARING DATE: | 8 & 10 March 2010 12 & 14 April 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Richardson SC |
| SOLICITOR FOR THE APPLICANT: | Barkus Doolan Kelly |
| COUNSEL FOR THE RESPONDENT: | Ms Eldershaw |
| SOLICITOR FOR THE RESPONDENT: | SWAAB Attorneys |
| COUNSEL FOR THE 2ND AND 3RD RESPONDENTS: | Mr Aldridge |
| SOLICITOR FOR THE 2ND AND 3RD RESPONDENTS: | Gilchrist Connell |
Orders
The wife and Mr Volker jointly and severally are to pay the husband's costs of and incidental to the husband’s application in a case filed 7 December 2009 and amended on 24 February 2010, on an indemnity basis.
The wife and Mr Volker jointly and severally are to pay the husband's costs thrown away as a consequence of any duplication of work that is required upon the wife providing instructions to any further lawyers to act for her in these proceedings.
The wife and Mr Volker have leave to apply to seek orders as to the apportionment of the costs to be paid by each of them, on terms that the husband shall not be a party to any such proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Dunwell & Dunwell and Ors (Indemnity Costs against a lawyer) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 8682 OF 2007
| Mr Dunwell |
Applicant
And
| Ms Dunwell |
Respondent
And
| X Firm |
Second Respondent
And
| Mr Volker |
Third Respondent
REASONS FOR JUDGMENT
The applicant husband seeks orders as set out in a Minute of Order dated 6 February 2012. The type of order sought is not often seen in the court however, it is not unique. The circumstance in which the order is sought is most unusual and has provoked considerable research and consideration of aspects of law and practice which are not frequently canvassed in this court. The orders sought are as follows:
1.That [Mr Volker] pay the husband’s costs of and incidental to this Application (as amended on 24 February 2010) (hereinafter called “this application”) on an indemnity basis.
2.In the alternative to Order 1, and in the event that Order 1 is refused, then the wife pay the husband’s costs of and incidental to this Application on an indemnity basis.
3.That [Mr Volker] pay the husband’s costs thrown away as a consequence of any duplication of work that is required upon the wife providing instructions to any further lawyers to act for her in these proceedings.
4.In the alternative to Order 3, and in the event that such Application is refused, then the wife pay the husband’s costs thrown away as a consequence of any duplication of work required upon her providing instructions to any further lawyers on an indemnity basis.
In the event that all the foregoing be refused then:
5.That the wife and [Mr Volker] be jointly and severally liable pay the husband's costs of and incidental to this Application on an indemnity basis.
6.That the wife and [Mr Volker] be jointly and severally liable to pay the husband's costs thrown away as a consequence of any duplication of work that is required upon the wife providing instructions to any further lawyers to act for her in these proceedings.
7.That leave be granted to the wife and the other respondents leave to apply to seek orders as to the apportionment of the costs to be paid by each of them on terms that the husband shall not be a party to any such proceedings.
The wife responded by seeking the following orders.
a)Orders 3 and 5 of the Husband’s Minute of Order be dismissed.
b)In the event that Order 3 of the husband’s Minute of Order is not dismissed, the wife seeks in the alternative that his costs incidental to the Application in a Case currently before the Court be reserved;
c)The costs of the wife which were thrown away due to the duplication of work carried out as a result of the wife instructing a new legal representative be reserved.
The second and third respondents seek that the application of the husband be dismissed and that the husband pay the second and third respondents’ costs of and incidental to this application on an indemnity basis.
This is a costs application arising from the hearing and resolution of an Application in a Case filed by the husband on 7 December 2009 and amended on 24 February 2010. The Amended Application sought to restrain the wife’s lawyers, X Firm, from continuing to act for the wife and joined those lawyers as parties. The individual lawyers Mr Volker and Ms James were specifically named as respondents. Orders for costs were included in the amendments. Costs orders were sought against all of the respondents.
The hearing of the husband’s application in a case, as above described, occurred over a number of days. After an adjournment, which occurred because of the necessity to determine the wife’s appeal against my refusal to disqualify myself from the further hearing of the case, the matter was listed to be finalised. The final day was to be on 6 February 2012. On 5 February 2012 the parties emailed to my Associate the following proposed Consent Orders which I would be asked to make.
1.That the wife be restrained by injunction from instructing [X Firm] and/or [Mr Volker] and/or [Ms James] to act for her in these proceedings.
2.That the husband be excused from further compliance with all of his discovery and financial disclosure obligations in these proceedings until:
2.1The wife executes and causes to be delivered to the husband’s solicitors a Confidentiality Agreement in the terms agreed between the husband and the wife;
2.2Any further solicitors instructed by the wife enter into a Confidentiality Agreement in terms agreed between the husband and the wife.
3.That the wife be restrained by injunction from providing any information, financial documents or financial disclosure that she may receive from the husband to [X Firm] and/or [Mr Volker] and/or [Ms James].
4.NOTED that, in respect of the Amended Application in a Case filed 24 February 2010, there remains outstanding:-
4.1Applications by the Applicant against all other Respondents except the wife;
4.2Issues as to costs.
I made the orders as sought by the parties and then proceeded to hear the costs application referred to in paragraph 4 of the consent orders.
Before proceeding further with these reasons, I note that I will, where possible, shorten any names which might identify the business partner of the husband. This case is significantly about the husband’s endeavours to preserve the confidentiality of business transactions with that person in order that he might, following the conclusion of proceedings between the husband and wife in this court, continue to conduct a business relationship with him.
Background Facts
The parties to this application are the husband, the wife, the former solicitor of the wife, Mr Volker, and Mr Volker’s firm X Firm. X Firm is owned by Z Pty Limited. Mr Volker is the sole director of that company (see exhibit H5).
The husband and wife have been engaged in litigation arising from an Application for final orders filed by the husband on 17 December 2007. The matter for determination is one of property division. The proceeding had also involved parenting matters, however, those seem now to be largely resolved.
A feature of the background to the property dispute between the parties is that the husband is engaged in business with his business partner. This is a long standing business relationship. The husband’s assertion is that his significant wealth, and consequently that of his family, has been generated by this business relationship. This is a fact which appears to be well within the knowledge of the wife. The husband has asserted and maintained since the breakdown of the marriage, that the continuation of his business relationship with his business partner is dependant upon his being able to maintain confidentiality about their work and relationship and also protect the privacy of the business partner.
The wife engaged the law firm X Firm to act for her following separation between the husband and wife. That firm was acting for her when the proceeding was commenced in this Court. Mr Volker has had carriage of the matter, and at a material time, he supervised another lawyer in the firm, Ms James, who also undertook work for the wife.
Following separation and each party engaging lawyers to act for them in relation to matrimonial matters, those lawyers commenced to negotiate on behalf of the husband and the wife. In the course of that interaction, the husband requested the wife and the wife’s legal representatives to each enter into confidentiality agreements before accessing any of the husband’s disclosed documents, which documents, the husband asserted, included information regarding entities connected with the business partner of the husband.
On 10 October 2007 the husband’s legal representatives sent a letter to the wife’s legal representatives, requesting that a confidentiality deed be entered into. The wife’s legal representatives sent a reply to that letter on the same day refusing the request. On 16 October 2007, the husband’s legal representatives repeated the request for the wife and her legal representatives to enter into confidentiality deeds.
On 22 October 2007, the wife’s legal representatives sent to the husband’s legal representatives a letter, which included the following passage in relation to the wife and the legal representatives rejecting the request of the husband:
Neither our firm nor our client is prepared to enter into the proposed confidentiality deed. It is unnecessary and, again, provocative. The fact that you repeat the request that this document be signed by letter dated 17 October 2007 does not alter our client’s nor our position. Confidentiality is properly and adequately covered by the law and our client has no intention of using the financial material for any improper purpose as seems to be inferred by the repeated request.
We are confident that you would have explained to your client our duty to the court and to your client relating to confidentiality. We are instructed that confidentiality has never been an issue for the parties in 12 years of marriage and so far as our client is concerned, her position of trust remains unchanged.
From our point of view, imposing such a request in order to have the unrestricted access to financial records to which she is entitled is no more than a delay tactic. We have advised our client that if your client continues to restrict access to financial documents, she should make an application to the court and seek appropriate orders. Hopefully, commonsense will prevail and this game playing will stop.
The husband says, and the wife does not dispute, that the wife entered into the home office of the husband and photocopied confidential documents in his office. This occurred sometime in 2008. These documents related to a company which is owned by the business associate of the husband. There were other documents also copied. These documents were then given by the wife to her legal representatives.
At the root of the Application to restrain the wife continuing to instruct X Firm, is a letter which Mr Volker caused to be sent in the course of his acting for the wife in the property division matter. The letter was drafted by Ms James, however, Mr Volker has given evidence that he was responsible for the letter being drafted. He also acknowledges that he did see the letter before it was sent. The letter was dated 9 May 2009. It was a letter addressed to Ms W of W Firm in the United States. Ms W was, at that time, the legal representative for the wife of the business associate of the husband. They were, it appears, acting for her in relation to matrimonial property and financial settlement.
Mr Volker gave evidence that the purpose of the letter was to request Ms W’s firm to carry out searches in the United States on behalf of the wife. The letter, dated 11 May 2009 stated as follows:
We are lawyers who act for Mrs [Dunwell] in relation to her divorce from Mr [Dunwell]. We understand that you act on behalf of [Mrs G] in relation to her divorce from [Mr G]. You may be aware that Mr [Dunwell] and [Mr G] are long standing business partners. Mr [Dunwell] is the former accountant of [Mr G]. Both [Mr G] and Mr [Dunwell] have interests in various corporate entities…
In our investigations on behalf of Mrs [Dunwell] we have uncovered a very complex international group structure that we believe Mr [Dunwell] has an interest in. It is highly likely that [Mr G] also has an interest in some of these structures. The entities involve both companies and trusts, and expand across Australia, Los Angeles, the United Kingdom and the Jersey Islands.
We require the assistance of a lawyer in [the United States] who may carry out searches in relation to some of these entities on behalf of our client. We would like to retain the services of your offices for the purposes of assisting our client in this regard.
Mrs [Dunwell’s] proceedings are already before the Family Court of Australia. Independent valuers have been appointed to the overseas entities and as a matter of urgency we require some assistance.
Mrs [Dunwell] is represented by Mr [Volker] (Principal of [X Firm]) and [Ms James] (practicing solicitor). You may contact [Ms James] on [number] or [Mr Volker] on [number]. Or you may email either of them as follows: [email addresses].
Some of the information that we have obtained in relation to the entities may also be of assistance to your client in relation to her proceedings. We are happy to assist your client in any way possible as well.
We look forward to hearing from you and trust that you will keep this confidential.
