Ian West Indoor and Outdoor Services Pty Ltd v Australian Posters Pty Ltd
[2011] VSC 287
•24 June 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 4033 of 2010
| IAN WEST INDOOR AND OUTDOOR SERVICES PTY LTD (ACN 086 394 434) | Plaintiff |
| v | |
| AUSTRALIAN POSTERS PTY LTD (ACN 004 828 380) | Defendant |
JUDGE: | EMERTON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 April 2011 | |
DATE OF JUDGMENT: | 24 June 2011 | |
CASE MAY BE CITED AS: | Ian West Indoor and Outdoor Services Pty Ltd v Australian Posters Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 287 | |
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ADMINISTRATIVE LAW – Appeal from VCAT – Solicitor restrained from acting against a defendant that it had previously acted against in similar proceedings – Knowledge of what occurred at compulsory conferences and terms of settlement in earlier proceeding – Confidential information as to settlement sum, steps by which settlement was reached and movements in negotiation – Duty of confidentiality – Real and sensible possibility of misuse – Victorian Civil and Administrative Tribunal Act 1998 (Vic) s 83.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M T Bevan-John | Taylor Splatt & Partners |
| For the Defendant | Mr N Jones | Darrer Muir Fleiter |
HER HONOUR:
This is an appeal from an order made in the Victorian Civil and Administrative Tribunal restraining the plaintiff’s solicitor, Mr William Griffiths, from acting for the plaintiff in the proceeding. The Tribunal’s order was made on the application of the defendant, the plaintiff’s adversary in the proceeding.
The defendant is a company which carries out the business of outdoor advertising. The plaintiff is an independent contractor which provided services to the defendant installing advertising posters. The plaintiff’s claim in the Tribunal is for damages and other orders pursuant to ss 158 and 159 of the Fair Trading Act 1999 (Vic) (the ‘West proceeding’).
Mr Griffiths and his firm, Taylor Splatt and Partners, acted against the defendant for another contractor, Wham Outdoor Advertising Pty Ltd, in an earlier proceeding in the Tribunal (the ‘Wham proceeding’). Wham’s claim against the defendant was based on the same representations as are alleged in the West proceeding, and on a contract for services that was apparently in similar if not identical form to the contract upon which the plaintiff is suing in the West proceeding. The Wham proceeding settled in August 2008 following two compulsory conferences under s 83 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (the ‘VCAT Act’) and an exchange of correspondence between the solicitors for the parties.
The Tribunal’s decision to restrain Mr Griffiths from acting was based on the following facts, which it said were not contested before it:
(a)Both Wham and the plaintiff entered into contracts with the defendant to install outdoor advertising posters;
(b)A number of paragraphs of the plaintiff’s outline in the West proceeding were substantially similar to the points of claim in the Wham proceeding;
(c)Compulsory conferences at the Tribunal in the Wham proceeding were conducted on a confidential basis;
(d)There was confidential correspondence between the defendant’s firm and Mr Griffiths’ firm, leading to an ‘in principle’ agreement to settle the Wham proceeding;
(e)Terms of settlement were executed in the Wham proceeding and were confidential to the parties to that proceeding;
(f)There were a number of common factual elements in the West proceeding and the Wham proceeding;
(g)Documents provided to the plaintiff in the Wham proceeding would also be relevant to the West proceeding; and
(h)Counsel instructed by Taylor Splatt and Partners appeared at two compulsory conferences in the Wham proceeding.
Mr Griffiths appeared at the Tribunal hearing to give evidence and was cross‑examined. The Tribunal noted that Mr Griffiths gave evidence that:
(a) he was not present at the compulsory conferences, but briefed counsel for them;
(b) he had been in similar situations before, representing different parties against one respondent;
(c) he bases his advice to his clients on their claims, not someone else’s;
(d) he was aware of the ‘Harman’ rule that documents obtained in legal proceedings may not be used for other purposes; and
(e) there were issues in the West proceeding in addition to those which arose in the Wham proceeding. In the West proceeding, in addition to the allegations about the representations, there had been a three year contract, so that some issues would be different.
