Epstein & Epstein

[2008] FamCA 907

FAMILY COURT OF AUSTRALIA

EPSTEIN & EPSTEIN [2008] FamCA 907

FAMILY LAW – INJUNCTION – LEGAL PRACTITIONER – conflict of interest – restrained from acting

Family Law Act 1975 (Cth)

In the Marriage of L P and K D McMillan  (2000) 26 Fam LR 653
In the Marriage of Thevenaz (1986) 11 Fam LR 95; FLC 91-748
Rakusin v Ellis, Munday & Clarke [1912] 1 Ch 831
Mills v Day Dawn Block Gold Mining Company Ltd (1882) 1 QLJ 62
In the Marriage of Kossatz (1993) FLC 92-386
In the Marriage of Griffis (1991) FLC 92-233
Farrow Mortgage Services Pty Ltd (in liq) v Mendall Properties Pty Ltd [1995] 1VR 1
Bransdon v Davis & Gilbert (2007) 37 Fam LR 555
Holborow v Macdonald Rudder [2002] WASC 265
McGillivray v Mitchell (1998) 23 Fam LR 238; FLC 92-818
D & J Constructions Pty Ltd v Head (t/as Clayton Utz) (1987) 9 NSWLR 118
In the Marriage of Magro (1989) 12 Fam LR 770; FLC 92-005

APPLICANT: Mr Epstein

RESPONDENT: Ms Epstein

FILE NUMBER: NCC 2048 of 2007

DATE DELIVERED: 29 October 2008

PLACE DELIVERED: Sydney

PLACE HEARD: Newcastle

JUDGMENT OF: Judicial Registrar Loughnan

HEARING DATE: 20 October 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Bates

SOLICITOR FOR THE APPLICANT: Boyd Olsen Lawyers

COUNSEL FOR THE RESPONDENT: Mr Stewart

SOLICITOR FOR THE RESPONDENT: MacLean & Curtis

Orders

1. The husband is restrained from instructing Boyd Olsen Lawyers in these proceedings.

2. The wife is restrained from instructing MacLean & Curtis Solicitors in these proceedings.

IT IS NOTED that publication of this judgment under the pseudonym Epstein & Epstein is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: NCC 2048 of 2007

MR EPSTEIN

Applicant

And

MS EPSTEIN

Respondent

REASONS FOR JUDGMENT

Applications

1. By his application filed 1 August 2008 the husband seeks to restrain the wife from retaining her current solicitors.

2. The wife seeks the dismissal of that application. On 20 August 2008 the wife filed a Response to an Application in a Case seeking that the husband be restrained from instructing his current solicitors.

The Law

1. The Family Law Rules 2004 provide as follows:

   r 8.03 Lawyer — conflicting interests

   8.03    A lawyer acting for a party in a case must not act in the case for any other party who has a conflicting interest.

   Note:

   This rule does not purport to set out all the situations in which a lawyer may not act for a party.

2. In the Marriage of L P and K D McMillan (2000) 26 Fam LR 653 the Full Court reviewed the authorities including reference to overseas authorities and said:

   [38]     It has been accepted in this court, at least since the decision in June 1986 of Frederico J in In the Marriage of Thevenaz (1986) 11 Fam LR 95; FLC 91-748, that the court:

   … has power to make orders restraining a firm of solicitors from continuing to act for one of the parties to proceedings in this court, if it is of the view that it would be likely that those solicitors may have confidential information relating to the other party to the proceedings arising out of a former relationship of solicitor and client with that party which may be used to the advantage of the present client or to the disadvantage of the former client in the current proceedings … [per Lindenmayer J in the unreported decision of Stewart (17 April 1997)]

3. In getting to that point there has been a tension between approaches identified in English Court of Appeal in Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831 and the Full Court of the Queensland Supreme Court in Mills v Day Dawn Block Gold Mining Company Ltd (1882) 1 QLJ 62. There have been a number of cases wherein the authorities have been reviewed.

4. In In the Marriage of Kossatz (1993) FLC 92-386, Mullane J provided the following summary of his decision in Griffis and of his reasons for preferring the Mills approach over the Rakusen approach (at 79,987):

   In In the Marriage of Griffis (1991) FLC 92-233 I referred at length to the law in relation to a solicitor’s duty of confidence and to the power of courts to restrain a solicitor from acting in breach of that duty. I there referred to the different approaches adopted by the English Court of Appeal in Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831 and the Full Court of the Queensland Supreme Court in Mills v Day Dawn Block Gold Mining Company Ltd (1882) 1 QLJ 62. The approach in Rakusen is that the client seeking the injunction must prove a “probability of mischief” — a likelihood of confidential information being disclosed or used to the client’s prejudice. The approach in Mills is a stricter approach that a court should restrain an attorney who places himself “in such a relationship as might lead to there being even an unwitting breach of duty”.

