Hatzis & Hatzis
[2022] FedCFamC1F 745
•29 September 2022
Federal Circuit and Family Court of Australia
(DIVISION 1)
Hatzis & Hatzis [2022] FedCFamC1F 745
File number: CAC 840 of 2021 Judgment of: GILL J Date of judgment: 29 September 2022 Catchwords: FAMILY LAW – LEGAL PRACTITIONERS – Where the former solicitor for the wife joined the firm representing the husband – Where the wife seeks that the husband’s firm is restrained from acting for him – Where the wife asserted that there was a risk of disclosure of confidential information and impact upon integrity of judicial process – Where consideration of the potential risk of disclosure is weighed against the precautionary measures taken by the husband’s firm to minimise and mitigate such risk – No real risk of disclosure – Where the wife asserts that the restraint should be granted in any event as protective of the integrity of the administration of justice and of the appearance of the administration of justice – Application refused. Cases cited: Asia Pacific Telecommunications Limited v Optus Networks Pty Limited [2007] NSWSC 350
Billington & Billington (No 2) [2008] FamCA 409
Dalton v Dalton (2018) 56 FamLR 500
Dealer Support Services Pty Ltd v Motor Trades Association of Australia Ltd [2014] FCA 1065
Kallinicos v Hunt (2005) 64 NSWLR 561
Osferatu & Osferatu (2015) FLC 93-666
Photocure ASA v Queen’s University at Kingston [2002] FCA 905
Prince Jefri Bolkia v KPMG (A Firm) [1999] 1 AC 222
Wilmer v Golding (No 2) [2017] FamCAFC 213
World Medical Manufacturing Corporation v Phillips Ormonde & Fitzpatrick Lawyers & Anor [2003] VSC 196
Division: Division 1 First Instance Number of paragraphs: 88 Date of hearing: 23 September 2022 Place: Canberra Counsel for the Applicant: Mr Coleman SC Solicitor for the Applicant: Foster Johnson Counsel for the Respondent: Mr Emmett SC Solicitor for the Respondent: Q Lawyers ORDERS
CAC 840 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS HATZIS
Applicant
AND: MR HATZIS
Respondent
order made by:
GILL J
DATE OF ORDER:
29 September 2022
THE COURT ORDERS THAT:
1.The wife’s Application in a Proceeding filed 1 September 2022 is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hatzis & Hatzis has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
GILL J:
This judgment concerns an application by the wife to restrain the husband from continuing to instruct his current solicitors.
Background
The application arises in circumstances where the solicitor that the wife previously instructed, Ms J (“the solicitor”), has ceased employment with the firm of solicitors previously engaged by the wife, K Lawyers. (K Lawyers), and on 22 August 2022 commenced employment with Q Lawyers, (QL), the firm who represents the husband.
The wife identifies that while she retained K Lawyers, being from late 2020 until about 21 May 2021, the solicitor was the legal practitioner with the primary conduct of her case and who she primarily engaged with. Those proceedings were initially focussed upon a parenting dispute between the parties, initiated by the husband on 23 November 2020. The parenting aspect of the dispute was resolved by consent in Division 2 of the Federal Circuit and Family Court of Australia (FCFCOA) on 5 July 2022. By then, the proceedings also involved disputes concerning payment of legal fees (per the wife’s Response filed 15 December 2020), property, and spousal maintenance (per the wife’s Amended Response filed 29 March 2021) agitated by the wife. The property aspect of the proceedings (which is now the primary focus of the proceedings) commenced prior to the termination of the retainer of K Lawyers.
The wife changed her legal representation and on 12 May 2021 the wife’s current solicitors, Phelps Reid Foster Johnson Lawyers (FJ) filed a Notice of Address for Service, a date prior to the wife’s assertion of the termination of the retainer with K Lawyers.
QL notified FJ on 8 August 2022 of the impending employment of the solicitor in that firm, to commence mid-2022.