The Tribunal, in restraining Mr Griffiths from acting in the West proceeding, relied on the decision of Einstein J in the New South Wales Supreme Court, Worth Recycling Pty Ltd v Waste Recycling and Processing Pty Ltd,[1] in which his Honour granted an order restraining a solicitor from acting for an opposing party on the basis that, because the solicitor had acted for a different opposing party against the defendant in earlier proceedings that were substantially similar, there was a threatened breach of duty of confidentiality in respect of information disclosed during a mediation and in a confidential deed of release entered into in the earlier proceedings. The decision at first instance was upheld on appeal.[2]
[1][2009] NSWSC 356 (5 May 2009).
[2]Worth Recycling Pty Ltd v Waste Recycling and Processing Pty Ltd [2009] NSWCA 354 (4 November 2009).
The Tribunal observed that the relevant question for the court in Worth was whether there was a ‘real and sensible possibility of misuse’ of the confidential information obtained under an undertaking of confidentiality during mediation and settlement negotiations and whether the similarity of the pleading of the proceedings to the earlier proceedings demonstrated the possibility of misuse.[3] The Tribunal found that Mr Griffiths was aware of the offers made at the compulsory conferences and in the correspondence in the Wham proceeding. Thus, he was aware not just of the settlement amount, but of the steps by which it was reached and the movements in negotiations. He had agreed it would be difficult to expunge from his mind his knowledge of the confidential dealings in the former case. The Tribunal concluded:
In Worth, the Court considered that a solicitor in that situation ought not to act for a client in the same position as a former client. The same applies in the present case. In my view, Mr Griffiths will not be able to expunge from his mind his knowledge of how the Respondent [the defendant] behaved in the former case [the Wham proceeding]. That knowledge was gained as part of confidential negotiations.[4]
[3] Ian West Indoor & Outdoor Pty Ltd v Australian Posters Pty Ltd [2010] VCAT 1118 (30 June 2010) [22] (Deputy President Steele).
[4]Ibid [26].
The Tribunal acknowledged that, unlike in Worth, there was no mediation agreement in the Wham proceeding. However, the Tribunal stated that a similar approach must apply to compulsory conferences at the Tribunal, because the parties ought to be able to reveal all relevant matters at mediation without an apprehension that disclosure might subsequently be used against them. Although the VCAT Act did not impose a duty of confidentiality on parties at a compulsory conference, the requirement that a compulsory conference be held in private supported the view that information obtained from a compulsory conference ought not to be available to a party who was not at the compulsory conference. The privacy of compulsory conferences ensured that the parties could reveal relevant information without that information subsequently being used against them.
Grounds of appeal
The plaintiff has raised three grounds of appeal:
(a)The Deputy President was in error in holding that the information possessed by Mr Griffiths about the defendant gained from another proceeding in which he had acted as a solicitor for another party suing the defendant, was confidential information;
(b)The Deputy President was in error in issuing a restraint on the basis only of a finding of possession of confidential information without any finding of risk of misuse of that information being made or open to be made;
(c)The Deputy President was in error in holding that the mere possession by Mr Griffiths of confidential information about the defendant (without any finding of risk of misuse of that information being made or being open to be made) was sufficient to disqualify him from acting as the plaintiff’s solicitor in the proceeding before VCAT.
First Ground: Did the Tribunal properly characterise the information as confidential information?
Counsel for the plaintiff, Mr Bevan‑John, submitted that the Tribunal’s reliance on Worth caused it to fall into error, in that it applied Worth without identifying any actual or particular confidential information, beyond a general reference to knowledge gained as a result of participation in the compulsory conferences, and without having regard to the basis upon which any duty of confidentiality binding the solicitor arose.
