Durban Roodepoort Deep Limited v Mark David Reilly and Ors - [2004] WASC 269

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: DURBAN ROODEPOORT DEEP, LIMITED -v- MARK DAVID REILLY and GLENN ROBERT FEATHERBY As Administrators of THE DEED OF COMPANY ARRANGEMENT OF LAVERTON GOLD NL (SUBJECT TO DEED OF COMPANY ARRANGEMENT) & ORS [2004] WASC 269

CORAM: LE MIERE J

HEARD: 17 MARCH, 11 JUNE 2004, 3 AUGUST 2004

DELIVERED : 17 DECEMBER 2004

FILE NO/S: COR 392 of 2002
COR 14 of 2003

BETWEEN: DURBAN ROODEPOORT DEEP, LIMITED (ARBN 086 277 616)
Plaintiff
AND
MARK DAVID REILLY and GLENN ROBERT FEATHERBY As Administrators of THE DEED OF COMPANY ARRANGEMENT OF LAVERTON GOLD NL (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
First Defendants
LAVERTON GOLD NL
Second Defendant
JOHN STRATTON
Third Defendant

Catchwords:

Application for injunction - Whether solicitors should be restrained from acting - Bases of application - Protection of confidential information - Applicant to establish that respondent possesses the relevant confidential information - Identification of confidential information - Applicant to identify the relevant confidential information with precision - Degree of particularity required - Insufficient precision in present case

Application for injunction - Whether solicitors should be restrained from acting - Chinese wall - Court to intervene where there is real as opposed to fanciful risk of disclosure - Newman v Phillips Fox (a firm) [1999] WASC 171; (1999) 21 WAR 309 - No substantial risk in present case

Application for injunction - Whether solicitors should be restrained from acting - The Court's control over the conduct of its officers - Delay

Legislation:

Corporations Act 2001 (Cth), s 436A

Corporations Law, s 1317HD

Result:

Applications for injunctive relief refused

Category: A

Representation:

Counsel:

Plaintiff:     Mr C B Edmonds SC & Ms J E Thomas
First Defendants           :     Mr D K Cooper
Second Defendant         :     Mr G I Macnish
Third Defendant           :     Mr G I Macnish

Solicitors:

Plaintiff:     Allens Arthur Robinson
First Defendants           :     Price Sierakowski
Second Defendant         :     Cocks Macnish
Third Defendant           :     Cocks Macnish

Case(s) referred to in judgment(s):

Bureau Interprofessionel Des Vins De Bourgogne v Red Earth Nominees Pty Ltd (t/as Taltarni Vineyards) [2002] FCA 588
Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307
Gugiatti v City of Stirling [2002] WASC 33; (2002) 25 WAR 349
In re a firm of Solicitors [1997] Ch 1
Mancini v Mancini [1999] NSWSC 800
Newman v Phillips Fox (a firm) [1999] WASC 171; (1999) 21 WAR 309
Prince Jefri Bolkiah v KPMG [1999] 2 AC 222
Sent v John Fairfax Publication Pty Ltd [2002] VSC 429
Waiviata Pty Ltd v New Millennium Publications Pty Ltd [2002] FCA 98
World Medical Manufacturing Corp v Phillips Ormonde & Fitzpatrick Lawyers (a firm) [2000] VSC 196
Younghanns v Elfic Ltd, unreported; SCt of Victoria; Library No 5970/1997; 16 July1998

Case(s) also cited:

Australian Liquor Marketers Pty Ltd v Tasman Liquor Traders Pty Ltd [2002] VSC 324
Belan v Casey [2002] NSWSC 58
Clay v Karlson (1997) 17 WAR 493
D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118
David Lee & Co (Lincoln) Ltd & Supasave Retail Ltd v Coward Chance (a firm) [1991] Ch 259
Equiticorp Holdings Ltd v Hawkins [1993] 2 NSLR 737
Fordham v Legal Practitioners' Complaints Commmittee (1997) 18 WAR 467
Grimwade v Meagher, Hedland, Morgan, Lidgett, Reid & Bellheath Pty Ltd (1995) 1 VR 446
MacDonald Estate v Martin (1990) 77 DLR (4th) 249
Manville Canada Incorporated v Ladner Downs (1992) 88 DLR 4th 208
Manville Canada Incorporated v Ladner Downs (1993) 100 DLR 4th 321
Mullins v Rothschild (2001) 120 A Crim R 574
PhotoCure ASA v Queen's University at Kingston [2002] FCA 905; (2002) 56 IPR 86
Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501
Tanning Research Laboratories Incorporated v O'Brien (the Leage) (1990) 169 CLR 332
Tottle Christensen v Westgold Resources NL [2003] WASCA 224
Village Roadshow Ltd v Blake Dawson Waldron [2003] VSC 505; (2004) Aust Torts Reports 81726
Wan v MacDonald (1992) 33 FCR 491
Westgold Resources NL v St Barbara Mines Ltd [2002] WASC 264
Williamson v Nilant [2002] WASC 225

LE MIERE J: The Court has before it applications for interlocutory injunctions in two matters, Supreme Court COR 392 of 2002 and Supreme Court COR 14 of 2003. In each matter, the applicants for interlocutory injunctions seek an order that the solicitors for the respondents to the application, Allens Arthur Robinson, be restrained from acting as solicitors for and on behalf of the respondents to the applications in that action.
The parties are agreed that the outcome of the application for interlocutory injunctions in COR 392 of 2002 will determine the outcome of the application in COR 14 of 2003. I will consider the application for interlocutory injunctions in COR 392 of 2002 and refer to COR 14 of 2003 only where necessary.