The following day FJ replied to QL advising that instructions were being taken, and advising that there was no acquiescence to QL’s continued involvement, followed on 16 August 2022 by correspondence that indicated that the wife was “not comfortable” with the continued involvement of QL.
Further correspondence was exchanged between FJ and QL, with FJ advising in unequivocal terms on 25 August 2022 that if QL persisted with the employment of the solicitor that an application would be made to restrain the husband from continuing to instruct QL.
Summary of arguments
At the hearing of the application, the wife relied upon two bases to justify the restraint. The first basis relied upon the risk of disclosure of confidential information held by the solicitor to QL, the second relied upon protection of the integrity of the judicial process.
In response, the husband accepted that the solicitor held information confidential to the wife, but asserted that sufficient protections are in place such as to mean that neither basis for restraint is made out, particularly given the impact of denying the husband access to the legal practitioner of his choice.
ORDERS SOUGHT
The relevant orders sought by the parties are set out below.
Applicant wife
As per the wife’s Application in a Proceeding filed 1 September 2022, the wife seeks:
(a)That the Husband be restrained from retaining Ms L or any other partner or employee at Q Lawyers in these proceedings.
(b)That the Husband pay the Wife’s costs of an incidental to this Application.
Respondent husband
As per the husband’s Response to an Application in a Proceeding filed 19 September 2022:
(a)That the Wife’s Application in a Proceeding filed 31 August 2022 be dismissed.
It should be noted that the reference to the wife’s Application in a Proceeding filed 31 August 2022 should be taken to be her Application in a Proceeding executed 31 August 2022 but filed 1 September 2022.
Evidence Relied Upon BY THE PARTIES
The applicant wife relied upon:
(a)Affidavit of the wife filed 31 August 2022;
(b)Affidavit of the wife filed 9 September 2022; and
(c)Case outline document filed 21 September 2022
The respondent husband relied upon:
(a)Affidavit of the husband filed 19 September 2022;
(b)Affidavit of Ms J filed 19 September 2022;
(c)Affidavit of Ms O filed 19 September 2022;
(d)Affidavit of Ms L filed 19 September 2022; and
(e)Case outline document filed 21 September 2022
Principles
In Dalton v Dalton,[1] the Full Court set out the overarching public policy context of applications to restrain a solicitor from acting, or to restrain a party using the legal representative of that party’s choice:
[14] It is well settled that the jurisdiction to restrain a solicitor from acting far a client is exceptional and to be exercised with caution, having regard to the totality of the evidence. Due weight is to be given to the public interest in a client not being deprived of their lawyer of choice without due cause. The public interest is also predicated on a client knowing that confidential information imparted to a lawyer will not be given to an opposing party unless the law requires its production. These public interests lie at the heart of the system of justice.
(Citations omitted)
[1] (2018) 56 FamLR 400.
It may be seen that there are strong competing considerations underlying the exercise of the power to restrain, each drawing not only from private interests, but also from the public interest in the proper administration of justice.
The Full Court in Osferatu & Osferatu (“Osferatu”),[2] described that there are three established categories supporting a restraint:
[20]...They are: breach of confidence, breach of fiduciary duty and the inherent jurisdiction of a court over its officers and to control its process. Each category has its own principles which guide its operation. The third category may be involved in conjunction with either of the first two so there is clearly an overlap; nonetheless the basis for the exercise of the jurisdiction in each is different.
[2] (2015) FLC 93-666.
In this case the wife relied upon the first and the third categories.
The first category
The first category is reliant upon the confidential nature of the information imparted by the wife to the solicitor during the period that the solicitor was charged with the conduct of the wife’s litigation.
In Osferatu, the Full Court agreed with the three-stage test identified by Goldberg J in Photocure ASA v Queen’s University at Kingston,[3] to determine whether or not to restrain in respect of breach of confidence:
[50] ...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 adverse interest 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
[3] [2002] FCA 905.
The first two stages were, sensibly, conceded by the husband, the area of contention being limited to the third stage.
