Karapataki & Karapataki
[2011] FMCAfam 6
•5 January 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KARAPATAKI & KARAPATAKI | [2011] FMCAfam 6 |
| FAMILY LAW ─ Legal practitioners ─ conflict of interest ─ grounds to restrain solicitor from acting against former client ─ inherent jurisdiction or implied power of court to supervise and control the conduct of legal practitioners as officers of the court ─ danger of misuse of confidential information ─ continuing duty of loyalty ─ relevance of "getting to know you" factors ─ conclusion that wife's solicitor should no longer act for her in current proceedings. |
| Family Law Act 1975 (Cth) |
| Afkos Industries Pty Ltd v Pullinger Stewart [2001] WASCA 372 Bahonko v Nurses Board of Victoria (No 3) [2007] FCA 491 Black v Taylor [1993] 3 NZLR 403 Bowen v Stott [2004] WASC 94 Giannarelli v Wraith (1988) 165 CLR 543 Ismail-Zai v The State of Western Australia (2007) WACA 150 Martin v MacDonald Estate (Gray) [1991] 1 WWR 705 Mills v Day Dawn Block Gold Mining Company Ltd [1882] QLJ 62 Owens (2009) FMCAFam 1397 Pond & Thurga (No 2) [2007] FamCA 587 Raats v Gascoigne Wicks [2006] NZHC 598 Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831 Skipworth v State of Western Australia & Ors (No. 2) (2008) 218 FLR 16 Spincode Pty Ltd v Look Software Pty Ltd(2001) 4 VR 501 State of Western Australia v Ward and Ors (1997) 76 FCR 492 Yunghanns v Elfic Ltd Unreported, Supreme Court of Victoria, Gillard J, 3 July 1998 |
| Applicant: | MS KARAPATAKI |
| Respondent: | MR KARAPATAKI |
| File Number: | MLC7797 of 2010 |
| Judgment of: | Walters FM |
| Hearing date: | 11 October 2010 |
| Date of Last Submission: | 22 November 2010 (Wife) 6 December 2010 (Husband) |
| Delivered at: | Melbourne |
| Delivered on: | 5 January 2011 |
REPRESENTATION
| Counsel for the Applicant: | Ms Daly |
| Solicitors for the Applicant: | Thomas Koutsoupias Lawyers & Co |
| Counsel for the Respondent: | Ms Stoikovska & Mr Mort |
| Solicitors for the Respondent: | Berger Kordos Lawyers |
ORDERS
IT IS ORDERED THAT:
The wife pay the husband’s costs fixed in the sum of $4785.00 ─ such costs to be paid within 9 months.
The matter otherwise be adjourned to 4 February 2011 at 9.30 a.m. for mention only.
AND THE COURT NOTES THAT:
The wife’s solicitor, Mr Koutsoupias, has indicated through Ms Daly of Counsel, that he will now cease acting for the wife.
IT IS NOTED that publication of this judgment under the pseudonym Karapataki & Karapataki is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC7797 of 2010
| MS KARAPATAKI |
Applicant
And
| MR KARAPATAKI |
Respondent
REASONS FOR JUDGMENT
Introduction
Mr Koutsoupias is a solicitor. He once acted for both the husband and the wife. He now acts for the wife in family law proceedings in this Court. The husband seeks an injunction restraining him from continuing to act for the wife.
Background
The husband is now 68 (nearly 69) years old. The wife is 61. They married in May 1990 and separated on 30 September 2009.
There are no children of the marriage.
Both parties were born in Greece. The wife came to Australia when she was 19. She says that she lived alone and worked and supported herself until the age of 40, when she met the husband. They married a relatively short time later.
The husband had lived in Australia for many years. According to the wife, he has two adult children as a result of two previous relationships. The husband says that he has one adult child of a previous relationship.
In approximately March 1997, the parties commenced living in a property at Property P, ("Property P"). They remained living there until they separated in September 2009.
The registered proprietors of Property P are the husband and the wife, together with the husband's sister and niece. According to the wife, she was "never made aware of the inclusion of (the husband's sister and niece) on title". Indeed, she alleges that she did not knowingly consent to the husband's sister and niece being included on the title and that she was "tricked into signing documents for these people to be added on title".
