Holford & Lorton
[2021] FedCFamC1F 267
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Holford & Lorton [2021] FedCFamC1F 267
File number(s): DNC 231 of 2020 Judgment of: BERMAN J Date of judgment: 9 December 2021 Catchwords: FAMILY LAW – LEGAL PRACTITIONERS – Conflict of interest – Application to restrain solicitor from continuing to act – Where final consent orders were previously made in relation to property settlement – Where the applicant is seeking that the orders be set aside on the basis of a miscarriage of justice – Where the respondent’s solicitor was representing the respondent at the time the consent orders were made – Where the respondent’s solicitor had previously acted for the parties in civil matters – Where there has been a delay in the applicant’s objection – Where the applicant considers the respondent’s solicitor had access to confidential information which may be misused – Where the applicant has not identified the confidential information – Where the applicant fails to establish the respondent will have an unfair advantage – Application dismissed.
FAMILY LAW – PROPERTY – Value of property – Expert evidence – Where the applicant seeks that the parties jointly instruct property valuers to provide retrospective valuations of real property and accountants to provide a retrospective valuation of a business – Where the applicant considers valuations relied upon when he entered into final consent orders were inaccurate – Where the respondent would not be relying upon retrospective valuations in her opposition to the applicant’s orders sought – Where the respondent should not be compelled to assist the applicant’s case – Application dismissed.
Legislation: Family Law Act 1975 (Cth) ss 79A, 90SN(1)(a) Cases cited: Mancini & Mancini [1999] NSWSC 800
McMillan & McMillan (2000) FLC 93-048
Thevenaz & Thevanaz (1986) FLC 91-748
Division: Division 1 First Instance Number of paragraphs: 72 Date of hearing: 30 November 2021 Place: Adelaide Counsel for the Applicant: Mr Baume Solicitor for the Applicant: Murati Lawyers Counsel for the Respondent: Ms Farmer Solicitor for the Respondent: Withnalls Lawyers ORDERS
DNC 231 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR HOLFORD
Applicant
AND: MS LORTON
Respondent
ORDER MADE BY:
BERMAN J
DATE OF ORDER:
9 DECEMBER 2021
THE COURT ORDERS THAT:
1.The Application in a Proceeding filed 18 October 2021 be 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 pseudonyms Holford & Lorton is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Berman J
INTRODUCTION
Mr Holford (“the applicant”) and Ms Lorton (“the respondent”) commenced a de facto relationship in about 2007 and separated in 2019. There are no children of the relationship.
Following separation the parties entered into negotiations seeking to resolve their financial differences.
The respondent engaged Withnalls Lawyers to advise her in or about December 2018. The applicant did not seek legal advice. Subsequent upon an agreement reached between the parties, the respondent’s solicitors prepared an Application for Consent Orders and a consent Minute of Order.
The documents were signed by each of the parties and on 25 March 2019 orders were made in terms of the Minute of Order.
It appears that the making of the final orders did not resolve the personal differences between the parties.
The respondent alleges that the applicant’s behaviour involving harassing and threatening conduct escalated and ultimately culminated in the applicant assaulting the respondent on 2 November 2020.
The applicant was charged with aggravated assault to which he pleaded guilty on 3 February 2021. The applicant was also in possession of a trafficable quantity of methamphetamines and was sentenced to twelve months imprisonment with three months to be served and the balance of the sentence of imprisonment suspended.
On 13 May 2020, the applicant filed an Initiating Application for final orders seeking that pursuant to s 90SN(1)(a) of the Family Law Act 1975 (Cth) (“the Act”) (later pleaded incorrectly as s 79A of the Act) the final orders for property settlement be set aside.
On 16 July 2021, the following orders were made by consent:
1.The question of the applicant de facto husband’s application as to section 90SN(1)(a) of the Family Law Act be bifurcated to the issue of any further section 90SM proceedings and determined discretely as a separate trial issue.