Mr Volker appears to have received no response to this letter, however, after the wife emailed a copy of the letter to the wife of the husband’s business associate, that lady caused the email to be passed on to the husband. There was, however, a considerable delay between the date of the letter (9 May 2009) and the date the husband first saw the letter (10 September 2009). The document received by the husband on 10 September 2009 consisted of a copy of an email from the wife in these proceedings to the wife of the business associate of the husband. Attached to that email was a copy letter dated 8 May 2009 from the wife’s solicitors to W Firm, Attorneys. Although it bears a date earlier than the letter actually sent to that firm by the wife’s solicitor, it is in identical terms. In oral evidence Mr Volker explained that the copy of the letter which the wife had attached to her email was a draft.
Further correspondence took place between the parties’ legal representatives in relation to the letter sent to Ms W. A letter of 19 October 2009 from the husband’s legal representatives to the wife’s legal representatives contains the following:
At the very commencement of negotiations, our client raised his significant concerns in relation to confidentiality. By letter dated 10 October 2007 we submitted to your firm a Confidentiality Deed and requested it be entered into by you and your client. You opposed that request as did your client. By your fax of 10 October 2007, you acknowledged your ethical and professional obligations. Our client maintained his position that in the unusual circumstances of this matter and where the interests of third parties was involved, it was appropriate for the legal representatives and your client to enter into a Confidentiality Deed. You and your client refused to do so.
[…]
Our client is considering his position in respect of:
1.Injunctive proceedings against Mr [Volker], Ms [James] and your firm;
2. Contempt proceedings;
3. Compliant to the Law Society/Legal Services Commission
In light of your clear willingness to disseminate confidential information, it is our client’s view that you should immediately cease to act on behalf of Mrs [Dunwell] in respect of all financial matters.
The wife’s legal representative denied that they had disseminated any information, and that the information they had placed in the letter came from public searches which they had undertaken and not from any documents they had received from the husband.
The husband filed his application in a case on 7 December 2009. As stated earlier that application was further amended on 24 February 2010.
In the course of the hearing which took place in March 2010, November 2011 and February 2012, the husband’s lawyers invited the second, third and fourth respondents to give evidence as to the letter in question. They each declined at that time to give evidence by affidavit or orally. During the hearing an explanation was given for Mr Volker and Ms James refusal to give evidence. The explanation was said to be firstly, that the giving of evidence by the lawyers would lead to loss of their client’s legal professional privilege and it was not necessary for either of the lawyers to give evidence.
In the course of discussion during the hearing on 10 March 2010 I said:
But what concerns me is that, in the absence of any evidence from the second and balance of the respondents, doesn’t it leave the situation that all that can be put on their behalf are submissions as to why the application sought by the husband should not be granted? And if all you can rely on is submissions and not back it with evidence, I wonder what the prospects of success in opposing the orders might be? I thought that you and the balance of your clients, apart form the wife, might want to contemplate that and, if you thought appropriate and if they thought appropriate, do something about putting some evidence on about it?
On 30 June 2010 the wife signed a letter of indemnity in favour the second third and fourth respondents. That letter became exhibit H10 in the hearing. On the face of it the letter confirms that the wife will indemnify the balance of the respondents in relation to any costs order made in the event that the appeal then being pursued by the wife is unsuccessful. The letter does not specifically refer to any other indemnity which might be operating at that time between the wife and the balance of the respondents. It does not suggest the wife obtain independent legal advice nor does it confirm that such an advice had been proffered to and rejected by the wife at the time the asserted indemnity was given by her. I refer to this matter at this point because it was the subject of significant cross-examination by the husband of Mr Volker which will be considered later in these reasons.
During the hearing of the husband’s Application in a case all the respondents had been represented by X Firm and by Dr Harper SC and Mr Gould as their counsel. On 24 November 2011, Dr Harper SC and Mr Gould advised the Court that the respondents would obtain separate legal advice. This decision was taken, they said, after consideration was given to the husband’s submissions in relation to the effect of possible impropriety by a solicitor together with the information that a complaint against Mr Volker had been made by the husband to the Legal Services Commission the previous week. The respondents subsequently obtained new and separate legal representation.
With each respondent separately represented, consent orders were agreed between the parties on 6 February 2012. Those orders have been set out earlier in these reasons.
credit
Mr Volker
Mr Volker was an unimpressive witness. Giving him the benefit of the doubt he may well have been nervous. His demeanour in the witness box did not suggest he was nervous, however, I am prepared to accept he may well have been so, given what was at stake for him in this hearing.
There were many occasions where he professed to not understand the question he was being asked. The cross-examiner, Mr Richardson SC, asked carefully crafted questions. The subject matter of the cross-examination must have been clear to the witness as he had been present as a party and/or legal representative for the wife in the proceeding over a significant period of time and many appearances. Notwithstanding the above, Mr Volker on a significant number of occasions either asked for the question to be repeated or alternatively appeared to have difficulty framing an answer to the question.
The Husband
The husband gave his evidence in a straight forward and co-operative manner. There was nothing about the way in which he gave his evidence or its content which led me to suspect he was not being honest.
The Wife
Like the husband, the wife presented as a witness doing her best to be truthful in her oral evidence. She appeared to be using her best efforts to assist the court by answering the questions which were asked of her. There was nothing, which I could identify, about the way the wife gave her evidence or the content of same which gave me concerns about her forthrightness or honesty.
Evidence
Affidavit Evidence
Husband
The husband relies on 2 affidavits
a)An affidavit sworn by him on 6 February 2012; and
b)An affidavit sworn by him on 10 March 2010.
The husband’s affidavit of 10 March 2010 sets out the following evidence.
He received a copy of the email and attached letter, which is the catalyst for the application currently before the Court, on 10 September 2009. After seeking advice from counsel, the husband’s letter to the wife’s legal representatives was sent on 19 October 2009.
The husband denies the assertion put forward by the wife’s counsel (Dr Harper SC), that this application was a ploy to delay the provision of certain documents to the single expert by the husband. He says that he has not sought to avoid providing documents and that he has in fact provided documents to the single expert which are relevant to the valuation being carried out. The husband’s affidavit sworn 6 February 2012 sets out his evidence as to the cost he has incurred during the course of the matter. He states that he has a costs agreement with Barkus Doolan Kelly, entered into on 4 June 2007. On that date, the husband also entered into a costs agreement with Mr Richardson SC. Other legal representatives retained in these proceedings include Mr Kearney, with whom the husband entered into a fee agreement on 27 September 2010, and Mr Beaumont, with whom the husband entered into a fee agreement on 18 February 2010.
The husband also sets out that there have been orders made previously in relation to costs made in the course of the Application in a case. In particular, on 9 June 2010 orders were made granting the Respondents a stay of proceedings on the condition that should the appeal, then being prosecuted by the respondents, be unsuccessful, they would pay the husband’s costs in respect for the application for a stay on an indemnity basis.
Wife
The wife relied on an affidavit sworn and filed by her on 19 February 2010.
The wife gave evidence that her legal representatives sent the letter in question to W Firm, but did not receive a response. The wife then contacted the wife of the husband’s business associate directly via telephone and then email and provided a copy of the letter to that lady, whom she asked to pass it on directly to her solicitor at W Firm.
The wife says she received no response to the email and so instructed her lawyer to engage different lawyers to undertake the work required.
The wife agrees that the husband had answered specific questions put to him by the wife’s legal representatives, exceeding 250 in number, and had provided substantial documentation in support of these answers. She states, however, that he refused to provide any further documentation or answers until the Application currently before the Court is completed. He has also refused requests which have come directly from the valuer at Y Financial Services. The wife sets out a list of letters sent and received by the wife’s legal representatives on the subject of the provision of further information by the husband, written between September 2009 and February 2010.
The wife says her legal representatives at X Firm have undertaken significant work on her behalf and she would incur significant wasted costs should she be required to change solicitors.
Mr Volker
On 31 January 2012, Mr Volker filed an affidavit which set out his evidence in relation to the letter which was sent by X Firm to W Firm.
Ms James no longer works for the firm X Firm and was not asked to give evidence as to the writing of the letter. Mr Volker stated in his evidence that “I caused [the letter] to be sent to [Ms W] of [W Firm] on 11 May 2009”. I understood that evidence to mean that Mr Volker took responsibility for the contents and dispatch of the letter.
Mr Volker said:
When the 11 May 2009 letter was sent I was aware that I was subject to an implied undertaking not to provide Ms [W] with any documents that had come into my possession as a result of their disclosure or production by the husband in these proceedings (Confidential Information) for the purposes of their use by Ms [W] in the proceedings between [Mr and Mrs G]. However, I understood that I was at liberty to provide to Ms [W] information provided to me by my client or publicly available documents such as ASIC searches.
Oral evidence
The oral evidence of the parties in this Application has been spread out over a number of hearing days which have taken place in relation to this application between 8 March 2010 and 14 February 2012.
Husband
The husband gave evidence orally on 23 November 2011. In the witness box, he added no further evidence in chief.
The husband gave the following evidence in cross-examination.
The husband stated that during the marriage, the wife had “some knowledge” about the financial affairs of the husband. He stated that his financial affairs were “complicated”, encompassing interests, through corporations and trusts, in a number of entities both in Australia and other countries. He said he had not contemplated that searches would be undertaken in relation to these interests, but understood why they would be undertaken.
The husband agreed that between mid-2007 and September 2009 he made available to the wife and her legal representatives, significant quantities of information regarding his financial affairs. He further agreed that prior to September 2009, he had no evidence that there was any threatened breach of confidence by the wife or her legal representatives.
He said he received a copy of the letter from his chief financial officer of I Business in Los Angeles, Ms C. His solicitor was on leave at the time when he received the letter. He said that in the two weeks she was on leave (she returned on 24 September 2009), he did not attempt to seek advice from any other solicitor at Barkus Doolan Kelly. He said he did not recall in that period receiving advice from another member of the firm in relation to a letter sent by Y Financial Services on 10 September 2009 requesting further financial information of the husband.
In relation to the letter sent by his solicitors on 25 September 2009, the husband stated that it was his practice to be involved in any responses by his legal representatives to Y Financial Services. When directed to his affidavit evidence of 10 March 2010, paragraph 13, the husband conceded that he “suspected” that he would have spoken to his solicitors about the letter from Y Financial Services of 16 September prior to the sending of the response on 25 September. The husband could not recall whether he chose to respond to the letter from Y Financial Services before addressing the letter to W Firm.
The husband denied that he saw the letter to W Firm as an opportunity to discontinue the provision of further financial information to the wife. He further denied that he had unilaterally decided to stop providing further financial information by the middle of November 2009.