Mr Bevan-John further submitted that as the Tribunal does not have an inherent jurisdiction to control the conduct of legal practitioners as officers of the court, it was confined to restraining Mr Griffiths from acting on the basis of the danger of misuse of confidential information. As a result, it was necessary to have regard to the conditions specified by Gummow J in Smith Kline and French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health[5] for the grant of relief arising from an equitable obligation of confidence. Those conditions were described by Gummow J as follows:
(i) the plaintiff must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question, and must be able to show that; (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge); (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence, and (iv) there is actual or threatened misuse of that information, without the consent of the plaintiff. [6]
[5](1990) 22 FCR 73 (‘Smith Kline’).
[6]Ibid 87.
It was therefore submitted on behalf of the plaintiff that in determining whether to restrain Mr Griffiths from acting in the West proceeding, the Tribunal had to ask itself the following questions:
(a)Precisely what information is claimed as confidential?
(b)Why is it confidential?
(c)How was it received or obtained?
(d)Is there a real and sensible possibility of misuse of that information?
The plaintiff submits that the Tribunal failed to ask itself these questions and, as a result, did not identify with specificity the confidential information but made statements ‘in global terms’ devoid of particularity. Further, the scope of the confidentiality found by the Tribunal was wider than the confidentiality imposed by the parties themselves by reason of the terms of settlement or by reason of the operation of s 85 of the VCAT Act and it did not consider whether the information was received by Mr Griffiths in circumstances that imported an obligation of confidence. As a result, the plaintiff says that the information referred to by the Tribunal as confidential information was not in fact identified by it as having the necessary quality of confidentiality.
The defendant submits that the confidential information is clearly identified in paragraph 25 of the Tribunal’s reasons: the Tribunal found that Mr Griffiths was aware not just of the settlement amount in the Wham proceeding, but the steps by which it was reached and the movements in negotiations. The defendant therefore identifies the settlement amount, the steps by which settlement was reached and the movements in negotiations as the confidential information that is liable to be misused in the West proceeding. It submits that the Tribunal could be satisfied that this information had the necessary quality of confidentiality and that it was received in circumstances that imported an obligation of confidence as a result of the terms of settlement, and the evidence given by Mr Griffiths in relation to the compulsory conferences.
In the appeal in Worth,[7] Hodgson JA (with whom Spigelman CJ and Campbell JA agreed) held that as the solicitor was not contractually bound by the terms of the mediation agreement and the deed of release, the grant of relief to the defendant turned upon the requirements set out in Smith Kline. The question of whether there was the necessary quality of confidentiality was very much informed by the terms of the mediation agreement and the circumstances of the mediation. The confidential information was imparted to the solicitor in circumstances that imported an obligation of confidence, owed directly to the defendant as well as to his own client. In this context, his Honour noted that:
… the mediation agreement did not merely provide that admissions and the like were “without prejudice” and thus not admissible: a provision to that effect would not necessarily make the admissions confidential, or preclude use of them to inform the gathering of evidence or the conduct of the case. However, in cl 10, the mediation agreement provided explicitly that “a person” (which would include [the solicitor]) “who acquires confidential information … in the course of the mediation will not disclose or use that information except in accordance with this agreement”, subject to a qualification applying if the information becomes public knowledge otherwise than by breach of the agreement. [8]
[7]Worth Recycling Pty Ltd v Waste Recycling and Processing Pty Ltd [2009] NSWCA 354 (4 November 2009).
[8]Ibid [30].
His Honour concluded that the solicitor knew that his client had promised the defendant that the solicitor would not use confidential information except in accordance with the mediation agreement, and he participated in the mediation with that knowledge. That clearly established that the confidential information acquired by the solicitor at the mediation itself was acquired by him in such circumstances as to import an obligation of confidence owed directly to the defendant not to disclose or use the information except in accordance with the mediation agreement.[9]
[9]Hodgson JA went on to observe that the deed of release also provided for confidentiality, although in terms of disclosure only and not in terms of use. The solicitor was aware of this, and also of the provision to the effect that the contents could be disclosed to professional advisers only if the disclosure was made subject to an obligation to the party not to disclose the contents to any person.
