Gugiatti v City of Stirling
[2002] WASC 33
GUGIATTI -v- CITY OF STIRLING [2002] WASC 33
| (2002) 25 WAR 349 | |||
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASC 33 | |
| Case No: | CIV:1405/1997 | 30 JANUARY 2002 | |
| Coram: | TEMPLEMAN J | 8/03/02 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Application unsuccessful Defendants' solicitors not restrained from acting for Defendant | ||
| B | |||
| PDF Version |
| Parties: | ALFRED ANTONIO GUGIATTI CITY OF STIRLING |
Catchwords: | Legal profession Conflict of interest Confidential communications between client and solicitor Whether solicitor should be restrained from acting against former client Turns on own facts |
Legislation: | Nil |
Case References: | D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118 Fordham v Legal Practitioner's Complaints Committee (1997) 18 WAR 467 Gugiatti v City of Stirling (2001) 116 LGERA 39 Mallesons v KPMG Peat Marwick (1991) 4 WAR 357 McMillan v McMillan (2000) 159 FLR 1 McVeigh & Anor v Linen House Pty Ltd & Rugs Galore Australia Pty Ltd & Ors [1999] VSCA 138 Mills v Day Dawn Block Goldmining Company Ltd; In re Marsland (1882) 1 QLJ 62 Mullins v Rothschild (2001) 120 A Crim R 574 Newman v Phillips Fox (a firm) (1999) 21 WAR 309 Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222 Rakusen v Ellis Munday & Clarke [1912] 1 Ch 831 Standard Chartered Bank of Australia Ltd v Antico (1996) 36 NSWLR 87 Wan v McDonald (1991) 33 FCR 491 Wentworth v Lloyd (1864) 11 ER 1154 Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
CITY OF STIRLING
Defendant
Catchwords:
Legal profession - Conflict of interest - Confidential communications between client and solicitor - Whether solicitor should be restrained from acting against former client - Turns on own facts
Legislation:
Nil
Result:
Application unsuccessful
Defendants' solicitors not restrained from acting for Defendant
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr E Carlose
Defendant : Mr J C W Skinner
Solicitors:
Plaintiff : E Carlose
Defendant : McLeods
Case(s) referred to in judgment(s):
D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118
Fordham v Legal Practitioner's Complaints Committee (1997) 18 WAR 467
Gugiatti v City of Stirling (2001) 116 LGERA 39
Mallesons v KPMG Peat Marwick (1991) 4 WAR 357
McMillan v McMillan (2000) 159 FLR 1
McVeigh & Anor v Linen House Pty Ltd & Rugs Galore Australia Pty Ltd & Ors [1999] VSCA 138
Mills v Day Dawn Block Goldmining Company Ltd; In re Marsland (1882) 1 QLJ 62
Mullins v Rothschild (2001) 120 A Crim R 574
Newman v Phillips Fox (a firm) (1999) 21 WAR 309
Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222
Rakusen v Ellis Munday & Clarke [1912] 1 Ch 831
Standard Chartered Bank of Australia Ltd v Antico (1996) 36 NSWLR 87
Wan v McDonald (1991) 33 FCR 491
Wentworth v Lloyd (1864) 11 ER 1154
Case(s) also cited:
Nil
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1 TEMPLEMAN J: The applicant, Alfred Antonio Gugiatti, is the plaintiff in an action which he has brought against the City of Stirling ("the City") which is represented by McLeods, solicitors. One of the partners of McLeods is Mr Denis McLeod, who was formerly a partner of McLeod & Co. That firm acted for Mr Gugiatti against the City between 1990 and 1994 in a dispute which is related to the current action. Mr Gugiatti claims to have given confidential information about his case to Mr McLeod while McLeod & Co were his solicitor. For that reason, and because he believes that Mr McLeod may be a witness in the current action, Mr Gugiatti now seeks to restrain McLeods from acting for the City and against him.
2 Although relief is sought against McLeods, they have not been joined in this application. Mr Gugiatti relies on the inherent authority which the Court has over its officers as the foundation of the jurisdiction which he invokes.