   I preferred the Mills test in Griffis on the basis that unlike Rakusen it is consistent with the public interest and the subsequent developments in the law as described in the judgment. I also preferred the approach in Mills that the applicant client need not prove the content of the confidence; but only a prima facie case that the information imparted was confidential.

5. That analysis was cited with approval in McMillan where the Full Court found further support for the view that the Rakusen test should no longer be applied in the decision of the Supreme Court of Victoria of Hayne J in Farrow Mortgage Services Pty Ltd (in liq) v Mendall Properties Pty Ltd [1995] 1 VR 1. However, the Full Court in McMillan said:

   [54] The test propounded by Hayne J of “a real and sensible possibility of the misuse of confidential information” does not go as far as, or is not as strict as, the test propounded by Frederico J in Thevenaz of even a theoretical risk of the misuse of the confidential information. To the extent that it is necessary in this case for us to express a concluded view (which it was not for the Full Court in McGillivray v Mitchell) we would support the application in this jurisdiction of the approach of Frederico J in Thevenaz (following Mills) which was adopted by Mullane J in Griffis and in Kossatz (and also by Lindenmayer J in the unreported case of Stewart to which we will shortly refer). We would do so for the reasons related to the sensitive nature of the jurisdiction which were referred to by Bryson J in D & J Constructions and by Rourke J in Magro and indeed also by Wilczek J in the present case.

6. In relation to what the applicant need prove the Full Court in McMillan said later:

   [86]  Again, as earlier indicated, we adopt what was said by Mullane J in Griffis, in reliance on Mills and Thevenaz, that the client need only prove “a prima facie case as to confidential material, the disclosure or use of which by the solicitor in the course of the conduct of the current proceedings for the present client would be prejudicial to the applicant”.

   [87]  In other words, the client need only give evidence that he has provided confidential information to the solicitor (or in this case, the law clerk/secretary). The client does not have to divulge the content of that information:

7. The risk has been found between persons who at a relevant time were partners in a solicitors firm - In the Marriage of Thevenaz; between a partner and an employed solicitor - In the Marriage of Magro; between a solicitor and an unqualified employee - In the Marriage of McMillan.

10.Thus, the Family Court has power to make orders restraining a firm of solicitors from continuing to act for one of the parties to proceedings before it and will exercise that power if it is satisfied there is even a theoretical risk of the misuse of the confidential information.

The Facts

11.The parties were married in October 2005 and separated on 28 April 2007.

12.Commins Hendriks solicitors took instructions from the husband and the husband’s parents during 2005 in relation among other things, to a mortgage. A solicitor from the firm gave ‘independent legal advice’ to the wife in relation to the mortgage and took instructions for the preparation of her will.

13.On 29 June 2007 the wife commenced these proceedings.

14.The husband instructed Commins Hendriks to act in the proceedings.

15.By a letter dated 26 July 2007 from her solicitor to the husband’s solicitors, the wife objected to Commins Hendriks acting for the husband. That letter was received on 30 July 2007.

16.On 6 August 2007 Judith Olsen of Boyd Olsen acted as agent for the husband on the instructions of Commins Hendriks at a Case Assessment Conference. Ms Kekeff represented the wife at that conference, with the wife attending by telephone.

17.On or around 8 August 2007 Commins Hendriks told the husband that they would cease to act for him in the proceedings. The husband says that at about that time he began to instruct Boyd Olsen to act for him.

18.On 26 September 2007 the husband, while at the premises of Boyd Olsen was introduced to Brian Kelly, an employed solicitor with that firm. The husband says that he and Mr Kelly had a conversation and he does not waive legal professional privilege in relation to the detail of that conversation.

19.Brian Kelly subsequently left that firm, changed rolls and was admitted to the bar. Mr Kelly joined the chambers of Carl Boyd.

20.On 23 June 2008 Brian Kelly appeared before a registrar as barrister for the wife in these proceedings.

21.By a letter dated 25 June 2008 from the husband’s solicitor to the wife’s solicitor, the husband complained about Brian Kelly being instructed for the wife.