An issue arose as to where the burden lies in respect of the third stage, there being some ambiguity in Osferatu, given firstly the apparent approval of Goldberg J’s statement:
[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
Consistent with Goldberg J’s allocation of burden for the first two stages, the Full Court recited the observations of Lord Millett in Prince Jefri Bolkiah v KPMG (A Firm)[4] that the burden resting on an applicant seeking restraint to show that the solicitor is in possession of information which is both confidential to the applicant and which may be relevant to the other client whose interests may be adverse to the applicant is one that is not heavy, the first requirement of the possession of confidential information being “readily inferred”, the second which “will often be obvious.”
[4] [1999] 1 AC 222.
However, the Full Court then described that:
[41]...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
It should be concluded that as the three stages represent the essential elements to justify the restraint, the burden in respect of each rests upon the applicant.
As observed in Prince Jefri, the first two stages are readily discharged.
The burden in relation to the third stage should also be considered as resting upon the applicant. It is a burden to establish risk that the confidential information will come into the hands of those with the conduct of the husband’s case. In Osferatu, the Full Court noted that risk exists on a continuum of “obvious to remote” and adopted as appropriate, the qualitative description of “any real risk” as used by Coleman J in Billington & Billington (No 2).[5]
[5] [2008] FamCA 409.
In a case such as this, “any real risk” is readily established where the solicitor who holds the confidential information is now a part of the legal practice that owes a fiduciary duty, or duty of loyalty to the husband, such loyalty carrying with it an implication that the practice will use the information that it possesses, or which any of its legal staff possess, to support the interests of their client.[6]
[6] See for example World Medical Manufacturing Corporation v Philips Ormonde & Fitzpatrick Lawyers & Anor [2000] VSC 196 per Gillard J at [88].
This is not the imputing of the knowledge held by the solicitor to the other members of the legal practice. Rather, it is the acknowledgement that a fundamental characteristic of the relationship between a client and lawyer (here the legal practice, QL) is that the lawyer owes a duty of loyalty to the client (here, relevantly, the husband). An aspect of that duty is the obligation upon a lawyer to use information that is held to the benefit of the client.[7]
[7] See for example Kallinicos v Hunt (2005) 64 NSWLR 561 at [33].
The nature of this duty readily leads to an inference being available of a latent “real risk.”
Once such a risk has been identified, a heavy evidential or persuasive burden then rests upon the respondent party, if that party seeks to rely upon there being sufficient protective measures to counter the risk.[8] It is generally solely within the capacity of the respondent party to lead evidence as to steps to ameliorate the risk, and a failure to adequately do so in the face of a latent risk of disclosure will result in a restraint being imposed.
[8] World Medical Manufacturing Corporation v Philips Ormonde & Fitzpatrick Lawyers & Anor [2000] VSC 196 per Gillard J at [121], Wilmer v Golding (No 2) [2017] FamCAFC 213 per Murphy J at [23].
Here, the circumstance of the solicitor who had the direct, substantial and ongoing conduct of the wife’s case for a considerable period now being in the employ of the practice conducting the husband’s case is sufficient to identify a real risk.
The heavy evidential or persuasive burden then falls to the husband. That is a burden that requires that the evidence led must be sufficiently cogent, in the light of the public and private interests being protected, to mean that the relief of restraint should not be granted despite an underlying or latent risk.
Prior to considering the efficacy of any measures that have been put into place, or are proposed to answer the latent risk, it is appropriate to give close consideration to the identification of the precise nature of the risk that has been identified and that is to be answered by the measures. Without that identification taking place, there is the potential that the protections will not be weighed directly against the particular risk of disclosure of confidential information that needs to be addressed.
In doing so, it should be observed that the case law recognises the confidential information attracting protection in broad terms, extending beyond the ‘hard’ information in the form of instructions obtained in preparation of the case to ‘softer’ categories of information as described by Gillard J in World Medical Manufacturing Corporation v Philips Ormonde & Fitzpatrick Lawyers & Anor (“World Medical”),[9] at [123, 124]:
123. What is confidential information in a given set of circumstances will depend upon those circumstances. I emphasised in the Yunghanns case what I described as the “getting to know you” factors which in my opinion are of considerable importance to former clients who feel that their trust and loyalty has been betrayed when a solicitor acts against them in a later piece of litigation.