3 The application is not opposed by McLeods, but by the City, albeit represented by McLeods. The City contends that the appearance that McLeods have changed sides is illusory. That is because the individual solicitors who have always acted for the City in relation to Mr Gugiatti, have left their previous firm and have become partners in McLeods. One of those solicitors, Mr Julius Skinner appeared for the City in this application.
4 Thus, Mr Skinner submits, McLeods are now "in a position akin to having represented the (City) since the commencement of the action". I do not accept that submission. If Mr McLeod has residual obligations to Mr Gugiatti, the firm should not act against him.
5 It has been settled law for nearly a century that the mere fact that a solicitor has acted for a client in a particular matter does not of itself entitle the client to restrain the solicitor from acting against him in the same matter: Rakusen v Ellis Munday & Clarke [1912] 1 Ch 831. However, if a solicitor is possessed of information which is confidential to his client, the solicitor cannot be permitted to act against his client unless there is no risk of disclosure. The risk must be real, and not merely fanciful or theoretical: but it need not be substantial. That is the test established by the House of Lords in Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222 (at 236-7) per Lord Millett. The test was adopted by Steytler J in Newman v Phillips Fox (a firm) (1999) 21 WAR 309 at 322.
(Page 4)
6 There is a further principle, which extends beyond the need to safeguard confidential information. As Burchett J said in Wan v McDonald (1991) 33 FCR 491 at 513, it arises from:
"a solicitor's duty of loyalty, which cannot be treated as extinguished by the mere termination of the period of his retainer, and the important consideration of public policy which gives special quality to the relationship of solicitor and client that the law will not generally permit to be stained by the appearance of disloyalty."
7 That proposition was considered by Malcolm CJ as a member of the Full Court in Fordham v Legal Practitioners' Complaints Committee (1997) 18 WAR 467 at 489. His Honour referred to:
"The rule (which) not only prevents the use of knowledge or information gained from the client during the course of a retainer, but also prevents the assumption of a position hostile to the client concerning the same matter. … It is the existence of the former relationship which has the potential to create in the mind not only of the former client but also of the reasonable bystander, a reasonable apprehension that use will be made of information provided in the course of the former relationship to the detriment of the former client, as by a cross-examination for the purpose of destroying his or her credit."
8 The principle was applied more recently by the Victorian Court of Appeal in McVeigh & Anor v Linen House Pty Ltd & Rugs Galore Australia Pty Ltd & Ors [1999] VSCA 138. There, Batt JA said (at [23]) the authorities establish that a court would restrain a solicitor from acting for a litigant not only in order to prevent disclosure of confidences of a client or former client, but also to ensure that the solicitor's duty of loyalty to the former client is respected, notwithstanding termination of the retainer, to uphold as a matter of public policy the special relationship of solicitor and client.
9 Batt JA went on to refer to an unreported decision of Phillips J in the Supreme Court of Victoria in a case in which a solicitor who had been engaged for a client to effect a particular transaction was then retained by another client to act against the former client in litigation involving the same transaction. Phillips J said:
"In such a situation I am strongly disposed to the view that the solicitor ought not to act, and I do not think that that depends
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- upon the existence or not of confidences imparted on the earlier occasion that now merit protection. It seems to me to depend rather upon the existence of the contract of retainer that was made in the first place, than upon the existence of confidences disclosed and meriting protection against misuse."
10 In other words, if a solicitor adopts a hostile position against a former client in the same or a related matter he should be restrained from acting because that of itself is a breach of professional duty. That of itself is likely to undermine the trust and confidence of the community in the legal profession.
11 There are, however, two qualifications to this principle. First, that the case is not "rare and very special" as Burchett J put it in Wan v McDonald (supra) at p 513.
12 Secondly, as Malcolm CJ said in Fordham (supra), a solicitor may assume a hostile relationship against a former client if such conduct would not give rise to an apprehension of impropriety in the mind of a reasonable bystander.
13 I assume for present purposes that the reasonable bystander is a lay person who knows something of the facts. However, in my view, the bystander cannot be taken to know any more of the facts than have emerged in the proceedings brought by the client against his former solicitor.
