Just Group Ltd v Peck
[2016] VSC 375
•1 July 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
S CI 2016 02141
| JUST GROUP LIMITED (ACN 096 911 410) | Plaintiff |
| v | |
| NICOLE PECK | Defendant |
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JUDGE: | Keogh J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 June 2016 |
DATE OF JUDGMENT: | 1 July 2016 |
CASE MAY BE CITED AS: | Just Group Ltd v Peck |
MEDIUM NEUTRAL CITATION: | [2016] VSC 375 |
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PRACTICE AND PROCEDURE – Inherent jurisdiction – Court’s control of its processes in aid of the administration of justice – Restraining solicitors from acting – Applicant seeking injunction preventing opponent’s solicitors from continuing to act – Relevant considerations – Kallinicos and anor v Hunt and ors (2005) 64 NSWLR 561, Grimwade v Meagher and ors [1995] 1 VR 446, Director of Public Prosecutions for Western Australia v Bennett & Co (2005) 151 A Crim R 516 followed – Circumstances of case not exceptional – No ‘real and sensible’ risk identified – Potential for prejudice to defendant substantial – Application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Wood QC with Ms E Murphy | Arnold Bloch Leibler |
| For the Defendant | Mr D Collins QC with Mr N De Young | Ashurst Australia |
HIS HONOUR:
By agreement made on or about 2 December 2015, the plaintiff employed the defendant as Chief Financial Officer and company secretary. The defendant took up that role in early January 2016. On 2 May 2016 she gave notice of the termination of her employment with the plaintiff. The defendant has since sought to take up employment with a significant trade rival of the plaintiff, Cotton On. The plaintiff commenced this proceeding on 3 June 2016 alleging that in taking up employment with Cotton On the defendant has acted in breach of the terms of her employment with the defendant. In particular, breach of a restraint clause and breach of a confidential information clause are alleged. The plaintiff seeks an injunction to restrain the defendant from commencing employment with Cotton On for 24 months from 6 June 2016, and from using the confidential information of the plaintiff.
By her defence dated 17 June 2016, the defendant argues that:
(a) The terms of the contract in force at the time of her resignation did not include a restraint;
(b) In the alternative, a restraint is in the circumstances excessive and unreasonable and unenforceable at law;
(c) The defendant has affirmed to the plaintiff that she would keep confidential any of the plaintiff’s confidential information disseminated to her during her employment.
The defendant has engaged solicitors Ashurst to represent her in the proceeding.
By summons dated 17 June 2016, the plaintiff seeks orders that:
(a) Ashurst be restrained from acting or continuing to act for and on behalf of, or from continuing to provide services to, the defendant in respect of these proceedings or the subject matter of these proceedings.
(b) The defendant be restrained from continuing to retain or communicate with any partner, officer, employee, servant or agent of Ashurst in relation to these proceedings or the subject matter of these proceedings.
This application follows on from communications between the parties commencing on 2 June 2016 by which the plaintiff questioned the relationship between the defendant, Ashurst and Cotton On.
The plaintiff relies on the inherent jurisdiction of the court in the administration of justice to impose the restraint for the protection of the integrity of the judicial process. In Kallinicos and anor v Hunt and ors,[1] Brereton J expressed that ground in the following terms:
[T]he 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…
The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief.[2]
[1](2005) 64 NSWLR 561.
[2]Ibid 582-3 (citations omitted).
In Grimwade v Meagher and ors,[3] Mandie J, in exercising the jurisdiction to prevent a member of counsel appearing for a particular party, relied upon the identified ‘unique, extraordinary and exceptional circumstances’ leading to the making of the application. His Honour stated that these identifying circumstances would:
…cause a fair-minded observer to apprehend a real risk that the first defendant would be unable to appear in the said action and act with that objectivity and detachment which the court expects of counsel appearing before it and a real risk that the first defendant would be unable to properly distinguish or avoid a conflict between his personal interests and his duty to his clients in the said action. Alternatively… I consider that there is a real and sensible risk of a lack of objectivity by the first defendant which not only gives rise to an undue risk of unfairness or disadvantage to the plaintiff but gives rise to a substantial concern that a fair trial would not be had and hence gives rise to a concern for the integrity of the judicial process and the due administration of justice.[4]
The exceptional circumstances identified by Mandie J in Grimwade related directly to the clearly identifiable risk. The risk was made ‘real’ by the circumstances leading to it, in particular the previous actions of counsel in prosecuting the proceeding to that point.
[3][1995] 1 VR 446 (‘Grimwade’).
[4]Ibid 454.
In Director of Public Prosecutions for Western Australia v Bennett & Co (A Firm)[5] the identified risk related to the inadvertent disclosure of information and the possibility that the particular information in the hands of the solicitors would ‘colour and influence’ the conduct by them of their client’s case. There were exceptional circumstances in that case, including the purpose for which the particular affidavit was obtained and read by the solicitors, that the affidavit contained material relevant to an ongoing police investigation the disclosure of which would be contrary to public interest, that in part the affidavit did remain confidential on the basis of public interest immunity, and that the material in the affidavit was relevant to the interests of the party represented by the solicitors in the very same proceeding. In related proceedings the party represented by the solicitors, Centurion, had unsuccessfully challenged the confidentiality of the affidavit. It should be noted that in that case the only disclosure of the affidavit had been to the solicitors, by virtue of them obtaining it from the court file in error and in contravention of the Criminal Property Confiscation Act 2000.[6]
[5](2005) 151 A Crim R 516 (‘Bennett’).