124. At p.10 of the unreported judgment I stated the following -
“But the degree of particularity of the confidential information must depend upon all the circumstances. Often it cannot be identified for fear of disclosure. In considering this factor it must be borne in mind that a solicitor makes notes, forms views and opinions of clients and observes things that the client may have forgotten or overlooked. In some cases the circumstances of the retainer and the nature of the legal work will be sufficient to establish the nature of the confidential information. In this regard the relationship between solicitor and client may be such that the solicitor learns a great deal about his client, his strengths, his weaknesses, his honesty or a lack thereof, his reaction to crisis, pressure or tension, his attitude to litigation and settling cases and his tactics. These are factors which I would call the ‘getting to know you’ factors. The overall opinion formed by a solicitor of his client as a result of his contact may in circumstances amount to confidential information that should not be disclosed and more importantly used against the client.”
[9] [2000] VSC 196.
That is, the protection must address the spectrum of information that is not confined to the giving of formal instructions, but extends to softer forms of knowledge gained in the solicitor client relationship. Unlike in World Medical,[10] in a case such as this, where the solicitor was retained for an extended period and had the primary carriage of the wife’s matter, the possession of such softer forms of information may be inferred.
[10] [2000] VSC 196.
It is against this broad scope of information that the nature of the risk must be viewed in the light of the protective measures.
Here the particular risk is of leakage of information from the solicitor into other members of the legal practice, and in particular the exposure of those acting for the husband to such leakages.
The nature of such potential leakages may be seen to be limited.
Firstly, the wife eschewed the notion that information would be imparted due to an impropriety on the part of the solicitor or QL, which I take to mean that she does not assert that a risk flows from a deliberate flouting of obligations as to confidentiality.
Secondly, the evidence of the solicitor is that she no longer has access to any material that may be held on the wife’s file by K Lawyers. Sensibly, there was no challenge to this assertion which may be accepted, particularly in the light of the circumstance that the solicitor no longer works for K Lawyers.
This then restricts the potential leakage to oral and non-verbal communication, the non-verbal risk being identified in Asia Pacific Telecommunications Limited v Optus Networks Pty Limited (“Asia Pacific”),[11] at [39,40]:
39. ...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 trading as Clayton Uts (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.
40. There is obviously daily contact or at least the opportunity for daily contact between the solicitors who acted on the Retainer and the solicitors acting for the defendant in these proceedings because they work in close proximity to each other. 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 colleague in general discussion about a case.
[11] [2007] NSWSC 350.
At its heart, the risk is that the solicitor, who was intimately acquainted with the conduct of the wife’s case for an extended period, and who is now a part of QL will inadvertently leak, in an either verbal or non-verbal manner, confidential information, in a manner that may come to the attention of those who conduct the husband’s case against the wife.
To combat such a risk a series of measures were identified and undertakings given.
The first of those undertakings that should be considered is that of the husband at Annexure A to his affidavit filed 19 September 2022:
Irrevocable Instruction by Client
I, [Mr Hatzis], in circumstances where I have been informed by my solicitor [Ms L] that the firm of [Q Lawyers] has employed a solicitor, [Ms J], who was employed by the solicitors who acted for my former wife, [K Lawyers], hereby irrevocably instruct [Q Lawyers] inclusive of each of the firm’s partners, employees and staff that:
1.[Q Lawyers] inclusive of each of the firm’s partners, employees and staff are not to seek to obtain from, discuss with or in any way become privy to any information from [Ms J] whatsoever, whether confidential to my former wife or otherwise, relating to my matter including the proceedings between us and I have expressly consented to any relevant person giving undertakings to both my former wife and to the Court that they will not do so; and,
2.I hereby expressly limit my retainer with [Q Lawyers] so as to waive my rights (if any) under my retainer with [Q Lawyers] to require [Ms L] or any other partner, employee or staff of that firm to seek or obtain in any way any information whatsoever, whether confidential to my former wife or otherwise, relating to my matter including the proceedings between us from [Ms J] and/or make use of any such information that [Ms J] may have obtained or be in any way privy to.