Unlike Worth, there was no mediation in the Wham proceeding and no mediation agreement that would itself give rise to an obligation of confidence on the part of the parties and their lawyers. There were two compulsory conferences, neither of which was attended by Mr Griffiths, although Mr Griffiths gave evidence that he was informed by counsel what had taken place at the conferences.
In addition, there were three letters passing between the solicitors containing settlement offers that were not expressed to be confidential. As to the terms of settlement, the confidentiality provision only obliged the parties to keep confidential “the terms of this deed”.
As Mr Bevan-John pointed out, what is said or done in a compulsory conference receives limited protection under the VCAT Act. Although a compulsory conference is to be conducted in private, s 85 provides only that evidence of anything said or done in the course of a compulsory conference is not admissible in any hearing before the Tribunal in the proceeding. This does not, in and of itself, impose an obligation of confidentiality upon the parties or the solicitors participating in a compulsory mediation.
For its part, the defendant submitted that the Tribunal had before it evidence that what took place at the compulsory conferences was confidential: Mr Griffiths himself told the Tribunal that the information that he received about what had taken place at the compulsory conference was confidential information. It says that that evidence was accepted by the Tribunal, which was therefore entitled to find that Mr Griffiths possessed confidential information. In these circumstances, so the defendant says, the plaintiff’s first ground of appeal does not raise a question of law. Information is either confidential or it is not. The terms of settlement make it plain that they are confidential and the Tribunal was entitled to arrive at that finding of fact. The defendant also pointed to the uncontested facts found by the Tribunal that both compulsory conferences were conducted on a confidential basis, that there was confidential correspondence between the firms leading to an in‑principle agreement and that terms of settlement were executed in the Wham proceeding that were confidential to the parties.
There was plainly no error in the Tribunal treating the terms of settlement as imposing an obligation of confidentiality in relation to the settlement sum. As to the steps by which settlement was reached and the movements in negotiation, the terms of settlement did not by their terms impose an obligation of confidentiality on the parties or their legal advisors. Likewise, the exchange of correspondence by which the settlement sum was reached was not expressed to be confidential.
Moreover, although compulsory conferences at the Tribunal are to be held ‘in private’ unless otherwise ordered, compulsory conferences form part of the general case management armoury available to the Tribunal and have a variety of functions that include identifying and clarifying the nature of the issues in dispute and the questions of fact and law to be decided by the Tribunal, and allowing directions to be given concerning the conduct of the proceeding. Promoting a settlement of the proceeding is only one of the functions of a compulsory conference. The VCAT Act does not provide that compulsory conferences are confidential but rather that anything said or done in the course of a compulsory conference is not admissible in the proceeding itself. I disagree with the Deputy President that the fact that the VCAT Act requires compulsory conferences to be held in private imports obligations of confidentiality.
In this case, apart from the settlement sum itself, the confidential information about the steps by which settlement was reached and the movements in negotiations received no express protection from any written agreement or from the relevant statute.
However, the defendant also relies on the evidence before the Tribunal given by Mr Griffiths himself as to how he received the information. Mr Griffiths said that while he did not attend the compulsory conferences, he was aware of the negotiations that occurred and admitted that those negotiations were confidential. When asked whether he acknowledged that the negotiations in the conferences were confidential he said, “Of course it is.”[10] He also agreed that the ‘without-prejudice correspondence’ was confidential.[11]
[10]Transcript of Proceedings, Ian West Indoor & Outdoor Pty Ltd v Australian Posters Pty Ltd (VCAT, C6632/2009, Steele DP, 16 November 2009) p28 line 6-7.
[11]Ibid p28 line 8-9.