The parties

The plaintiff is a company incorporated in South Africa and is the ultimate holding company of all of the shares issued in DRD Australasia ApS (DRDApS) and DRD Australasia Pty Ltd (DRDApL).
The second defendant, Laverton Gold NL (Laverton), is subject to a deed of company arrangement. The first defendants are the administrators of the deed of company arrangement of Laverton. They have observed these proceedings but taken no active part.
The third defendant (Stratton) was at all material times a director of Laverton and a number of other companies.
Charles Mostert was at all material times a director of the plaintiff, and of DRDApS and DRDApL.
In July 1999 the executive directors of the plaintiff included Roger Kebble, the executive chairman, Michael Prinsloo, the chief executive officer, and Mostert, the chief financial officer.
The plaintiff alleges that on 9 July 1999 officers of the plaintiff issued a total of 8,282,056 shares (the Shares) to a number of companies.
P T Barisan Tropical Mining (BTM) held a contract of works in relation to a goldmine in Indonesia known as the Rawas Mine. Laverton held all the shares in BTM through two wholly owned subsidiaries – Rawas Ltd and Tiku Ltd. The Rawas gold mine is central to the allegations made by the plaintiffs in this action.

Allegations by the plaintiff in COR 392 of 2002

The plaintiff alleges that Mostert caused DRDApS to pay $1,100,000 to Petrosea in reduction of a debt due to Petrosea from BTM on or about 9 July 1999 and $500,000 to BTM on or about 6 December 1999. The plaintiff further alleges that Mostert caused DRDApL to pay $3,240,821.78 to BTM between 8 March and 16 August 2000 and miscellaneous expenses incurred by BTM totalling about $46,580.65 (the Payments).
The plaintiff alleges that on 5 July 1999 Mostert orally represented to representatives of Petrosea that in consideration of Petrosea remaining on site at the Rawas Mine and providing contract mining services to the mine, the plaintiff would pay to Petrosea the moneys then owed to Petrosea and for all further services rendered by Petrosea in respect of contract mining services at the mine (the representation). The plaintiff alleges that as a result of the representation, Petrosea demanded, on 27 November 2000, payment of the sum of $US2,328,004.15 and the plaintiff agreed to pay and did pay on 30 April 2002 $1,200,000 to Petrosea.
The plaintiff alleges that at all material times and with the knowledge of Mostert neither DRDApS nor DRDApL was under any legal liability to make the Payments, the plaintiff, DRDApS and DRDApL received no benefit in return for the payments for the making of the representation and Mostert was not authorised by the plaintiff to make the representation.
The plaintiff alleges that from on or about 1 July 1999, Laverton conspired with Mostert and others to injure the plaintiff by procuring the issue of the Shares and to injure the plaintiff, DRDApS and DRDApL, by procuring Mostert to make the Payments and the representation in circumstances where no benefit was received in return.
The plaintiff alleges the following matters concerning Laverton and the Rawas Mine. The Rawas Mine was at all material times Laverton's major asset. Laverton owned the entire issued share capitals of Rawas Ltd and Tiku Ltd. Rawas Ltd and Tiku Ltd in turn owned all the shares in BTM. To the knowledge of Stratton, Laverton, and others, the Rawas Mine was operating at a loss and it was anticipated that reserves of ore would run out and the mine would be closed by April 2000 and shares in Rawas Ltd, Tiku Ltd and BTM were of no value. As at July 1999 neither Laverton nor BTM was able to pay its creditors. On 6 July 1999 the directors of Laverton, including Stratton, resolved to accept an offer by the plaintiff to acquire all of the shares in Rawas Ltd and Tiku Ltd from Laverton by the payment of the equivalent of $US9.25 million. Settlement was to be by way of shares in the plaintiff. To the knowledge of the relevant Laverton directors, including Stratton, no offer had been made by the plaintiff in relation to the Rawas Mine. Thereafter, officers of the plaintiff issued shares in the plaintiff to creditors of Laverton.
The plaintiff says Laverton is liable pursuant to s 1317HD of the Corporations Law to account to the plaintiff for:
(a)the profit made by the recipients of the Shares;
(b)the loss suffered as a result of the payment to Petrosea; and
(c)legal and other professional costs and expenses incurred by DRD in applying to validate the issue of the Shares and resolving the claim made by Petrosea.
The orders sought by the plaintiff are that the whole of the first defendants' decision made on 4 December 2002 to reject all of the plaintiff's formal proof of claim dated 25 November 2002 for admission to proof under the deed be reversed and the defendants do admit all of the plaintiff's formal proof of claim dated 25 November 2002 for admission to proof under the deed in such amount as the Court may determine.

Second and third defendants' application for injunction – an overview

The second and third defendants submit that in or about 1998 a solicitor, Steven Cole, was instructed by, and provided advice to, Laverton and its directors including Stratton, in relation to:
•the solvency of Laverton;
•the obligations and liabilities of the directors, including Stratton, in circumstances where it might subsequently have been alleged that Laverton may have been trading whilst insolvent;
•the potential for any conflict of interest which the directors, including Stratton, may have had, having regard to the fact that not only were they directors of Laverton but additionally they were directors of some of Laverton's creditors, and
•the proposed sale of Laverton's interest in the Rawas Mine.
The second and third defendants say that Cole was in possession of confidential and privileged information of Laverton, Stratton and the directors of Laverton.
In 1999 Cole became a partner of Allens Arthur Robinson, the solicitors for the plaintiff in Supreme Court action COR 392 of 2002 and COR 14 of 2003. I will refer to Allens Arthur Robinson and its predecessor firms as "Allens".
The second and third defendants submit that Cole and Allens are in possession of confidential and privileged information regarding Laverton, Stratton and the directors. They submit that the confidential information is relevant, if not critical, to the issues which have been raised in COR 392 of 2002, namely, the allegations of insolvency and the allegations made by the plaintiff that Laverton is liable to it for Laverton's and Stratton's assistance in breaches of fiduciary duties owed to the plaintiff by its directors. The second and third defendants submit that there is a real possibility that Cole has imparted, whether inadvertently or otherwise, some or all of the confidential information to David Martino, a partner of Allens, and Simon Davis, a solicitor employed by Allens, who are the solicitors conducting the action on behalf of the plaintiff. The second and third defendants further submit that there is a real possibility that Cole will impart, whether inadvertently or otherwise, if he has not already done so, some or all of the confidential information to Martino and Davis with whom Cole will have regular, if not constant, contact.