The wife asserts that the inclusion of the two women as registered proprietors of Property P was part of "a ruse by my estranged husband to avoid any payment (of child support) to his previous relationships".
In paragraph 17 of her affidavit sworn 16 August 2010, the wife deposed as follows:
The climax to our separation came when I discovered that (the husband's sister and niece) were included as joint proprietors (of Property P). My husband then admitted to me that the reason he had included them was to protect his property in case of litigation from his previous children or relationships. I then willingly left the home because I was not in agreement with this arrangement he had put in place in relation to (Property P) …
The wife filed an initiating application on 20 August 2010. She sought orders in relation to property settlement, including an order that Property P be sold (with the net proceeds of the sale to be divided equally between the parties).
Further details of the wife's property settlement application are not relevant for present purposes.
The husband filed a response to the wife's initiating application on
11 October 2010. In it, he sought orders intended to prevent
Mr Koutsoupias from continuing to act for the wife. The affidavit in support of his response does not deal with substantive property settlement issues. It only deals with Mr Koutsoupias’ alleged conflict of interest.
The proceedings came before the Court on 11 October 2010, when directions were made for the filing of further material dealing with the alleged conflict of interest (including written submissions), and the matter was otherwise adjourned to 15 December 2010 for mention. Both parties’ costs were reserved. On 15 December 2010 the matter was adjourned to 5 January 2011 for judgment.
The parties confer with Mr Koutsoupias
According to the husband:
a)he heard about Mr Koutsoupias through a radio advertisement, which indicated that Mr Koutsoupias’ firm provides a range of legal services, including estate planning;
b)he then told the wife about Mr Koutsoupias and his firm, and told her that they should see him "to discuss respective wills, estate planning and financial needs";
c)the wife agreed to see Mr Koutsoupias;
d)
the husband and the wife later told a friend (Ms R) about
Mr Koutsoupias and his firm;
e)Ms R indicated that she would like to see Mr Koutsoupias for advice about a will;
f)the husband, the wife and Ms R saw Mr Koutsoupias (together) on 21 September 2009;
g)Mr Koutsoupias addressed Ms R’s questions at the start of the joint conference; and
h)Ms R then left the room (leaving the husband and the wife with Mr Koutsoupias).
The husband deposed as follows:[1]
16. I then told Mr Koutsoupias that the wife and I wanted to discuss wills, estate planning and other financial matters. Mr Koutsoupias advised that it would be necessary to conduct a title search on (Property P) so that he could provide advice in relation to title holdings and interests. Mr Koutsoupias advised that the cost of the search was $40 and I provided him with this amount in full. He then told me that he would process the search and shortly thereafter produced a title search.
17. He then told the wife and I that there were two registered proprietors on title in addition to the wife and I, namely (my sister and my niece). This was already known to us.
18. Mr Koutsoupias then advised me that he was unable to prepare a will for me as instructed because of the structure of shareholdings on title. He said it could not be done. I now know that his advice was incorrect.
19. After further discussions regarding shareholdings on title, he recommended to me that the nature of shareholdings and title holdings be changed. He advised me to remove my sister and niece from the title on the basis that the structure of the shareholdings was unfair to the wife. I was astonished by his conduct and attitude as there was no basis for his conclusions.
20. Mr Koutsoupias further advised that the wife was at risk of being removed from (Property P) as a result of the nature of the shareholdings. Discussions were had as to the nature of the third party interest, which have now become directly relevant to this case. If I had known I was speaking to my wife's future lawyer, I would never have … engaged in such discussions.
21. The wife became very suspicious and distrusting (sic) after this consultation and announced she was separating. She left (Property P) a few days later on 30 September 2009.
[1] See his affidavit sworn 11 October 2010
The husband objects to Mr Koutsoupias acting for the wife
The husband became aware that Mr Koutsoupias was acting for the wife on 5 October 2009 (when Mr Koutsoupias telephoned him to advise that he was acting for her). According to the husband,
Mr Koutsoupias asked him "for a proposal to effect a financial settlement between (the parties)".