I find it unsurprising that the parties and their lawyers treated the compulsory conferences as confidential. Although compulsory conferences can serve a variety of purposes, in this case they operated as a platform on which the parties could negotiate a settlement. They effectively took the place of a mediation. As the New Zealand Court of Appeal pointed out in Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd,[12] the very nature of mediation requires that in principle it be conducted on a confidential basis, with the parties encouraged to ‘lay bare their souls’ for the purpose of facilitating a conciliation and resolution of the dispute. Understandably, parties will be cautious about doing so if what they do and say can be used against them for a different purpose by lawyers who happen to be participating.[13]
[12][2001] 3 NZLR 343 (‘Carter Holt’).
[13]Ibid [24].
Accordingly, although the VCAT Act provides very limited statutory protection for confidential information divulged in the course of a compulsory conference, the circumstances in which that information is divulged and, in particular, the understanding of the persons to whom it was divulged that it be kept confidential, may give rise to an obligation of confidentiality. A compulsory conference held for the purposes of enabling the parties to ‘lay bare their souls’ in order to facilitate a conciliation and resolution of the dispute is most likely to import an understanding by the participants that anything said is said in confidence.
In this case, while Mr Griffiths did not attend the compulsory conferences, the counsel that he had retained to attend on behalf of the plaintiff informed him of what had occurred at the compulsory conferences. His evidence makes it clear that he understood the information conveyed to him by counsel to be confidential. I am satisfied that the information imparted to Mr Griffiths about what occurred at the compulsory conferences was imparted in circumstances that imported an obligation of confidence. The same applies to the ‘without prejudice’ correspondence.
It was submitted in argument by Mr Bevan-John for the plaintiff that Mr Griffith’s answers to whether the negotiations in the conferences and the ‘without prejudice’ correspondence were confidential simply reflected a misunderstanding of the legal position on the part of Mr Griffiths. I do not accept that submission. Regardless of the position under the VCAT Act, it was open to the parties to proceed with settlement negotiations and to enter into correspondence on the basis that they would be confidential.
The Tribunal did not go through the factors identified in Smith Kline as giving rise to an obligation of confidence. However, on the facts before it, the Tribunal made no error in treating the particular information that it had identified in paragraph 25 of its reasons as confidential information.
Ground 1 is not made out.
Second and third grounds: The risk of misuse of information
The Tribunal based its decision on its finding that it was unlikely that Mr Griffiths could expunge his knowledge of the way in which the defendant negotiated in the Wham proceeding. The Tribunal said:
Mr Griffiths has information about the way the Respondent [defendant] negotiated in the Wham proceeding, a case with many similarities to the current one. He can not expunge that knowledge from his mind. If the Respondent wishes to negotiate with the Applicant [the plaintiff], it is entitled by the confidentiality agreed in the Wham proceeding to be able to do so with a representative who does not have that knowledge.[14]
[14]Ian West Indoor & Outdoor Pty Ltd v Australian Posters Pty Ltd [2010] VCAT 1118 (30 June 2010) [29] (Deputy President Steele).
However, the Tribunal gave no express consideration to how Mr Griffith’s knowledge of the negotiations in Wham proceeding could be misused by him, or even how it was likely to be helpful to the plaintiff and disadvantageous to the defendant in the West proceeding.
The Tribunal had before it the affidavit of Shane Willliam Dare sworn 28 October 2009, in which Mr Dare described in point form the similarities between the points of claim filed in the Wham proceeding and the ‘outline of history’ filed in the West proceeding. Mr Dare also described the circumstances giving rise to the defendant’s concern about the misuse of confidential information to include the following:
…
(b)the applicant’s solicitors have documents in their possession that were provided by the respondent in the Wham proceeding;
(c)it is clear that the application and information obtained in the Wham proceeding has been used to make allegations in this [the West] proceeding;
(d)there appear to be common factual elements in the claims made in this [the West] proceeding and the Wham proceeding;
…
(f)information and documents that were the subject of 2 confidential compulsory conferences in the Wham proceeding will be used by the applicant’s solicitors to assist the applicant in these [the West] proceedings.