Chronology of events

It is instructive to look at the chronology of relevant events.
In August 1998, Laverton engaged Deloitte Corporate Finance Ltd to provide an independent valuation of BTM, and related companies.
In September 1998, Randgold Resources, of which Kebble was the chairman of directors, issued a due diligence audit on the Rawas project. The report contains an analysis of BTM's balance sheet, the income statement, debt and liabilities and contracts, assets and cash flow projections.
In October 1998, Cole met in conference with Stratton and directors of Laverton. At that time Cole was the principal of Cole & Co. In his affidavit, sworn 14 October 2003, Stratton deposes that Cole acted for Laverton and Stratton. Stratton deposes that in or about October 1998, on his own behalf, and on behalf of Laverton, he provided Cole with detailed instructions seeking advice, and Cole provided Laverton and Stratton with advice, in relation to:
"(a)the solvency of Laverton;
(b)the obligations and liabilities of the directors, including [himself], in circumstances where it might subsequently have been alleged that Laverton may have been trading whilst insolvent;
(c)the potential for any conflict of interests which the directors, including [himself], may have had, having regard to the fact that, not only were they directors of Laverton but additionally they were directors of some of the creditors of [Laverton]; and
(d)the proposed sale of Laverton's interests in the Rawas Mine in Sumatra."
At par 17 of his affidavit, Stratton deposes that the information provided to Cole covered in detail the following:
"(a)the complex and detailed financial information concerning Laverton including information relating to its solvency, cash flow, liabilities and assets;
(b)information regarding the interests of the directors, including [Stratton], in relation to positions held by the directors, and [Stratton], not only as directors of Laverton but as officers of some of [Laverton's] creditors;
(c)detailed information regarding the relationship between Laverton and its major shareholders;
(d)information regarding the Rawas Mine;
(e)information regarding the creditors; and
(f)information relating to the knowledge of the directors, including [Stratton], of the alleged insolvency of Laverton at the material time."
(the Relevant Information)
In an affidavit sworn on 28 November 2003, Cole deposes as follows. In or about October 1998 he attended a conference or conferences at offices in South Perth and several officers of Laverton and/or associated companies (the Laverton group) were present. The only matters that Cole recalls relevant to the conferences are:
"(a)the subject matter of the conference(s) concerned corporate solvency issues and the duties and prospective liabilities of officers of the companies;
(b)[Cole] gave legal advice on the issues raised;
(c)Mr Barry Bolitho was present for most of the conference(s);
(e)[Stratton] was present for part of the conference(s);
(f)some information (including financial) relevant to the subject matter of the conference was provided orally to Cole and in written form."
Cole does not recall any other details, or who his client was, or receiving the instructions or information referred to by Stratton in his affidavit.
The minutes of a meeting of directors of Laverton on 5 October 1998 make reference to Cole. The minutes record that Stratton, Buitendag, R B Kebble and R A R Kebble declared, that as directors of companies which were creditors of Laverton, they had a conflict of interest with respect to the matters before the meeting and absented themselves from further involvement with the meeting. Bolitho reported to the meeting matters concerning a company called Repadre. Bolitho reported that Repadre had given notice that it would make a demand against Laverton for the sum of approximately $2.5 million and that Laverton's obligation to pay the debt was not disputed. Bolitho informed the meeting that advice had been taken from Cole concerning the obligations of the directors in those circumstances, particularly relating to issues of insolvent trading and options available to the company and its directors. The minutes record that, having regard to the advice received from Cole, if Laverton remained unable to negotiate a payment extension, or was unable to source repayment of the Repadre debt from any other means, and demand for the Repadre debt was insisted upon by Repadre, Laverton would not be able to pay all its debts as and when they became due and payable and in such circumstances would be insolvent. The meeting resolved that, in recognition of the uncertainty affecting the company's financial status, it should request the ASX to suspend quotation of its securities.
On 5 October 1998, Laverton requested the ASX to suspend trading in its shares pending finalisation of arrangements to provide for the ongoing financial commitments of the company. Laverton informed the ASX that it was considering a range of possible courses of action to improve the financial status of the company. One of the possible actions being considered was the disposal of equity in its wholly owned subsidiary, BTM, which owned the Rawas gold project, either by way of sale or in consideration of certain of the company's existing debts being converted to equity in BTM.
On 6 November 1998, the directors of Laverton resolved to offer for sale by tender, as a going concern, the equity in BTM. On the same day, Laverton informed the ASX that it was offering for sale, as a going concern, the equity in BTM. The announcement said that that process would allow the major shareholder, Consolidated African Mines Ltd (CAM), to best determine the basis of their continued support to Laverton.
Meanwhile, on 5 November 1998, Freehills, solicitors, had sent an engagement letter to the plaintiff in Johannesburg with regard to acting on behalf of the plaintiff in relation to its proposed acquisition of the shares in BTM.
In December 1998, a further draft Deloittes/RSG valuation was prepared. The draft conclusion was that $US13 million represented a fair market value for BTM's interest in Rawas.
In May 1999 Cole became a partner of Allens.
The financial statements of the consolidated accounts of Laverton and its controlled entities for the year ended 30 June 1999 were signed by Stratton on 24 September 1999. The consolidated accounts show an asset deficiency of approximately $18.5 million. A note to the financial statements states that the accounts disclosed a working capital deficiency of approximately $43.3 million. The note states that the accounts had been prepared on the basis that the economic entity could meet its commitments and could therefore continue normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The directors acknowledged that that assumption was based upon the continued financial support of its major shareholder, Western Investments Ltd, which was controlled in the measure of greater than 90 per cent by CAM, and upon the proposed sale of the Rawas gold project.
There is a further note that on 18 August 1999 the directors of Laverton announced that they were having final negotiations for the sale of the Rawas goldmine to the plaintiff. In consideration of the substantive portion of all of the debts of the Laverton group being transferred to the plaintiff and subject to Laverton's shareholders' approval, the plaintiff would acquire the Rawas goldmine. A residual debt would remain and it was intended that this would be converted into equity by way of a new issue of shares. The auditors stated that the financial statements disclosed a working capital deficiency of $43,299,601. The company was in final negotiations for the sale of the Rawas goldmine to the plaintiff, including the transfer of a significant portion of the debts of the Laverton Group. No final agreement had been reached for such a sale to take place. Without a conclusion to this sale, or further financial support, there was significant uncertainty as to whether it would be able to continue as a going concern.