14 The present application has proceeded on affidavit evidence. There is no dispute as to the background facts: but there is a dispute about the extent of the confidential information which Mr Gugiatti claims to have given to Mr McLeod.
15 I make the following findings in relation to the background facts. In about 1958, Mr Gugiatti, who is an automotive mechanic, commenced an automotive repair business from premises at Gwelup within the City. He also sold fuel from those premises. He did so pursuant to approvals given by the City. Later, Mr Gugiatti allowed trucks to be parked on the premises.
16 In 1988, Mr Gugiatti was ordered by the City to cease using the premises for the parking of trucks. Attempts to resolve the dispute were unsuccessful: and in 1991, the City successfully prosecuted Mr Gugiatti for illegal use of the land.
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17 Between 1991 and 1996, Mr Gugiatti had various negotiations with the City in an attempt to find a way to permit him to continue carrying on his business and to avoid the losses that would be inflicted on him if he was forced to cease his business activities at the premises. These attempts were unsuccessful. In 1996, Mr Gugiatti was ordered by the City to cease carrying on the business within three years. In compliance with the order, Mr Gugiatti left the premises on 31 December 1999 and relocated his business elsewhere.
18 In April 1997, Mr Gugiatti commenced the current action against the City. He alleged that the City had owed him a duty of care in 1958 when it approved his application to construct a workshop on the land, and in 1976 when it approved his application to install underground fuel storage tanks. Mr Gugiatti alleged that the City had breached the duty of care by approving applications which did not comply with the relevant by-laws and Town Planning Scheme, and by not telling him that the uses to which he intended to put his land were not permitted. Mr Gugiatti claimed damages including construction costs, demolition costs, relocation costs, the cost of replacement land, loss of profit, lost income, damages for loss of reputation, damages for anxiety and the cost of his unsuccessful defence of the prosecution which the City had brought against him in 1996.
19 The question whether the City was liable to pay damages to Mr Gugiatti (if any could be proved) was tried as a preliminary point by Commissioner Pringle QC who heard the matter in April and May 2000. In a judgment delivered on 22 June 2000, the learned Commissioner held that the City was not liable to Mr Gugiatti but that if Mr Gugiatti had had a claim, it would not have been statute barred.
20 Mr Gugiatti appealed to the Full Court. The City cross-appealed. The Full Court allowed both the appeal and the cross-appeal. However, the Court held that the Commissioner's findings on the limitation issue should be set aside on the basis that the issue could not be determined until all of the evidence on the damages claim had been heard.
21 The position now, therefore, is that the trial of the damages and limitation issues is pending in this Court.
22 Mr Gugiatti instructed McLeod & Co in about January 1990 when he realised that his own efforts at resolving the dispute with City were likely to be unsuccessful. Mr Gugiatti went to Mr McLeod because he had been told (as is the case) that Mr McLeod is an expert in local government law
(Page 7)
- and in matters relating to planning approval for the use of land for commercial purposes.
23 Mr Gugiatti met Mr McLeod at the latter's office on 30 January 1990. Subsequently, Mr Gugiatti dealt also with Ms Kelly Ralph, a solicitor employed by McLeod & Co. Mr Gugiatti was told by Mr McLeod that Ms Ralph would be dealing with the matter under his direction and supervision. Ms Ralph left McLeod & Co in 1995.
24 Between January 1990 and about December 1994, Mr Gugiatti had several lengthy discussions and meetings with Mr McLeod and Ms Ralph. He paid more than $13,000 in fees to McLeod & Co.
25 Initially, Mr McLeod was instructed to prepare and submit papers to the City for approval to develop the land so as to enable Mr Gugiatti to upgrade his business. When Mr Gugiatti was prosecuted by the City in 1991, Mr McLeod and Ms Ralph were instructed in that matter and in relation to the options available to both Mr Gugiatti and the City for the continuation or cessation of the business. Later, McLeod & Co were instructed to seek a rezoning of the land for the purpose of enabling Mr Gugiatti to continue his businesses lawfully.