This undertaking was signed and dated by the husband on 7 September 2022. This undertaking is of considerable importance as it nullifies the potential impact of the duty of loyalty as a reason for the communication of confidential information. Insofar as the duty of loyalty may require the communication of confidential information, the undertaking not only excuses QL from any such obligation, but restrains QL by instructions from doing so.
Undertakings are also given by the solicitor in the following terms at Annexure B of the husband’s affidavit filed 19 September 2022:
Irrevocable Undertaking
I, [Ms J], undertake that I have not disclosed, directly or indirectly, to any person at [Q Lawyers] any confidential information concerning [Ms Hatzis] and I further irrevocably undertake not to:
1.Disclose directly or indirectly to any person at [Q Lawyers] any confidential information that I may have in my possession or control containing [Ms Hatzis].
2.Speak with any person at [Q Lawyers], or [Mr Hatzis], concerning any information I may have concerning [Ms Hatzis] as a result of my previously being employed as a solicitor at [K Lawyers].
3.Have any ongoing involvement with the family law proceedings between [Ms Hatzis] and [Mr Hatzis], including having any communication whatsoever with [Mr Hatzis] for the purpose of the matter.
4.Peruse or deal with in any way, any files, tax invoices, briefs or other documents held by [Q Lawyers] in relation to the [Hatzis] family law matter.
Further and complementing the undertaking given by the solicitor is a corresponding undertaking given by Ms L, the solicitor in the firm with the primary conduct of the husband’s case, at Annexure B of the husband’s affidavit filed 19 September 2022:
Irrevocable Undertaking by Solicitor Supervising and with Carriage
I, [Ms L], undertake that:
1.[Ms J] has not disclosed to me, either directly or indirectly, any confidential information that she may have as a consequence of her past employment at [K Lawyers], that firm having acted for [Ms Hatzis] in her family law matter with [Mr Hatzis] during the period until 11 May 2021.
2.From [mid-2022], when [Ms J] joins [Q Lawyers] as an employed Senior Associate, [Ms J] shall have no involvement in the conduct of the [Hatzis] family law matter.
3.I will not engage in any communications with [Ms J], either directly or indirectly, in relation to the [Hatzis] family law matter, or in her presence.
4.I have directed that the file of [Mr Hatzis] on Affinity (being the document management software operated by [Q Lawyers]) is locked such that [Ms J] cannot access the file and I am informed that has been implemented.
5.All staff members are aware that [Ms J] is not to access the [Hatzis] file in any way, nor is the [Hatzis] matter to be discussed with her directly, indirectly or in her presence at any time.
6.I will, immediately upon becoming aware of any breach of possible breach of this undertaking, take appropriate action.
This was signed and dated by Ms L on 8 August 2022.
Ms L also described the administrative arrangements to prevent inadvertent leakage from the solicitor. They involve the restriction in the persons who will work on the matter, confined to Ms L, her administrative assistant, Ms M, an associate lawyer Ms N, and in the event that Ms L is unavailable to supervise Ms N, that she be supervised by Ms O.
The solicitor will share neither Ms N nor an administrative assistant with Ms L for the duration of the practice’s retention by the husband.
Electronic access to the file is locked such that only authorised staff may access it and any paper file it to be kept in a locked cupboard in Ms O’s office.
Ms L and the solicitor will not work on matters together for the duration of the retained, nor will Ms L supervise the solicitor.
The protocol for telephone contact with the husband is via Ms L’s mobile phone rather than reception.
Ms L describes that she and the solicitor have offices about fifteen metres apart.
Those arrangements are supported by the representation by Ms L that in the event of either breach of the undertaking or failure of the steps, that she will notify FJ within seven days of such.