The husband's solicitors wrote to Mr Koutsoupias on 21 October 2009, raising what was described as a potential conflict of interest and putting him on notice that objection would be taken to him continuing to act for the wife.
The husband and his solicitors heard nothing or almost nothing further from Mr Koutsoupias until September 2010, when the husband was served with the wife's application filed 20 August 2010.
The husband summarised the basis of his application to restrain
Mr Koutsoupias from acting for the wife as follows:[2]
I provided instructions and information to Mr Koutsoupias on a strictly confidential basis and now I believe that confidential information that was divulged during our conference may be used to undermine my position in these proceedings. I believe that it is unfair for Mr Koutsoupias to continue to represent the wife in circumstances where I perceive there to be an abuse of confidentiality and where there is absolutely no prejudice to the wife engaging other representation as the application has only recently been filed.
[2] See paragraph 27 of the husband’s affidavit sworn 11 October 2010
Mr Koutsoupias responds
Somewhat surprisingly, Mr Koutsoupias saw fit to respond to the husband's assertions. He swore an affidavit on 25 October 2010.
In his affidavit, Mr Koutsoupias disagreed with certain aspects of the husband's description of the conference that took place on 21 September 2009 – but the following, at least, is clear:
a)Mr Koutsoupias conferred with the husband and the wife together.
b)The purpose of the conference was to discuss issues relating to the preparation of a will.
c)The ownership of Property P was discussed.
d)Mr Koutsoupias obtained a search of the title to Property P.
e)The fact that the husband's sister and niece were registered proprietors of Property P (with the husband and the wife) was discussed.
f)A degree of tension arose during the course of the conference.
g)The conference was terminated without Mr Koutsoupias receiving instructions to prepare a will for either party.
Mr Koutsoupias said that the wife telephoned him a few days after the conference and asked him to represent her in relation to family law proceedings. He also said that:
a)he told the wife that he would only represent her "with the consent of her husband";
b)he rang the husband on 6 October 2009 and told the husband that the wife had asked him to represent her;
c)during the telephone call, he asked the husband "for his consent, which he gave without hesitation, saying that he was happy that (the wife) had retained (Mr Koutsoupias) as her solicitor as she would find it very difficult to find another Greek speaking practitioner"; and
d)other matters were discussed during the telephone call.
The husband's affidavit sworn 11 October 2010 annexes a letter dated 21 October 2009 from his solicitors to Mr Koutsoupias. The letter raises "the potential conflict of interest" and continues:
… we will not correspond with you in relation to family law matters beyond making arrangements for the collection of our clients effects, until the Law Institute of Victoria Ethics Committee has provided us with a ruling in relation to your continuing involvement; a ruling which we are in the process of requesting.
In his affidavit, Mr Koutsoupias asserted that the husband "has attempted to delay proceedings and make this matter as difficult as possible for (the wife)", and that part of the delaying process involved a failure on the husband's part to obtain the relevant ruling from the Law Institute of Victoria Ethics Committee.
The fact of the matter is, however, that Mr Koutsoupias also foresaw the potential for a conflict of interest to arise. In paragraph 22 of his affidavit, he deposed as follows:
When (the husband) first raised the issue of conflict with his solicitors, I immediately indicated to them that I would be prepared to abide by a ruling by Professional Standards of the Law Institute, as I had terminated the conference immediately I foresaw the potential for a conflict to arise.
Suffice it to say (at this stage) that:
a)there is no reason why Mr Koutsoupias could not have sought an appropriate ruling from the Law Institute of Victoria, if he felt discomfort with the position in which he found himself; and
b)
Mr Koutsoupias’ affidavit sets up a clear conflict between his version of the events that occurred at the conference on
21 September 2009 (including statements or concessions allegedly made by the husband in Mr Koutsoupias’ and the wife's presence) and the husband's version of those events.
The husband replies
The husband swore a further affidavit on 9 November 2010. In it, he joined issue with Mr Koutsoupias regarding a number of matters dealt with in Mr Koutsoupias’ affidavit. Of most significance are the following:
a)The husband reaffirmed that –
i)"the wife has always known that (the husband's sister and niece) are registered proprietors of (Property P) because the wife was told by me and it was agreed when (Property P) was purchased that (they) would be joint proprietors"; and
ii)"the wife and I together with (the husband's sister and niece) attended the conveyancing solicitors’ office to execute the transfer documents".
b)
The husband denied that Mr Koutsoupias asked him for his consent to represent the wife. He said that he did not provide
Mr Koutsoupias with his consent.