2.The de facto husband Mr Holford pay by way of security or costs for the application pursuant to section 90SN(1)(a) of the Family Law Act the sum of $35,000 such sum to be paid to the Trust Account of the de facto wife’s solicitors Withnalls Lawyers on or before 14 September 2021.
3.The applicant be restrained from alleging further particulars as to the section 90SN(1)(a) action or claim without leave of the court other than as identified in the “Verified Points of Claim” filed 3 February 2021.
The bifurcated application is listed for hearing on 3 February 2022 in the Darwin circuit.
By way of trial directions, the applicant was to file and serve his affidavits of evidence and a Financial Statement by 4.00 pm on 17 September 2021.
The respondent was to file and serve her affidavits of evidence and a Financial Statement by 4.00 pm on 19 November 2021.
On 17 September 2021, a Judicial Registrar extended time for compliance by the applicant and the respondent such that the applicant was ordered to file his trial material by 4.00 pm on 15 October 2021 and the respondent was ordered to file her trial material by 4.00 pm on 20 December 2021.
It is conceded on behalf of the applicant that he has not complied with trial direction orders and it is acknowledged that there has not been any application to further extend time or that the trial as currently listed should be vacated.
The absence of any cogent explanation and the blatant non-compliance with an order of the Court is potentially egregious.
By Application in a Proceeding filed 18 October 2021, the applicant seeks orders conveniently summarised as follows:
(1)The applicant seeks leave to withdraw his Further Amended Initiating Application and Verified Points of Claim filed on 3 February 2021.
(2)The applicant seeks leave to file and serve a Further Amended Initiating Application as foreshadowed in Exhibit “H-4” to the applicant’s affidavit filed 18 October 2021.
(3)That the firm of Withnalls Lawyers cease acting for the respondent in the proceedings.
(4)That the parties engage B Pty Ltd to provide retrospective valuations as at 12 March 2019 of the following real estate:
(a)1 C Street Suburb D NT;
(b)2 C Street Suburb D NT; and
(c)F Street Suburb P NT.
(5)That the parties engage G Accountants to determine the retrospective value as of 12 March 2019 of the business owned by H Pty Ltd, and that the respondent provide any such documents as may be requested by the accountants to complete the valuation.
(6)That the respondent in her capacity as sole director of H Pty Ltd produce all files, ledgers, notes, rental agreements and records relating to the leases it managed for the applicant and his entity J Pty Ltd.
(7)The applicant seeks leave to issue four subpoena.
The applicant no longer seeks an order in terms of paragraph 7 of the Application in a Proceeding, namely that the respondent produce bank statements for a certain period of time.
PARAGRAPHS 1 AND 2 OF THE APPLICATION
The applicant’s former solicitors, Maleys Barristers and Solicitors, filed a Further Amended Initiating Application on 3 February 2021 on behalf of the applicant.
Whilst the primary order sought was that the orders made by consent on 20 March 2019 be varied pursuant to s 79A(1)(a) on the basis of a miscarriage of justice by reason of fraud, suppression of evidence and the giving of false evidence, it is understood that the relevant section is s 90SN(1)(a) of the Act.
The basis of the application to vary the final orders is particularised in the Verified Points of Claim as annexed to the Further Amended Initiating Application.
The gravamen of the applicant’s complaint at the time was that for the purposes of the consent orders, his business was valued at $300,000 however, he alleges that the respondent mislead him by her failure to disclose that the applicant’s business had a superannuation debt of $228,954.09 as of 4 March 2020.
In addition, the applicant contends that the respondent stole money from his investment property rental account managed by her in the total sum of $38,013.85.
In summary, the applicant contends that if he had been aware of the extent of the superannuation debt he would not have entered into the consent order because in bringing the debt to account, there was not an equal distribution of property as between the parties.
The applicant alleges that he did not give instructions to his solicitor Ms P who was employed at Maleys Barristers and Solicitors to sign and file the Further Amended Initiating Application which included the Verified Points of Claim.
The allegation made by the applicant would if true, represent a serious act of professional misconduct on behalf of Ms P.