The husband was directed to Annexure “C” to the wife’s affidavit, which was a letter to the wife by the husband’s legal representatives on 19 October 2009. In particular his attention was drawn to the following portion of the letter:
There can be no explanation for your correspondence which would satisfy our client that he should have any confidence that the material he has provided to date and any material he may provide in the future will be kept confidential by your office.
The husband did not recall whether he had formed the view that there was no explanation he would have accepted. He said further:
Dr Harper:You – your view was by the 19 October that it wouldn’t matter what your wife’s lawyers … said – by way of explanation, you just wouldn’t believe them, would you?
Husband:I don’t know. If they offered an explanation that was credible, I guess I would listen.
The husband was taken to paragraph 10.4 of his affidavit, in which he set out the date of drafting of the affidavit filed on 7 December 2009 “after his review”. He agreed that his solicitors had prepared the affidavit and that he had relied on their information as to the date of drafting.
Wife
The wife gave oral evidence on 23 November 2011. She added no evidence in chief to that which she had set out in her affidavit.
The wife conceded she was aware from the earliest days of the proceedings in this matter that the husband was particularly concerned with the preservation of the confidentiality of his business affairs, in particular, those dealings which were connected with the husband’s business associate.
She stated it was her understanding that the letter to W Firm was sent for the purpose of seeking to engage those lawyers to represent her interests in the United States. They were to undertake searches and inquiries on her behalf. She agreed, however, that this task could have been undertaken by any lawyer in the United States. She said she knew which firm was representing the wife of the husband’s business associate prior to the sending of letter, however, she was not aware of which lawyer within that firm had carriage of the matter. She understood that either Mr Volker or someone in his office established that Ms W was the solicitor with carriage of the matter.
The wife understood the law firm would be provided with information which would enable and direct them to take steps to undertake investigations on her behalf in relation to Mr Dunwell. She denied that the attempted engaging this law firm was intended to provoke the husband.
She conceded she knew confidentiality of financial matters going to the relationship between the husband and his business associate was a concern to the husband; that she knew that W Firm were acting for that business associate’s wife in a property settlement between them. She denied, however, that she intentionally engaged this law firm as provocation.
Mr Richardson: Do you accept that for you to engage those attorneys, having regard to the matters you’ve acknowledged this morning and to reveal any matter to them concerning the financial relationship between Mr [Dunwell] and [Mr G] would be a step highly provocative to the husband?
Wife: Well, I realise that now, yes.
She further agreed that the lawyers in the United States did not need to have any relationship with Mrs G.
The wife conceded the husband had offered to provide documents to Y Financial Services to enable them to proceed with the valuation work on the basis the documents were not shown to the wife or her solicitors at this time. The wife continued to hold the view that the husband was seeking to proceed on the basis that she never saw the documents provided to Y Financial Services.
The wife was then taken to the letter from Christine Kelly to Y Financial Services of 17 November 2009 at 10.32 a.m. (p 62 of the annexures to the wife’s affidavit) which stated
Unfortunately an issue has arisen between the parties which is delaying us sending you our client’s responses.
The wife was then directed to a letter from Christine Kelly to Ms James of the same date, some six minutes after the previously mentioned letter, which was requesting a response to the husband’s proposal in this matter. The wife conceded that at 17 November 2009, the husband’s legal representatives were still seeking a response to their letter of 19 October 2009. The wife stated that she was not aware or was not sure of the email from Christine Kelly to Ms James on 27 October with the proposal as to the interim provision of information while the matter of the letter to W Firm was dealt with, and maintained that she still contended that the husband was using the Application to avoid providing information.
Mr Richardson: Was it any part of your intention or desire to engage [W Firm] that you might obtain some advantage from that firm for the purpose in these proceedings as a consequence of their knowledge of matters from the [G & G] proceeding?
Wife: No
Mr Richardson: In the second sentence of the letter written to Ms [W] it is said “We understand that you act on behalf of [Mrs G] in relation to her divorce from [Mr G]”. From your approval of that letter, do you have anything to offer as to the relevance of that proposition?
Wife: It’s just a way of introduction.
Mr Richardson: For what purpose?
Wife: Clarify who I was
In relation to the sentence in the letter to Ms W “In our investigations on behalf of Mrs [Dunwell], we have uncovered a very complex international group structure that we believe Mr [Dunwell] has an interest in.”, it was suggested to the wife that those inquiries were wholly or partly based on information which the husband had disclosed. She denied this to be the case.
The wife was asked about her knowledge of the companies and entities of the husband, in particular whether she could identify any entities which were not disclosed by the husband in his provision of financial information. She said that she knew of the Dunwell Trust in the beginning, but could not point to another entity not disclosed by the husband. She was also unaware of the types of searches which could be undertaken to locate such entities apart from ASIC searches.
The wife was further asked why the letter to Ms W included the sentence “It is highly likely that [Mr G] also has an interest in some of these structures”. She denied that it was her intention to offer information useful to Mrs G’s case “as a carrot”, and did not offer an alternate explanation for the inclusion of that sentence. She was shown the sentence “The entities involve both companies and trusts and expand across Australia, Los Angeles, The United Kingdom and Jersey Islands” and it was suggested to her that the information in that sentence was irrelevant. She said that she didn’t know. It was then suggested that the purpose of the letter to Ms W was to offer to provide information to that firm. She said that she had no idea and that it was not her intention.
Mr Richardson: Can you offer any explanation of what your lawyer’s intention may have been? Perhaps they’ve explained it to you?
Wife: No, Absolutely not.
Mr Richardson: You see, if you were engaging them to act for you and you were doing it with integrity, you would be expecting, wouldn’t you, that the work they would do for you would have nothing to do with [Mrs G] and her affairs?
Wife: Yes
Mr Richardson: And that the work that your lawyers would do and the information they would reveal would have nothing to do with [Mrs G] and her affairs?
Wife: Nothing to do with it.
Mr Richardson: But this letter was suggesting entirely the contrary?
Wife: I can’t say anything.
The wife was questioned about the purpose of the letter, on the part of both the wife and her legal representatives. I think it helpful to reproduce the transcript in full in this section, as it highlights the conflict between the wife and the solicitors in their understanding and aims in relation to the contents of the letter.
Mr Richardson: The messages conveyed in this letter were written by your lawyers with your specific approval, is that correct?
Wife: To send a letter
Mr Richardson: You can’t answer it yes or no?
Wife: Yes I asked them to write a letter.
Mr Richardson: That is not what I have asked you?
Wife: Well, the answer is no.
Mr Richardson: So when you told his Honour earlier today that you saw this letter before it was sent, you remember saying that don’t you?
Wife: Yes I saw it – I saw it
Mr Richardson: This letter?
Wife: This letter.
Mr Richardson: Right and that you approved of it before it was sent?
Wife: Yes.
Mr Richardson: Was that correct?
Wife: Yes.
Mr Richardson: When you said that?
Wife: Yes. To the general terms of the letter
Mr Richardson: So there is no doubt, is there, that your lawyers had your specific approval to write to these people in precisely the terms they did?
Wife: To send this – yes to send this letter
Mr Richardson: This letter?
Wife: This letter.
Mr Richardson: And quite apart from engaging potentially these lawyers to undertake searches for you, can I suggest that by the terms of this letter you in fact had three aims, or those who wrote it had three aims that you approved of. The first being that there would be an information swap between you on the one hand and [Mrs G] on the other hand, through your respective lawyers in way that might advantage each of your cases?
Wife: No
Mr Richardson: So that wasn’t something contemplated by the provision of information referred to in paragraph 6 and being happy to assist [Mrs G] in any way possible referred to in paragraph 6, is that right?
Wife: Absolutely, I reject it.
Mr Richardson: Well, what were you going to provide her?
Wife: I have no idea.
…
Mr Richardson: The second one was to provide, contrary to Mr [Dunwell’s] expressed concerns, information concerning [Mr G] that might in turn cause Mr [Dunwell] to be put under pressure in these proceedings?
Wife: No.
Mr Richardson: And the third one was to try and attract a job for Mr [Volker] in the [G] litigation within Australia?
Wife: No.
Mr Richardson: No?
Wife: No.
Mr Richardson: That wasn’t contemplated by the “we”, being the authors of the letter, “are happy to assist your client in any way possible” as well?
Wife: I have – I have no idea
Mr Richardson: So when you approved this letter, you believed that the author of the letter, in making that statement, was in fact proffering their assistance, other that on a professional basis?
Wife: No, not at all
Mr Richardson: Perhaps if she needed Mr [Volker] to do for her other than in his role as a lawyer?
Wife: No.
Mr Richardson: Well what was it that you understood by that statement? What was it that you understood Mr [Volker] was offering to do to assist [Mrs G]?
Wife: I have no idea
Mr Richardson: But you were happy for it to be sent, to be interpreted by those who may see it in whatever way it may be fairly seen, is that right?
Wife: I actually just thought it was being polite.
It was put to the wife that she was not aware of the extent of the communications between X Firm and W Firm, despite her statement in paragraph 10 of her affidavit that her lawyers “did not receive a response from [W Firm]”. She conceded that she had no direct knowledge of what communication did take place between the firms prior to the letter in order to establish that Ms W was the solicitor with carriage of the G v G matter, nor did she have direct knowledge of any correspondence following the sending of the 9 May letter. She also conceded that she relied on her legal representatives for the knowledge she had on the subject. The wife was asked further whether Mr Volker had told her why he was not “in evidence” in this matter. She responded that he had not.
The wife was asked about the payment of legal bills in the current proceedings. She said she had been “paying my bills” in response to a question as to whether she was paying the legal costs of both herself and her legal representatives. She could not say whether she was paying for her legal representative’s costs, only that she “paid her share”. She also could not point to any document, nor had she seen any document which suggested that she was only paying a share of the costs incurred in the current application.
At that point in the hearing, the husband made a call directed to the respondents to produce fee memorandums and tax invoices issued to the wife in relation to these proceedings and to the appeal proceedings in respect of the period 24 February 2010 and thereafter. The call also covered the same class of documents which have been issued to any of the other respondents in the case during the same period.
When the parties came before the Court on 7 February 2012, the wife had signed consent orders in relation to the substantive part of this Application, and so her cross-examination was not continued.
Mr Volker
Mr Volker gave oral evidence on 7, 8 and 14 February 2012, following the consent orders being entered into by the parties on 6 February 2012.
In his evidence in chief, he said in relation to the letter of 11 May 2009 to W Firm that
a)He saw the letter before it was sent;
b)He authorised the letter; and
c)He took responsibility for the letter being sent.
Mr Volker was cross-examined by the husband’s counsel.
Mr Volker asserted that he claimed some expertise in matters of Family Law. He acknowledged he was the solicitor responsible for the carriage of the wife’s case during the time she instructed his firm. He asserted he had acted scrupulously in accordance with his legal and ethical obligations.