26 Against that background, I turn to the contentious matters.
27 In an affidavit in support of this application Mr Gugiatti says:
"During these various discussions and meetings, I was requested to, and did, provide McLeod & Co with confidential and privileged information. The information provided covered, in quite some detail, everything connected and pertaining to my businesses, including matters relating to the nature and extent of my entitlement to damages in the event of my being ordered to cease my businesses and also matters bearing on the limitation issues. On the basis of the information provided, I received advice from McLeod & Co on the various options available to me and my entitlement to damages and the extent of my damages. McLeod & Co and Mr Denis McLeod are in possession of material, confidential and privileged information bearing on the issues pending in this action."
28 Mr McLeod made an affidavit in response. He said that on 1 September 2001 Mr Skinner joined McLeods as a partner. In early October 2001 Mr McLeod became aware that Mr Skinner was
(Page 8)
- representing the City in the litigation involving Mr Gugiatti. Mr McLeod went on to say:
"Between mid 1994 and October 2001 I cannot recall that I had any dealings with Mr Gugiatti. When I first became aware that Julius Skinner was acting for the City of Stirling in the proceedings involving Mr Gugiatti, I had little recollection of Mr Gugiatti's case, or any advice which I or anyone else in the firm had given to Mr Gugiatti, and I barely recalled Mr Gugiatti's name."
30 Mr McLeod went on to say that he had made his affidavit for the purpose of disclosing the nature of his firm's contact with Mr Gugiatti as it appeared from his perusal of the two files. Mr McLeod then summarised the contents of the file and referred to the time he personally had spent in meetings with Mr Gugiatti as recorded in his timesheets: a total of some seven hours.
31 Not only did Mr McLeod summarise the contents of the files, he exhibited the entire files to his affidavit. He did so without Mr Gugiatti's knowledge or consent, despite the fact that the files contained letters written by McLeod & Co to Mr Gugiatti which are clearly privileged.
32 Mr Gugiatti filed an answering affidavit in which he noted "with regret and deep concern that (McLeods) have chosen to include, amongst the exhibits, materials which are obviously confidential and privileged and that this was done without my consent."
33 Mr Gugiatti went on to say that Mr McLeod's affidavit was inaccurate and misleading, and that the brief file notes which Mr McLeod had exhibited did not reflect adequately the extent of the discussions at the relevant meetings. In particular, Mr Gugiatti said, the discussions at meetings on 18 March and 16 May 1994 were not confined to matters set out in the file notes. Mr Gugiatti continued:
"At times the lengthy discussions I had with Mr McLeod focussed on the liability of the (City) to pay me damages in the event it forced me to cease carrying on the businesses and the quantum. I recall being asked and giving Mr McLeod confidential and privileged information, including a detailed
(Page 9)
- account of my past dealings with the (City), the history of my businesses and the nature and extent of the losses I would suffer.
We also discussed the question of damages on the basis of the difference between the value of the businesses and the value of the businesses I would have carried on elsewhere had the tort not been committed. I recall discussing with him the weaknesses of my case in relation to this aspect of my claim for damages."
34 Mr Gugiatti said that on the basis of the information provided to Mr McLeod in relation to damages, Mr McLeod advised him that the losses would be devastating.
35 This evidence is supported by a letter dated 13 January 1994 which Mr McLeod wrote to the City. He said:
"We urge the Council to consider the matter from the point of view of Mr Gugiatti, who for many years has used his land on the assumption that the Council approvals had their full value, and endeavour to resolve this matter by reconsidering the future use of the land and approving a development that will not destroy 35 years of work in building up a family business.
It would be out of the question of Mr Gugiatti to relocate his business without compensation. The relocation costs, land and building costs and costs related to the disruption of the business rule out such a proposal."
36 Mr Gugiatti also deposed to fact that, in strict confidence, he had told Mr McLeod about certain personal matters relating to his dispute with the City. These matters were reflected in one of the letters on the file. Mr Gugiatti believes they would be detrimental to the prospects of settling the current dispute.