[6]Ibid 519.
Counsel for the plaintiff argued that:
(a) The evidence, including inferences which should be drawn, established the nature of the past, present and likely future relationship between Ashurst and Cotton On, and the current and ongoing relationship of solicitor and client between Ashurst and the defendant;
(b) Information which was commercially sensitive and confidential to the plaintiff will necessarily be released to Ashurst in the conduct of this proceeding;
(c) (a) and (b) above established a real and sensible risk of inadvertent disclosure of commercially sensitive and confidential information by Ashurst to Cotton On;
(d) Such disclosure would cause great prejudice to the plaintiff; and
(e) In the circumstances a fair-minded, reasonably informed member of the public would conclude that the administration of justice required that Ashurst not continue to act for the defendant in this proceeding.
Counsel for the respondents to the summons, being the defendant and Ashurst, argued that:
(a) There was no basis for asserting a real risk of dissemination of confidential information by Ashurst to Cotton On;
(b) There were no exceptional circumstances justifying the exercise of this Court’s inherent jurisdiction;
(c) There would be very significant prejudice to the defendant if she were deprived of her solicitors at this stage of the litigation; and
(d) There had been delay by the plaintiff in pursuing its application which weighed against the granting of the relief sought.
There were four affidavits filed in support of the plaintiff’s application, namely:
(a) Affidavit of Mr Mardirossian (a partner at Arnold Bloch Leibler), sworn 17 June 2016;
(b) Affidavit of Mr Marshall (a solicitor in the employ of Arnold Bloch Leibler), sworn 24 June 2016;
(c) Affidavits of Mr McCartney (the non-executive director of the plaintiff), sworn 17 June and 27 June 2016.
Counsel for the plaintiff submitted that those affidavits established the following facts:
(a) The plaintiff and Cotton On are serious trade rivals operating in a competitive environment;
(b) The defendant was employed in the second most senior management position with the plaintiff;
(c) As a consequence, the defendant had access to highly confidential and commercially sensitive information of the plaintiff. Access was in the period January to May 2016, and is therefore very ‘current’;
(d) The defendant expressly acknowledged, in the contractual documents between her and the plaintiff, the legitimate interest of the plaintiff in its commercially sensitive information;
(e) The plaintiff alleges breach by the defendant of restraint and contractual confidentiality provisions by her taking up employment with Cotton On;
(f) The plaintiff would suffer significant loss and damage if Cotton On has access to its commercially sensitive and confidential information;
(g) Ashurst has in the past acted for Cotton On;
(h) The defendant’s defence of the plaintiff’s action is extremely well resourced; and
(i) The respondents to the application have declined to say whether Cotton On is paying the defendant’s legal expenses or has agreed to indemnify her in respect of any costs order.
Referring then to inferences that could be drawn, counsel for the plaintiff submitted that there was a real possibility that Cotton On was funding or supporting the defendant in the litigation, and that it was ‘not out of the realms of possibility’ that Cotton On was supporting the litigation. It was argued that it was not unlikely in those circumstances that Ashurst was in relatively regular communication with Cotton On ‘at least as to the progress of the litigation’.
Counsel for the plaintiff repeated that Ashurst would gain access to highly commercially sensitive and confidential information of the plaintiff in the proceeding. No suggestion was made that Ashurst would intentionally misuse the information, but it was submitted that there was ‘a real and sensible risk that, in the course of communications with Cotton On, whether in the role as solicitors for Cotton On or as solicitors for Ms Peck, there is a risk of inadvertent disclosure causing great prejudice to [the plaintiff]’, and further that possession of the confidential information might ‘colour or influence’ Ashurst in its likely future role as solicitors for Cotton On. If the risk eventuated and commercially sensitive and confidential information of the plaintiff were to be inadvertently released to Cotton On, great injustice would be done to the plaintiff. A fair minded observer would not expect the administration of justice to give rise to or permit such a result. It was submitted for the plaintiff that the proper solution would be to allow the application restraining Ashurst and the defendant from continuing in the relationship of solicitor and client in this proceeding.
Counsel for the respondents to the application submitted that:
(a) It was important to identify precisely what obligation towards the person seeking the order, or to the court, may be breached or imperilled by the practitioner acting in the proceeding. On this application it had not been established what, if any, confidential and commercially sensitive information would be accessed by Ashurst, or that there was a real risk of inadvertent disclosure by some undisclosed process by Ashurst to Cotton On. Counsel did acknowledge the likelihood that confidential and commercially sensitive information would be disclosed in the conduct of the proceeding, but said that this would be subject to the usual Harman type undertakings.[7] The information would be further protected by processes such as more specific undertakings, restrictions on the persons to whom the information could be disclosed, and redaction of documents. The defendant would not oppose such a course, and would instruct her solicitors to enter into an acceptable form of confidentiality undertaking;
[7]Harman v Secretary of State for the Home Department [1983] 1 AC 280.