By their defence in action COR 392 of 2002, the defendants plead that Laverton made full disclosure to DRD of the operational and financial circumstances of the Rawas Mine.
From 1 July 1999, the plaintiff made payments for the costs of running the Rawas Mine.
The plaintiff alleges that on 9 July 1999 Laverton purported to accept the purported offer of 7 April 1999 and the first tranche of shares in the plaintiff were issued to Laverton creditors.
The Rawas mine ceased operations in April 2000.
Cole deposes that on one occasion in 2000 he acted for the plaintiff in connection with issues concerning the Rawas Mine.
Phillip Sacks, a solicitor assisting in the conduct of the matter on behalf of the second and third defendants, swore an affidavit to which he annexed a copy of a letter from Allens to DRD in which Allens referred to advice given by Cole in July 2000 "to the effect that Clough has a reasonably strong case against DRD. However, Petrosea's case against DRD is not completely straightforward …". Sacks stated in his affidavit that it was apparent from that reference in the Allens letter that Cole provided advice to the plaintiff in relation to the very issues the subject of these proceedings.
That is contested by the plaintiff. In an affidavit sworn on 14 March 2004, Cole deposes that as his knowledge of the issues the subject of these proceedings is so limited he was not in a position to make a judgment as to whether or not he provided advice to the plaintiff in relation to the very issues the subject of these proceedings as asserted by Sacks. Cole further swears that as a result of having sighted a letter of Allens of 5 July 2000 to the plaintiff, he recalled that that letter of advice was the product of his acting on behalf of the plaintiff on the occasion referred to in the earlier letter of Allens and reasonably reflects the scope of his instructions at that time.
Mark Wellesley‑Wood was appointed chairman of the plaintiff in May 2000. He has sworn that he became concerned about irregularities in relation to the conduct of the plaintiff's Australian acquisitions and engaged a firm of investigators, Controlled Risks Group, to make inquiries. In October 2000, Controlled Risks Group issued its investigation report. The report dealt with, amongst other things, the Rawas transaction, various invoices that had been rendered for corporate services, and a transaction known as the CNF transaction. Upon receipt of the report, Wellesley‑Wood retained Allens as the plaintiff's Australian legal advisers to advise it in relation to possible claims against third parties concerning the Rawas transaction.
Simon Davis deposes that an entry made on his behalf on the Allens billing system records:
"27 Oct 00: discussions ALK & SC re Rawas – 6 units."
SC refers to Cole. ALK refers to Tony Kuhn, the Allens partner who was first instructed by the plaintiff in relation to the Rawas matter. A unit of time in the Allens billing system represented 10 minutes, so six units represented one hour.
An entry made on Kuhn's behalf on the billing system was as follows:
"27 Oct 00: discussions SC & SYD – 2 units."
SYD refers to Simon Davis.
Neither Cole nor Davis has any recollection of the discussions referred to in the entry in the billing system.
Simon Davis deposes that in July 2001 he had one or two conversations with Cole about the potential settlement of a claim that had been made against the plaintiff by P T Petrosea over money allegedly owed to Petrosea pursuant to a contract in respect of the Rawas goldmine. The settlement at that stage envisaged the shares in Rawas Ltd and Tiku Ltd (the Hong Kong companies owning the shares in BTM, which in turn owned the rights to the Rawas Mine) being transferred to Petrosea. Davis deposes that he considered that in drafting and structuring the settlement, including the transfer of the shares to Petrosea, he would require assistance from a partner in the corporate commercial department of Allens, and that is why he spoke to Cole. Davis deposes that the only factual matter that he recalls discussing with Cole was the ownership structure of the mine. Davis does not recall Cole providing him with information and says that on the contrary he was seeking Cole's legal input and so he was providing information to Cole. Further, Davis says he was already aware of the ownership structure of the Rawas Mine from information he had received from the plaintiff.
In a subsequent affidavit Davis deposes that the Allen's billing system records that he discussed those matters with Cole for 12 minutes on 16 July 2001, and that on 19 July 2001 he spent 18 minutes in discussions with Cole and Kuhn concerning a telephone call from Botes, an officer of the plaintiff.
On 28 November 2003, Cole swore that about 2 years ago he spoke with Simon Davis about issues generic to foreign companies engaged in mining operations in Indonesia in connection with the corporate structure of Laverton's interests in the Rawas Mine in Indonesia.
On 14 March 2004, Cole swore an affidavit in which he referred to the time entries in the records of Allens recorded by Davis on 16 July and 19 July 2001 indicating discussions between Davis and him on those dates. Cole swore that there was no corresponding entry on his part in those records and that he had no recollection of those discussions unless they were the same discussions to which I have referred in the previous paragraph.
On 15 July 2002, Allens, as solicitors for the plaintiff, sent a fax to Laverton's solicitors, Cox Macnish, rescinding the Rawas transaction.
On 18 September 2002, the first defendants were appointed as administrators of Laverton pursuant to s 436A of the Corporations Act 2001 (Cth).
At the second meeting of creditors of Laverton held on 15 October 2002 the creditors of Laverton resolved that Laverton execute a deed of company arrangement (the DOCA). The DOCA was executed on 31 October 2002. On 25 November 2002 the plaintiff sent a formal proof of debt to the administrators. At pars 1 and 12 of the proof of debt, the plaintiff alleged that Laverton was liable to pay to it the sum of at least $7,245,167 plus R101,538,199.80 plus $US39,390.83. These debts arose out of the alleged involvement of Laverton, through Laverton's former directors Kebble and Stratton, in alleged breaches by certain former directors of the plaintiff of statutory duties owed to the plaintiff, and the alleged dishonest procurement and/or assistance by Laverton, through Kebble and Stratton, in alleged breaches by the plaintiff's former directors of fiduciary duties they owed to the plaintiff.
On 4 December 2002, the administrators rejected the proof of debt.
On 20 December 2002, the plaintiff commenced the present proceedings, COR 392 of 2002, to set aside the administrators' decision to reject the proof of debt.