He agreed that his affidavit was carefully prepared and that he took care to accurately set out information in that document. It was then put to Mr Volker that his oral evidence in chief was different to that contained in his affidavit. He denied that was the case. He disagreed with the proposition that he could not, in fact, know what was or was not provided in any communication between any other member of his firm and Ms W.
Mr Volker was taken to the transcript of 8 March 2010, particularly to the point where the subject of Mr Volker giving evidence and the comment by me that
They could put an end to the whole thing and say “Look, not only did we never intend that, but it has never been done,” or words to that effect.
He said that he recalled those words. He agreed that despite the issue being raised in the earlier stage of the proceedings, he had not been prepared to provide that evidence before the current hearing. He disagreed with the proposition that he had acted in order to leave Mr Dunwell with no opportunity to test that evidence.
Mr Volker acknowledged that on 8 March 2010 I raised with the wife’s counsel the question of Mr Volker and Ms James giving evidence in order to assert that no information outside of the letter of 11 May 2009 had been provided to W Firm. He also acknowledged that Dr Harper SC told the Court “they could give that evidence”. He acknowledged that it was not until 30 January 2012 that he provided evidence in the case.
Mr Volker was asked to explain the difference between the date on the letter his firm sent to W Firm (11 May 2009) and the date on the letter which the wife had sent by email to the wife of the husband’s business associate (8 May 2009). He said the earlier dated letter had been a draft sent to the wife for her approval.
The deposit to Mr Volker’s trust account of $150,000 by an entity titled “The [S] Trust”, being a payment made on behalf of the wife, was drawn to the witness’s attention. He was then asked to acknowledge that the wife in these proceedings has an obligation to fully and frankly disclose any material change to her financial circumstances. He did acknowledge that obligation. He also acknowledged that if she was unwilling to disclose as required, then he, as her lawyer, would be obliged to withdraw from the proceeding. He agreed that as far as he could remember the S Trust had not been disclosed to the husband.
The witness also acknowledged that his firm had acted on the purchase for the wife of a property in about March last year. He acknowledged that since that purchase he had not caused the disclosure of the purchase to be made to the husband. He asserted that it was entirely proper for him to continue to act in the proceeding for the wife notwithstanding the failure to disclose the transactions.
Mr Volker acknowledged that he was under an obligation not to use documents obtained by him in a proceeding, whether the documents be publically available or not, in a way which is not for a legitimate step in the proceeding.
Mr Volker agreed that from the early days of the proceeding the husband had made it clear to the wife’s legal representative (i.e himself) that he had a long standing professional relationship with his business associate. He acknowledged the husband had said the business associate was a man who had a high regard for his own privacy and confidential information. He acknowledged that the husband had said that relationship could be at risk if there was a breach of his claims to confidence.
The witness told the court that the purpose of attempting to engage the services of W Firm, was to have them undertake searches relative to the wife’s matrimonial case in Australia. He asserted there was no other purpose.
Mr Volker was asked “You chose a particular lawyer to ask to accept the engagement to…carry out that task?” He answered “Under my instructions, yes.”
Mr Volker acknowledged that he knew Ms W was acting for the wife of the business associate of the husband, in highly publicised financial proceedings arising from a matrimonial breakdown. He knew the husband sought to preserve his financial/business relationship with his business associate. He knew the husband had sought to keep confidential his business dealings with that man. He knew that he had provided assurances to the husband’s solicitors that he would not act in a way to improperly breach that confidentiality. Mr Volker denied he had acted contrary to the assurance given by sending the subject letter to Ms W.
The witness asserted that the only purpose in seeking to engage Ms W was to have searches carried out in the United States. He acknowledged that until Ms W was engaged no lawyer-client relationship existed. He acknowledged he had effectively provided the husband with assurances his business dealings with his business associate would be kept confidential. That evidence having been given the witness was asked the following question:
Mr Richardson: So in the face of the promise that you had made, or assurances that you had made, to Mr [Dunwell], would you accept that it was entirely improper for you to impart to that firm, with whom you had no retainer or lawyer-client relationship, any information concerning Mr [Dunwell] and [Mr G] and their relationship?”
Mr [Volker]: No.
When pressed further as to why he did not write simply asking for Ms Wto take on the position of acting as agent or acting for the wife in obtaining searches in the United States he responded “those weren’t my instructions”. He was then asked:
Mr Richardson: You’re not suggesting, are you, that if you had given an assurance, as a solicitor, to Mr [Dunwell], to act in a particular way, that if your client instructed you specifically to act contrary to that assurance, that you as a lawyer would simply be free to act in accordance with your client’s instructions?”
Mr [Volker]: I wouldn’t.
Mr Volker said that at the time of writing the letter he did not have in mind any specific searches to be carried out in the United States. He had in mind searches of “the US entities” the husband had interests in. He acknowledged that prior to May 2009 his client had already had searches in the United States carried out by Mr K. That person had sworn an affidavit in March 2009.
It was put to Mr Volker that the task Ms W was said to be required to carry out had already been done by Mr K. He denied that.
It was put to the witness “Just as you had no specific instructions in mind for her (Ms [W]) as to companies you wished her to search, this was all for another purpose entirely”. He denied that was the case.
It was put to Mr Volker: “You have the view, don’t you, that if your client gives you documents, then those are documents that fall into the category of those that you’re entitled to use as you see fit?” He replied “Generally speaking, yes.” Asked if there was any caveat to that he said: “Well, if they were Mr [Dunwell’s] documents pertaining to these proceedings”. He went on to explain that he could use any such document provided by his client “Only within the confines of his obligations under the law.” He said further in his evidence he understood he was at liberty to provide to Ms W any document provided to him by the wife, only if she accepted engagement as an agent. That acceptance he said would ensure “Solicitor-client privilege and the fact that she was engaged as an agent in the proceedings”.
It was put that the information provided to Ms W in the letter of 11 May 2009 “was likely to be highly provocative to the relationship between the husband and [Mr G].” He replied “I don’t agree”.
Mr Volker was asked if he saw a distinction in relation to his obligations under Hearne v Street (this being a reference to the High Court’s decision in Hearne v Street (2008) 235 CLR 125) in relation to documents which come into his possession as opposed to information which comes to his attention as a result of a discovery process. He answered: “Yes, there is a – I could provide – is there a distinction? I see I would be able to provide information to my agent, relevant to the case to Mrs [Dunwell] and Mr [Dunwell], if it was relevant to the task that they had been engaged to do.” He was asked did he see himself as free to provide documents or information from same even if obtained by the wife from the husband without his having provided them to her if the documents were relevant to the engagement of Ms W.
Mr Volker asserted that whatever the source of a particular piece of information may have been, he would not divulge that information to anybody who was not a lawyer engaged in the proceeding or an expert witness appointed for the purpose of giving evidence in the proceeding.
Mr Volker was asked about paragraph three of his affidavit. He agreed that in that paragraph he defined two categories of documents which might have come into his possession in the proceeding. The first he called confidential documents the second he did not. He was taken to paragraph five of his affidavit. There he asserted he had not provided any confidential information to Ms W.
The witness was reminded that in 2007 the husband had complained the wife had entered his office and removed business papers of his. The witness was reminded that in an affidavit sworn by the wife on 1 October 2008 the wife accepted she had removed documents from the husband’s office. He agreed that had occurred.
Mr Volker agreed that he would be cautious about the use of any material provided to him by the wife about the business dealings of the husband and his business associate. Further he agreed he would be particularly cautious because of the assurance he had provided to the husband about confidentiality. He agreed that he had freely provided information about his understanding or belief of the financial relationship between the husband and the business associate, to a person with whom he held no agency agreement. He denied that in those circumstances he acted appallingly.
The witness was asked about an affidavit sworn by Mr T, an accountant retained for the wife to carry out work as an adversarial expert witness. Annexed to that document and identified as a document provided to the witness by the wife’s solicitors, was a letter written by the husband’s business associate to the husband. This was acknowledged to be a document provided by the wife to her solicitors. It was also alleged by the husband to be a document removed from his office by the wife without his permission. The document contained, inter alia, the following words: “Please also note that this agreement is highly confidential, subject to confidentiality agreements entered into.” and “thus not to be shared with anyone.”
It was put to Mr Volker that he paid no attention to those words in the letter. He denied that.
Mr Volker was asked a series of questions about the circumstances in which the above letter was described in the affidavit of Mr T as being material obtained by the wife or her solicitor arising from searches carried out. The affidavit had been drafted in the office of X Firm and sworn by Mr T. It was also put to Mr Volker that he knew the document had been removed by the wife from the husband’s possession without his consent. The transcript of these questions shows that the witness was either very confused about the question being asked or alternatively was avoiding answering the questions. Consequently the witness was taken to an affidavit filed by the husband and sworn 26 September 2008. Paragraph 80 was read onto the transcript as follows:
I placed a lock on my office door after our separation, and particularly when I became concerned that [the wife] was copying confidential and sensitive material, relating to the [I Business] and to [Mr G]. I was conscious of [the wife’s] relationship with [Mr M]. Mr [M] is no longer an employee of the [I Business], and now works for a rival company.”…
I was also extremely concerned that [the wife] had breached the confidentiality and trust I had built up with [Mr. G] over many years. My discretion in relation to [Mr G] is a crucial part of our ongoing professional relationship….
From the documents that [the wife] has now disclosed, by way of annexures to the affidavit of Mr [T], my concerns have been heightened. It is clear that [the wife] had gone into my office and obtained copies of documents relating to both the [I Business] and [Mr G], which she would not normally have any access to.”
The witness acknowledged he would have read the affidavit at about the time of its service.
The wife swore an affidavit on 1 October 2008 which Mr Volker said he prepared notwithstanding that the affidavit itself does not so state. The witness’s attention was drawn to the response of the wife to paragraph 80 of the husband’s earlier affidavit which had been read to the witness. In that paragraph she deposed as follows:
I made copies of a few documents, all of which have been attached to my affidavit. …
I do not intend to use any documents in relation to [the husband’s] business affairs, or those of [Mr G], for any purpose other than the family law proceedings. The only people who have access to these documents are my professional advisors in these proceedings.
The witness acknowledged that is what the wife had said. He agreed that the wife knew very little about the husband’s business affairs. He conceded that no suggestion had been made by or on behalf of the wife that she had been a share holder or office bearer of a company F Company.
It was put to Mr Volker that if the only purpose in writing to Ms W was to ask if she would take instructions to act as an agent and conduct searches in the United States, there was no reason to provide any information about the relationship between the husband and his business associate. He denied that was the case. He said the “relevance was that this was a matter that involved what we considered a possibility that [the husband] would have assets outside of Australia and outside of the USA. Now, I thought that was relevant to tell her when- if she accepted the engagement.”