The law
There is no absolute rule that a legal practitioner who has acted for a client in a particular matter must not act against that client in the same or any other matter.[3] It has been said, however, that there are three possible grounds for restraining a legal practitioner from acting for a party to litigation:[4]
a)the inherent jurisdiction or implied power of the court to supervise and control the conduct of legal practitioners as officers of the court (in order to safeguard the due administration of justice);
b)a breach of a supposed fiduciary duty of loyalty not to act against a client, or against a former client, in the same matter or a closely related matter; and
c)the danger of misuse of confidential information.
[3] See, for example, Gugiatti v City of Stirling [2002] WASC 33 (per Templeman J), citing Rakusen v Ellis Munday & Clarke [1912] 1 Ch 831; see also McGillivray v Mitchell (1998) FLC 92-818
[4] See, for example, Spincode Pty Ltd v Look Software Pty Ltd(2001) 4 VR 501; Kallinicos v Hunt (2005) 64 NSWLR 561; Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404; Bahonko v Nurses Board of Victoria (No 3) [2007] FCA 491; Canberra Residential Developments Pty Ltd v Brendas [2009] FCA 1484; Pond & Thurga (No 2) [2007] FamCA 587; see also Ismail-Zai v The State of Western Australia (2007) WACA 150
I shall refer to the first of the above grounds as “the supervision and control ground”. I shall refer to the second and third grounds as “the duty of loyalty ground” and “the confidential information ground” respectively.
An application to restrain a legal practitioner from acting for a party to litigation must be made without delay, and failure to take the point at an early stage might well cast doubt on the validity of any subsequent complaint.[5]
[5] See McGillivray v Mitchell (1998) FLC 92-818
The supervision and control ground
Leaving aside any questions relating to whether this Court has inherent jurisdiction, as opposed to "an implied incidental power to make orders necessarily incidental to express powers",[6] the test to be applied in relation to the supervision and control ground seems to be "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)".[7] Such jurisdiction or power as is inherent in the supervision and control ground should be regarded as exceptional, and must be exercised with caution,[8] with "due weight" being given to the public interest in a litigant not being deprived of his or her lawyer of choice without a good reason.[9]
[6] See, for example, Skipworth v State of Western Australia & Ors (No. 2)[2008] FMCA 544; (2008) 218 FLR 16 at 27, per Lucev FM; State of Western Australia v Ward and Ors (1997) 76 FCR 492; and see my comments in Owens (2009) FMCAFam 1397, at paragraph 21
[7] See Kallinicos v Hunt (2005) 64 NSWLR 561
[8] See Kallinicos v Hunt
[9] See Pond & Thurga (No 2), at paragraph 216
In State of Western Australia v Ward and Ors,[10] the Full Court of the Federal Court said:[11]
… the requirements of natural justice do not involve an absolute right to the legal adviser of a party's choice. The instances in which courts have prevented chosen counsel or solicitors from acting have involved misconduct, potential use of confidential information, and a real risk of lack of objectivity and of conflict of interest and duty … The present case (i.e. State of Western Australia v Ward) is only another example of situations in which the “integrity of the judicial process”, the “interests of justice” and the “need to preserve confidence in the judicial system”, to use some of the notions that lie behind the inherent jurisdiction to exclude counsel or solicitors, may override the public interest that a litigant be able to be represented by the lawyer of its choice. That public interest is “an important value”. … It is a serious matter to prevent a party from retaining its chosen lawyer. … But … particular circumstances may require some modification of the public interest in the ability of a litigant to have a lawyer of its choice.
[10] (1997) 76 FCR 492
[11] at page 498
It is, of course, settled law that legal practitioners have duties to the court, as well as duties to their clients, and that the former necessarily override the latter.[12] Put another way, a legal practitioner’s duty to the client is subordinate to his or her duty to the court – which duty remains paramount even if the client gives instructions to the contrary.[13] Indeed, unlike a legal practitioner's duty to a client (which can be waived or ratified by a properly informed and advised client who is not under any disability), a legal practitioner's duty to the court cannot be waived.[14] .