Mr Dare deposed further that the respondent [the defendant] had instructed him that was concerned that information disclosed in confidential and without prejudice discussions leading to the making of the Terms of Settlement would be used for the benefit of the applicant [plaintiff], including the confidential terms of settlement themselves.
Counsel for the defendant, Mr Jones, briefly compared the ‘points of claim’ in the Wham proceeding and an ‘outline of history of dispute’ in the West proceeding. He pointed out that the representations alleged were the same. He said that while the representations were made to different people, they arose from the same meetings; agreements were made and executed on the same day in July 2005; notices were given under the same clause (cl 9.2) of the agreements; the relief sought was in exactly the same form.
Furthermore, Mr Jones referred to correspondence from Mr Griffiths to the defendant’s solicitors in which Mr Griffiths conceded that “naturally” the points of claim in the West proceeding were very similar to those filed in the Wham proceeding, that it was highly probable that “similar fact” evidence would be called and that the principal of Wham, Mr Keenan, would be called as a witness in the West proceeding. Mr Griffiths stated that there were different contracts and certain different factual matters, “but the majority were of common ground including representations, meetings and like factual matters”.
The defendant therefore submits that, critically, the representations that were alleged to give rise to the cause of action in the Wham proceeding are the same as the representations alleged in the West proceeding. Likewise, the meetings and other elements of the factual matrix are the same.
However, before the Tribunal there was also evidence from Mr Griffiths as to the difference between the two proceedings and the effect of those differences on his ability to ‘misuse’ information obtained in the Wham proceeding. Mr Griffiths was asked whether there was anything he could say to satisfy the Tribunal that, if there was confidential information that he had obtained in the course of the negotiations, there was no danger of disclosure or misuse of such knowledge. He said:
Well, in this matter I did not attend the mediation myself. I instructed counsel, who attended both mediations. I, of course, was given the report upon the mediation, but I do not believe, other than what the matter settled for, there is anything that I’m aware of that is confidential and detrimental of itself. As I said, the reason for advising on settlement is not what you’ve settled something else for but what is a proper settlement of the matter before you, and that is the way this would be dealt with on its own losses material. [15]
[15]Transcript of Proceedings, Ian West Indoor & Outdoor Pty Ltd v Australian Posters Pty Ltd (VCAT, C6632/2009, Steele DP, 16 November 2009) p25 line 31 to p26 line 9.
Mr Griffiths was then asked whether he was aware of the ‘mindset’ of his opponent in the course of negotiating a final figure. He said that so far as the settlement figure was concerned, it was a lower figure that he and counsel had advised the client to accept, so there were peculiar circumstances in the Wham proceeding which would not apply in the present case. When asked about any connection between the West proceeding and the Wham proceeding he said:
They’re very different circumstances leading up to them both signing an identical agreement, which was the last agreement signed. In this matter, in the West matter, there was in fact a three year agreement which he had signed and from which he agreed to terminate to go to the one year agreement. That is a very different factual situation to the Wham matter where he had in fact been an employee of AP [the defendant] and had signed the one year agreement. So they’re factually different. Whilst the end agreement, the representations have a lot of similarity, the quantums are different, and the circumstances leading into the action are different. [16]
[16]Ibid p26 line 22] to p27 line3.
Mr Griffiths then went on to explain the circumstances of the settlement of the Wham proceeding, which included that Wham had serious financial problems and that he was instructed to accept the offer against his advice.
When asked in cross‑examination whether he could expunge from his mind his knowledge of the confidential dealings that he had with Wham, he said:
I’m only a human being. Of course I’m aware of what it is [the settlement sum], but it is not a factor. The factor is, what is the loss this client has settled [sic]? What is a reasonable figure on this.[17]
[17]Ibid p31 line1-4.
In Tricontinental Corporation Ltd v Holding Redlich (a firm),[18] Mandie J considered an argument that knowledge of monetary amounts involved in a previous settlement as well as a party’s negotiating moves in settlement negotiations was useful information which might unconsciously be used by solicitors to assess any negotiating position in a subsequent proceeding. However, his Honour concluded that likely differences in the issues and evidence in the later proceeding would be such as to render knowledge of the history of negotiations in an earlier proceeding of negligible use or relevance.