It was put to Mr Volker that to the extent that his letter to Ms W revealed information about the financial affairs of Mr Dunwell and/or Mr G outside of the United States the letter did so for no legitimate forensic purpose. He denied that.
The witness was asked why he said in the letter to Ms W that he understood she acted for Mrs G. He said he did so to give her background. He said “I wanted to make sure she was apprised of the facts to make a professional determination if she wanted to take the engagement, as our agent.”
He denied that the legitimate reason for advancing such information would be to alert Ms W of a potential conflict for her if she took the agency.
He was asked why he said “You may be aware that [Mr G] and Mr [Dunwell] are long standing business partners”. He said it was part of the wife’s case. It went to matrimonial assets and resources.
It was put to Mr Volker:
Mr Richardson: You were telling her facts that came into your knowledge as a lawyer, that you had no business to disclose to her, when she had no professional obligation to you or your client”.
Mr [Volker]: I was giving her background.
The witness then had his attention drawn to the following extract from the letter sent to Ms W:
Mr [Dunwell] and [Mr G] have interests in various corporate entities, including [I Business].
In our investigations on behalf of Mrs [Dunwell], we have uncovered a very complex international group structure that we believe Mr [Dunwell] has an interest in. It is highly likely that [Mr G] also has interest in some of these structures. The entities involve both companies and trusts, and expand across Australia, Los Angeles, the United Kingdom and the Jersey Islands.
Mr Volker was asked why it was necessary to provide that information to Ms W. He replied “Background”.
Asked about the term “uncovered” in the letter he was asked whether he was referring to entities which were not disclosed by the husband. Mr Volker responded in the affirmative.
He was asked if these entities were discovered after Mr T swore his affidavit. Mr Volker responded “I don’t have a recollection to be honest”. He was asked if he had any record which may assist him to answer the question. He did not seek access to any record. He was asked what entities he wanted searched in the United States. He could not recall. He was asked again if he had a record which might assist him provide the answer. He did not seek access to any record.
It was put to Mr Volker that it can be inferred that he had 3 aims for sending the letter to Ms W. The first was to promote to her an idea that there might be an exchange of information to the mutual benefit of both Mrs Dunwell and Mrs G. The second was that Mr G may become aware of this and put pressure on the husband to settle the case. The third was to hold himself out as someone who might have the expertise and be well placed to act on any aspect of the G & G matter. Mr Volker disagreed with all those three propositions.
The witness agreed that the proposal in the letter that “some of the information we have obtained in relation to the entities may also be of assistance to your client in relation to her proceedings”, was outside of the stated purpose of seeking to engage Ms W. He agreed it was not part of providing background.
Mr Volker was asked about the following passage:
Some of the information that we have obtained in relation to the entities may also be of assistance to your client, in relation to her proceeding.
Mr Volker said he would only have provided that information if he had been engaged as Sydney/Australian agent by Ms W in the United States proceeding involving the husband’s business associate and his estranged wife. He denied that he was proposing to provide Ms W with information that was made available to him in the Dunwell case for the purpose of Ms W using that information on behalf of her client the wife of the husband’s business associate. It was put to him that is exactly what he had suggested in his earlier evidence. In relation to that same proposition the witness was asked
Mr Richardson: You wouldn’t expect her, if she be an ethical lawyer, to even accept from you information that you had obtained in the course of acting for another client, would you?”
Mr [Volker]: I wouldn’t expect her to do anything outside the law.”
In his evidence Mr Volker said he was not required to keep confidential information or documents obtained from public records or documents produced to him by the wife. It is common ground that some of the documents provided to Mr Volker by the wife were the husband’s records which the wife had photocopied in his office without his knowledge or consent.
It was put to the witness that what was written in the subject letter was an open offer. The witness replied “It was an offer, if she wanted to use our professional services.” The evidence continued as follows:
Mr Richardson: And that means engage you or your firm?
Mr [Volker]: As her agent.
Mr Richardson: For some client, other than the client you were writing to her about, being your client?
Mr [Volker]: Yes. She didn’t act in that regard.
Mr Richardson: Having regard to the whole of your evidence, do you still reject the proposition that part of your intention in this letter was to endeavour to secure, for yourself, an engagement in the [G and G] proceedings insofar as they might relate to steps in Australia?
Mr [Volker]: Yes.
Mr Richardson: Wasn’t even in your mind?
Mr [Volker]: No.
A short time after that last exchange the following evidence was given by Mr Volker:
Mr Richardson : Continuing [extract from the letter to [W]]
“we are happy to assist your client in any way possible, as well.”
Mr Richardson : You went on to say. Why would you say that?
Mr [Volker]: If we were---
Mr Richardson: Why would you say that, if the sole purpose of this letter, was to endeavour to engage Ms [W] to do searches for your client, as you told his Honour earlier today?
Mr [Volker]: If she wanted to engage us as her agent.
Mr Richardson: You said, that prospect wasn’t even in your mind when you wrote this letter. You don’t see the conflict, Mr [Volker]?
Mr [Volker]: No conflict.
Mr Volker was asked if he held an indemnity for his costs in relation to the amended application of the husband filed 24 February 2010. He said the indemnity covered his firm and himself and has been given by the wife. He said the indemnity was in writing and covered the whole of any cost order which is made against him.
He was asked if the only document comprising the indemnity was the document tendered on 8 February 2012. He answered in the affirmative although he believed there may have been an email which he described as a “confirmation email”.
In relation to the indemnity Mr Volker said he had from the wife, he said “I asked her to obtain independent legal advice, prior to giving me the indemnity”.
It was put to the witness that he did not have any discussion with Mrs Dunwell about an indemnity, other than one in relation to the undertaking he gave on 9 June 2010. He denied that suggestion.
It was put to Mr Volker that there was no purpose in writing a letter to the wife after 9 June 2010 about an indemnity for a specific event if she had already given an all encompassing indemnity at an earlier time.
Mr Volker denied the suggestion that he had acted appallingly as a solicitor by issuing a bill to Mrs Dunwell for the work done for all four respondents.
Further, Mr Volker agreed the letter sent to the wife in June 2010 contained no suggestion to the wife that she obtain independent legal advice about giving an indemnity.
It was put to Mr Volker:
Mr Richardson: The indemnity that you say she gave at the time you became a party, is not in writing anywhere is it? ---He replied: There’s reference to it in writing. He was asked: Where is it? You didn’t produce it on the call did you?
Mr [Volker]: No.
Mr Volker was asked about exhibit H10, being a copy of a letter from X Firm to the wife dated 30 June 2010. The following was put to him about the letter:
(a)The letter contains no confirmation that she has been advised she should obtain independent legal advice. (Mr Volker agreed)
(b)It was apparent to you as Mrs [Dunwell’s] lawyer that in circumstances where both counsel were instructed to act on behalf of three parties, two of which had interests in conflict with Mrs [Dunwell], that it was clear that they had a conflict of interest in providing her with any advice on the matter. (Mr Volker responded “The conflict was evident.”)
(c)You should not have provided advice if you were acting honourably. (Mr Volker conceded he had a conflict. He asserted he advised the wife to obtain independent legal advice.)
At the conclusion of the cross-examination of Mr Volker his counsel sought leave to adduce further evidence in chief from him. I granted that application. Thereafter Mr Volker gave evidence saying he did not provide any documents to Ms W. He further said he did not have any further communication with Ms W following the letter he had sent to her firm.
other important evidence contained in the exhibits
H1 contained a letter from Christine Kelly of Barkus Doolan Kelly to X Firm dated 24 February 2010 and the response from X Firm dated 25 February. The letter from Ms Kelly is about the evidence of the wife to be relied upon in court. Ms Kelly noted that neither Mr Volker nor Ms James had given evidence, and that this omission would necessarily strengthen the husband’s case. The response is a counter-accusation that the husband is disingenuous as to his “posture about confidentiality” and the application is a misuse of the Court process.
H5 contains an ASIC search in relation of Z Pty Ltd, which is the company which owns/trades as X Firm. The search names Mr Volker as the sole director.
H6 contains a letter faxed from Christine Kelly of Barkus Doolan Kelly to X Firm dated 31 March. Ms Kelly offers, on behalf of her client, to settle the matter. The offer is that if the orders sought as to Mr Volker and X Firm are agreed to, the husband will forego the orders as to costs.
H7 contains a letter faxed from Christine Kelly of Barkus Doolan Kelly to X Firm dated 7 March 2010. The letter contains an offer to settle. The husband offers to forego any costs orders if Mr Volker and X Firm are restrained from acting in the matter and disclosing any information from the matter.
H8 contains copies of the trust matter ledger for this matter of X Firm and copies of letters sent to the wife by the firm in relation to withdrawals from that account by them.
H9 contains a letter from Paul Kozub of Gilchrist Connell to Christine Kelly of Barkus Doolan Kelly dated 7 February 2012. The letter states that Gilchrist Connell’s fees will be met by LawCover.
H10 contains a letter from X Firm to the wife dated 30 June 2010. The letter is in relation to the purported indemnity agreement between the wife and the second, third, and fourth respondents. In relation to this matter, the letter sets out the events of 9 June 2010, in particular that the wife received advice for 45 minutes as to indemnity costs and other matters then before the Court. The letter states that “you [the wife] confirmed that you alone would bear those costs in the event that the appeal was unsuccessful. To be abundantly clear, this means that if the appeal is unsuccessful, [the husband] will seek indemnity costs from all of us and we will turn to you to meet the entirety of those costs.”
H11 contained a letter from Ms R of X Firm to Christine Kelly of Barkus Doolan Kelly dated 7 February 2012. It is a response to a letter from Ms Kelly to Gilchrist Connell in relation to costs. The letter states that Gilchrist Connell do not represent Mr Volker or X Firm in relation to the costs sought by the husband as to the Appeal and the stay application. The letter denies that neither the firm nor Mr Volker have failed to attend to these costs, as their undertaking on that issue did not crystallise until a cost assessment order was issued.
H12 contains the affidavit of Mr K, who was employed by the wife to analyse the husband’s disclosed documents and establish appropriate areas of further investigation.
Submissions
Husband
The husband relied upon his written submissions. He also addressed the Court on 14 February 2012.
The husband accepted that the Application currently before the Court was an extraordinary application. He said the Court was not required to determine the merits of the main application the husband had been perusing to restrain the wife’s continued engagement of X Firm as that application had been determined by the recently made consent order providing for the outcome sought by the husband. However in determining the cost application currently before the Court, the facts of the main application remained applicable.