Bases of the defendants' application

The defendants put their case on two bases. First, the defendants invoke the Court's jurisdiction founded on the right of the former client to the protection of his confidential information. Secondly, the defendant's invoke the Court's inherent jurisdiction to control the conduct of its officers.

Protection of confidential information

The primary basis upon which the defendants put their case is the protection of confidential information they claim to have imparted to Cole. In such cases, the former client must establish that the solicitor possesses confidential information which might be relevant to the matter and to the disclosure of which he has not consented: Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222 at 234 – 235.
The plaintiff admits that the defendants conveyed information to Cole at a time that Cole was acting as their solicitor. However, the plaintiff denies that the defendants have established that Cole possesses confidential information which is relevant to the present proceedings between the plaintiff and the defendants.
The plaintiff submits that the defendants must establish not only that confidential information passed between them and Cole whilst Cole was acting on their behalf, but the defendants must also establish that the information is still confidential, having regard to material which has subsequently come into the public domain or might readily be deduced from such information or has or will be available to the plaintiff in the course of the proceedings.
In Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307, Carindale, the respondent in another action pending in the Federal Court, applied to the Federal Court for an injunction to restrain a firm of solicitors from acting on behalf of Mr and Mrs Smith, the applicants in the other Federal Court action (the main proceedings). The injunction was sought on the ground that one of the partners in the firm, Mr Astill, was in possession of confidential information concerning the operations of Carindale which touched on issues in the main proceedings and which he obtained while acting as its solicitor. In the main proceedings, the Smiths claimed damages in respect of conduct allegedly engaged in by Carindale in contravention of s 52 and s 53A of the Trade Practices Act. They alleged that in August 1991 it was misrepresented to them that Carindale would not accept a price of less than $150,000 for any of the lots contained in the first stage of the Carindale Country Club Estate, that the next stage of the estate to be released would be priced from $175,000 and that it would ensure that all houses built in the estate would be of a maximum size of 300 square metres and of such a standard as to result in the estate having an "exclusive" quality and character. Those misrepresentations were alleged to have induced the Smiths to buy one of the lots in the first stage on the estate on 3 September 1991 from which purchase losses were said to have flowed to them.
Mr Astill had a close association with Carindale from the outset. He was retained as the company solicitor from 1989 until about January 1992. He provided legal advice with respect to a range of matters, including the drafting of terms for the standard contract used by Carindale for the sale of lots in the estate. He was involved in the establishment of Carindale, being for a short time a director and the company secretary of Carindale. After his retirement as secretary, he maintained a close association with the activities of Carindale. He was kept advised of the progress of the development of the estate and was regularly informed of details of lot sales. He was closely involved in the marketing of the estate. He undertook numerous business trips to Hong Kong in connection with the marketing.
Carindale submitted that the confidential information possessed by Astill fell into two classes. First, information relating to the marketing strategy, pricing strategy and pricing policy and progress of the sales in respect of the estate and secondly, information relating to the minimum size and quality of housing which Carindale would require to be maintained in the estate. The first category of information was said to be relevant to the Smiths' allegation that they were told Carindale would insist on minimum sale prices for stages 1 and 2 of $150,000 and $175,000 respectively. The second stage was said to be relevant to what the Smiths say they were told about the estate's building standards.
Drummond J declined to grant an injunction on the basis of the first category of information, but granted an injunction on the basis of the second category of information. In relation to the first category of information, Drummond J said, at 315:
" … the evidence indicates that the information in question long ago lost any element of confidentiality which it may originally have had. The pricing and marketing information to which I have referred has long since been made known to real estate agents and members of the media interested in the Estate. Moreover, the marketing information does not appear to be relevant to any issue in the main proceedings. Carindale's specific concern about the information possessed by Mr Astill is that it may indicate that Carindale was prepared to accept less than the $150,000.00 which the Smiths allege it was represented to them in August 1991 as the minimum price which Carindale would accept for lots in the First Stage of the Estate. However, forms lodged in the Valuer-General's public records indicate that at least 17 lots in the Estate were sold by Carindale for less than $150,000.00 between July 1991 and December 1991. These records would also contain details of the discounted sales to which I have referred insofar as they are not included in this group of sales. It thus appears that the only information concerning pricing that is of relevance to the Smith action which Mr Astill may have acquired has either been publicly disseminated by Carindale or is available in public records.
I therefore do not consider that an injunction should lie against the respondents in respect of Mr Astill's knowledge of the information concerning Carindale's 'marketing and pricing policy'."
In In re a firm of Solicitors [1997] Ch 1 at 9 – 10, Lightman J said that for the purpose of the law imposing constraints upon solicitors acting against the interests of former clients, the law is concerned with the protection of information which:
(a)was originally communicated in confidence;
(b)at the date of the later proposed retainer was still confidential and may reasonably be considered remembered or capable, on the memory being triggered, of being recalled; and
(c)was relevant to the subject matter of the subsequent proposed retainer.
In World Medical Manufacturing Corp v Phillips Ormonde & Fitzpatrick Lawyers (a firm) [2000] VSC 196, Gillard J refused to restrain the plaintiff's former solicitors from acting as solicitors and patent attorneys in a Federal Court proceeding. One of the grounds on which his Honour refused the injunctions sought was that the confidential information supplied to the defendants was the type of information that ultimately was or would be in the public domain or, which by the time of the Federal Court hearing, would be easily ascertainable by an experienced patent attorney.
In Bureau Interprofessionel Des Vins De Bourgogne v Red Earth Nominees Pty Ltd (t/as Taltarni Vineyards) [2002] FCA 588, Ryan J dismissed a motion seeking to restrain a firm of solicitors from continuing to act as solicitors for the applicants in the proceedings on the grounds that Ms Anne Dufti, a solicitor employed by the firm currently engaged by the applicant, had, whilst employed by another firm of solicitors, Mallesons, acted for the respondents and in that capacity had acquired confidential information. Ryan J refused to grant the injunction sought. His Honour was prepared to assume that Ms Dufti, in the course of acting for the respondent whilst at Mallesons, acquired information which, at that time, was confidential. However, his Honour considered that Ms Dufti was not privy to any information possessed by the respondent which remained confidential to it. His Honour was reinforced in that conclusion by the lapse of time since Ms Dufti ceased to act for the respondent and the likelihood that any strategy which may have been conceived, or fact which may have been identified, as answering the applicant's case had already been, or would shortly be, disclosed to the applicant's advisors by way of correspondence or in pleadings in the present proceedings.
In my view, the defendants must establish that Cole possesses confidential information which remains confidential and which is not available to the plaintiff in the present proceedings or readily ascertainable by the plaintiff.