22.By a letter dated 14 July 2008 from the wife’s solicitor to the husband’s solicitor, the wife sought information about Mr Kelly’s involvement with the husband.

23.By a letter dated 16 July 2008 from the husband’s solicitor to the wife’s solicitor, the husband’s solicitor confirmed that the wife’s solicitor said Brian Kelly would no longer be instructed:

…I note that you have indicated to me that you will no longer instruct Mr Kelly to act on the wife’s behalf in these proceedings and I accept that that is now the case. …

24.By a letter dated 24 July 2008 from the wife’s solicitor to the husband’s solicitor, the wife sought an answer to the letter of 14 July 2008. By inference there was then no agreement that Brian Kelly would not be instructed by the wife.

25.By a letter dated 24 July 2008 from the husband’s solicitor to the wife’s solicitor, information was provided about the interaction between the husband and Brian Kelly. It was noted that the wife’s solicitor had reneged on the alleged agreement not to instruct Brian Kelly.

26.By a letter dated 25 July 2008 from the wife’s solicitor to the husband’s solicitor, detail was again sought about the conversation between the husband and Brian Kelly.

27.By a letter dated 28 July 2008 from the husband’s solicitor to the wife’s solicitor, the husband advised that an application would be filed to prevent the wife instructing Brian Kelly.

28.By a letter dated 30 July 2008 the wife’s solicitors raised a complaint about Ms Olsen continuing to act for the husband in light of the facts that:

Ø  Mr Boyd was in chambers with Mr Kelly and thereby had access to Mr Kelly’s files;

Ø  Mr Boyd had taken a call for Mr Kelly, from the wife’s mother, in relation to the proceedings; and

Ø  Mr Boyd is married to Ms Olsen.

29.In that letter, however, the wife’s solicitors suggested that both their complaint in relation to Ms Olsen and the husband’s complaint in relation to Mr Kelly, be withdrawn:

…

Our client is reluctant to seek new Counsel at this stage of the proceedings due to both time and financial considerations and is willing to overlook your potential conflict if you will do the same in relation to Mr Kelly.

30.On 1 August 2008 the husband filed an Application in a Case seeking that the wife’s solicitors and the wife be restrained from instructing Brian Kelly as counsel for the wife.

31.On 20 August 2008 the wife filed a Response to an Application in a Case seeking that the husband be restrained from instructing Boyd Olsen and Ms Judith Olsen.

32.In her affidavit sworn and filed 20 October 2008 the wife says she discovered that Ms Olsen had appeared as agent for Commins Hendriks on the husband’s behalf after her current lawyers had requested that Commins Hendriks cease to act but before they withdrew. It is this fact that the wife relies on to seek that Boyd Olsen cease to act for the husband. The wife’s counsel told me that he would not be pursuing the claim on the basis of the potential communication through Mr Kelly’s chambers or Mr Boyd’s marriage to Ms Olsen. That was a sensible concession.

33.At a later point, Mr Kelly informed the wife’s solicitors that he will no longer accept instructions in the matter. That resolved the issue about Mr Kelly.

Discussion

34.The husband seeks to restrain the wife from continuing to instruct her solicitors, Maclean & Curtis because of the privileged communication he had with Brian Kelly which may have later been exposed to Maclean & Curtis when they instructed Mr Kelly to act for the wife in these proceedings.

35.The husband deposes to having a conversation with Mr Kelly when he was a solicitor employed by Boyd Olsen and receiving advice from him. He has said that he will not waive privilege in relation to the detail of that communication.

36.Mr Kelly later appeared for the wife in the proceedings on instructions from her solicitors. Although not determinative of the matter, Mr Kelly has refused to take further instructions in the proceedings.

37.As her barrister, Mr Kelly is obliged to use his relevant knowledge and skill for the benefit of the wife. Mr Kelly had a communication with the husband in the context of the current proceedings. The husband claims privilege in relation to that communication. Mr Kelly later took instructions from the wife’s solicitors in those same proceedings. There is at least a theoretical risk of the misuse of the confidential information.

38.The wife seeks to restrain the husband from continuing to instruct his solicitors, Boyd Olsen because of the privileged communication she had with Commins Hendriks, which may have later been exposed to Boyd Olsen when they were instructed to act as agents for Commins Hendriks, for the husband in these proceedings.