Those undertakings and arrangements are further supplemented by evidence given by the Senior Partner at QL, Ms O directed to the arrangements put into place to prevent leakage.
Ms O gives evidence that supports the arrangements identified by Ms L, but which extends access to the receptionist, Practice Manager and accounts clerk.
Those arrangements are also supported by an undertaking given by Ms O in the following terms as in [11] of her affidavit filed 19 September 2022:
I, [Ms O], undertake that:
1.[Ms J] has not disclosed to me, either directly or indirectly, any confidential information that she may have as a consequence of her past employment at [K Lawyers], that firm having acted for [Ms Hatzis] in her family law matter with [Mr Hatzis] during the period until 11 May 2021.
2.From [mid-2022], when [Ms J] joined [Q Lawyers] as an employed Senior Associate, [Ms J] has not had and shall not have any involvement in the conduct of the [Hatzis] family law matter.
3.I will not engage in any communications with [Ms J], either directly or indirectly, in relation to the [Hatzis] family law matter, or in her presence or hearing.
4.The file of [Mr Hatzis] in paper form, is in a locked cupboard in my office, to which only [Ms L] (my partner who has primary conduct of the matter), [Ms L]’s personal assistant, [Ms M], and I have a key. The file will be kept in this cupboard at all times when it is not in use by [Ms L], her personal assistant, our employed Associate, [Ms N], or me.
5.The file of [Mr Hatzis] on Affinity (being the document management software operated by [Q Lawyers]) is locked, such that [Ms J] cannot access the file.
6.All staff members are aware that [Ms J] is not to access the [Hatzis] file in any way, nor is the [Hatzis] matter to be discussed with her directly, indirectly or in her presence or hearing at any time.
7.I will, immediately upon becoming aware of any breach or possible breach of this undertaking, take appropriate action including to inform the lawyers for [Ms Hatzis] of the breach or possible breach as soon as practicable and within not more than 3 business days.
The wife observes that the representations about limited electronic access are not supported by evidence from a relevant information technology manager.[12] However, given that the information flow being protected against is from, rather than to the solicitor, this aspect is of lesser significance.
[12] See for example the criticism in Dalton & Dalton (2018) 56 FamLR 400 at 411.
The wife also observes that it may be anticipated that there will be a delay before the matter is resolved. During that time, it appears that the solicitor and the team dealing with the matters will be in reasonably close physical proximity given the office layout. It may also be anticipated that, given the significant pool of property in this case, as the matter approaches trial there will be occasions where the case is prominent within the life of QL.
It was also observed that QL does not, apparently, apply information barriers as part of its day-to-day business, unlike much larger firms, and so the need for such is not part of an ingrained culture. However, it also appears, particularly given the nature of the undertaking given by Ms O in respect of “all staff” that the size of the firm means that it can be anticipated that the protections in this instance would be able to be well understood across the firm, and the knowledge of them would not suffer dilution across a large workforce.
Whilst the wife sought that an inference be drawn that the increasing protections (QL having put into place further protections as the case has progressed) speak to the initial inadequacy of the protections, the latent risk is not one that crystallises in the initial absence of the full suite of protections, but is a risk that continues with the passage of time and which warranted, over the longer term, the stronger protections offered now.
Conclusion as to the first category
The significance of the various protections is that they buttress the undertakings given by the solicitor. Whilst the wife questions the efficacy of such, noting the caution to be exercised in respect of information barriers even where the solicitors are of impeccable standing and harbour the best intentions (as here), what is to be assessed is the risk of inadvertent leakage from the solicitor. Where she undertakes that she will not impart information, the occasions for inadvertent communication are minimised by the suite of protections. The partial disconnection between the team working on the case and the solicitor minimises such occasions. Quarantining the information in the case from the solicitor also minimises any occasion for inadvertence.