Precise identification of confidential information

The plaintiff submits, in relation to the confidential information said to have been imparted to Cole, that the defendants must identify the information with precision and not merely in global terms.
In Carindale Country Club Estate, Drummond J held, at p 313, that "acceptable testimony by the client that the former solicitor was in receipt of relevant confidential information is not conclusive of the solicitor being disqualified from acting further in his new retainer". His Honour noted, as to the first class of information referred to earlier, that which concerned Carindale's marketing strategies, pricing policies, sales results and sales prices, that it was difficult to identify with any precision the information so described that possessed a confidential quality. His Honour concluded that the evidence before him as to the marketing and pricing information which Carindale said Mr Astill received in confidence, but which generally went no further than providing a general or global description of that information, was insufficient to enable any judgment to be made as to whether the information now in question qualified as information given in confidence. His Honour said at 314:
"It is a basic requirement that before material will be recognised as having the character of confidential information, the information in question must be identified with precision and not merely in global terms … The requirement is insisted upon even though it may necessitate disclosing to the Court the very information the confidentiality of which it is sought to preserve by the action. … 'The more general the description of the information which a plaintiff seeks to protect, the more difficult it is for the court to satisfy itself that information so described was imparted or received or retained by a defendant in circumstances which give rise to an obligation of confidence.' "
If confidential information is the basis upon which the injunction is sought, it is necessary to be able to state precisely what information is being protected. As Bryson J pointed out in Mancini v Mancini [1999] NSWSC 800 at [7]:
"It is of importance to observe that information generally is not protected; the protection available relates to confidential information, and is available to the person entitled to the confidence … A case about confidential information cannot be nebulous; Confidential information which once existed may no longer be confidential; it may no longer be available although it was communicated in the past; it may not be material to any use which might now be proposed to be made of the information. Without specificity, a claim to protection cannot be defended or decided on any fair procedural basis, and a general allegation of the kind put forward here to the effect that from the nature of the past legal business confidential information must have been communicated should not … be upheld."
In Bureau Interprofessionel Des Vins De Bourgogne v Red Earth Nominee, (supra), Ryan J repeated with approval the statement by Drummond J in Carindale Country Club Estate to the effect that the party seeking to restrain a solicitor from acting so as to prevent the disclosure of confidential information must identify with some precision the confidential information possessed by the solicitor.
In Waiviata Pty Ltd v New Millennium Publications Pty Ltd [2002] FCA 98, Sunderberg J, at [6] referred with apparent approval to the statement of Drummond J that before information will be recognised as confidential, it must be identified with precision and not merely in global terms.
In In re a firm of Solicitors (supra) at 10, Lightman J said:
"On the issue whether the solicitor is possessed of relevant confidential information:
(a)it is in general not sufficient for the client to make a general allegation that the solicitor is in possession of relevant confidential information if this is in issue; some particularity as to the confidential information is required … but the degree of particularity required must depend upon the facts of the particular case, and in many cases identification of the nature of the matter on which the solicitor was instructed, the length of the period of original retainer and the date of the proposed fresh retainer and the nature of the subject matter for practical purposes will be sufficient to establish the possession by the solicitor of relevant information."