[18]BC9400946.
In my view, the Tribunal was required to more closely scrutinise the way in which it was said that the confidential information might be used to the benefit of the plaintiff and the disadvantage of the defendant. That might have caused the Tribunal to consider whether likely differences in the issues and evidence in the Wham proceeding would be such as to render knowledge of the history of negotiations in that proceeding of negligible use or relevance in the West proceeding. In the West proceeding, the issues have not yet crystallised because no defence has been filed. As the plaintiff pointed out, a proceeding may begin as a standard debt claim, but then diverge from the norm in defence – or even in reply. Moreover, for the reasons given by Mr Griffiths in his evidence, the amounts for which a solicitor might advise the plaintiff to settle the proceeding will depend on the particular circumstances of the plaintiff and the losses that it has incurred.
In my view, Worth is distinguishable from the present case, in that its facts led readily to a conclusion of a real and sensible possibility of misuse of confidential information. The plaintiff there engaged the solicitor to act for it because it knew the solicitor had been involved in a successful mediation with the defendant in an earlier case involving substantially similar issues. In Worth, the solicitor in question swore an affidavit in which he stated that he had had a conversation with the director of the plaintiff, Mr Cooper, who had been scheduled to give evidence in an earlier proceeding (referred to as the ‘Veolia proceeding’) in which Mr Cooper told him that he considered that Worth, as a competitor of the defendant in the liquid waste industry, also had a claim against the defendant. In the conversation, Mr Cooper said that he assumed the resolution of the Veolia proceeding had been favourable to that plaintiff and that Worth wished to pursue its own claim against the defendant. The solicitor told Mr Cooper that the terms and details of the resolution between Veolia and the defendant were confidential. Mr Cooper then asked the solicitor whether Veolia was ‘happy’ with the resolution and the solicitor said he believed it was. Mr Cooper said that he would immediately make arrangements to talk to a person at Veolia about Worth’s desire to instruct the solicitor to pursue its claim. His Honour accepted that the likelihood was that, encouraged by the solicitor’s remarks, Mr Cooper contacted the person at Veolia concerning whether the resolution was favourable and whether he was happy with the resolution and their instructing of the solicitor. His Honour found that the risk of misuse of the information was highlighted by Worth’s desire to retain the solicitor because the solicitor had attended the mediation and Veolia was ‘happy’ with the terms of settlement that resulted from the mediation. So much was apparent from, amongst other things, the fact that the solicitors were retained on terms which included the person responsible for the work being the solicitor who had attended the mediation. There was also evidence that some days later Mr Cooper discussed with the solicitor whether the mediator used by Veolia could be used in any mediation between Worth and the defendant.
There was therefore ample evidence in Worth that the plaintiff chose to retain the solicitor in question in order to reproduce the ‘happy’ experience in the earlier proceeding. The plaintiff had contrived to obtain, as far as possible, the same ‘happy’ outcome as Veolia. There was good reason for the Court to form the view that the confidential information held by the solicitor might be misused, whether or not the solicitor in question intended to do so. In the present case, however, the plaintiff retained Mr Griffith as his solicitor before Wham and there could be no suggestion that he did so in order to take advantage of Mr Griffith’s knowledge of the Wham proceeding. Furthermore, on Mr Griffith’s evidence, the settlement in the Wham matter was not necessarily a ‘happy’ one at all.