[12] See, for example, Halsbury's Laws of Australia Volume 16 at paragraphs [250-385] and following; Grimwade v Meagher and Ors(1995) 1 VR 446
[13] See Giannarelli v Wraith (1988) 165 CLR 543 at 555-6; see also the Chief Justice of Victoria's paper entitled The Duty owed to the Court – Sometimes Forgotten, which was delivered (as the keynote address) to the Colloquium of the Judicial Conference of Australia on 9 October 2009.
[14] See Afkos Industries Pty Ltd v Pullinger Stewart [2001] WASCA 372 and Holborow v Macdonald Rudder[2002] WASC 265.
The practical implications of legal practitioners’ overriding or paramount duties to the court were described by Heenan J in Holborow v Macdonald Rudder:[15]
If there are circumstances which are likely to imperil the discharge of these duties to a court by a legal practitioner acting in a cause, whether because of some prior association with one or more of the parties against whom the practitioner is then to act, or because of some conduct by the practitioner, whether arising from associations with the client or a close interest which gives rise to the fair and reasonable perception that the practitioner may not exercise the necessary independent judgment, a court may conclude that the lawyer should be restrained from acting, even for a client who desires to continue his service.
[15] [2002] WASC 265; see also Pascot [2010] FamCA 644
The inherent jurisdiction or implied incidental power referred to in the supervision and control ground has been invoked in cases where there was a potential that the legal practitioner might become a witness in the proceedings, and where the subject matter of litigation was likely to involve an evaluation of the legal practitioner's conduct.[16] It has also been held that it may be appropriate to invoke the jurisdiction or power in a case where the practitioner might feel impelled to justify or defend his or her conduct in representing a client, or where the legal practitioner's credibility could be at stake.[17]
[16] See Holborow v Macdonald Rudder
[17] See Holborow v Macdonald Rudder; Bowen v Stott [2004] WASC 94
The potential misuse of information which might not comfortably be described as “confidential information” also falls within this general category. For example, legal practitioners can often learn a great deal about a client’s personality, weaknesses or strengths, honesty (or perhaps dishonesty), fears and reactions (including reactions to pressure or tension). Similarly, legal practitioners can learn much about a client’s attitude and approach to litigation. In Yunghanns v Elfic Ltd,[18] Gillard J described these considerations as “getting to know you” factors.
[18] Unreported, Supreme Court of Victoria, Gillard J, 3 July 1998
In a case where a former client’s credibility becomes a matter of significance, his or her former legal practitioner’s knowledge of the “getting to know you” factors can become a powerful weapon at the disposal of the practitioner's new client. Irrespective of the actual effectiveness of the weapon, it can be anticipated that the former client would feel anxiety about the potential of being cross examined by a practitioner who might be perceived as being in a position of unfair superiority - ─ or by Counsel instructed by such a practitioner.[19] In Black v Taylor,[20] for example, Richardson J. said (in the context of proceedings involving a family solicitor potentially acting for the estate of a deceased family member in proceedings brought against it by another family member):
… it would not be unreasonable for a family member to feel chagrin and concern to find a lawyer who had built up knowledge of that kind was able consciously or unconsciously to draw on it when acting against (the family member).
[19] See Black v Taylor [1993] 3 NZLR 403; Raats v Gascoigne Wicks [2006] NZHC 598; see also Ismail-Zai v The State of Western Australia (2007) WACA 150
[20] [1993] 3 NZLR 403
In McMillan,[21] the Full Court adopted the following passage from the minority judgment of the Supreme Court of Canada in Martin v MacDonald Estate (Gray),[22] – which was a decision (although not in the family law jurisdiction) dealing with an employed solicitor changing firms:
In preparing for the hearing of a contentious matter, a client will often be required to reveal to the lawyer retained highly confidential information. The client’s most secret devices and desires, the client’s most frightening fears, will often, of necessity, be revealed. The client must be secure in the knowledge that the lawyer will neither disclose nor take advantage of these revelations.
