FOLEY and FOLEY
[2016] FCWA 41
•10 JUNE 2016
JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA
ACT: FAMILY LAW ACT 1975
LOCATION: PERTH
CITATION: FOLEY and FOLEY [2016] FCWA 41
CORAM: WALTERS J
HEARD: 21 APRIL 2016
DELIVERED : 10 JUNE 2016
FILE NO/S: PTW 2934 of 2015
BETWEEN: MR FOLEY
Applicant
AND
MS FOLEY
Respondent
Catchwords:
FAMILY LAW – INJUNCTIONS – Legal practitioners – where solicitor moved from firm representing husband to firm representing wife – application to restrain wife's solicitors from continuing to act for her – confidential information – significance of "getting to know you" factors – effectiveness of "information barrier" – consideration of Full Court's decision in Osferatu v Osferatu (2015) 53 Fam LR 433 – ruling that wife's solicitors should not continue to act for her
Legislation:
Family Law Act 1975 (Cth)
Category: Not Reportable
Representation:
Counsel:
Applicant: Mr Hooper SC
Respondent: Dr Dickey QC
Solicitors:
Applicant: Law Firm B
Respondent: Law Firm A
Case(s) referred to in judgment(s):
Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd [2007] NSWSC 350
Billington & Billington (No 2) [2008] FamCA 409
Black v Taylor [1993] 3 NZLR 403
Holborow v Macdonald Rudder [2002] WASC 265
In the Marriage of R A and E Thevenaz (1986) 11 Fam LR 95
Ismail-Zai v The State of Western Australia (2007) 34 WAR 379
Kallinicos v Hunt (2005) 64 NSWLR 561
Karapataki & Karapataki [2011] FMCAfam 6
Mancini v Mancini [1999] NSWSC 800
Martin v MacDonald Estate (Gray) [1991] 1 WWR 705
McMillan & McMillan [2000] FamCA 1046
Mintel International Group Limited v Mintel (Australia) Pty Ltd [2000] FCA 1410
Osferatu v Osferatu (2015) 53 Fam LR 433
PhotoCure ASA v Queen's University at Kingston [2002] FCA 905
Pond & Thurga (No 2) [2007] FamCA 587
Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222
State of Western Australia v Ward and Ors (1997) 76 FCR 492
Stewart & Stewart (unreported, Family Court of Australia, Lindenmayer J, 17 April 1997)
Yunghanns v Elfic Ltd (Unreported, Supreme Court of Victoria, Gillard J, 3 July 1998)
Zalfen v Gates [2006] WASC 296
WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT - PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED
Introduction
1This is an application for orders restraining a firm of solicitors from continuing to act for their client in these proceedings. The applicant is [Mr Foley]. The firm of solicitors is [Law Firm A].
2Mr Foley married [Ms Foley] [in] 2000. They separated in April 2014 and divorced in September 2015. There are four children of the marriage, aged between 9 and 15.
3Although they are now divorced, I shall refer to Mr Foley as "the husband" and Ms Foley as "the wife" because it is more convenient and less confusing than referring to them in other terms. I mean them no disrespect by doing so.
4At all material times, the husband has been represented by [Law Firm B] and the wife has been represented by [Law Firm A].
5The husband and the wife are in dispute regarding issues relating to alteration of property interests and child support. The husband filed an initiating application in this Court on 12 March 2016. The wife filed a response to the initiating application on 17 March 2016. It is unnecessary to record the orders sought by each party. For ease of reference, I shall refer to the broader aspects of the dispute between them as "the matrimonial dispute".
6[Mr W] is a solicitor who was admitted to practice in Western Australia in 2002. He is accredited by the Law Society of Western Australia as a Specialist in the field of Family Law.
7Mr W was employed by Law Firm B as a solicitor. He worked there (initially as an Articled Clerk and then as a solicitor) from 2001 to 2016. In March 2016, he ceased employment with Law Firm B and commenced employment with Law Firm A.
8Mr W had professional dealings with the husband while he was employed by Law Firm B. In January and February 2016, he conferred with the husband in relation to the matrimonial dispute. He sought information from the husband, which was provided. He also sought and obtained instructions from the husband. In addition, he did other work for or on behalf of the husband while he was employed at Law Firm B.
9The husband perceives that Mr W has effectively "changed sides". Notwithstanding steps that Law Firm A have put in place to avoid the possibility of confidential information in Mr W's possession being conveyed to his colleagues at Law Firm A, the husband seeks orders restraining Law Firm A from continuing to act for the wife in the matrimonial dispute.
The husband's case
10The husband says1 that he met with Mr W on two occasions in late January and early February 2016. The first meeting lasted approximately one hour and 10 minutes. The second meeting lasted approximately 40 minutes. During the meetings, they discussed "a range of matters", including –
1)the history of [the parties'] relationship;
2)the weight attaching to the varied nature of contributions… discussed;
3)the content of [the husband's] initiating affidavit;
4)the relevance and weight to be attached to facts and therefore what should and should not be addressed or included in affidavits;
5)[the husband's] attitude to child welfare issues;
6)the Minute of Final Orders Sought; and
7)the Schedule of Assets and Liabilities to be attached to [the husband's] financial statement.
11In his second affidavit at [9], the husband adds:
[[Mr W]] took details for a proof of evidence which was dealt with by inclusion in a detailed chronology dealing with issues, including:
a)the history of my and [the wife's] financial relationship;
b)my proposal for spousal maintenance;
c)police restraining orders and the interim violence restraining order between myself and [the wife];
d)my evidence of [the wife's] conduct post-separation and incidences of domestic violence, some of which were witnessed by the children; and
e)aspects of parenting issues.
12The husband clearly states that Mr W took his instructions for the purposes of Law Firm B giving him advice as to his possible final property settlement entitlements, and to prepare for the proposed litigation (which had yet to commence). He says that he told Mr W "at length" about his financial and emotional relationship with the wife.
The wife's case
13The wife deposes2 that the solicitor with the conduct of her file at Law Firm A is [Ms N]. Beyond that, the wife says little of significance – save that she opposes the granting of the orders sought by the husband. She has no personal knowledge of whether Mr W has conveyed or is likely to convey confidential information to other lawyers at Law Firm A. In essence, she trusts her solicitors to ensure that they do not gain access to any confidential information which the husband has provided to Mr W (or, no doubt, that Mr W may have obtained – during his employment with Law Firm B – from sources other than the husband himself).
14Mr W deposes3 that he was admitted to practice as a solicitor in Western Australia in February 2002. He is accredited by the Law Society of Western Australia as a Specialist in the field of Family Law.
15Mr W confirms that he was employed at Law Firm B from 2001 to 2016 – initially as an articled clerk and then as a solicitor. His last day of employment at Law Firm B was 4 March 2016.
16Mr W also says that:
a)at some time before 29 January 2016, and while he was still employed at Law Firm B, he spoke with a senior paralegal regarding the matrimonial dispute;
b)he had not previously had any involvement with the matrimonial dispute;
c)the paralegal advised Mr W that the partner having the conduct of the husband's file (Mr B) wanted Mr W "to undertake certain limited work in respect of (the matrimonial dispute)", but that Mr B "would continue to have the conduct of the matter";
d)the paralegal advised him that he would be required to meet with the husband "to take some instructions" from him;
e)Mr W responded by saying that, in order "to make some assessment as to what instructions (he) would need to take from the client (he) would first need to know something about what the issues in the case were"; and
f)the paralegal then described to Mr W "what she understood as being the issues" in the matrimonial dispute.