The husband’s submissions, in large part, address the assertion that Mr Volker, in his capacity as the legal representative for the wife, acted entirely improperly in the course of the proceedings, and that he should not be found by the Court to be a credible witness. In relation to the latter of those submissions, counsel for the husband said that the evidence of Mr Volker was evasive, at some points contradicted itself, and at some points was inherently improbable, so much so that it ought simply be rejected.
It was submitted that the Court needed to take into account the following matters:
a)Firstly the letter of Mr Volker to Ms W of 9 May 2009. The husband submits that having regard to the obligations Mr Volker had generally as a lawyer, and particularly the specific assurances he had given to the husband in 2007, this letter ought not have been written. It is submitted that Mr Volker’s oral evidence would reinforce that contention;
b)Secondly, Mr Volker and the respondents associated with him ought to have recognised, from the outset, that there was an inherent conflict of interests arising in X Firm’s representation of the wife and the balance of the respondents on the subject;
c)Thirdly, the wife has entered into consent orders, the effect of which was to provide, at a very late stage, entire success to the husband in the main Application in a Case brought before the Court in December 2009. The husband submits that other than the inference drawn that unconflicted and independent advice swayed the wife’s actions in this matter, there is no explanation as to why the wife has taken this course at so late a stage in the Application. The husband submits that he has incurred significant costs in the pursuit of this Application, which has been resisted by all of the respondents “forcefully at every stage”; and
d)Fourthly, the husband has sought to resolve the matter on several occasions. It is submitted that the husband has made two offers of settlement, in March of 2010 and March of 2011 (as set out in H6 and H7), which were each rejected by the respondents. It is further submitted that the effect of these offers were substantially the same as the consent orders entered into on 6 February 2012, and attached no cost penalties to the respondents. In the intervening time between the offers and the costs application hearing, the husband has incurred significant costs. He submits that the offers made by the husband in March 2011 assume significance in the consideration of how the costs in this matter ought to be apportioned.
It is on the basis of the above considerations that the husband submits it would be wholly unfair for the husband to be obliged to cover any of the costs arising out of this Application. The Application sought to secure relief which was ultimately conceded by the Respondents. The husband called on the Court to consider an order directed at the solicitor rather than simply at the respondent, in view of the conduct of Mr Volker and the other considerations listed above.
In relation to Mr Volker’s credit, the husband first directed the Court’s attention to the respondents’ written submissions relating to the hearing of 23 November 2011. The husband drew the Court’s attention to paragraphs 14 and 16 of the Wife’s submissions in relation the hearing date 23 November 2011. Those paragraphs read as follows:
14.It is hard to see how this conclusion [that a fair minded member of the public would conclude that the integrity of the Court process could only be served by the solicitors for the wife withdrawing] could be reached.
a)It should, in the absence of any concrete evidence to the contrary, be assumed that the solicitors, who are officers of the court, at all times intended, and intend, to act in accordance with their duties to the court and their client;
b)Apart from the husband’s assertions based on the letter, there is no evidence of any breach of duty by the solicitors at any time.
c)The property proceedings between husband and wife have been on foot for nearly four years. In that time there have been numerous applications and interlocutory processes. Apart from the letter, there is nothing to suggest other than that the solicitor respondents have conducted themselves scrupulously in accordance with their duties to the court and their client.
d)Also in that time there is no evidence of any receipt or misuse of identified confidential material.
e)Therefore for the letter to carry the sinister construction for which the husband contends, it must be treated differently and at odds with all other conduct of the solicitor respondents in the proceeding.
f)The letter itself on its face, if read fairly and objectively, is capable of inferences which are not sinister at all.
g)In the absence of some concrete evidence of prejudicial conduct by the solicitors the court should read the letter as implicitly based on the solicitors’ intention to act at all times in accordance with their duties to the court and their client.
h)The sinister interpretation of the husband is no more than conjecture and suspicion which is not enough to shift any evidentiary onus to the solicitors.
i)The solicitors are not required to give evidence to rebut any inference against them.
j)No reason has been shown to deprive the wife of her choice of lawyer except an unreasonably held suspicion by the husband.
16.A fair minded and reasonably well informed member of the public would be much more likely to conclude that the integrity of the process and the proper administration of justice would be undermined by preventing the wife from using her lawyers of choice, than by any conduct of the solicitor respondents.
The husband submits that these submissions ask the Court to assume scrupulous behaviour on behalf of the wife’s former solicitors; however, the evidence of the second and third respondents, as embodied by Mr Volker, would lead the Court to conclude the behaviour of those parties was not scrupulous as was set out. He further points to the proceedings of 8 March 2010, in which Dr Harper said, in relation to the use to which the wife may put information gathered in the proceeding:
That couldn’t possibly be the case, that she is precluded from doing her own researches in relation to those companies, then the effect of knowing about their existence from the proceedings doesn’t mean she has to treat the knowledge of the fact of their existence as confidential.
Counsel for the husband stated this statement by Dr Harper indicated the respondents were of the opinion that information and documentation on an entity of the opposing party, gathered subsequent to disclosure by the opposing party of the existence of that entity, were not subject to any limitations related to confidentiality. The husband directed the Court to Hearne v Street (2008) 235 CLR 125 at paragraph 96.
96. Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise[66], to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include documents inspected after discovery[67], answers to interrogatories[68], documents produced on subpoena[69], documents produced for the purposes of taxation of costs[70], documents produced pursuant to a direction from an arbitrator[71], documents seized pursuant to an Anton Piller order[72], witness statements served pursuant to a judicial direction[73] and affidavits[74]. The appellants did not dispute the existence of this principle, and in particular did not dispute its potential application to the affidavit of Mrs Hesse and the witness statement of Dr Tonin.
The husband pointed to the correspondence of 2007, in which the husband requested that the respondent and her legal representatives enter into a confidentiality agreement, and was refused. The husband submits that Mr Volker responded “stridently”, saying that it was “irrelevant” and “nitpicking”, and assured the husband that the confidentiality of the husband’s dealings with his business associate would be protected.
The husband submits that Mr Volker said this application ought never have been pursued, that the husband ought to have accepted Mr Volker’s representations on the matter in 2009 as to maintaining confidentiality and never have filed the Application in a Case to restrain the wife continuing to instruct X Firm. The husband submits that from the husband’s point of view, this was an unreasonable position to take, given what could be regarded as “an egregious breach of the assurance which had been made to him by Mr [Volker] previously”. The husband points out that there were any number of attorneys in the United States who could have conducted the relevant searches for the wife, which was claimed to be the sole purpose of contacting W Firm. Further, in contacting that firm particularly, Mr Volker’s stated sole purpose could be seen to be a fabrication.
The husband submits that Mr Volker in oral evidence could not point to any particular reputation held by W Firm in relation to searches which would have caused him to form the opinion that they were the most suitable firm to carry out the job, nor could he identify any company (of the husband’s or otherwise), which he considered required such searches. The husband further submits that searches in the United States had, in fact been carried out, by Mr K, two months prior to the letter being sent to W Firm.
In light of the circumstances surrounding the sending of the letter, it is submitted, by the husband, that this provocative action of seeking to engage a lawyer, who is in conflict with the very business partner whose confidentiality the husband is seeking to protect, was undertaken with an improper collateral purpose. It is submitted that the collateral purpose had nothing to do with the stated purpose. Counsel for the husband noted that it was “extraordinary” that Mr Volker sought to draw a distinction that “there was no lawyer-client relationship or no agency between he and Ms [W]”. It was submitted that this distinction was relevant, in light of the proposal he (Mr Volker) suggested to Ms W in the letter. The husband submits that the gratuitous provision of information contained in the letter to Ms W served no purpose but to suggest the promise of being able to provide information to Ms W in the G and G matter.
The respondents have throughout the course of this Application, resisted these orders strenuously, to the point of Appealing to the Full Court of the Family Court in June 2010 against my refusal of their application that I disqualify myself from the further hearing of the matter. In late 2011, the second and third respondents withdrew as the wife’s legal representatives, stating that a conflict of interest had arisen in relation to their representation of the wife.
As set out earlier, on the day before this hearing resumed on 7 February 2012, the parties entered into consent orders in the following terms:
1.That the wife be restrained by injunction from instructing [X Firm] and/or [Mr Volker] and/or [Ms James] to act for her in these proceedings.
2.That the husband be excused from further compliance with all of his discovery and financial disclosure obligations in these proceedings until:
2.1The wife executes and causes to be delivered to the husband’s solicitors a Confidentiality Agreement in the terms agreed between the husband and the wife;
2.2Any further solicitors instructed by the wife enter into a Confidentiality Agreement in terms agreed between the husband and the wife.
3.That the wife be restrained by injunction from providing any information, financial documents or financial disclosure that she may receive from the husband to [X Firm] and/or [Mr Volker] and/or [Ms James].
4.NOTED that, in respect of the Amended Application in a Case filed 24 February 2010, there remains outstanding:-
4.1Applications by the Applicant against all other Respondents except the wife;
4.2Issues as to costs.
It is apparent, after comparing the Orders sought by the husband and the Consent Orders entered into by the Parties on 6 February 2012, that the respondents have conceded to the orders sought by the husband.
With order 1 of the husband’s application ultimately being conceded, there was no necessity to have an order made as sought by the husband in paragraph 7 of that application. Any provision of information held by X Firm to any third party without the specific instruction of the wife would amount to malpractice on the part of the firm. Given that the wife was restrained from continuing to instruct that firm to act for her in the proceedings in this court, it would not be possible for X Firm to accept any instructions from her during the continuation of that order.
(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; and
There is evidence that the husband offered to resolve the proceedings on the basis that X Firm cease to act for the wife. If such a position was volunteered then the husband would not pursue costs. There is no suggestion that offer was accepted.
Exhibits H6 and H7 set out two offers made to resolve the application before the court. The first was made on 31 March 2010 in the following terms:
However, on a without prejudice subject to costs basis, he is prepared to resolve the proceedings on the basis that all orders sought in his Amended Application filed 24 February 2010 be made with the exception that he is willing to forego those parts of the Application that seek any form of order for costs against any of the Respondents and, to avoid ambiguity, a notation be included that Mrs [Dunwell] would not be prevented by those injunctions from retaining your firm or Mr [Volker] or Ms [James] if they happen to be with another firm at the time to represent her in any parenting proceedings if any such parenting issue should be reopened in the future.
The second offer of settlement was made on 7 March 2011 and contained the following offer.
We are instructed to make a proposal for settlement in respect of the pending Application in a Case (as amended on 24 February 2010) as follows:
1. That the First, Second, Third and Fourth Respondents consent to the following orders on a without admissions basis:-
1.1 That the wife be restrained by injunction from instructing [X Firm] and/or [Mr Volker] and/or [Ms James] to act for her in the proceeding pending before the Family Court of Australia in file number SYC8682/2007.