37 I accept Mr McLeod's evidence that he has no particular recollection of Mr Gugiatti's case. There is, of course, the possibility that his recollection might be refreshed. This is a matter to which Ipp J referred in Mallesons v KPMG Peat Marwick (1991) 4 WAR 357 at 367.
38 I accept also as entirely genuine Mr Gugiatti's concern that his files have been provided to the City without his knowledge or consent. Mr McLeod's reason for making this disclosure appears from a letter his
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- firm wrote to the Court to accompany his affidavit. The letter does not appear to have been copied to Mr Gugiatti's solicitors.
39 In the letter, McLeods said:
"In order to meet both our obligations to the City and the requirements of ethical conduct, we propose to place all relevant information before the Court and assist the Court in assessing whether or not the firm does have a conflict of interest as a result of its previous dealings with Mr Gugiatti, but we will not otherwise be taking an adversarial position in response to Mr Gugiatti's application."
- Despite that expression of intention, Mr Skinner did adopt an adversarial position in this application. He did so because he is anxious to give effect to the City's instruction that it wishes to maintain the continuity of its representation so as to avoid the need to change solicitors and thereby suffer a considerable amount of wasted expenditure. I should record, however, that McLeods has not acted in the substantive matter since Mr Gugiatti's present solicitor informed them of his client's objection.
40 I appreciate the difficulty in which McLeods find themselves. In such circumstances, it is always open to an officer of the Court to ask the Court for guidance. That might require the Court (but preferably not the trial Judge) to peruse a file containing privileged material in order to determine whether a client's objection is justified.
41 In the present case, however, McLeods did not take that course. They disclosed the file not only to the Court, but to the City. They did so without Mr Gugiatti's knowledge or consent. He had no opportunity to object.
42 When I asked Mr Skinner during the course of argument how that course could be justified, he said that although he had not considered the issue as I had put it to him, it was arguable that by asking the Court to make orders based on advice he had received from McLeods, Mr Gugiatti had waived any privilege in relation to relevant documents.
43 In fact, Mr Gugiatti's claim is not based on advice he received but on the fact that he gave confidential information to Mr McLeod. However, I accept that the matter is arguable: although it is not necessary for me to decide the point in these proceedings, because nothing turns on it.
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44 The principle on which Mr Skinner relies was expressed in the following terms by Hodgson J in Standard Chartered Bank of Australia Ltd v Antico (1996) 36 NSWLR 87 at 94-5:
"If a party, by pleadings or evidence, expressly or impliedly makes an assertion about the content of confidential communications between that party and a legal adviser, then fairness to the other party may mean that this assertion has to be taken as a waiver of any privilege attaching to the communication."
- In the present case, of course, there is no "other party" in the sense in which Hodgson J used that expression. However, if the principle applies here, then, since the confidential communications which Mr Gugiatti claims to have made were not set out in any documents, it seems that Mr Gugiatti would be required to disclose the information in support of his present claim.
45 Indeed, it is Mr Skinner's submission that Mr Gugiatti should now identify the information in question and show that it is both confidential and that it is, or might be, relevant to the issues remaining alive in his action against the City.
46 In support of this approach, Mr Skinner relied on the fact that in Newman v Phillips Fox and Fordham v Legal Practitioners' Complaints Committee (supra), the Court did consider the material facts. However, in Newman, the facts were "largely undisputed": see 21 WAR at p 311. The Fordham case arose out of a finding of unprofessional conduct by the solicitors. That was itself a matter which obviously required the Tribunal to enquire into privileged communications between the solicitor and the client.
47 Mr Skinner's submission is directly contrary to the view taken by the Full Court of the Supreme Court of Queensland in Mills v Day Dawn Block Goldmining Company Ltd; In re Marsland (1882) 1 QLJ 62. It was there held that if the Court:
"were to insist upon actual proof of the existence of such confidence and to insist upon knowing what it was and whether it was likely to prejudice a client's interests, they would compel him to strip himself of the protection which the Court usually afforded and the whole mischief he wished to avoid might arise …"
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- The Court went on to hold therefore that it was not for the Court to determine the conflict of facts in a case where a client had made out a prima facie case for his protection.