17As the time for the conference with the husband approached, Mr W "took steps to prepare" for it. For example, he reviewed what appear to be drafts of a chronology and a schedule of assets and liabilities. Thereafter, he directed the paralegal to review documents forming part of the husband's disclosure (which documents were already in the possession of Law Firm B) for the purpose of refining the draft chronology and draft schedule of assets and liabilities – and to "determine what additional documents we would need to seek from (the husband) to better complete the disclosure". By the time Mr W met with the husband, the paralegal had produced "more advanced versions" of the chronology and schedule of assets and liabilities.
18The paralegal and Mr W conferred with the husband on or about 29 January 2016. His description of the conference is as follows:
•I explained to the client that I was to be involved with the matter for the purpose of taking some… instructions from him, but that [Mr B] would otherwise continue to have the conduct of the matter.
•I spoke about, in very general terms, the considerations that apply in the determination of a property settlement case (for example, assessment of contributions and so forth). I thought that providing that explanation might assist the client to understand why it was that we were asking for instructions about particular points and why other points might or might not be relevant.
•My memory is that the majority of the time during that first meeting was taken up with taking the client's instructions as we worked through the schedule of assets and liabilities. Some of the information that we had already entered in the schedule in preparation for the meeting the client confirmed as being correct. In respect of other items on the schedule the client provided instructions for changes to be made. In respect of other items the client said that he would need to make inquiries and he said that he would make those inquiries following the meeting.
•Nearing the end of the time that had been allocated for the meeting we had not started work on the chronology so I discussed with the client that that was probably a logical point to break and we discussed that we would need to meet on a second occasion to work on the chronology. In preparation for that second meeting I gave the client a copy of the draft chronology and explained the sort of further more detailed information that we would need for him to gather in preparation for the next meeting so that by the time [of the] next meeting he would be in a position to be able to provide the details necessary to continue with the drafting of the chronology.
19Mr W's second conference with the husband took place on or about 3 February 2016. He does not recall whether or not the paralegal was present. His description of this conference is as follows:
•[The husband] may have brought with him to the second meeting certain disclosure documents being disclosure documents which we had asked him to compile during the course of the first meeting. For example, documents relating to items appearing on the Asset Schedule.
•Otherwise, the substantive part of the second meeting related to the chronology.
20Mr W says that during either the first or the second conference he explained to the husband "in broad and general terms" what would be involved if the husband were to commence proceedings, including in relation to pre-action procedures. He confirms giving general and seemingly uncontroversial advice about the types of documents that would have to be filed, but then adds:
[The husband] asked me about what I thought… should be the parameters for his proposal. I explained to him that I had only become involved in the matter recently and that I had not read the file (meaning I had not read the advice to him) and so I was not in a position to be able to express a view about what the appropriate outcome would be. I explained to him in general terms that he might set out a somewhat ambit claim in his [initiating application] compared to what he might be prepared to do on a more concessional basis to see the case settled.
21After the two conferences described above, Mr W met with the paralegal and directed her to prepare a letter dealing with pre-action procedures, which letter was to include the chronology and schedule of assets and liabilities discussed with the husband at the conferences. He does not explain whether the letter was to be forwarded to the husband or the wife (or her legal representatives).
22In relation to the preparation of the letter, Mr W says:
… I directed her to the precedent letter that I usually used for that purpose and I then left it with her to use that precedent letter and to prepare a draft suitable for the particular matter. Apart from directing her to the appropriate precedent I do not recollect having any significant involvement with the drafting of the letter itself. My recollection is that some time later she told me that she had drafted the letter and she had then taken it to [Mr B] to settle.
23Mr W denies that he ever took instructions for or prepared a proof of evidence for the husband. He does not recollect a discussion with the husband regarding the husband's "emotional relationship" with the wife.
24Mr W has also given a formal undertaking (dated 4 April 2016) in the following terms:
I undertake to the Court, to [Law Firm B] and [the husband] that I will not disclose any information that I may be aware of concerning either [the husband] or the proceedings before the Family Court of Western Australia between [the husband] and [the wife] to any other person.
In that regard, I undertake not to:
1.speak with [the wife] or any person at [Law Firm A] concerning any information I may have concerning [the husband] or his proceedings;
2.disclose directly or indirectly any information that I may have in my possession or control concerning [the husband] and his proceedings;
3.have any involvement with the proceedings;
4.view any correspondence files, tax invoices, briefs or emails either sent to [Law Firm A] or received by them, nor be involved in the matter in any manner whatsoever in the future;
5.convey to any person any information about the affairs of [the husband] which I may have as a result of my employment with [Law Firm B].
25Ms N confirms4 that she has been a director of Law Firm A since 1998 and that she has the sole conduct of the wife's file at the firm. As is to be expected, she can say nothing about any confidential information that may have come into Mr W's possession while he was at Law Firm B. Her evidence focuses, instead, on what is commonly called an "information barrier" erected within Law Firm A. In the present context, the purpose of the information barrier should be, of course, to ensure that any confidential information possessed by Mr W does not come into the possession of other lawyers at Law Firm A. As described by Ms N, however, the primary purpose of the information barrier appears to be to ensure that any confidential information possessed by Law Firm A does not fall into Mr W's possession. That may be of assistance to the wife (who has been a client of Law Firm A at all relevant times), but is of little assistance to the husband: it is the husband's confidential information (and not the wife's confidential information) that should be perceived as being at risk of coming into the hands of someone with an adverse interest.
26An analysis of Ms N's evidence reveals that, in reality, the only protections offered by Law Firm A against the possibility of Mr W supplying confidential information about the matrimonial dispute to members of the firm whose interests are adverse to those of the husband comprise –
a)the instructions given to the staff of Law Firm A that they cannot discuss the matrimonial dispute with Mr W in any way;
b)the instructions given to Mr W that he must not discuss either the husband or the matrimonial dispute with any member or employee of Law Firm A;
c)Ms N's assurance that she has not conversed on any level with Mr W about any matter which directly or indirectly involves the matrimonial dispute, including mentioning the name of the matter to him; and
d)Ms N's willingness to give an undertaking to the Court in relation to the conduct of the file at Law Firm A and the safeguard of any confidences "if the husband so requires".
The law
27I discussed the law dealing with the bases upon which a solicitor may be restrained from acting against his or her former client in Karapataki & Karapataki [2011] FMCAfam 6 ("Karapataki"). Omitting the majority of footnotes, I said:
28.There is no absolute rule that a legal practitioner who has acted for a client in a particular matter must not act against that client in the same or any other matter. It was said in Kallinicos v Hunt(2005) 64 NSWLR 561 ("Kallinicos v Hunt"), however, that there are three possible grounds for restraining a legal practitioner from acting for a party to litigation:
a)the inherent jurisdiction or implied power of the court to supervise and control the conduct of legal practitioners as officers of the court (in order to safeguard the due administration of justice);
b)a breach of a supposed fiduciary duty of loyalty not to act against a client, or against a former client, in the same matter or a closely related matter; and
c)the danger of misuse of confidential information.