1.2 That [X Firm] and/or [Mr Volker] and/or [Ms James] be restrained from disclosing any information they have received in the proceedings, file number SYC8682/2007.
1.3 No order as to costs of any party with respect to the amended Application filed on behalf of the husband 24 February 2010.
As can be seen the respondents could have escaped any cost order had they resolved the matter on either of the two basis offered.
(g) such other matters as the court considers relevant.
There are two distinct aspects of conduct which it seems to me need to be considered in the determination of this application. The first is whether the sending of the letter by the respondents to Ms W breached the implied obligation of Mr Volker and the wife, not to make use of any document or information obtained from the husband via the process of disclosure, otherwise than for the purpose for which it was given. The second aspect to be considered is whether the sending of that letter to Ms W was such an inflammatory, provoking, reckless or potentially hazardous action (relative to the continued ability of the husband to do business with his long term business partner) as to amount to behaviour which should give rise to an order for costs.
Such costs order which could arise because the action of sending the letter itself may ground the injunctive orders sought against the respondents as part of the orders the Court may have had at its disposal had the proceeding initiated by the husband against the wife and the remaining respondents proceeded to conclusion. As it has transpired the order sought by the husband has been granted unopposed.
Ultimately I consider it unnecessary to determine if the letter to Ms W breached Mr Volker’s implied obligation not to disclose information obtained from the husband’s disclosure. I note that Mr Volker did not provide specific evidence to satisfy the Court that all the information in the letter had come from publicly available documents rather than any disclosure from the husband. Rather he asserted that no document or information of a confidential nature was disclosed. Clearly when the letter is closely examined that is not the case.
There are aspects of the behaviour of Mr Volker which I find very troubling. The husband had made requests/demands of the wife and her solicitors X Firm in 2007 when the proceedings were in their infancy in this court. He pointed out that his business operated because of his long standing business relationship with Mr G. He asserted that the continuation of that business relationship was dependant upon his keeping confidential Mr G’s business. He clearly understood his obligation to provide disclosure to the wife to the business details for his own business operations, however, in so doing, he specified the information provided was to remain strictly confidential to the wife, her lawyers and any expert engaged to value the business interests of the husband. He has in fact provided documents as requested by the single expert engaged by the parties to value the husband’s interests on the basis the documents and information is not provided to the wife and her legal representatives before his proceeding against them was completed.
In my experience, the lengths the husband went to in order to achieve confidentiality is rarely seen in the court and that must have been a matter apparent to Mr Volker. Even if Mr Volker suspected the husband was not genuine in his requests for confidentiality but rather seeking to avoid proper disclosure or dissuade the wife conducting appropriate searches, he had a duty to his client to remain alive to the possibility that what the husband was saying was in fact correct and consequently any action on the wife’s part which breached what Mr G considered to be his confidential business relationship with the husband, giving rise to a breakdown in that business relationship. In the circumstances of this case, the husband would no doubt say such an outcome would be equivalent to “killing the goose which laid the golden egg”.
In the light of that background it is very troubling to see the letter which Mr Volker penned to Ms W. In sending that letter Mr Volker either did know or should have known the following:
·If the husband became aware of the letter he would be very distressed and take the action he did against the wife and Mr Volker.
·There were many other attorney agents in the United States who could have been engaged who had no connection with the G & G matrimonial disputes. This is a fact acknowledged by Mr Volker in his oral evidence.
·He provided information to Ms W which was superfluous to the task of asking her to accept an appointment as agent for X Firm in circumstances where she was not in a professional relationship with X Firm or the wife and thereby not obliged to keep confidential.
·The provision of the following information may not have been capable of being established as contained in public documents and therefore the source of the information would need to be identified if Mr Volker was challenged. Some of that information may have been sourced only in documents photocopied by the wife without the knowledge or permission of Mr Dunwell or from documents provided by the husband as part of disclosure.
(a)That Mr Dunwell and Mr G are long standing business partners.
(b)Mr Dunwell is the former accountant of Mr G.
(c)Both Mr G and Mr Dunwell have interests in various corporate entities including I Business.
(d)We have uncovered a very complex international group structure that we believe Mr Dunwell has an interest in.
(e)It is highly likely that Mr G also has an interest in some of these structures. (This suggests that X Firm had not, at the time of the letter, carried out sufficient investigations to ascertain who the share holders were of the “complex international group”).
(f)The entities involve both companies and trusts and expand across Australia, Los Angeles, the United Kingdom and the Jersey Islands.
·In saying “Some of the information that we obtained in relation to the entities may also be of assistance to your client in relation to her proceedings” Mr Volker (according to his own oral evidence) was touting for business and anticipated his firm may be instructed to act as Australian lawyers for Mrs G or as agents for Ms W in relation to those proceedings. Such a purpose must be seen as collateral to the purpose for which information obtained from the husband about his business affairs could be legitimately used.
·He should have appreciated that if Ms W agreed to act for the wife or to act as agent for X Firm, she would not, if she acted ethically, use the information obtained from the Dunwell and Dunwell case on the G and G case.
·Mr Volker should have realised that if he was asked to act for Ms W or for Mrs G in relation to Australian interests of that lady, he would be unable to use the information obtained from acting for Mrs G in the Dunwell case without her express authority. The chances of finding himself in a point of conflict in acting for the two women was high.
·Further given the undertaking he had given to the husband through correspondence in 2007 he would be unable to provide any information to Ms W or Mrs G which he had acquired as part of the Dunwell case even if Mrs Dunwell was to authorise him to do so.
·The use of the words “We are happy to assist your client in any way possible as well” is unqualified. Mr Volker may well have assumed Mrs G and Ms W would understand such information would be conveyed only for reward within a relationship of solicitor and client. However, it could not be anticipated that the husband in these proceedings would have that understanding if he applied the ordinary meaning to those words. Further, if Mr G was to see the letter there is no reason to suspect he would understand that there were unwritten qualifications to the offer. The risk that he might see the letter and consider he should urgently sever his relationship with the husband must be assessed as high.
As it has transpired, the husband has been successful in his application against the respondents and on that ground, all other considerations being equal, may well be entitled to an order for costs (putting aside at this stage the type of cost order which might be ordered). The question I am now considering is whether the above mentioned matters which fall for consideration under subsections (c) and (g) of section 117(2A) add further to the compulsion to make an order for costs against the respondents or any particular respondent. In my mind they do.
In my view the letter to Ms W should never have been written. Other attorneys should have been selected. The wife had already obtained a number of searches of companies and interests in the United States and other countries around the world through the efforts of Mr K, who filed an affidavit annexing all his work on 20 March 2009. Further, assuming for one moment that there was nothing unwise, imprudent or dangerous to the wealth of the Dunwell family constituted by seeking to engage Ms W to act for the wife or as agent for Mr Volker’s firm, then the extent of the provision of information provided to a person who held no relationship with the writer of the letter, or the wife, which required the preservation of confidentiality, was reckless, a breach of Mr Volker’s written undertaking to the husband and in the circumstance, improper and unreasonable conduct.
I conclude that in the circumstances of this case, and on the evidence currently available to me, even if Mr Volker held written instructions to send the letter to Ms W it would still be improper to do so. There may, I accept, be aspects of the interaction between the wife and Mr Volker which need to be considered (not in this case). That may arise in the context of the testing of the indemnity Mr Volker believes he holds from the wife to pay any costs incurred by him as a result of having been joined as a party to the action.
I conclude that in sending the letter to Ms W Mr Volker must clearly have anticipated the husband’s reaction or at the very least have understood the husband would be very concerned about the consequences to his business relationship with Mr G should he become aware of some form of collaboration and exchange of information taking place between the law firms. Mr Volker did therefore cause the institution of the application by the husband and by defending the application gave rise to the husband incurring costs which he should not have been required to incur.
Another matter which was raised in submission by the husband was the fact that Mr Volker failed to go into evidence about the circumstances in which the letter to Ms W was written and the fact that there had been no further communication between he and Ms W. He could also have given evidence that no documents or information had been provided to Ms W, nor had he received instructions from Ms W or Mrs G. He could have offered an undertaking to the Court not to have any further communication with Ms W or her firm. There are probably other actions he could have taken, all of which the Court may well have accepted, even if the husband did not. The absence of evidence from Mr Volker about the letter and any subsequent actions relative to the supply or otherwise of information or documents sourced from disclosure by the husband had the potential to be fatal to the wife’s opposition to the husbands Application in a Case.
The fact that Mr Volker and Ms James, the authors of the subject letter, were apparently not proposing to give evidence was the subject of correspondence by the husband’s solicitors to the wife’s solicitors on 24 February 2010. That letter was responded to on 25 February 2010. The letter from the husband’s solicitor to the wife’s solicitor included the following:
Lest there be any doubt about it, our client takes the position that the failure of Mr [Volker] and Ms [James] to dive direct affidavit evidence of their intentions, beliefs and understandings will necessarily strengthen the inference which is otherwise available in any event, including in particular that the authors of that letter of 8 (sic) May 2009 were plainly offering to disclose information to third parties in breach of the implied obligation identified in Hearne v Street (2008) 235 CLR 125 as well as their equitable obligations
In the response to the letter of 24 February the wife’s solicitor said as follows:
Indeed the evidence relating to your client’s application leads to the strong inference that his posture about confidentiality is disingenuous and is a misuse of the court’s process generally and for the ulterior purpose of both obtaining unfair advantage in the provision of information to the valuation experts and of destabilising the wife’s forensic position and causing her unnecessary delay and expense.
At the time the discussion took place between the respondents’ counsel and myself as to why Mr Volker was not giving evidence to assist the court in the determination of the husband’s application, it was put on behalf of the respondents that the giving of evidence would lead to a waiving of legal professional privilege (presumably in relation to all of the respondents).
One of the possible outcomes of Mr Volker giving evidence would have been that the conflict which became evident to Mr Volker and his counsel on the last day of the hearing may have become apparent as the evidence Mr Volker was required to give, was formulated. The pathway chosen in not having Mr Volker give evidence early in the life of the husband’s application in a case was a strategic one. With the benefit of hindsight it clearly extended the time taken in the hearing of the case at the very least.
Having regard to all those matters I am of the view that the husband is entitled to a costs order.
Who Should The Cost Order Be Made Against?
The husband seeks a variety of costs orders all in the alternative. Firstly, orders are sought for Mr Volker to pay the husband’s costs of this application, as amended 24 February 2012, together with any costs incurred as a result of duplication of work required following the wife obtaining a new solicitor. If those orders do not draw favourable attention from the Court then the husband seeks, in the alternative, that the wife pay those costs. The costs order sought by the husband in either case is an indemnity costs order.