(b) Ashurst does not currently act for Cotton On, and has no current retainer or costs agreement with Cotton On;
(c) Even assuming that Cotton On had agreed to indemnify the defendant in respect of legal costs, there is no basis for asserting that Cotton On would thereby be in a position to, or have an entitlement to, receive information from Ashurst. It was submitted that there was no real risk of inadvertent disclosure;
(d) The plaintiff’s application is novel. The circumstances of the case are unexceptional. It is common that confidential and commercially sensitive information might need to be disclosed in the conduct of the proceedings. There is no relevant difference between the extent of the risk associated with disclosure of such information to Ashurst, than with disclosure to some other legal firm which might in future be retained by Cotton On. The exceptional circumstances present in cases such as Bennett[8] and Grimwade[9] are in clear contrast to the unexceptional circumstances of this case, and those cases are in no way analogous to the present application.
(e) There would be significant prejudice suffered by the defendant if she were forced at this stage of the litigation to cease to engage Ashurst and to retain alternative solicitors. That prejudice has been compounded by the plaintiff’s delay in bringing this application. The proceeding commenced on 2 June 2016. A defence was filed on 17 June. Discovery is to be made by 28 June. The plaintiff is to file and serve affidavits by 11 July, and the defendant by 18 July. The proceeding is listed for trial on 2 August. The defendant would suffer prejudice both as to costs and as to the preparation and taking of steps in the proceeding, particularly having regard to the tight timetable.
(f) The plaintiff’s subpoena of Ashurst, issued 24 June 2016, should be set aside, because it was not established that the categories of documents identified were relevant. More particularly, it was asserted that there was no legitimate forensic purpose for access to the documents, and that the subpoena represented a ‘fishing expedition’. There was no legitimate forensic purpose in the defendant simply seeking to obtain documents to see whether they may be of relevance or of assistance to the plaintiff on this application. Particular reliance was placed upon the principles summarised by Derham AsJ in Webb v Wheatley.[10]
[8](2005) 151 A Crim R 516.
[9][1995] 1 VR 446.
[10][2015] VSC 153, [55].
The respondents produced the engagement letter between the defendant and Ashurst. No reference is made in that document to any involvement by Cotton On.
In my view, the submissions of the respondents to the application should be largely accepted, and as a consequence this application should be dismissed.
The substance of the main proceeding, in part, is that the defendant has had access to the commercially sensitive and confidential information of the plaintiff, that once learned that information cannot be unlearned, and that therefore relief is required to prevent that information from being passed on to Cotton On. There are very clear differences between that circumstance, and the circumstance which prevailed in Bennett.[11] First, in Bennett the confidential information had already been disclosed to the solicitors. The restrictions which might be imposed on the release of information in this case to Ashurst could not apply. Second, the solicitors in Bennett were at that very time acting, in the same proceeding, for a client who had a clear interest in obtaining the information for the purposes of the proceeding. In this case Ashurst does not currently act for Cotton On, and has no current retainer from Cotton On. There is no evidence as to when Ashurst last acted for Cotton On. Third, there is no evidence to establish the probability that Ashurst will in future act for Cotton On, or that any confidential information obtained by Ashurst in the conduct of the current proceeding will be directly relevant to a future retainer with Cotton On. Fourth, in relation to any future retainer with Cotton On Ashurst is in no different position to any other solicitor the defendant might engage if she and Ashurst are restrained in the way sought by the plaintiff. That new solicitor would have access to the same commercially sensitive and confidential information of the plaintiff, could not unlearn that information, and might in future act for Cotton On.
[11](2005) 151 A Crim R 516.
To the extent that commercially sensitive and confidential information is required to be divulged by the plaintiff in the prosecution of the proceeding, orders can be sought to appropriately protect that information to deal with the risk of disclosure. The defendant has clearly indicated a willingness to cooperate with that process, and will instruct Ashurst accordingly.
I do not regard the circumstances of this case as exceptional. Nor has there been clearly identified a ‘real and sensible’ risk arising as a consequence of the circumstances of the case. To the extent that any such risk does exist, it is clearly outweighed by the prejudice which would be suffered by the defendant if she were to be restrained from continuing to retain Ashurst as her solicitor in this proceeding. The potential for prejudice to the defendant is substantial and has been compounded by some delay by the plaintiff in bringing the application.
For the reasons submitted by counsel for the respondents I consider that the subpoena issued by the plaintiff to Ashurst should be set aside. In my view the subpoena clearly represents a fishing expedition, and has no legitimate identifiable forensic purpose.
The orders I will make in the proceeding are as follows:
1. The plaintiff’s summons dated 17 June 2016 be dismissed;
2. The subpoena issued by the plaintiff directed to Ashurst Australia, dated 24 June 2016, be set aside.
I will hear the parties as to the issue of costs.
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