The combination of the solicitor’s undertaking with a suite of protections that remove the circumstances which may give occasion for an inadvertent or even unconscious slip, verbal or non-verbal, are sufficient to conclude that there remains no real risk of disclosure of confidential information held by the solicitor to those involved in the husband’s case within QL.
Relief should not be given on the basis of the risk of breach of confidence.
The third category
This however, leaves the third of the categories identified in Osferatu, being “the inherent jurisdiction of a court over its officers and to control its process.”
Despite the statutory nature of the jurisdiction of this court, it is accepted that the court has such a jurisdiction, at least as an incident of its capacity to control its own processes and to protect them from abuse.
While there is potentially overlap between the three categories each is of a distinct character. In Dealer Support Services Pty Ltd v Motor Trades Association of Australia Ltd (“Dealer Support”),[13] [93-98] the distinctiveness was identified:
93. I accept this third basis in principle as expounded by Mandie J in Grimwade at 452, Brooking JA in Spincode at [40]-[41] and [60] and Young J in Geelong School Supplies at [29], [33] and [35].
94. First, the test to be applied is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a solicitor be prevented from acting in the interests of the protection of the integrity of the judicial process and the appearance of justice.
95. Second, due weight should be given to the public interest in a client not being deprived of the solicitor of its choice. That public interest is an important value, although it can be over-ridden with due cause (WA v Ward at 498 per Hill, Branson and Sundberg JJ).
96. Third, this third basis is not discharged by it being demonstrated that the first basis does not apply (cf Photocure at [56] and [60] per Goldberg J). It has independent scope. The third basis deals not just with private fiduciary relationships and inter-partes fiduciary obligations, but rather the administration of justice, the public interest and the appearance of propriety of officers of the court. The third basis is not only justified, but its justification explains its additional scope.
97. Fourth, nevertheless this jurisdiction is an “exceptional one” and is “to be exercised with appropriate caution” (Young J in Geelong School Supplies at [35] and Brereton J in Kallinicos at [76]).
98. The principles are clear enough. Their application is another question.
[13] [2014] FCA 1065.
That is, while there may be overlap, the third category has content independent from either breach of confidence or breach of the duty of loyalty, neither of which in this case justifies the proposed restraint. Rather the touchstone is the test set out in Asia Pacific,[14] at [42]:
42. ...The test to be applied is whether a fair-minded reasonably informed member of the public would conclude that the proper administration of justice requires that the relief should be granted in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice...
[14] [2007] NSWSC 350.
That case also identified the exceptionality of the remedy, the caution before granting it, and the weight to be given to the “public interest in a litigant not being deprived of the lawyer of his or her choice without due cause.” However, in weighing such it was further observed at [42]:
42. ...in my view if the court is otherwise of the view that the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice, requires the lawyers to cease to act there would have to be evidence of a most compelling nature as to the cost, inconvenience and impracticality to avoid an order restraining the lawyers from acting further...
The wife argued that the breach of confidence issue still looms large in relation to this third category, observing that the test incorporates that of a “fair minded reasonably informed member of the public” and further asserting that such a hypothetical person may take a different view of the confidence issue than a judicial officer weighing the matter. The point made for the wife was that the appearance in respect of both loyalty and confidence is sufficient to enliven the third basis.
Bluntly stated, the relevant appearance is that the person who was the legal confidante and advisor to the wife in her litigation now resides in the enemy camp.
Against this the husband observed that Dealer Support at [104] considered in relation to the third basis that “it is not irrelevant that the first basis for disqualification is not satisfied. There is no real risk of the misuse of confidential information” as was the absence of any actual conflict of duty. These were considered as powerful matters pointing against restraint under the third ground.
It should also be noted here that as the retainer by the wife of the solicitor has ended there is no enduring duty of loyalty owed to the wife.[15]
[15] Kallinicos v Hunt (2005) 64 NSWLR 561 at [76].
It may be observed that the test in relation to the third ground is difficult to give independent content to, and is not one that provides distinct boundaries when applied to a particular factual matrix.