Our judicial system could not operate if this were not the case. It cannot function properly if doubt or suspicion exists in the mind of the public that the confidential information disclosed by a client to a lawyer might be revealed.
[21] [2000] FamCA 1046; (2000) 26 Fam LR 653, at paragraph 65
[22] [1991] 1 WWR 705, at 728-729
It is very important, however, not to elevate the significance of the “getting to know you” factors. Indeed, it is crucial to evaluate and inform their relevance in the broader context of the inherent jurisdiction or implied power of the court to supervise and control the conduct of legal practitioners as officers of the court (in order to safeguard the due administration of justice). Thus, and as Heerey J said in Mintel International Group Limited v Mintel (Australia) Pty Ltd:[23]
Insofar as reliance is placed on the "getting to know you" principle, a moment's consideration of the way that litigation is conducted in Australia shows that this cannot be accepted too literally, especially in relation to counsel. There are many bodies such as Commonwealth and State government entities, banks, insurers, media companies and many others which are constantly engaged in litigation. Counsel retained to act on behalf of such bodies inevitably acquire information, not confidential information in the strict sense, but experience as to the corporate culture of the clients, their internal policies, the way they deal with litigation, tactics, the personalities of important decision-makers and so forth. I do not accept that general experience of that kind would impose what presumably on the respondent's argument would be lifetime restraints on counsel from acting against such a body. Indeed it is a feature of an independent Bar that counsel might appear one day on behalf of such a body and the next day against it. While perhaps strange to observers from countries where the legal profession is organised differently, this freedom enhances the independence of counsel and their capacity to give objective and sometimes unwelcome advice. The cab rank rule works both ways. The driver is obliged to accept the fare, but the fare does not buy the service of the driver beyond the stipulated journey.
[23] [2000] FCA 1410, at paragraph 44
The duty of loyalty ground
It is likely that any supposed fiduciary duty of loyalty owed by a legal practitioner to his/her client does not survive the termination of the retainer. In Ismail-Zai v The State of Western Australia (2007) WACA 150, Steytler P said:
23. In my opinion, the weight of authority currently supports the proposition that the duty of loyalty does not survive the termination of the retainer. Moreover, some of the cases which support the existence of a continuing duty of loyalty seem … to draw no clear distinction between a fiduciary obligation of that kind, on the one hand, and the court's inherent supervisory jurisdiction to protect the integrity of the judicial process, on the other. …
24. In any event, … there may be little distinction, for any practical purpose, between the question whether there is a breach of the continuing duty of loyalty, on the one hand, and the question is whether there is a real risk of a breach of confidence and whether there is or will be other impropriety of a kind that is likely to undermine the integrity of the judicial process and the due administration of justice (which comprehends the appearance of justice), on the other hand. … I find it difficult to envisage circumstances in which a lawyer who acts in the same or a closely related matter against a former client will neither be in a position in which there is a real risk of a breach of duty of confidence nor be acting in such a way as to undermine the integrity of the judicial process or the due administration of justice.
I agree with the above analysis, and conclude that the second ground for restraining a legal practitioner from acting against a former client (being the duty of loyalty ground) is, in essence, a restatement of the first and third grounds (being the supervision and control ground and the confidential information ground) in omnibus form. Put another way:
… because of the frequent recourse to the term "duty of loyalty" …, it is necessary to emphasise that that eloquent, but elastic, term is not itself precise. The measure of the obligation upon the former (legal practitioner) should not be deduced from that description alone but, rather, from an examination of the principles on which courts have acted to regulate or restrict actual or anticipated conduct of former legal advisers.[24]
[24] Per Heenan AJA in Ismail-Zai v The State of Western Australia, at paragraph 63
The confidential information ground
Generally speaking, cases dealing with applications to restrain a legal practitioner from acting in family law proceedings have focused on the confidential information ground, and less frequently on the duty of loyalty ground. The leading authority is the decision of the Full Court in McMillan [2000] FamCA 1046.[25]
[25] (2000) 26 Fam LR 653
The confidential information ground, and the effect of McMillan, were summarised by O’Ryan J in Pond & Thurga (No 2):[26]
Prior to (McMillan) it was uncertain whether a narrow test of actual prejudice (arising from the possible misuse of confidential information) or the broader test of theoretical risk of prejudice was to be applied. … The Full Court ultimately adopted the broad approach in Mills v Day Dawn Block Gold Mining Company Ltd[27] and Thevanaz[28] of a theoretical risk of prejudice rather than proof of actual prejudice. The Full Court found that the narrow or English approach which requires ‘real mischief or prejudice’ to follow in order to justify court intervention (an approach stemming from Rakusen v Ellis, Munday & Clarke[29]) was inappropriate for the family law jurisdiction. The Full Court … cited with approval the summary of the law provided by Lindenmayer J in Stewart (unreported, 17 April 1997):
All that is necessary is that the wife swears that she has conveyed confidential information to the solicitors and that she believes, not unreasonably, that that information may be used against her, or at least to her disadvantage, in these current proceedings.