29.I shall refer to the first of the above grounds as "the supervision and control ground". I shall refer to the second and third grounds as "the duty of loyalty ground" and "the confidential information ground" respectively.
30.An application to restrain a legal practitioner from acting for a party to litigation must be made without delay, and failure to take the point at an early stage might well cast doubt on the validity of any subsequent complaint.
The supervision and control ground
31.Leaving aside any questions relating to whether this Court has inherent jurisdiction, as opposed to "an implied incidental power to make orders necessarily incidental to express powers", the test to be applied in relation to the supervision and control ground seems to be "whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting – in the interests of the protection of the integrity of the judicial process and the due administration of justice (including the appearance of justice)".5 Such jurisdiction or power as is inherent in the supervision and control ground should be regarded as exceptional, and must be exercised with caution, with "due weight" being given to the public interest in a litigant not being deprived of his or her lawyer of choice without a good reason.
32.In State of Western Australia v Ward and Ors (1997) 76 FCR 492 the Full Court of the Federal Court said:
… the requirements of natural justice do not involve an absolute right to the legal adviser of a party's choice. The instances in which courts have prevented chosen counsel or solicitors from acting have involved misconduct, potential use of confidential information, and a real risk of lack of objectivity and of conflict of interest and duty … The present case (i.e. State of Western Australia v Ward) is only another example of situations in which the "integrity of the judicial process", the "interests of justice" and the "need to preserve confidence in the judicial system", to use some of the notions that lie behind the inherent jurisdiction to exclude counsel or solicitors, may override the public interest that a litigant be able to be represented by the lawyer of its choice. That public interest is "an important value". … It is a serious matter to prevent a party from retaining its chosen lawyer. … But … particular circumstances may require some modification of the public interest in the ability of a litigant to have a lawyer of its choice.
33.It is, of course, settled law that legal practitioners have duties to the court, as well as duties to their clients, and that the former necessarily override the latter. Put another way, a legal practitioner's duty to the client is subordinate to his or her duty to the court – which duty remains paramount even if the client gives instructions to the contrary. Indeed, unlike a legal practitioner's duty to a client (which can be waived or ratified by a properly informed and advised client who is not under any disability), a legal practitioner's duty to the court cannot be waived.
34.The practical implications of legal practitioners' overriding or paramount duties to the court were described by Heenan J in Holborow v Macdonald Rudder [2002] WASC 265:
If there are circumstances which are likely to imperil the discharge of these duties to a court by a legal practitioner acting in a cause, whether because of some prior association with one or more of the parties against whom the practitioner is then to act, or because of some conduct by the practitioner, whether arising from associations with the client or a close interest which gives rise to the fair and reasonable perception that the practitioner may not exercise the necessary independent judgment, a court may conclude that the lawyer should be restrained from acting, even for a client who desires to continue his service.
35.The inherent jurisdiction or implied incidental power referred to in the supervision and control ground has been invoked in cases where there was a potential that the legal practitioner might become a witness in the proceedings, and where the subject matter of litigation was likely to involve an evaluation of the legal practitioner's conduct. It has also been held that it may be appropriate to invoke the jurisdiction or power in a case where the practitioner might feel impelled to justify or defend his or her conduct in representing a client, or where the legal practitioner's credibility could be at stake.
36.The potential misuse of information which might not comfortably be described as "confidential information" also falls within this general category. For example, legal practitioners can often learn a great deal about a client's personality, weaknesses or strengths, honesty (or perhaps dishonesty), fears and reactions (including reactions to pressure or tension). Similarly, legal practitioners can learn much about a client's attitude and approach to litigation. In Yunghanns v Elfic Ltd (Unreported, Supreme Court of Victoria, Gillard J, 3 July 1998), Gillard J described these considerations as "getting to know you" factors.
37.In a case where a former client's credibility becomes a matter of significance, his or her former legal practitioner's knowledge of the "getting to know you" factors can become a powerful weapon at the disposal of the practitioner's new client. Irrespective of the actual effectiveness of the weapon, it can be anticipated that the former client would feel anxiety about the potential of being cross-examined by a practitioner who might be perceived as being in a position of unfair superiority – or by Counsel instructed by such a practitioner. In Black v Taylor [1993] 3 NZLR 403, for example, Richardson J said, (in the context of proceedings involving a family solicitor potentially acting for the estate of a deceased family member in proceedings brought against it by another family member):
… it would not be unreasonable for a family member to feel chagrin and concern to find a lawyer who had built up knowledge of that kind was able consciously or unconsciously to draw on it when acting against (the family member).
38.In McMillan & McMillan [2000] FamCA 1046 ("McMillan"), at [65] the Full Court adopted the following passage from the minority judgment of the Supreme Court of Canada in Martin v MacDonald Estate (Gray) [1991] 1 WWR 705, at 728-729 – which was a decision (although not in the family law jurisdiction) dealing with an employed solicitor changing firms:
In preparing for the hearing of a contentious matter, a client will often be required to reveal to the lawyer retained highly confidential information. The client's most secret devices and desires, the client's most frightening fears, will often, of necessity, be revealed. The client must be secure in the knowledge that the lawyer will neither disclose nor take advantage of these revelations.
Our judicial system could not operate if this were not the case. It cannot function properly if doubt or suspicion exists in the mind of the public that the confidential information disclosed by a client to a lawyer might be revealed.
39.It is very important, however, not to elevate the significance of the "getting to know you" factors. Indeed, it is crucial to evaluate and inform their relevance in the broader context of the inherent jurisdiction or implied power of the court to supervise and control the conduct of legal practitioners as officers of the court (in order to safeguard the due administration of justice). Thus, and as Heerey J said in Mintel International Group Limited v Mintel (Australia) Pty Ltd [2000] FCA 1410 ("Mintel"), at [44]:
Insofar as reliance is placed on the "getting to know you" principle, a moment's consideration of the way that litigation is conducted in Australia shows that this cannot be accepted too literally, especially in relation to counsel. There are many bodies such as Commonwealth and State government entities, banks, insurers, media companies and many others which are constantly engaged in litigation. Counsel retained to act on behalf of such bodies inevitably acquire information, not confidential information in the strict sense, but experience as to the corporate culture of the clients, their internal policies, the way they deal with litigation, tactics, the personalities of important decision-makers and so forth. I do not accept that general experience of that kind would impose what presumably on the respondent's argument would be lifetime restraints on counsel from acting against such a body. Indeed it is a feature of an independent Bar that counsel might appear one day on behalf of such a body and the next day against it. While perhaps strange to observers from countries where the legal profession is organised differently, this freedom enhances the independence of counsel and their capacity to give objective and sometimes unwelcome advice. The cab rank rule works both ways. The driver is obliged to accept the fare, but the fare does not buy the service of the driver beyond the stipulated journey.
The duty of loyalty ground
40.It is likely that any supposed fiduciary duty of loyalty owed by a legal practitioner to his/her client does not survive the termination of the retainer. In Ismail-Zai v The State of Western Australia (2007) 34 WAR 379, Steytler P said:
23.In my opinion, the weight of authority currently supports the proposition that the duty of loyalty does not survive the termination of the retainer. Moreover, some of the cases which support the existence of a continuing duty of loyalty seem … to draw no clear distinction between a fiduciary obligation of that kind, on the one hand, and the court's inherent supervisory jurisdiction to protect the integrity of the judicial process, on the other. …
24.In any event, … there may be little distinction, for any practical purpose, between the question whether there is a breach of the continuing duty of loyalty, on the one hand, and the question is whether there is a real risk of a breach of confidence and whether there is or will be other impropriety of a kind that is likely to undermine the integrity of the judicial process and the due administration of justice (which comprehends the appearance of justice), on the other hand. … I find it difficult to envisage circumstances in which a lawyer who acts in the same or a closely related matter against a former client will neither be in a position in which there is a real risk of a breach of duty of confidence nor be acting in such a way as to undermine the integrity of the judicial process or the due administration of justice.