48 This decision was followed by the Full Court of the Family Court in McMillan v McMillan (2000) 159 FLR 1. The Court held that in circumstances such as this:
" … the former client (should) be required only to 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."
- However, the Full Court in McMillan also pointed out that Australian courts have not generally followed this aspect of the Mills decision. In particular, the Full Court noted the reservations expressed by Bryson J in D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118. Bryson J said (at p 124):
"To my understanding the Court of Appeal in Rakusen looked at the evidence of the facts without following any special principles such as were referred to in Mills v Day Dawn in which all assumptions are made against the solicitor and conflicts of testimony are not resolved."
Bryson J was of the view that a stricter approach had been taken in relation to family law matters than in other cases. At p 123 his Honour said:
"It seems natural that a particularly careful view would be taken in family law business, as such litigation tends to be about highly confidential facts and a very wide range of facts and circumstances can conceivably be relevant; the sensitivity which even the most reasonable people feel about such litigation when they are engaged in it calls for careful measures to secure not only that justice is done but also that it is apparent that it is done, an appearance which would not survive any general impression that lawyers can readily change sides."
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50 That, I think, is the appropriate course in the present case. The result is not, as Mr Skinner submits, that Mr Gugiatti should now be required to provide the detail of his instructions to Mr McLeod. It is that I should consider his application on the basis of the evidence as it stands.
51 Having considered the evidence, I accept that Mr Gugiatti gave confidential information to Mr McLeod between 1991 and 1994. I have no reason to doubt Mr Gugiatti's evidence to this effect. As I have noted above, it is supported to a certain extent at least by material on the file. Furthermore, Mr McLeod is not able to contradict Mr Gugiatti's evidence because he has no relevant recollection.
52 However, I am not able to make any finding about precisely what Mr Gugiatti said to Mr McLeod. I should emphasise that no criticism can be made of Mr Gugiatti for not disclosing this information. It is well established that no adverse inference can be drawn from a claim of privilege: Wentworth v Lloyd (1864) 11 ER 1154 at 1154-5. But because I do not know what the information was, and Mr McLeod cannot recall, it seems unlikely that the information could be used by the City in the current action to the prejudice of Mr Gugiatti.
53 I therefore turn to the question arising from Fordham: whether, if McLeods now act against Mr Gugiatti, such conduct would give rise to an apprehension of impropriety in the mind of the reasonable bystander.
54 In answering that question, I take into account that the confidential information imparted by Mr Gugiatti was not recorded in any writing on McLeod & Co's file. I also take account of Mr McLeod's lack of recollection. Furthermore, it is significant, in my view, that although Mr Gugiatti discussed his potential loss and damage with Mr McLeod in 1991-1994, Mr Gugiatti is unlikely to have suffered any substantial loss or damage until he was required to relocate his business in 1996, long after McLeods ceased acting for him.
55 I also take into account the fact that in pursuing his claim for damages, Mr Gugiatti will be obliged to give discovery of documents relating to his business activities and his financial position. I infer that Mr Gugiatti gave information of that nature to Mr McLeod because it could only have been on the basis of such information that Mr Mcleod advised Mr Gugiatti that his losses would be "devastating" and foreshadowed Mr Gugiatti's claim to the City in the letter of 13 January 1994. I repeat: the City is entitled to be provided with this information as part of the discovery process.
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56 In all the circumstances, while I have considerable sympathy for Mr Gugiatti's position, I am not persuaded that a reasonable bystander would consider that his claim against the City arising from damages he suffered in 1996, could be prejudiced by the City's knowledge of confidential information given to Mr McLeod between 1991 and 1994, even if Mr McLeod could remember it.
57 I can see that there is at least a risk that the City might make use of the material in McLeods' files to cross-examine him as to credit in his claim for damages. However, I think that risk can be eliminated by requiring the City to return to Mr Gugiatti's present solicitor the copies of the McLeod & Co files which were served on it in the present proceedings, and any further copies which have been made, and (if Mr Gugiatti required it) to verify on oath that this has been done.