The draft Further Amended Initiating Application that the applicant seeks leave to file does not contain a Verified Points of Claim and seeks the following declarations:
1.For the purpose of section 90SN(1)(a) of the Act, the Court is satisfied there was a miscarriage of justice by reason of fraud, suppression of evidence, and the giving of false evidence.
2.For the purpose of section 90SN(1)(b) of the Act, the Court is satisfied circumstances have arisen since the Consent Orders were made rendering it impracticable for part of them to be carried out.[1]
[1] Affidavit of the applicant filed 18 October 2021, annexure “H-4”, page 28.
There is no indication as to the basis upon which the orders are sought other than in the recitals that assert the following:
A.…
B.The purpose of the Consent Orders was to distribute the assets of the relationship equally between the Applicant and Respondent.
C.Notwithstanding their purpose, the Consent Orders unjustly and overwhelmingly favoured the Respondent.
D.The Respondent failed to comply with her obligation of full and frank disclosure in accordance with the Family Law Act 1975 (Cth) (“the Act”).
E.The absence of full and frank disclosure by the Respondent, led the Court to making Consent Order that are not just and equitable.
F.…
G.By reason of the way the Consent Orders were engrossed, an error in relation to order 5 was made in that order 5 cannot be given effect.[2]
[2] Ibid.
It is apparent that the recitals do little to inform the basis for the declarations sought.
Given the matters raised by the applicant in respect of the alleged conduct of his former solicitor, it cannot be said that the Verified Points of Claim provide any assistance to the respondent to better understand the case that she has to meet.
Accordingly, the importance of the applicant’s trial affidavit is the only basis upon which the respondent and the Court can better understand what underpins the orders sought by the applicant to set aside the final orders.
It is a matter for the applicant to set out the orders that he seeks and the basis upon which they are sought. Given that there is a concession made on behalf of the applicant that the recitals do not inform the basis for the declarations sought, it is a matter for the applicant as to how he proposes to present his case.
In the circumstances, orders were made giving the applicant leave to file and serve his proposed Further Amended Initiating Application in the form appearing as annexure “H-4” annexed to his affidavit filed 18 October 2021.
It is a matter for the respondent to consider what action, if any, should be taken should the applicant file and serve the proposed Further Amended Initiating Application in the absence of a trial affidavit.
SHOULD THE RESPONDENT’S SOLICITORS CEASE ACTING
The applicant seeks that Withnalls Lawyers cease acting for the respondent in the proceedings.
The applicant acknowledges that the Application for Consent Orders was prepared by the respondent’s solicitors. He contends that they had acted for him over several years and as a result should now cease acting for the respondent.
The applicant summarises his concerns in paragraphs 10 to 12 inclusive of his affidavit filed 18 October 2021. In essence, the applicant states that he trusted that the respondent’s current solicitor Ms Farmer would not act contrary to his interests in representing the respondent in the Application for Consent Orders.
The history of Ms Farmer’s involvement relates to her representation of the parties in 2016 in relation to defending a personal violence restraining order. It appears that as a result of the obligation on the parties to attempt to resolve their differences by mediation, there was a successful negotiated settlement.
In addition, Ms Farmer represented L Pty Ltd in 2014 regarding a dispute that the company had with a builder. It was resolved in 2015. The applicant argues that as a result of Ms Farmer’s involvement with him and his company L Pty Ltd, Ms Farmer may have received information which could now “be misused”[3] in the proceedings. The applicant has an overarching concern that Ms Farmer’s involvement may well impact adversely on the integrity of the proceedings.
[3] Affidavit of the applicant filed 18 October 2021, paragraph 12.
There is no affidavit from Ms Farmer but there is a response from the respondent that seeks to place the applicant’s assertion that Withnalls Lawyers has a conflict in context.
The respondent admits that Withnalls Lawyers acted on behalf of the parties in respect of a personal restraining order arising out of a physical altercation.