41.I agree with the above analysis, and conclude that the second ground for restraining a legal practitioner from acting against a former client (being the duty of loyalty ground) is, in essence, a restatement of the first and third grounds (being the supervision and control ground and the confidential information ground) in omnibus form. Put another way (per Heenan AJA in Ismail-Zai v The State of Western Australia (supra), at [63]):
… because of the frequent recourse to the term "duty of loyalty" …, it is necessary to emphasise that that eloquent, but elastic, term is not itself precise. The measure of the obligation upon the former (legal practitioner) should not be deduced from that description alone but, rather, from an examination of the principles on which courts have acted to regulate or restrict actual or anticipated conduct of former legal advisers.
The confidential information ground
42.Generally speaking, cases dealing with applications to restrain a legal practitioner from acting in family law proceedings have focused on the confidential information ground, and less frequently on the duty of loyalty ground. The leading authority is the decision of the Full Court in McMillan.
43.The confidential information ground, and the effect of McMillan, were summarised by O'Ryan J in Pond & Thurga (No 2) [2007] FamCA 587, at [213] (footnotes omitted):
Prior to (McMillan) it was uncertain whether a narrow test of actual prejudice (arising from the possible misuse of confidential information) or the broader test of theoretical risk of prejudice was to be applied. … The Full Court ultimately adopted the broad approach in Mills v Day Dawn Block Gold Mining Company Ltd and Thevanaz of a theoretical risk of prejudice rather than proof of actual prejudice. The Full Court found that the narrow or English approach which requires 'real mischief or prejudice' to follow in order to justify court intervention (an approach stemming from Rakusen v Ellis, Munday & Clarke) was inappropriate for the family law jurisdiction. The Full Court … cited with approval the summary of the law provided by Lindenmayer J in Stewart (unreported, 17 April 1997):
All that is necessary is that the wife swears that she has conveyed confidential information to the solicitors and that she believes, not unreasonably, that that information may be used against her, or at least to her disadvantage, in these current proceedings.
44.His Honour continued at [214]:
Importantly, the adoption of the stricter approach in the family law jurisdiction was borne out of cases concerning practitioners that had acted for both husband and wife and reasons specific to this factual situation. In these cases the reasons for adopting this test have been based on the sensitive nature of the jurisdiction and the in-depth factual inquiries that the court was often required to make into parties' financial history, conduct and contributions. …
28More recently, the Full Court has dealt with the subject in Osferatu v Osferatu (2015) 53 Fam LR 433 ("Osferatu"). Referring to Kallinicos v Hunt , their Honours said at [20] that there are three established categories on the basis of which solicitors may be restrained from acting against their client or former client. These are:
a)breach of confidence (which I have described as "the confidential information ground");
b)breach of fiduciary duty (which I have described as "the duty of loyalty ground"); and
c)the inherent jurisdiction of a court over its offices and to control its process (which I have described as "the supervision and control ground").
29Their Honours added that the third category "may be involved in conjunction with either of the first two so that there is clearly an overlap".
30The Full Court was only concerned with the confidential information ground, and did not discuss the other two grounds.
31In relation to the confidential information ground, their Honours said (footnotes omitted):
22.The manner in which a client's confidential information is to be protected in family law proceedings was clearly explained by the Full Court in McMillan where the Full Court extensively reviewed existing authorities in the Family Court and in many other courts. The following statement of Frederico J in In the Marriage of R A and E Thevenaz (1986) 11 Fam LR 95 ("Thevenaz") was expressly adopted by the court:
Thus "a practitioner who wishes to cease acting for one party and to continue to act for the other party will be restrained from doing so by the court if there is any evidence that confidential communications have been made to him by the party for whom he is ceasing to act. In such a case the court will not weigh conflicting evidence as to confidence. It will act upon the evidence of the client who swears that he has made the confidential communication". (Reference omitted).
23.The following passage from Thevenaz was also expressly adopted by the Full Court in McMillan:
It is my view that in this case [the lawyer] should not continue to act on behalf of [the wife]. It may well be that the risks were he to do so are more theoretical than practical. However, it is asserted and not contradicted that material in the files does relate to confidences exchanged in the course of the former firm previously acting on behalf of both parties and would embarrass the husband. It is of the utmost importance that justice should not only be done but should appear to be done. In the circumstances of the present case, there is a risk which may well be merely theoretical but still exists, that justice might not appear to be done.
24.In an unreported decision of Stewart & Stewart (unreported, Family Court of Australia, Lindenmayer J, 17 April 1997) ("Stewart") Lindenmayer J said:
… All that is necessary is that the wife swears that she has conveyed confidential information to the solicitors and that she believes, not unreasonably, that that information may be used against her, or at least to her disadvantage, in these current proceedings…
25.Of that passage the Full Court in McMillan said at [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… In the present case, we consider it sufficient, as we said earlier, that the husband has sworn that he had given instructions to Mr Pitts as to how he wished his "matter to be conducted and the position to be put to the wife". It is obvious that such matters would come within the description of "confidential information".
26.It is, however, important to recognise that McMillan, as were Thevanez and Stewart, was a case where the applicant was seeking to restrain a solicitor or a clerk to whom they had recently, and directly, given instructions from acting, or the firm to which they had moved, from acting, in those proceedings. Because the applicants in those cases had given instructions to the solicitor about the very matter in issue, it follows easily that there would be a finding that the solicitor who had moved was in possession of confidential information which is or may be relevant to that matter. It is for that very reason that the passage of Lindenmayer J in Stewart commenced with the words "All that is necessary is that …". His Honour was simply saying that, in such circumstances, the burden borne by the applicant was discharged by such evidence. Nothing that appears in Stewart, Thevanez or McMillan obviates the need for an applicant seeking such relief from discharging his/her burden of proof by adducing cogent and persuasive evidence. This is particularly so where, as here, the circumstances differ from McMillan. In this case Mr F had never taken instructions from the wife.
27.In Mancini v Mancini [1999] NSWSC 800 ("Mancini") Bryson J said 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. No circumstances were put forward in which Mrs Mancini herself is entitled to the protection of the law against the use of any particular information by Mr Mancini or by the lawyers whom he has chosen to retain. It is not possible to address in any clear way and to come to a decision on protection of any alleged confidential information without identifying what the confidential information is in a sufficiently specific way to enable it to be identified. Without doing that it is not possible to come to a conclusion on whether the information truly is confidential, to consider and appraise the circumstances in which it came into existence and was communicated, to come to any conclusion about whether protection is appropriate, or to make any enforceable order. 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 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 in my opinion be upheld. (Emphasis added)
28.The need for this proof is obvious. In Billington & Billington (No 2) [2008] FamCA 409 ("Billington") Coleman J said at [43]:
As the authorities make clear, the jurisdiction to grant relief of this kind "is to be exercised with caution". The court understands caution to be exercisable in relation to the totality of the evidence, and the matters relevant to the exercise of the jurisdiction, and not to be referrable only to the interests of the party seeking the relief. Relevant in that context is the need to give appropriate weight to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause. Also relevant in this context is the cost and inconvenience of requiring the wife to retain new lawyers. Quite apart from the work required to be undertaken by solicitors familiar with the case to adequately represent the wife's interests before the Full Court, realistically, were new solicitors now to be instructed, a far greater level of reading and preparation would be required, and at greatly increased expense to the wife.