[26] [2007] FamCA 587, at paragraphs 213
[27] [1882] QLJ 62
[28] (1986) 11 Fam LR 95; FLC 91- 748
[29] [1912] 1 Ch 831
His Honour continued:[30]
Importantly, the adoption of the stricter approach in the family law jurisdiction was borne out of cases concerning practitioners that had acted for both husband and wife and reasons specific to this factual situation. In these cases the reasons for adopting this test have been based on the sensitive nature of the jurisdiction and the in-depth factual inquiries that the court was often required to make into parties’ financial history, conduct and contributions. …
[30] See paragraph 214
Although the Full Court in McMillan did not (itself) summarise the test to be applied when deciding whether or not to restrain a legal practitioner from acting for a party to litigation on the basis of the confidential information ground, it is clear that its elements are as follows:
a)The party seeking the restraint ("the complainant") must:
i)raise a prima facie case that he or she has provided confidential information to the legal practitioner; and
ii)demonstrate that there at least a theoretical possibility that the confidential information could be used to the advantage of the other party, or, alternatively, to the disadvantage of the complainant.
b)In order to meet the two requirements in (a) above, the complainant need do no more than depose to the fact that he or she –
i)has conveyed confidential information to the legal practitioner; and
ii)believes, not unreasonably, that the confidential information may be used against him or her, or to his or her disadvantage, in the current proceedings.
Delay
Irrespective of the ground relied upon to restrain a legal practitioner from acting for a party to litigation, delay, and especially unreasonable or unexplained delay, is likely to be fatal to the application. The leading authority is McGillivray v Mitchell,[31] where the Full Court said:[32]
… if a family law litigant has a genuine concern about a former legal adviser acting against him or her in later family law litigation, the litigant must take the point at least in correspondence with the other side at the earliest possible opportunity. If he or she does not do so, then he or she is possessed of a weapon which can later be used as a delaying tactic at some point in the proceedings convenient to his or her position. Furthermore a failure to take the point initially must also cast doubt on the bona fides of any later complaint concerning the existence of confidential information in the practitioner in question, and on the bona fides of any alleged apprehension regarding the possible misuse of such confidential information.
[31] (1998) FLC 92-818
[32] See paragraph 36
The wife's submissions
The wife's submissions were filed on 22 November 2010. I shall refer to them as "WS". They contain the following concessions:
a)In family law, in Australia, even if there is only a "theoretical risk" of prejudice to a party (arising from an alleged conflict of interest), then the solicitor for the other party should not continue to act – and a court has the power to restrain a legal practitioner in such circumstances.
b)Although a party ordinarily has a right to engage his/her solicitor of choice, each case (dealing with an alleged conflict of interest) must be determined on its merits, with the court having a discretion as to whether or not a legal practitioner should be restrained from acting.
c)The husband made his objection known to Mr Koutsoupias at an early date.
d)
It is neither necessary nor desirable for the Court to go behind the husband's version of events regarding his dealings with
Mr Koutsoupias.
e)One consultation between the husband and Mr Koutsoupias could theoretically provide the basis for a conflict of interest to arise. In other words, it is not essential for a solicitor/client relationship to continue over an extended period.
All the above concessions are important. They are consistent with the authorities referred to elsewhere in these Reasons.