39.The submission on behalf of the wife is that Bransdon v Davis & Gilbert (2007) 37 FamLR 555 is authority for the proposition that “the court would only restrain the appearance of a legal representative because of his or her duty to the court in a clear case”. With respect, I do not think the Full Court was dealing with a case similar to this. In Bransdon the issue was whether, after raising with the parties a possible future conflict for solicitors acting for two parties in proceedings, a judge should have restrained the solicitors from acting of her own motion. In that case the Full Court adopted the discussion and findings of Heenan J in Holborow v Macdonald Rudder [2002] WASC 265. In Holborrow, Heenan J was dealing with proceedings which were initially commenced by a firm of solicitors (the firm). The firm sought to restrain another solicitor (Mr Williams) who was not a party to the proceedings, from acting for the plaintiff in proceedings before the court. Mr Williams had been the former solicitor for the plaintiff. The basis for the relief sought was that Mr Williams had a personal interest in the outcome of the proceedings, that he was likely to be a witness and that it was “contrary to the due administration of justice and the integrity of the judicial process that he have any further participation in the proceedings”. In neither Bransdon nor Holborow was the court dealing with the potential for confidential communications between a lawyer and one party to be made available to the other party, which is at the heart of the matter before me.

40.The wife also relies on McGillivray v Mitchell (1998) 23 Fam LR 238; FLC 92-818 where the Full Court identified the issue as a matter of discretion and delay by the applicant as one important factor. McGillivray was decided before McMillan and was considered in the latter decision as I have quoted above. Here the period of delay is the period from the time the wife first realised that Ms Olsen appeared as agent for the husband at the Conciliation Conference. It is the wife’s case that she was not aware of that at the time of the conference as she attended the conference by telephone. She does not say when she found out but says in her affidavit of 20 October 2008:

I now find that Judith Olsen, by her own admission, acted for Commins Hendricks in relation to this matter prior to taking instructions from the Respondent Father after Commins Hendriks informed the Respondent Father that they were ceasing to represent him.   

41.Thus the wife says she was not aware of the potential conflict until recently. There is no challenge to that evidence. I cannot find that there was a significant delay.

42.Commins Hendriks gave advice to the wife in relation to a mortgage involving the husband and his parents and took instructions from her in relation to a will. The wife claimed and Commins Hendriks accepted that as a result of those communications, there was a conflict in them acting for the husband in these proceedings. After being requested to withdraw but before doing so, Commins Hendriks had Boyd Olsen act as their agents at a Case Assessment Conference. A Case Assessment Conference is a significant event and calls for an agent to have substantive instructions. Rule 12.03 of the Family Law Rules 2004 provides:

RULE 12.03 Case assessment conference

      (1)         A case assessment conference must be held in the presence of:

      (a)         a Registrar; or

      (b)         a family consultant.

      (2)         The purpose of a case assessment conference is:

      (a)         to enable the person conducting the conference to assess and make any recommendations about the appropriate future conduct of the case; and

      (b)         to enable the parties to attempt to resolve the case, or any part of the case, by agreement.

      (3)         If the case is not settled by the end of the conference, the parties must immediately attend a procedural hearing.

Note 1    A party and a party’s lawyer must attend a case assessment conference and a procedural hearing (see subrule 1.08 (3) and rule 12.11).

Note 2    A party to a parenting case must disclose a copy of an expert’s report no later than 2 days before a case assessment conference (see paragraph 15.55 (1) (a)).

43.Sufficient instructions are likely to have passed between principal and agent in relation to that conference to assist in planning the future conduct of the case and to enable the parties to attempt to settle all or part of the case. There is at least a theoretical risk of the misuse of the wife’s confidential information.

Conclusion

44.One can readily understand why the two applications before me are resisted. It is expensive and inconvenient to change solicitors in the course of proceedings and such a change can add to delay. In the case of the husband, he has already been put to one such change.

45.At the heart of this issue is the potential conflict between the duty of a legal practitioner to maintain the confidences of a client on the one hand and to apply all of his or her skill and relevant knowledge for the benefit of a client, on the other. There are also the special circumstances of this jurisdiction referred to by Bryson J in D & J Constructions Pty Ltd v Head (t/as Clayton Utz) (1987) 9 NSWLR 118 and by Rourke J in In the Marriage of Magro (1989) 12 Fam LR 770; FLC 92-005. This Court has focussed on the risk of confidential information being misused.

46.It is not suggested before me that a legal practitioner has misused confidential information. Nevertheless, there is a risk in each instance and the solicitors should not continue to act.

I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Judicial Registrar Loughnan

Associate: 

Date:  29 October 2008