29.These are serious and weighty considerations which must, of course, be balanced against the competing interests of the client which were described by Lord Millett in Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222 at 236 ("Prince Jefri") as follows:
…It is of overriding importance for the proper administration of justice that a client should be able to have complete confidence that what he tells his lawyer will remain secret. This is a matter of perception as well as substance. It is of the highest importance to the administration of justice that a solicitor or other person in possession of confidential and privileged information should not act in any way that might appear to put that information at risk of coming into the hands of someone with an adverse interest.
30.…
31.This conveniently leads to the next point. Once the client has discharged the onus of proving that the solicitor is in possession of confidential information which is, or may be relevant to the new matter, that is not the end of the case.
32.The next step involves a consideration of the risk that the relevant confidential information will be disclosed. The risk of disclosure "must be a real one, and not merely fanciful or theoretical. But it need not be substantial": Prince Jefri at 237.
33.How is this to be determined? It is by the consideration of the risk and of any protective measures taken or proposed by the solicitor or his or her new firm. The evidentiary burden on this issue falls squarely on the lawyer or the firm to which he or she has moved. As Lord Millett said in Prince Jefri at 237–8:
Once the former client has established that the defendant firm is in possession of information which was imparted in confidence and that the firm is proposing to act for another party with an interest adverse to his in a matter to which the information is or may be relevant, the evidential burden shifts to the defendant firm to show that even so there is no risk that the information will come into the possession of those now acting for the other party. There is no rule of law that Chinese walls or other arrangements of a similar kind are insufficient to eliminate the risk. But the starting point must be that, unless special measures are taken, information moves within a firm. In MacDonald Estate v Martin 77 DLR (4th) 249, 269, Sopinka J said that the court should restrain the firm from acting for the second client "unless satisfied on the basis of clear and convincing evidence that all reasonable measures have been taken to ensure that no disclosure will occur." With the substitution of the word "effective" for the words "all reasonable" I would respectfully adopt that formulation.
34.We agree with Goldberg J in PhotoCure ASA v Queen's University at Kingston [2002] FCA 905 ("PhotoCure") where he said at [50] and [51]:
50.It is apparent from Lord Millett's judgment that there are three stages which need to be considered:
•whether the firm is in possession of information which is confidential to the former client;
•whether that information is, or may be, relevant to a matter in which the firm is proposing to act for another party with an interest adverse to the former client;
•whether there is any risk that the information will come into the possession of those persons in the firm working for the other party.
51.The burden of establishing the first two propositions is upon the former client but the burden of establishing the third proposition moves to the firm proposing to act once the first two propositions are satisfied…
35.A balancing of the nature of the information against a consideration of the person to whom the information was given, when the information was given, the relevance of that information to the current proceedings, the risk of disclosure and any proposed protective measures is required before any determination can be made as to whether any relief is required and, if so, what is the appropriate relief.
36.…
37.None of this conflicts with what was said in McMillan. At [93] their Honours said:
…We accept that the mere fact of access to confidential information is not the test. Rather the issue is whether the former client actually imparted confidential information to a solicitor (or clerk) who is now employed by the solicitors acting on the other side of the litigation.
38.The risk, and management of the risk, were not issues in McMillan, although the authorities quoted there deal with that aspect of the law in the manner we have described.
39.Before leaving this discussion we wish to refer to the statement in McMillan that even "a theoretical risk of the misuse of the confidential information" is sufficient to found relief. The phase "a theoretical risk" was echoed in Prince Jefri in the passage quoted earlier. For our part, we find the word "theoretical" unhelpful. There is indeed a continuum of risk from obvious to remote. In Asia Pacific, Bergin J described the risk of disclosure or misuse as "probably real and not fanciful" (at [41]). In Billington Coleman J referred to "any real risk" (at [37]). That phrase was also used by Goldberg J in PhotoCure (at [78]). This is a more meaningful phrase. The consideration should be whether there is a real risk of misuse as opposed to one which is merely fanciful. To the extent that what we have said may be seen to represent a departure from McMillan (which we do not necessarily accept), it is to accord with more recent authority and provides a clearer test.
40.We return finally to Lord Millett in Prince Jefri:
Accordingly, it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious. I do not think that it is necessary to introduce any presumptions, rebuttable or otherwise, in relation to these two matters. But given the basis on which the jurisdiction is exercised, there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case… (Emphasis added)
41.It follows from the above discussion that the law requires that an applicant seeking to restrain a solicitor from acting must adduce evidence that establishes the confidential information and the risk of the misuse of that information in the circumstances. The weight and persuasiveness of any evidence adduced depends, of course, on the precision of the evidence called, the nature of the confidential information and the nature of the risk of disclosure.
32In summary:
a)In considering whether to grant injunctive relief of the nature sought in the current application, the Court must balance two serious and weighty considerations:
i)the obligation to ensure that a lawyer in possession of confidential information cannot act in any way that puts (or that might appear to put) that information at risk of coming into the hands of someone with an adverse interest; and
ii)the need to give appropriate weight to the public interest in a litigant not being deprived without due cause of the lawyer or law firm of his or her choice (thereby avoiding the potential of the litigant having to incur the additional cost and endure the inevitable inconvenience associated with retaining a new lawyer or law firm).
b)The party seeking the restraint ("the applicant") must adduce cogent and persuasive evidence that either –
i)the applicant has provided confidential information to the lawyer who has changed firms ("the departing lawyer"); or
ii)the departing lawyer has come into the possession of confidential information through his/her previous employment with the applicant's lawyers.
c)The information asserted to be confidential information must be identified with some degree of specificity (to satisfy the Court that it remains both confidential and relevant to the extant proceedings). Where an applicant has recently, and directly, given instructions to the departing lawyer "about the very matter in issue", however, a finding that the departing lawyer is in possession of confidential information which is or may be relevant to that matter "follows easily". In other words, evidence of this nature – in and of itself – will ordinarily discharge the burden borne by the applicant to adduce "cogent and persuasive evidence" that confidential information has been passed to the departing lawyer.
d)If the requirements in (b) and (c) above have been met, the Court must give consideration to the nature (or character) and gravity of the risk that the relevant confidential information will be disclosed. The risk need not be substantial, but it must be real (and not merely fanciful or theoretical).
e)If the Court is satisfied that the relevant information is indeed confidential information and that there is a real risk that it will be disclosed, the Court must then consider any protective measures taken or proposed by the departing lawyer and/or the law firm that the departing lawyer has joined. In this regard, the evidentiary burden falls squarely on the departing lawyer or the firm to which he or she has moved, because the starting point is that, unless special measures are taken, information will be recognised as moving within a firm – or, put another way, the knowledge of one lawyer within the firm will be imputed to all other lawyers within the firm.
f)Nevertheless, there is no rule of law that "information barriers" will inevitably be insufficient to eliminate the risk of confidential information moving within a firm. An "information barrier" will be deemed sufficient to eliminate the risk of confidential information moving within a firm if the Court is satisfied on the basis of clear and convincing evidence that effective measures have been taken to ensure that no disclosure will occur.
g)In considering the above matters, the Court is required to consider and balance –
i)the nature of the information the disclosure of which is at risk;
ii)the past and present role of the departing lawyer;
iii)when the information was provided or otherwise came into the departing lawyer's possession;
iv)the relevance of the information to the current proceedings; and
v)the character and gravity of the risk of disclosure of that information (including in the light of any proposed protective measures).