Another alternative order sought is that the wife and Mr Volker be jointly and severally liable to pay the husband’s costs of the application on an indemnity basis. The orders also seek an extension to cover the cost of any duplicated work required on the husband’s part because of the wife appointing new solicitors.
In the later type of order sought, the husband acknowledges that there may be necessity for apportionment proceedings between the wife and Mr Volker. The husband undertakes not to participate in those proceedings. Such a circumstance would allow the wife and Mr Volker to give evidence of matters which would usually be the subject of legal professional privilege and thereby not disclosed in court proceedings.
The husband clearly seeks the order that Mr Volker pay the costs rather than the wife for an understandable reason. That reason is that in the property proceedings, still unresolved between the parties, the payment of legal fees associated with the proceeding are usually taken into consideration in a number of ways. The probability is that the larger the wife’s expenditure on legal fees the greater the impact that is likely to have on the outcome for the husband. The same is true for the wife so far as it relates to the husband’s expenditure on legal fees is concerned.
As stated earlier the wife seeks that the costs order sought against her be dismissed or in the alternative the costs be reserved. The balance of the respondents opposes the orders sought by the husband and seek the husband pay their costs. I will first address the husband’s application. I do so in the knowledge that it is opposed by all the respondents.
As far as I am concerned I perceive a significant difficulty in making an order against Mr Volker solely. That difficulty is that there has been no exploration in this hearing of the basis upon which Mr Volker may claim indemnity from the wife. Thus the ambition that the wife should not be responsible for the payment of the husband’s costs because of the role played by Mr Volker in the sending of the letter to Ms W cannot be determined in these proceedings however it may yet occur as a result of any further proceeding between the wife and Mr Volker.
If, during the hearing, I had heard acceptable evidence that the wife was not given advice as to the clearly foreseeable consequences of writing the subject letter to Ms W and that Mr Volker did not hold written instructions from the wife acknowledging the advice of Mr Volker to send the subject letter, then I would feel more comfortable about making a costs order which operated solely against Mr Volker. It would then be a matter for Mr Volker to pursue the wife in relation to his asserted indemnity. As an aside only, I note there is authority which supports a conclusion that even if Mr Volker held specific instructions from the wife to send the subject letter it would still remain improper for him to do so rather than his ceasing to act for her. I add that comment only to emphasise that even if Mr Volker fulfilled the requirements, which I alluded to above, there may yet be an argument that it would be improper for him to have sent the letter either because of the Hearn v Street requirement, his other obligations to the court, his professional obligations as set by his professional governing bodies or because of the particular circumstances of this case.
As a consequence of the above I propose to make a costs order against the wife and Mr Volker jointly and severally.
The next matter to be determined is whether the order should operate to include “costs thrown away as a consequence of any duplication of work that is required upon the wife providing instructions to any further lawyers to act for her in these proceedings”. No argument was addressed to the form of this order. It is an order which, if made, would effectively operate for the continuation of the proceedings between the parties. The parties have still not concluded their parenting and property proceedings. It can be reasonably anticipated that the proceedings should be finalised within the next 12 month period if the Court is given the opportunity to address the final orders sought by each party and not have to be diverted from that path by the necessity to determine interlocutory applications.
If the order sought is made then in the event of a dispute as to whether a cost was incurred as a result of the wife having to change her solicitor following the orders made on 6 February 2012 then that matter can be determined by an assessor or by the Court should that be necessary.
On the face of it, fairness would dictate that if the wife and/or Mr Volker are to pay the husband’s costs of the application then they should be responsible for costs incurred as a direct result of the application having succeeded. I will therefore make the order sought against the wife and Mr Volker jointly and severally, to pay the husband’s costs thrown away as a consequence of any duplication of work that is required upon the wife providing instructions to any further lawyers to act for her in these proceedings.
Should The Order Be For Indemnity Costs?
Having considered the authorities referred to above and matched to facts I have accepted in this case, I consider that the husband is entitled to a compensatory cost order in the form of an indemnity cost order. I have concluded that the facts of the case warrant a departure from the usual basis upon which costs are ordered, namely, party and party. I conclude that the case illustrates facts of an exceptional kind. The letter sent by the wife and her lawyer to Ms W was without due regard to the possible consequences to the husband’s livelihood and future ability to generate income. There was no good reason to send the letter to that firm and every proper reason not to do so.
If the ultimate responsibility for the sending of, and content of, the letter to Ms W is that of Mr Volker then his conduct in the circumstance of this case is reprehensible or at the very least “improper or unreasonable”. He should have immediately stepped aside from the case when he was asked to do so by the husband. He should also have recognised the conflict in which he found himself with the wife once the husband filed his application in a case on 7 December 2009. There may be a case for him to have refused to send the letter even if specifically instructed to do so. Such a refusal can be justified, even where written instructions have been given, on the High Court authority of Giannarelli v Wraith (1988) 165 CLR 545 at 555-6. “The duty to the court is paramount and must be performed, even if the client gives instructions to the contrary”.
If the letter was sent on instruction where the wife was properly advised as to the mischief which would be attended to the sending of the letter and she provided written instructions which acknowledged that advice but nonetheless required the letter to be sent, then she would probably be found to have acted with reckless indifference to the husband’s livelihood and such action if it did manifest a change in the husband’s ability to earn income would no doubt have a financial consequence in the orders the court could make under s 79 of the Act.
If the wife instructed for the letter to be sent without receiving proper advice as to the potential consequences of that action then the fault would be seen as that of Mr Volker in failing to give that advice. Failing to give the wife proper advice before the letter was sent would, in the circumstances of this case, be sufficient causation to found an order for indemnity costs.
Whether the wife or Mr Volker ultimately be required to pay the husband’s costs is a matter to be resolved between them.
The question which arises here is whether the wife would have chosen to take the decision she had taken to resist the Application of the husband had she not been so influenced by her legal representatives.
As set out by Mullane J in Anstis & Anstis and Anor (No 2) (2000) FLC 93-014, the quality and timeliness of the legal advice given by the wife’s legal representatives was a factor for consideration when determining the division of indemnity costs. In that matter, it was held that the wife was liable to pay costs as to a portion of the proceedings due to the fact that she stated she would not have acted in the manner she had without the advice of her legal representatives. In that matter, distinction was drawn between various portions of the proceedings and the legal representative’s actions at those different times, and costs were apportioned accordingly. Mullane J stated in relation to this matter:
35. The wife did not make any submission that she would not have made the application she made in her Form 8A application if her solicitors had returned the passports to the husband when they were requested to do so or upon service of the husband's application on them. She does not submit that inadequate or incorrect advice was given to her, causing her to persist with her application. She has made no application for her solicitors to indemnify her in respect of any costs order against her. Her Counsel, Mr Hamilton, did, however, submit that the wife was not responsible for the adjournments in relation to the costs argument because these arose from the failure of the second respondent to properly inform her about the proceedings and to properly advise her in relation to the need for separate representation.
In this instance, the wife does not make any submission that she would have acted any differently had she received different advice from her solicitors, nor does she claim that the advice she received was incorrect or inadequate. There are two issues to be taken up in relation to this lack of submission. The first is that it is obvious that notwithstanding her lack of submission as to the influence of her legal representative on her actions, it remains a fact that since obtaining new legal representation in late 2011, the wife has in fact changed her position. After some two years of resisting the application of the husband, within just over two months, the wife has acceded to the husband’s application in full.
Mr Volker, as I have outlined earlier in these reasons, has acted in an improper manner, in the carriage of this matter, if he proceeded without written instructions from the wife. Even if the wife gave instructions to send the letter in the drafted form having been properly advised as to the possible adverse outcomes of sending the letter, the content of the letter made it improper for him to send it. The content was blatantly self serving to Mr Volker, in the offer of representation of Ms W’s client in Australia. Further, Mr Volker and his associates, maintained the carriage of this matter and refused to give evidence as to the creation of the letter at the centre of this dispute until this final costs application. It was pointed out in Court as early as March 2010 that the provision of detail as to the purpose of the letter and explanation as to why certain information was in the letter would probably have lessened the duration of this application considerably.
It was submitted by the husband that the purpose of the wife’s solicitors not giving evidence was not to protect the wife’s position, but rather to protect their own position. I agree that conclusion is available on the evidence before the court.
Mr Richardson submitted on behalf of the husband that the wife’s change in position in relation to resisting the husband’s Application altered dramatically following her change of legal representatives. It was further submitted that at the time the wife did alter her position on resisting the Application of the husband, there was no other change of circumstance which would warrant such a change of position.
Comment On A Submission
During the submissions made by the second and third respondents the following submission was made:
However, it is submitted, if the documents are publically available, either through searches, being tendered in Court or being disseminated to another person without restriction, a legal representative is at liberty to do with them as they like.
I hope in the making of that submission it was not intended to cover a situation where a document or information is used by a lawyer for an improper purpose. I consider it quite within the proper exercise of power by the court to make an order for costs against a lawyer pursuant to Rule 19.10 who disseminates information which came to him while acting for a party in a Family Law proceeding, even were that information was obtained from a document publically available or tendered in court, if that action gave rise to costs of a party being wasted and where the court concludes there was some improper or unreasonable behaviour involved on the part of the lawyer.
Lawyers must have the same type of obligations to their clients as medical practitioners do to their patients in the sense that there is an obligation to “first do no harm” to their client. The publication of information, however obtained by a lawyer, which causes commercial loss to a party to a Family Law proceeding immediately will give rise to an examination of the role of the lawyer in the dissemination and whether that action was proper and reasonable.
The court also bears in mind that the provisions of section 121 of the Act provide embargos which affect practitioners practicing in this jurisdiction which are not duplicated in other jurisdictions.
Orders To Be Made
The orders sought by the husband have been set out earlier in these reasons. I propose to make an order that the wife and Mr Volker jointly and severally pay the husband’s costs of and incidental to his application (filed on 7 December 2009 and amended 24 February 2010) an indemnity basis.
The amendment to the husband’s application did not change the order sought for indemnity costs to be paid by Mr Volker or the wife. There is in my opinion no reason to restrict the commencement of the cost order to the date of the amended application.
The husband has sought that the wife and the other respondents have leave to apply to the court for determination as to the apportionment of the costs to be paid be each of them. No submission was made against that order being made. It seems to me to be an appropriate order to make.
The husband seeks Certification for senior counsel. I propose to make that certification. No submission to the contrary was made. Each of the parties has been represented by senior counsel for all the hearings conducted before me to date. At one time the wife was represented in court by junior counsel however that was only in the circumstance where her retained senior counsel was committed elsewhere and could not attend.
The proceeding is a complex one involving what, at this time, appears to be a complex business structure. The case warrants the briefing of senior counsel.
I certify that the preceding two hundred and two hundred and ninety (290) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench delivered on 11 May 2012.
Associate:
Date: 11 May 2012
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