That statement by Lightman J was cited with apparent approval by Gillard J in World Medical Manufacturing Corp v Phillips Ormonde & Fitzpatrick Lawyers (supra).
Counsel for both the defendants and the plaintiff claimed support from the decision of Templeman J in Gugiatti v City of Stirling [2002] WASC 33; (2002) 25 WAR 349. The facts of that matter were as follows. From 1990 until 1994, the applicant had been represented by Mr McLeod in the dispute with the respondent. In April 1997, no longer represented by McLeod, the applicant commenced an action against the respondent for negligence. In October 2001, McLeod became aware that a partner who had just joined his firm (McLeods) represented the respondent in the action commenced by the applicant. The outstanding issues in that action remaining after the trial of a preliminary point were whether the claim was time‑barred by reason of limitation legislation and the assessment of damages. The applicant sought to restrain McLeods from representing the respondent. The applicant deposed that between January 1990 and December 1994, he had had several lengthy discussions with McLeod. He said:
"During these various discussions and meetings, I was requested to, and did, provide McLeod & Co with confidential and privileged information. The information provided covered, in quite some detail, everything connected and pertaining to my businesses, including matters relating to the nature and extent of my entitlement to damages in the event of my being ordered to cease my businesses and also matters bearing on the limitation issues. On the basis of the information provided, I had received advice from McLeod & Co on the various options available to me and my entitlement to damages and the extent of my damages. McLeod & Co and Mr Dennis McLeod are in possession of material, confidential and privileged information bearing on the issues pending in this action."
In a subsequently affidavit, Mr Gugiatti swore:
"At times the lengthy discussions I had with Mr McLeod focused on the liability of the City to pay me damages in the event it forced me to cease carrying on the businesses and the quantum. I recall being asked and giving Mr McLeod confidential and privileged information, including a detailed account of my past dealings with the City, the history of my businesses and the nature and extent of the losses I would suffer. We also discussed the question of damages on the basis of the difference between the value of the businesses and the value of the businesses I would have carried on elsewhere had the tort not been committed. I recall discussing with him the weaknesses of my case in relation to this aspect of my claim for damages."
Templeman J found that Mr Gugiatti gave confidential information to Mr McLeod between 1991 and 1994. However, his Honour was not able to make any finding about precisely what Mr Gugiatti said to Mr McLeod. His Honour said that because he did not know what the information was, and Mr McLeod could not recall, it seemed unlikely that the information could be used by the City in the current action to the prejudice of Mr Gugiatti.
His Honour then considered whether, if McLeods continued to act against Mr Gugiatti, such conduct would give rise to an apprehension of impropriety in the mind of the reasonable bystander. His Honour took into account the fact that in pursuing his claim for damages Mr Gugiatti would be obliged to give discovery of documents relating to his business activities and his financial position. The learned trial Judge inferred that Mr Gugiatti gave information of that nature to Mr McLeod. His Honour observed that the City is entitled to be provided with that information as part of the discovery process. In all of the circumstances, his Honour was not persuaded that a reasonable bystander would consider that Mr Gugiatti's claim against the City arising from damages he suffered in 1996 could be prejudiced by the City's knowledge of confidential information given to Mr McLeod between 1991 and 1994, even if Mr McLeod could remember it.
Before a court will grant an injunction to protect a client's confidential information by restraining his former solicitor from acting against him, the former client must establish that the solicitor possesses confidential information and must identify the confidential information with precision and not merely in global terms. The client must identify the confidential information with some particularity. The degree of particularity required must depend upon the facts of the particular case. The confidential information must be identified with sufficient particularity to enable the court to determine whether the information is truly confidential, whether the confidential information which once existed, if it did, continues to be confidential and whether the confidential information is relevant to any issue in the current proceedings and might be used in those proceedings.
In my view, the defendants have not identified the alleged confidential information with sufficient precision to warrant the grant of an injunction to restrain Allens acting for the plaintiff. In pars 15 and 17 of the affidavit of Stratton, sworn 14 October 2003, Stratton describes the subject matter of the information which he provided to Cole. The subjects of the information he provided include the solvency of Laverton and information regarding the Rawas Mine. However, Stratton does not identify the information in relation to those subjects which he conveyed to Cole.
The defendants submit, in effect, that a client is not required to identify the confidential information with greater precision where to do so would compel him to strip himself of the protection which the injunction sought is designed to provide.
In Sent v John Fairfax Publication Pty Ltd [2002] VSC 429, Nettle J considered the precision with which the confidential information must be described. His Honour accepted the statement of Drummond J in Carindale Country Club Estate as a statement of the general principle. His Honour referred to the statement by Gillard J in Younghanns v Elfic Ltd, unreported; SCt of Victoria; Library No 5970/1997; 16 July1998:
"The degree of particularity of the confidential information must depend upon all the circumstances. Often, it cannot be identified for fear of disclosure."
His Honour noted that less precision of description may be required where more would annihilate the confidence sought to be protected. His Honour considered that in that case it was likely that any more precision of description than had been employed would tend to disclose the information which it was sought to keep confidential. His Honour held that in the circumstances of that case the information which was sought to be protected was sufficiently precisely described.
The plaintiff's counsel points out that there are ways in which confidential information may be presented to the court without annihilating its confidentiality.
In the end, the issue is whether, in all the circumstances of the case, the defendants have identified the information with sufficient particularity to enable the Court to determine that the information conveyed to Cole was confidential, that it remains confidential, and that it has not been publicly disclosed, is not readily ascertainable, and is relevant to the present action and may possibly be used in that action.
In my view, the defendants have not identified the information with sufficient particularity. The plaintiff pleads that as at July 1999 Laverton was not able to pay its creditors. The defendants submit that they imparted information to Cole concerning the solvency of Laverton. To say that information was conveyed to Cole concerning the solvency of Laverton does not enable the Court to determine whether the information conveyed was confidential, remains confidential, and is relevant to the proceedings. There is much information concerning the solvency of Laverton in October 1998 and July 1999 that is a matter of public record and is readily ascertainable. The information was not given to Cole in the context of seeking advice as to the legality or propriety of what became the Rawas transaction with the plaintiff. The information was conveyed in the context of obtaining advice concerning the obligations of directors of Laverton relating to issues of insolvent trading and options available to the company and its directors in the event that the company was insolvent.
As I have said, in his affidavit of 14 October 2003 Stratton swore that in or about October 1998 he provided Cole with detailed instructions on the matters I have referred to, including the solvency of Laverton and the proposed sale of Laverton's interest in the Rawas mine in Sumatra. In par 17 of his affidavit, Stratton deposed:
"I believe that in consequence of the instructions provided to Cole, as set out in par 15 above, Cole is in possession of confidential and privileged information regarding Laverton and myself which is relevant to the issues in these proceedings and in related proceedings of COR 14 of 2003."
I struck out that sentence. Whether the information given to Cole was, or is, confidential or privileged is a mixed question of fact and law. To determine whether the information is and remains confidential and whether it is relevant to the issues in these proceedings requires that the information be identified with some degree of precision. To state that the information is confidential is, at least in this context, a statement of a legal conclusion.
In par 17 of his affidavit of 14 October 2003 Stratton went on to say:
"The confidential and privileged information provided to Cole covered in detail the following … ".
Stratton then went on to set out the list of subject matters I have referred to earlier. I struck out the words "confidential and privileged" on the ground that, in its context, the assertion that the information was confidential and privileged was a statement of a legal conclusion.
If I had not struck out Stratton's assertions that the information that he conveyed to Cole was, and is, confidential and relevant to the proceedings, that would not be sufficient to warrant the grant of the injunctions sought in this case. It is for the Court to determine whether the information conveyed was confidential and privileged, whether it remains confidential and privileged, and whether it is relevant to the current proceedings and might be used in those proceedings. The Court is unable to make that determination if the deponent merely describes the subject matter of the information and asserts that it is confidential and privileged.
The plaintiff's allegations concerning the Rawas transaction are of central importance in the current proceedings. Stratton has sworn that he gave instructions to Cole concerning the proposed sale of Laverton's interest in the Rawas mine in Sumatra. Stratton has also deposed that he gave confidential and privileged information to Cole covering in detail information regarding the Rawas mine. As I have said, I struck out the words "confidential and privileged" which Stratton used to describe the information he provided to Cole concerning the Rawas mine. Stratton's description of the information that he gave to Cole, that is information regarding the Rawas mine and instructions in relation to the proposed sale of Laverton's interest in the Rawas mine, is insufficient for the Court to determine whether the information was confidential, remains confidential, is relevant to the current proceedings and might be used in those proceedings. The information might be information which was conveyed to the plaintiff, which is in the public domain or which is readily ascertainable by the plaintiff. The defendants have not discharged the burden of proving that the information was confidential, remains confidential, is relevant to the current proceedings and might be used in those proceedings to the disadvantage of the defendants.