The litigation was ultimately resolved by the respondent withdrawing her application however, before that occurred it appears that the applicant met with Withnalls Lawyers on one occasion and then instructed counsel by way of a direct brief.
It is not controversial that the 2016 litigation did not require the disclosure of financial information.
The respondent was aware of the applicant’s instructions to Withnalls Lawyers in respect of a commercial dispute. Ms Farmer was not instructed but rather a colleague, Ms M, had the carriage and conduct of the proceedings on behalf of the applicant.
The respondent had some knowledge of the dispute but was not involved as a party.
The applicant did not object to Ms Farmer representing the respondent for the purposes of the Application for Consent Orders. By his counsel, a concession was made that the first formal objection was raised by the applicant’s solicitors by letter dated 13 October 2021 which appears as annexure “H-10” to the applicant’s affidavit filed 18 October 2021. The extent of the applicant’s concerns are set out in the following extract:
Acting against a former client
It has come to our attention that you previously acted for our client in various matters.
Considering you have acted for our client, we are at a loss to understand how you decided it was appropriate to act against your former client.
We have real concerns about you acting in this matter. Those concerns relate to potential misuse of confidential information relating to our client and his entities.
There is also a need to protect the integrity of this proceeding.
Given the circumstances, we request that you explain why you believe it is appropriate to act in this proceeding against your former client.[4]
[4] Affidavit of the applicant filed 18 October 2021, annexure “H-10”, page 98.
Before turning to the respondent’s solicitors’ response, it is necessary to observe that the issue of a potential conflict arising appears in the applicant’s Initiating Application filed 13 May 2020.
The extent of the applicant’s concerns at that time is expressed in the following terms:
The Respondent’s lawyers for the Consent Orders had formerly represented the Applicant and the Respondent in both personal and business matters previously. The Applicant believed the lawyer would act in the Applicant’s best interest as well considering she had represented the Applicant previously with the Respondent. The Applicant believes the lawyer did not provide clear and timely information about the Consent Orders, did not review them with the Applicant. In relation to the Applicant and the Respondent in this case the Applicant believes it is a conflict of interest that this lawyer represented the Respondent in this matter knowing full well the history of both the Applicant and Respondent.[5]
[5] Initiating Application filed 13 May 2021, page 7.
Legal Principles
The three established categories which form the basis of a solicitor being restrained from acting against a former client are as follows:
(1)Breach of confidence.
(2)Breach of fiduciary duty.
(3)Inherent jurisdiction of a court over its officers and to control its process.
The concern expressed on behalf of the applicant is that Withnalls Lawyers, but in particular Ms Farmer, had access to confidential information which may be misused to give the respondent an unfair advantage.
The respondent’s solicitors requested that the applicant identify the confidential information that the applicant considers could be relied upon to his detriment. In addition, the issue of waiver is raised in circumstances where the applicant failed to bring an application seeking the Court’s consideration as to whether the respondent’s solicitors should be restrained from further involvement.
The Full Court in McMillan & McMillan (2000) FLC 93-048 adopted the statement of Frederico J in Thevenaz & Thevanaz (1986) FLC 91-748 at 75,447 as authority for the accuracy of the following extract:
Thus “a practitioner who wishes to cease acting for one party and to continue to act for the other party will be restrained from doing so by the court if there is any evidence that confidential communications have been made to him by the party for whom he is ceasing to act. In such a case the court will not weigh conflicting evidence as to confidence. It will act upon the evidence of the client who swears that he has made the confidential communication”. (see Legal Profession Law and Practice in Victoria (Gifford) 1980 ed. at p.356.)