In relation to this third ground in Kallinicos v Hunt (“Kallinicos”),[16] at [76] Brereton J, consistently with what is set out above, relevantly set out the following:
76. …However, the court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice;
The test to be applied in this inherent jurisdiction is 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;
The jurisdiction is to be regarded as exceptional and is to be exercised with caution;
Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause.
(Citations omitted)
[16] (2005) 64 NSWLR 561.
The circumstances in Kallinicos that resulted in restraint are instructive. There the issue was the potential for the solicitor to be a material witness who would come under scrutiny, and whose propriety may be challenged. What then would attract the attention of the reasonably informed member of the public was that the independent objectivity of the solicitor as a solicitor would be compromised and that, despite being well intentioned, he would be perceived not to be able to advise in a manner “free and unaffected by the impact of personal interest.”
That is, what attracted the objective concern as to the impact upon the administration of justice was the reasonable identification of a risk to the role of the solicitor, derived from the circumstances of the case. The issue that warranted the exercise of the exceptional jurisdiction was not a mere impression or discomfort, but the identification of circumstances that carry with them the implication of potential compromise to the administration of justice.
Conclusion as to the third basis
Applying this approach to the current case, here, where there is no ongoing duty of loyalty applying to the solicitor, her move to QL does not carry with it an objective perception of compromise to the administration of justice that relates to the previous relationship of loyalty.
Further, to the extent that the issue of confidence is raised, the removal of risk of betrayal of that confidence means that there is no lingering circumstance pertaining to the maintenance of confidence that warrants an objective assessment that the appearance of justice is compromised.
That is, the third category does not reveal in the circumstances of the case a remaining objective basis for considering that either the administration of justice or appearance of the administration of justice would be compromised.
In any event, even if there had been some lingering issue in respect of the third ground that is a matter that would have to be weighed against the competing public policy consideration of the importance of the husband being able to retain the solicitor of his choice, and of the impact of now denying that.
Such an impact should be considered to be heavy.
Although the wife asserted a lack of direct evidence as to the impact of restraint upon the husband, a high degree of impact may be inferred both from the duration for which he has retained his solicitors and the apparently complex pool. Further, at [13-16] of his affidavit filed 19 September 2022, the husband described:
13. I further understand, based on the Costs Notice filed on my behalf in these proceedings on 2 September 2022, that I have incurred fees totalling $658,892.50 to that date, being $95,647.50 for the property proceedings and $563,245 for the parenting proceedings.
14. I have great confidence in [Q Lawyers] and [Ms L], who have represented me throughout these proceedings. There will be significant prejudice to me if I have to instruct new solicitors. In part this is because of the knowledge [Ms L] has in connection with my case arising from speaking to me and taking instructions from me for many hours, and having been personally present with me at each and every court event, and involved in the drafting and settling of more than 14 affidavits filed by me in the course of the proceedings.
15. My financial affairs are very complex. I have an interest in more than 53 companies, and 31 Trusts. Extensive disclosure, comprising more than 2000 documents, has been provided/exchanged with my former wife’s lawyers. My legal representatives have been heavily involved in the disclosure process. I am very concerned that it will take many months for new lawyers to get up to speed, and will delay the progression of these proceedings including valuations.
16. More importantly, a significant amount of my personal time will be required to meet with and brief new solicitors as to relevant background knowledge that cannot be ascertained from simply reading the file. In addition to being the sole carer of our 3 minor children, and responsible for all their day to day needs, I work full time managing our business interests. These court proceedings already take up a large amount of my time, and I will be significantly prejudiced in my ability to run my business interests and care for our children if they continue any longer than necessary.
While it was submitted that the parties are only now at the point of valuation, the apparent complexity which has accompanied getting to that point, along with what may be assumed to be complex and extensive disclosure requirements point again to a heavy burden upon the husband that would accompany a restraint.
Conclusion
The wife’s Application in a Proceeding filed 1 September 2022 is dismissed.
I certify that the preceding eighty-eight (88) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Gill. Associate:
Dated: 29 September 2022
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