58 Furthermore, McLeods should be required to undertake that no material in the files to which privilege attaches will be used against Mr Gugiatti in the pending action.
59 I think that the possibility of Mr McLeod's recollection being refreshed, should be eliminated by requiring him not to disclose any confidential information given to him by Mr Gugiatti to any member or employee of the firm. I appreciate that the courts have generally been against the construction of "Chinese walls", particularly in small firms such as McLeods which has only seven partners. This is, however, an unusual case in the sense that Mr McLeod is the only person now in the firm with whom Mr Gugiatti dealt. Mr McLeod is therefore the only person who needs to be quarantined in the way I propose.
60 I conclude that, provided the appropriate orders are made and undertakings given, the prospects of Mr Gugiatti's suffering any prejudice as a result of McLeods now acting against him are very remote indeed. I do not think, therefore, that McLeods should be restrained from acting for the City on the ground that Mr McLeod acted previously for Mr Gugiatti.
61 There remains the question arising from the possibility that Mr McLeod may be a witness in the pending proceedings.
62 I have noted above that one of the outstanding issues is whether Mr Gugiatti's claim against the City is statute barred. As I understand it, Mr Gugiatti's case will be that time did not start to run against him until it became apparent that his position was irretrievable: in other words, that it was inevitable he would suffer loss. Mr Gugiatti contends that loss was not inevitable while there was a possibility that the City would rezone his
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- land so as to permit him to continue his business activities. That was a matter which McLeod & Co were pursuing on Mr Gugiatti's behalf in 1994. On 2 December 1994, McLeod & Co wrote to Mr Gugiatti saying that a rezoning proposal would go before the City on 6 December and that it seemed likely the proposal would be accepted.
63 Earlier, in 1993, McLeod & Co investigated the possibility that Mr Gugiatti might enjoy non-conforming use rights in relation to the land. This is confirmed in a letter dated 19 August 1993 from McLeods to Mr Gugiatti.
64 In these circumstances, it is submitted on behalf of Mr Gugiatti that Mr McLeod would be able to give material evidence that Mr Gugiatti did not know in August 1993 that his position was irretrievable.
65 I can see that, depending on the way he puts his case on damages, Mr Gugiatti may wish to prove that his position was not irretrievable in 1993. So far as rezoning is concerned, it was accepted by Mr Skinner that:
"there's no dispute that any rezoning proposals could have had the effect that the business could have carried on." (TS 463)
- That is a concession made on behalf of the City, on which Mr Gugiatti may now rely.
66 If it becomes necessary for Mr Gugiatti to adduce evidence about the effect of McLeod & Co's advice on his state of mind, he will no doubt rely on any relevant correspondence: and he may give evidence about any advice given to him orally. Such evidence would not be hearsay. But given Mr McLeod's lack of recollection, it seems unlikely that he would be able to give evidence helpful to Mr Gugiatti, even if asked to do so.
67 One of the difficulties with this aspect of Mr Gugiatti's application is that it is not yet clear how he will formulate his claim for damages. For that reason, the Full Court held that it would be "difficult and unwise" to decide questions of limitation before determining what, if any, damage had been suffered as a consequence of the City's breaches of duty: see Gugiatti v City of Stirling (2001) 116 LGERA 39.
68 In all the circumstances, I consider it unlikely that Mr McLeod will be able to give any useful evidence in support of Mr Gugiatti's case. And having regard to the orders which I propose to make so as to quarantine Mr McLeod, I think it unlikely that he could give any evidence against Mr Gugiatti.
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69 However, if that situation changed, Mr Gugiatti could renew this application. I think the risk of that happening is small: but it is a risk which McLeods and the City must bear.
70 I therefore conclude that in the circumstances as they appear at present, there is no reason to restrain McLeods from acting for the City on the ground that Mr McLeod may be a witness in the proceedings.
71 I shall hear from counsel as to the precise form of orders and as to costs. My inclination is to make no order as to costs because although the application has been unsuccessful, I accept that it was not made unreasonably. That was the position in D & J Constructions (supra), with a similar result.
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