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
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…
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- Hatzis & Hatzis [2022] FedCFamC1F 745
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- [2022] FedCFamC1F 745
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CaseChat Overview and Summary
This case involves the wife's application to restrain the husband from continuing to instruct his current solicitors, Q Lawyers, due to concerns about the risk of disclosure of confidential information held by the former solicitor for the wife, Ms J, who has now joined Q Lawyers. The application was heard in the Family Court of Australia, Federal Circuit Court Division. The primary legal issue before the court was whether there was a real risk of disclosure of confidential information from the former solicitor to the husband’s current legal team and whether this justified restraining the husband from continuing to instruct Q Lawyers. Additionally, the court considered whether the restraint should be granted to protect the integrity of the judicial process and the appearance of justice.
The court examined the three established categories for restraint as outlined in Osferatu & Osferatu. The first category concerns breach of confidence, where the risk of disclosure of confidential information held by the former solicitor was assessed. The court concluded that the combination of the solicitor's undertaking and the suite of protections put in place by Q Lawyers sufficiently minimised the risk of inadvertent disclosure. The second category, breach of fiduciary duty, was not directly addressed in this case. The third category involves the inherent jurisdiction of the court to control its process and protect the integrity of the judicial process. The court found that while the inherent jurisdiction is an exceptional power to be exercised with caution, the measures taken by Q Lawyers to mitigate the risk of disclosure were sufficient. The court emphasised that the inherent jurisdiction has independent scope and is not merely a fallback if the other bases do not apply.
The court ultimately dismissed the wife's application, finding that there was no real risk of disclosure of confidential information and that the precautionary measures taken by Q Lawyers were adequate. The court also considered the impact on the husband's right to choose his legal representative but concluded that this did not outweigh the importance of protecting the integrity of the judicial process. The wife's application was thus refused, and her request to restrain the husband from instructing Q Lawyers was denied.
The final order was that the wife’s application filed on 1 September 2022 was dismissed.
The court examined the three established categories for restraint as outlined in Osferatu & Osferatu. The first category concerns breach of confidence, where the risk of disclosure of confidential information held by the former solicitor was assessed. The court concluded that the combination of the solicitor's undertaking and the suite of protections put in place by Q Lawyers sufficiently minimised the risk of inadvertent disclosure. The second category, breach of fiduciary duty, was not directly addressed in this case. The third category involves the inherent jurisdiction of the court to control its process and protect the integrity of the judicial process. The court found that while the inherent jurisdiction is an exceptional power to be exercised with caution, the measures taken by Q Lawyers to mitigate the risk of disclosure were sufficient. The court emphasised that the inherent jurisdiction has independent scope and is not merely a fallback if the other bases do not apply.
The court ultimately dismissed the wife's application, finding that there was no real risk of disclosure of confidential information and that the precautionary measures taken by Q Lawyers were adequate. The court also considered the impact on the husband's right to choose his legal representative but concluded that this did not outweigh the importance of protecting the integrity of the judicial process. The wife's application was thus refused, and her request to restrain the husband from instructing Q Lawyers was denied.
The final order was that the wife’s application filed on 1 September 2022 was dismissed.
Orders
Orders of the court
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).
Background
Background to the litigation
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
Evidence
Evidence Before The Court
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 2022Principles 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.
Decision
Reasons for decision
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.
Ratio Decidendi
Legal Principle Established
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