The plaintiff's Chinese wall

The plaintiff submits that if the defendants have discharged the onus upon them of proving that Allens possessed confidential information which might be relevant to the current proceedings the Court should refuse to grant an injunction restraining Allens from acting for the plaintiff because Allens have put in place an information barrier, or Chinese wall, as a result of which there is no real risk that the confidential information will come into possession of those acting for the plaintiff in the present proceedings.
The burden rests on the plaintiff to show that there is no risk that confidential information conveyed by or on behalf of the defendants to Cole and which relates to the present proceedings will come into the possession of those acting for the plaintiff in the present proceedings.
The Court will intervene to protect a former client's confidence if there is a real – as opposed to a fanciful or theoretical – risk of disclosure, though the risk need not be substantial.
In Newman v Phillips Fox (a firm) [1999] WASC 171; (1999) 21 WAR 309, Phillips Fox had proposed a number of information barriers to ensure that there was no risk of disclosure. Steytler J found that the proposed wall was deficient. It was established ad hoc, and no educational program accompanied it. Nor was any monitoring or disciplinary sanction proposed. In that case, solicitors who had previously acted for the plaintiff joined Phillips Fox as a partner and associate respectively. The position was exacerbated by the fact that administrative staff formerly employed by the old firm had also joined Phillips Fox. They may have been the recipients of confidential information and there was no adequate wall in place to stop the leakage of information from them.
This case is very different. The only person allegedly in possession of confidential information is Cole. He has no recollection of the confidential information. Any notes or records he has of the information imparted to him are not available to anyone in Allens acting for the plaintiff. The information barrier or Chinese wall that has been erected by Allens is extensive. It includes an educational program and disciplinary sanctions for breach. In my view, there is no substantial risk of disclosure of confidential information by Cole.

The Court's control over the conduct of its officers

The second basis on which the defendants put their case is that the Court should grant an injunction to restrain Allens from acting for the plaintiff in the exercise of the Court's inherent jurisdiction to control the conduct of its officers.
The solicitor's duty to the Court and the Court's discretion to supervise the conduct of its officers founds the jurisdiction of the Court to grant an injunction to restrain solicitors from acting in certain circumstances. However, in my view the circumstances do not exist in this case for the exercise of that jurisdiction. This is not a case of a solicitor having changed sides. Cole is not acting against the defendants. The defendants' case rests upon Cole being in possession of, or having been in possession of, confidential information which might be used to the disadvantage of the defendants. For the reasons I have given, Cole's duty to preserve confidential information does not, in the circumstances of this case, justify the grant of an injunction.

Delay

The plaintiff submits that in considering whether or not to grant injunctive relief the Court should take into account the delay of the defendants in seeking relief. The relevant delay is the period between 27 March 2003, when Stratton became aware that Cole had become a partner in Allens, and 6 October 2003 when the defendants first alleged that Allens should cease acting for the plaintiff because Cole had previously acted for the defendants. During that period Allens undertook substantial legal work on behalf of the plaintiff and incurred substantial costs for carrying out that work.
The defendants delayed taking action to restrain Allens from acting for the plaintiff and the plaintiff would be disadvantaged if Allens were now restrained from acting for it. I would not refuse to grant injunctive relief on the ground of delay if the defendants had established that Allens possessed confidential information which is or might be relevant to the current proceedings and the plaintiff had not shown that there was no risk of disclosure. However, the circumstance of the plaintiff's delay causes me to carefully scrutinise the defendants' evidence that Allens possess confidential information that is or might be relevant to the current proceedings. For the reasons I have stated, the defendants have not discharged the burden on them of proving that Allens or Cole possessed confidential information which remains confidential and which is or might be relevant to the current proceedings. That is because the defendants have failed to identify the information with sufficient precision.

Conclusion

The defendants sought relief primarily on the basis that injunctive relief was necessary to protect their confidential information. They have failed to establish that Cole, or Allens, possessed confidential information, which remains confidential and which is or might be relevant to the present proceedings. Furthermore, the plaintiff has established that if Cole was or is in possession of any relevant confidential information, there is no substantial risk of disclosure of that confidential information by Cole. The application[s] for injunction[s] will be refused.