Discussion
33I begin by recognising the need to balance the two "serious and weighty" considerations referred to above. On the one hand, the wife should not be deprived without due cause of the law firm and legal representation of her choice. On the other, the Court must do its best to ensure that any confidential information in Mr W's possession does not come into the hands of the wife or those who represent her interests.
34Mr Hooper SC (for the husband) submits that it is obvious that Mr W received confidential information and that a concession to that effect should have been made. I agree. As was made clear in Thevanez, McMillan and Osferatu, in cases of this nature the Court will not weigh conflicting evidence as to confidence: it is sufficient if the client swears to having provided confidential information. Further, and as the Full Court said in Osferatu at [26], in cases where an applicant "had recently, and directly, given instructions" to a solicitor who has moved firms "about the very matter in issue, it follows easily that there would be a finding that the solicitor who had moved was in possession of confidential information which is or may be relevant to that matter". Their Honours also explained that, although the applicant must adduce "cogent and persuasive evidence" that he or she has provided confidential information to the lawyer who has changed firms, "the burden borne by the applicant was discharged by such evidence".
35Mr Hooper also submits that "this is not a matter where the involvement of the practitioner was indirect and limited to the fact of common employment and superficial knowledge". Again, I agree. As Mr Hooper suggests, the preparation of a chronology and schedule of assets and liabilities are at the core of any financial dispute in this jurisdiction.
36Dr Dickey QC (for the wife) submits, in effect, that the husband's evidence regarding Mr W having received confidential information is nebulous, and certainly something less than cogent and persuasive. He refers to the passage from Mancini cited in in Osferatu at [27]. In Mancini, however, the evidence presented by the applicant failed to show that she had ever conveyed to the relevant firm any identified information which had a bearing on the principal litigation. Indeed, the applicant failed to establish that she (personally) was ever the client of the firm. The reference to Mancini follows immediately after the Full Court's comment that, in the case before it (Osferatu), the lawyer the object of the application "had never taken instructions from (the client)". The Full Court was differentiating such circumstances from those adhering in McMillan and Thevanez – where, as I have explained, the applicants were seeking to restrain solicitors or clerks to whom they had recently, and directly, given instructions. Because instructions had been given to practitioners about the very matter in issue "it follows easily that there would be a finding that the solicitor who had moved was in possession of confidential information which is or may be relevant to that matter". In such circumstances, the Full Court held that an applicant need say little or nothing more: the burden borne by him or her has been discharged.
37Dr Dickey emphasises that Mr W did not have conduct of the husband's case when he was at Law Firm B and that he met the husband on only two occasions (for approximately one hour on each occasion). He also emphasises that Mr W is an experienced practitioner and an accredited Family Law specialist. The fact of the matter is, however, that none of those considerations is relevant to the issue now before the Court. Where what I have described as the confidential information ground is relied upon in support of an application for an injunction such as that sought by the husband, it matters not whether a lawyer has spent one hour or a hundred hours (or, perhaps more relevantly in the context of contemporary legal practice, one billable hour or a hundred billable hours) with a client or working on a client's file, whether the lawyer is experienced or inexperienced and whether he or she has a fine reputation; what is relevant is whether the lawyer is in possession of confidential information and whether there is a real, but not necessarily substantial, risk that the confidential information will fall into the hands of an opposing party in the same dispute as that in relation to which the lawyer (or the firm for which the lawyer previously worked) was engaged, or those who represent the opposing party's interests. The relevant considerations have been discussed under the heading The law above.
38Family Court proceedings, whether involving parenting or property issues, can involve a wide range of relevant issues. Lawyers representing parties to such proceedings become privy to their clients' attitudes to particular issues, and to their fears and vulnerabilities. To this can be added their clients' honesty (or perhaps dishonesty), priorities, and willingness (or unwillingness) to compromise on certain matters. As discussed above, these considerations have been referred to as "getting to know you" factors. They comprise a form of information which cannot comfortably be described as "confidential information", but which can nevertheless become a powerful weapon at the disposal of those with adverse interests. It would be perfectly understandable for a client to feel trepidation about the potential of being cross-examined by an opponent with such a weapon at his or her disposal (or by counsel instructed by that opponent). For all that the significance of the "getting to know you" factors should not be elevated, it is difficult to ignore that Family Court proceedings are very different to the corporate or commercial litigation to which Heerey J referred in the passage from Mintel cited above.
39Also cited above is the passage from the minority judgment of the Supreme Court of Canada in Martin v MacDonald Estate (Gray) (supra) – which was adopted by the Full Court in McMillan – in which reference is made to clients revealing to their lawyer their "most secret devices and desires" and their "most frightening fears".
40The Full Court in Osferatu made no direct reference to the "getting to know you" factors, although it did not dismiss their relevance. On the other hand, and save for a preference for the expression "real risk" over the words "theoretical risk", their Honours qualified, but otherwise endorsed and applied McMillan. It follows that the "getting to know you" factors should not be ignored. They were not discussed in Osferatu because, as is apparent from the decision at [21], the Full Court was only concerned with the risk of the misuse of confidential information (properly so-called). It did not concern itself with the other established categories on the basis of which solicitors may be restrained from acting against a client or former client – namely, breach of fiduciary duty and the court's inherent jurisdiction over its officers and to control its processes (or, as I described them in Karapataki, the duty of loyalty ground and the supervision and control ground). As was recognised in Osferatu at [20], however, the confidential information ground (or breach of confidence ground), the duty of loyalty ground and the supervision and control ground overlap.
41It is sometimes suggested, in relation to both the confidential information ground and the so-called "getting to know you" factors, that the departing lawyer may have no recollection of confidential information or of discussions with or impressions of the client. Such suggestions are of little relevance. As Newnes M said in Zalfen v Gates [2006] WASC 296 ("Zalfen v Gates") at [98]:
It is a matter of common experience that recollection of something thought to have been completely forgotten may at a later time be triggered by some comment or event or simply come to mind. The fact that [a lawyer] currently has no recollection of [a relevant matter] is a factor to be taken into account, but cannot be regarded as establishing that any relevant information about the matter is lost to him forever.
42As I have said, Mr W has deposed that he does not recollect discussing with the husband either his "emotional relationship" with the wife or the letter dealing with pre-action procedures. No doubt there are other aspects of his interaction with the husband that Mr W does not recall, but the reality is that the husband is one of a very large number of clients for whom Mr W has provided legal services over many years. It is fair to assume that the husband's awareness and perception of his interaction with his legal advisers in relation to the matrimonial dispute is likely to be very different. In any event, and for the reasons summarised in the passage from Zalfen v Gates referred to above, I give little weight to Mr W's current inability to recall all aspects of his professional dealings with the husband.