Bryson J in Mancini & Mancini [1999] NSWSC 800 said:
7.It is of importance to observe that information generally is not protected; the protection available relates to confidential information, and is available to the person entitled to the confidence. No circumstances were put forward in which Ms Lorton herself is entitled to the protection of the law against the use of any particular information by Mr Holford or by the lawyers whom he has chosen to retain. It is not possible to address in any clear way and to come to a decision on protection of any alleged confidential information without identifying what the confidential information is in a sufficiently specific way to enable it to be identified. Without doing that it is not possible to come to a conclusion on whether the information truly is confidential, to consider and appraise the circumstances in which it came into existence and was communicated, to come to any conclusion about whether protection is appropriate, or to make any enforceable order. …
Accordingly, proof of the existence and nature of the purported confidential information needs to be provided.
In the current circumstances, the request for the relevant confidential information to be identified has not been favoured with a response. The respondent’s solicitor has not represented the parties in the current proceedings and then at some stage decided that she would only represent the respondent.
It may well be the case that a conflict exists however, that is not able to be determined in the absence of the confidential information relied upon being identified. It has not.
Accordingly, the applicant has failed to establish that the retention by the respondent of Withnalls Lawyers and in particular Ms Farmer provides the respondent with an unfair advantage.
The issue of a potential conflict is a matter of the proper administration of justice. There may be an argument that the acquiescence and lack of action by the applicant could be considered as a waiver however that is a matter that does not need to be considered at this stage.
SHOULD THE RESPONDENT BE OBLIGED TO JOINTLY INSTRUCT AND APPOINT SINGLE EXPERT VALUERS
Paragraphs 4 and 5 of the application seek that the parties engage a firm of property valuers to provide a retrospective valuation of three parcels of real estate and that a firm of chartered accountants be jointly instructed to undertake a retrospective valuation as at 12 March 2019 of the respondent’s real estate business known as H Pty Ltd.
The applicant contends that the valuations used by the parties, but in particular his reliance upon them at the time that he entered into the Application for Consent Orders, were inaccurate and flawed.
It is not asserted that there was any misrepresentation by the respondent that induced the applicant to rely upon the valuations obtained.
The respondent does not accept that there has been a miscarriage of justice and there is no part of her opposition to the orders sought by the applicant that would involve reliance upon retrospective valuations of either real estate or her real estate business.
It appears that there is a fundamental misunderstanding on the part of the applicant and/or his solicitors that the orders sought in paragraphs 4 and 5 are tantamount to discovery. They are not. The orders sought seek that the parties jointly engage single expert valuers. There is no good reason why the respondent should be required to do so if it is not part of her case. The issue is not one of property settlement but rather whether there has been a miscarriage of justice. It is not asserted on behalf of the applicant that there has been a difficulty or a refusal to facilitate the necessary aspects of the preparation of the applicant’s case.
In the circumstances, paragraphs 4 and 5 of the Application in a Proceeding provide no foundation for the non-compliance by the applicant of trial directions.
Given that the respondent does not concede that the foreshadowed focus on retrospective valuations is a relevant or necessary consideration to determine whether there has been a miscarriage of justice at the time of making of the final orders, the respondent should not be compelled to assist in the preparation of the applicant’s case.
I do not propose to make orders in respect of paragraphs 4 and 5 of the application.
ALLEGATION OF FRAUD
The applicant seeks the production by the respondent of files, ledgers, notes, rental agreements and records relating to managed leases for the applicant and J Pty Ltd.
There is uncertainty as to what the applicant seeks by way of production of documents. The applicant alleges that for a period of time whilst the respondent was managing his investment properties, she retained approximately $1,000 per month without the applicant’s consent, permission or tacit authority.
The allegation is denied by the respondent who highlights that all of the documents requested by the applicant have been produced to the extent that they remain in existence but in any event there is nothing to prohibit the applicant seeking the documents from the jointly instructed accountants, N Accountants.
There is some force to the respondent’s argument. In any event, the applicant did not press paragraph 6 in circumstances where leave was given for a subpoena to issue to the accountants for the period 1 January 2012 to 31 December 2017.
It is not conceded by the respondent that there is any relevance to the documents even on the applicant’s case at its highest.
CONCLUSION
For these reasons the Application in a Proceeding should be dismissed.
I make the order as appears at the commencement of these reasons.
I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 9 December 2021
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