It must be noted that in the Court of Appeal, Hodgson JA expressed the view that misuse would be “almost inevitable” if the solicitor should take part in any settlement negotiations and that it was very difficult to keep the settlement negotiations quarantined from the conduct of the proceedings generally.[19] Moreover, in Carter Holt, the New Zealand Court of Appeal said:
… a party seeking the exclusion of the other side’s legal adviser must first show that there is an appearance of risk, going beyond the remote or merely fanciful, of conscious or unconscious use or disclosure by the lawyer of something relevant to the current dispute of which the lawyer gained knowledge as a result of participation in an earlier mediation. But if that threshold is reached, it is then for the lawyer to demonstrate that in fact no such risk exists or that, if it does, no damage, other than de minimus, could possibly result from use or disclosure.[20]
[19]Worth Recycling Pty Ltd v Waste Recycling and Processing Pty Ltd [2009] NSWCA 354 (4 November 2009) [44].
[20]Carter Holt, 349.
However, having considered the reasoning of the New Zealand Court of Appeal in Carter Holt, Hodgson JA emphasised that the onus lay on the party seeking the injunction to show a threat of misuse sufficient to justify an injunction. The existence of a common factual element was not sufficient to shift the onus of proof. However, proof of a real and sensible possibility of misuse may be sufficient to justify an injunction. [21]
[21]Worth Recycling Pty Ltd v Waste Recycling and Processing Pty Ltd [2009] NSWCA 354 (4 November 2009) [42].
In my view, an appearance of risk ‘going beyond the remote or merely fanciful’ is not sufficient. There must be a ‘real and sensible’ possibility of misuse, and I agree that the mere existence of a common factual element will not be sufficient to shift the onus of proof.
Accordingly, I have concluded that the Tribunal’s finding that there was a real and sensible risk of misuse of the confidential information was not open simply upon the concession by Mr Griffiths that he could not expunge from his mind knowledge of the confidential negotiations in the Wham proceeding. The Tribunal did not properly turn its mind to whether there was a real and sensible risk of misuse by Mr Griffith of confidential information concerning the settlement amount, the steps by which settlement was reached and the movements in negotiations in the Wham proceeding. It did not consider how the information might be capable of being misused in the West proceeding, that is, applied for the benefit of the plaintiff to the disadvantage of the defendant.
In the circumstances, the Tribunal erred in issuing a restraint on the basis only of a finding of possession of confidential information without any finding of risk of misuse of that information being made or open to be made and by holding that the mere possession by Mr Griffith of confidential information about the defendant was sufficient to disqualify him from acting as the plaintiff’s solicitor in the VCAT proceeding.
Grounds 2 and 3 are made out.
I have considered whether the evidence that was before the Tribunal would be sufficient to justify an injunction in this case. I have considered in particular the evidence in the affidavit of Mr Dare referred to above. In relation to the similarities between the ‘outline of history’ and the ‘points of claim’, some allegations are apparently similar, although it is to be observed that the ‘outline’ consists of no more than 23 paragraphs, whereas the ‘points of claim’ comprise 56 paragraphs. Moreover, three of the six clauses said to be “substantially similar” are no more than fairly standard clauses alleging breaches of duty or unconscionable conduct. The similarity seems to boil down, as Mr Jones said in submissions, to entry into the same form of agreement with the defendant and representations of a similar kind being made to the plaintiffs on separate occasions. The identification and analysis of the similarities was cursory, to say the least, and the defendant’s case may well have benefited from more detailed explication and analysis.
Similarly, in relation to the areas of concern articulated in paragraphs 36 and 37 of Mr Dare’s affidavit, no elaboration or explanation was given as to why, for example, it was said to be “clear” that the application and information obtained in the Wham proceeding had been used to make allegations in the West proceeding or how it was said that information and documents that were the subject of the compulsory conferences in the Wham proceeding would be used by the plaintiff’s solicitors to assist the applicant in the West proceeding.
As a result, I have not been persuaded that the two proceedings are so relevantly similar that knowledge of offers and negotiations in the Wham proceeding will give rise to a real and sensible possibility of misuse of that information in the West proceeding. On the evidence that was before the Tribunal, no injunction ought to be granted.
Conclusion
The appeal must be upheld and the order of the Tribunal enjoining Mr Griffith from acting for the Applicant in the VCAT proceeding set aside.
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