43In relation to the information barrier, Mr Hooper submits that there is no evidence of appropriate supervision within Law Firm A to ensure the effectiveness of the barrier. Similarly, he submits that undertakings have not been obtained from relevant staff (including support staff) who may – wittingly or unwittingly – become the conduit by which confidential information may be transmitted from Mr W to those with interests adverse to the husband in the matrimonial dispute. He argues that Ms N made no mention of the size of Law Firm A (again, including support staff) and, for example, "how the firm socialises".
44More importantly, Mr Hooper argues that the failure or refusal of the wife's advisers to acknowledge that Mr W is in possession of confidential information should motivate the Court to exercise caution before accepting the effectiveness of the proposed information barrier in Law Firm A. In my opinion, there is merit in this submission. Indeed, caution is warranted in the light of the firm's apparent failure to recognise information such as that possessed by Mr W as in fact comprising confidential information. Put another way, how can a firm protect from disclosure something it cannot identify or acknowledge?
45Reference was made to the decision of Bergin J in Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd [2007] NSWSC 350 as an example of how an information barrier can fail. In the course of a careful (and interesting) judgment, her Honour – who, in an earlier judgment, had been satisfied that the information barrier which eventually failed comprised "a sensible and safe system" to ensure that there was no real risk of confidential information being disclosed – said (emphasis added):
33.The exposure of a breach of a confidentiality undertaking in relation to an information barrier is rare. Counsel advised that they could find no case in which such an occurrence had been exposed.… The structure of the practising profession is that the more senior solicitors supervise the more junior solicitors. The consequence of this regime is that the experience and judgment of the more senior lawyer is observed by and communicated to the junior lawyer as that lawyer develops in the practice of the profession. One aim of such a structure is that the important aspects of daily legal practice, including protecting the client's privileged information, will become second nature to the developing lawyer. It is not part of every day legal practice for a lawyer to have his or her knowledge from a case quarantined from another lawyer within the same section of the firm. The system of justice permits this unusual process in instances where the client's right to have the lawyer of choice is not outweighed by a real risk of disclosure of confidential information of a former client to the present client. The quarantining of such knowledge is a somewhat ethereal concept that is not second nature to a lawyer and when it is permitted it needs very special care.
34.…
35.The fact that two solicitors… failed to recognise the problem [that eventually arose] has certainly diminished the satisfaction that I had in 2005 that there was an appropriate system in place to prevent any real risk of disclosure or misuse of the confidential information. In this regard I am not referring to the information in the cupboard or on the computer system. I am referring to the knowledge of the solicitors who acted in the Retainer. Much more should have been done to keep the level of consciousness as high as it was at the time of the swearing of the affidavits in the first application and the giving of the confidentiality undertakings. Whether that was by way of signage on doors or something more sophisticated does not matter, so long as the solicitors were assisted in their vigilance in honouring their undertakings and being true to their sworn evidence.
36.In this application [the relevant firm] did not call any evidence of any steps the firm intended to take to ensure the heightened consciousness of the solicitors to their confidentiality undertakings and adherence to their sworn evidence. [There was no] evidence of how [the firm] intended to avoid a repetition of this conduct in the future. Rather it seemed to be suggested in submissions that the experience of this application in itself would heighten that awareness so that there should be no concern that a further breach would occur. Theoretically that might be correct but unfortunately even the sworn evidence given in the first application did not keep the awareness at the required level. The rawness of the present experience will probably heighten the awareness of the need for vigilance but how long that might last is another matter.
37.The reality is that the solicitors were all working very hard with deadlines to meet and time constraints. Such is the life of a busy and successful lawyer. That will not change.… [Compliance] with undertakings relies upon those who are bound by them maintaining a consciousness of their requirements.… I agree that with time and with the intrusion of other pressing matters awareness will lessen. In the absence of any evidence of any new regime to keep the level of consciousness up I do have real concerns about the risk of disclosure in the sense identified by Bryson J, as his Honour then was, in D & J Constructions Pty Ltd v Head & Ors t/as Clayton Utz(1987) 9 NSWLR 118 at 123:
… it is not realistic to place reliance on such arrangements in relation to people with opportunities for daily contact over long periods, as wordless communication can take place inadvertently and without explicit expression, by attitudes facial expression or even avoiding people one is accustomed to see, even by people who sincerely intend to conform to control.
38.… It is extremely difficult to compartmentalise knowledge that has been gleaned from confidential information and even more difficult to know whether such knowledge may trigger an inadvertent affirmative or negative response to a question posed by a colleague in general discussion about a case. The unfortunate inadvertent conduct of [the two relevant solicitors] is a salutary lesson to the proponents of the advantages of information barriers as a mechanism for law firms seeking to retain 'business' in this very competitive environment. It must be remembered that although there are 'business' pressures on the operations of a law firm the duties of the lawyers are professional duties both to the Court and to the client. If the Court endorses the creation of an information barrier the professional obligations of the lawyers are onerous to ensure that it is maintained and that it is perceived to be able to be maintained. Such a barrier must be robust to justify such perception. In this case it has proved to be paper-thin…
46I well understand that the law has moved on since the decision in Prince Jefri. Osferatu itself is ample evidence of that. Nevertheless, and in spite of the fact that they refer to information barriers (or "Chinese walls" as they were then called) within financial institutions and not law firms, Lord Millett's comments in Prince Jefri at 238-9 , although lengthy, bear repeating (emphasis added):
Chinese walls are widely used by financial institutions in the City of London and elsewhere. They are the favoured technique for managing the conflicts of interest which arise when financial business is carried on by a conglomerate. The Core Conduct of Business Rules published by the Financial Services Authority recognise the effectiveness of Chinese walls as a means of restricting the movement of information between different departments of the same organisation. They contemplate the existence of established organisational arrangements which preclude the passing of information in the possession of one part of the business to other parts of the business. In their Consultation Paper on Fiduciary Duties and Regulatory Rules the Law Commission (1992) (Law. Com. No. 124) describe Chinese walls as normally involving some combination of the following organisational arrangements: (i) the physical separation of the various departments in order to insulate them from each other — this often extends to such matters of detail as dining arrangements; (ii) an educational programme, normally recurring, to emphasise the importance of not improperly or inadvertently divulging confidential information; (iii) strict and carefully defined procedures for dealing with a situation where it is felt that the wall should be crossed and the maintaining of proper records where this occurs; (iv) monitoring by compliance officers of the effectiveness of the wall; (v) disciplinary sanctions where there has been a breach of the wall.
KPMG [and similar] firms are very experienced in the erection and operation of information barriers to protect the confidential information of each client, and staff are constantly instructed in the importance of respecting client confidentiality. This is, KPMG assert, part of the professional culture in which staff work and becomes second nature to them. Forensic projects are treated as exceptionally confidential and are usually given code names. In the present case KPMG engaged different people, different servers, and ensured that the work was done in a secure office in a different building. KPMG maintain that these arrangements satisfy the most stringent test, and that there is no risk that information obtained by KPMG in the course of Project Lucy has or will become available to anyone engaged on Project Gemma.
I am not persuaded that this is so. Even in the financial services industry, good practice requires there to be established institutional arrangements designed to prevent the flow of information between separate departments.…
The Chinese walls which feature in the present case, however, were established ad hoc and were erected within a single department. When the number of personnel involved is taken into account, together with the fact that the teams engaged on Project Lucy and Project Gemma each had a rotating membership, involving far more personnel than were working on the project at any one time, so that individuals may have joined from and returned to other projects, the difficulty of enforcing confidentiality or preventing the unwitting disclosure of information is very great. It is one thing, for example, to separate the insolvency, audit, taxation and forensic departments from one another and erect Chinese walls between them. Such departments often work from different offices and there may be relatively little movement of personnel between them. But it is quite another to attempt to place an information barrier between members all of whom are drawn from the same department and have been accustomed to work with each other. I would expect this to be particularly difficult where the department concerned is engaged in the provision of litigation support services, and there is evidence to confirm this. Forensic accountancy is said to be an area in which new and unusual problems frequently arise and partners and managers are accustomed to share information and expertise. Furthermore, there is evidence that physical segregation is not necessarily adequate, especially where it is erected within a single department.
In my opinion an effective Chinese wall needs to be an established part of the organisational structure of the firm, not created ad hoc and dependent on the acceptance of evidence sworn for the purpose by members of staff engaged on the relevant work.
47Mr Hooper submits that Law Firm A has little experience in establishing and maintaining an information barrier. That may be so, but it is the nature of the proposed information barrier that is of concern in the particular circumstances of this case. As I have explained, the problem does not arise from the possibility of those retained by the wife communicating her confidential information to Mr W (whether directly or indirectly); the problem relates to Mr W having to quarantine his knowledge of the matrimonial dispute from all members of staff at Law Firm A whose interests in that dispute may be perceived to be adverse to those of the husband. I accept without hesitation that Mr W will not search for information about the wife's case in the offices of his colleagues or on the firm's computer system, but that is of cold comfort to the husband if Mr W allows his guard to slip during his ordinary day-to-day contact (within the office and on social occasions) with those with whom he works over a period of months, if not years. In every sense, the concept of an "effective" information barrier within a specialist family law firm such as Law Firm A is likely to be illusory. I am not confident that policies, practice manuals, educational programs, briefings (whether regular or irregular), undertakings or the appointment of a compliance manager or series of compliance managers will avoid the problems to which I have referred: cf Prince Jefri at pp 238-9. They may well be useful in the present circumstances, and they may well be sufficient in a large firm where compartmentalisation is provided for within its structure, but with the best will in the world they are unlikely to be effective at a firm such as Law Firm A.
48I would add that, during the course of his submissions, Dr Dickey informed the Court that Law Firm A is a comparatively small firm. It comprises three directors, one consultant, three senior associates, two associates and one lawyer – a total of 10 professional staff. It also employs 14 administrative staff.
49I need say no more about information barriers generally. In the particular circumstances of the case now before me, I am not satisfied that the husband could have complete (or any reasonable) confidence that what he told Law Firm B, and what he told Mr W in particular, will remain secret.
50The wife has offered no evidence regarding the likely or potential prejudice to her if she is obliged to instruct other solicitors (or counsel). I accept that there is likely to be additional cost and inconvenience to the wife if she is obliged to retain a new lawyer. In her second affidavit, Ms N speaks of the substantial amount of work that Law Firm A have undertaken on the wife's behalf, that four members of independent counsel have been instructed to appear on behalf of the wife at various times and that the wife has been billed fees in excess of $300,000. Ms N also emphasises the complexity of the matrimonial dispute. I accept Ms N's evidence in this regard, but none of it serves to persuade me that the risk to the husband – and to the administration of justice – that the husband's confidential information might come into the hands of those with an adverse interest in the matrimonial dispute should be sacrificed on the altar of the wife's desire to retain the lawyers or law firm of her choice. As I have said elsewhere in these reasons, the public interest in a litigant not being deprived of the legal representation of his or her choice is not unqualified. If there is sufficient cause, then that is what must occur. In this case, and through no fault of the wife, there is indeed sufficient cause.
51In all the circumstances, I am not satisfied that the steps put in place by Law Firm A comprise effective measures to ensure that confidential information in Mr W's possession will not be shared with other members of the firm or with the wife. In forming that conclusion, I have taken into account all the factors to which I have referred including, in particular, Mr W's direct involvement with the husband during his employment at Law Firm B. I have also given weight to the evidence which indicates that Mr W is indeed in possession of confidential information relating to the matrimonial dispute. Because of his awareness of this information, there is a real (and certainly not a theoretical) risk that it or some of it will be disclosed to persons whose interests in the matrimonial dispute may be adverse to the husband.
52I have not ignored or minimised the assurances given by Ms N on behalf of Law Firm A; nor have I ignored or minimised the undertaking given by Mr W. In other circumstances, it is possible that such assurances and/or such an undertaking would have been adequate to satisfy the Court that the relief sought by the husband should not be granted. But not in these circumstances.
53I emphasise that I do not question for one moment the honesty, integrity or professionalism of Mr W or Ms N. I accept that any disclosure of confidential information would be accidental or as a result of inadvertence. Nevertheless, and for the reasons I have given, the risk exists – and it is a real risk.
54During the course of submissions, Dr Dickey suggested that the Court should be cautious not to impede unduly the ability of lawyers to move from one firm to another. Among other things, he observed that Perth is a comparatively small city with a limited number of specialist family law firms. While that may be true, such considerations cannot fairly be regarded as "serious and weighty" and thereby worthy of being weighed in the balance with long-standing principles such as (on the one hand) the obligation to ensure that a lawyer in possession of confidential information cannot act in a way that puts that information at risk of coming into the hands of someone with an adverse interest and (on the other hand) the need to give appropriate weight to the public interest in a litigant not being deprived without due cause of the lawyer or law firm of his or her choice. If a lawyer (including a young lawyer) is in possession of adequately identified confidential information which remains relevant, if he or she obtains employment in a different firm which represents interests adverse to the client whose confidential information the lawyer holds and if there is a real risk that such information will be disclosed to the lawyer's colleagues at his or her new place of employment, then – unless the lawyer or the firm to which he or she has moved satisfies the Court that effective measures have been taken to ensure that the confidential information will not be disclosed – the new firm will be restrained from acting.
Conclusion
55I am satisfied that the husband has adduced cogent and persuasive evidence that Mr W is in possession of adequately identified confidential information which remains relevant. Further, I am satisfied that there is a real risk of confidential information being disclosed by Mr W.
56In all the circumstances, I am not satisfied that the protective measures to which I have referred (including, in particular, the information barrier and Mr W's undertaking – which the Court accepts) are effective to prevent the disclosure of the confidential information available to Mr W.
57It follows that Law Firm A should not act for the wife in these proceedings. I shall hear from counsel regarding any orders which may follow from my ruling in this regard.
I certify that the preceding [57] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court
Associate
10 June 2016
This judgment was republished on 14 July 2020 at the direction of the Chief Judge of the Family Court of Western Australia to correct an error in paragraph numbering.
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1 see husband's affidavits sworn 2 March 2016 and 5 April 2016
2 see the wife's affidavit sworn 31 March 2016
3 see Mr W's affidavit sworn 4 April 2016
4 see Ms N's affidavits sworn 24 March 2016 and 13 April 2016
5 See Kallinicos v Hunt (2005) 64 NSWLR 561
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