WS refer to various matters deposed to by the husband in his affidavit material. The primary submissions contained in WS, however, are to the following effect:
a)Because the wife was present at all times during the husband's consultation with Mr Koutsoupias, the husband could not have conveyed "confidential information" to Mr Koutsoupias.
b)In any event, the husband did not provide (and does not assert that he provided) Mr Koutsoupias with any "confidential information" which could be used to his disadvantage.
c)Further, and because of the presence of the wife during the consultation, any information conveyed to Mr Koutsoupias at that time (whether confidential or not) could not be used – in any relevant sense – to the advantage of the wife; nor could it be used to the disadvantage of the husband.
The husband's submissions
The husband's submissions were filed on 6 December 2010. I shall refer to them as "HS".
HS refer to various matters deposed to by the husband and
Mr Koutsoupias in the affidavit material. The primary submissions contained in HS are to the following effect:
a)Justice will not be seen to have been done if Mr Koutsoupias is permitted to continue to act for the wife.
b)Mr Koutsoupias has been provided with confidential information.
c)There is a possibility that Mr Koutsoupias will be required to give evidence in the proceedings, because he may seek to contradict the husband's version of statements or admissions made at the conference on 22 September 2009.
d)During the course of the conference, Mr Koutsoupias observed that tensions arose around issues relating to the ownership of Property P. As a result, Mr Koutsoupias had the advantage of observing the husband in such a situation. In the present case, the "getting to know you" factors place the husband at a distinct disadvantage.
e)Given the "particular sensitivities" associated with family law proceedings, the theoretical risks if Mr Koutsoupias were to continue to represent the wife to the husband are manifest.
Discussion
In paragraph 21 of HS, Mr Mort (counsel for the husband) submitted as follows:
On any objective basis, a reasonable person would see that in a situation where a lawyer has conferred at length with the husband, where a lawyer has allegedly made a judgement call on the husband's conduct in terms of third parties registered on title, where the lawyer has observed the husband in a tense situation and calls an end to the conference, where the lawyer is now privy to confidential information provided by the husband on an important trial issue, and where the husband will know for the duration of the matter that his wife's lawyer has a perceived advantage due to his contact with him, then (there is a serious risk of an injustice to the husband).
I agree with Mr Mort.
The reality is that Mr Koutsoupias has already joined issue with the husband on a number of factual issues surrounding statements or admissions made or allegedly made during the course of the conference on 21 September 2009. The very fact that Mr Koutsoupias has sworn an affidavit disputing the husband's version of events makes it clear that he has seen fit to "enter the arena" (as it were) as a witness in support of the wife. And there is a strong likelihood that he will be required to give evidence on behalf of the wife. Such a likelihood does not sit comfortably with accepted concepts of the due administration of justice, including the appearance of justice.
I reject the suggestion that the husband could not have conveyed confidential information to Mr Koutsoupias because the wife was present at all relevant times. As O’Ryan J observed in Pond & Thurga (No 2), the adoption of the current approach to this subject in the family law jurisdiction had its genesis in cases concerning practitioners who had acted for both husband and wife.
The expression "confidential information" does not refer to information about which the other party to the litigation is unaware. It is intended to encompass information conveyed (directly or indirectly) to a legal practitioner in the context of a client providing instructions to the practitioner, or otherwise seeking the practitioner’s advice. It matters not, it seems to me, that another person may be present when the information is conveyed. After all, the wife may not have understood the significance of information imparted by the husband – but
Mr Koutsoupias, in his role as her solicitor, would have a clear obligation to explain its significance to her. He would also have a clear obligation to use the information for her benefit in the litigation. And there are other possibilities. For example, the wife might forget something that the husband said or admitted during the joint conference, but Mr Koutsoupias would be obliged to remind her of the statement or admission. A further example could arise in the event of the wife and Mr Koutsoupias having different recollections of statements or admissions made by the husband during the conference. Mr Koutsoupias might then find that his own recollection is arguably more advantageous (or disadvantageous) to the wife's case than her own.
Mr Mort submits that paragraph 23 of Mr Koutsoupias’ affidavit is "iniquitous", and that it –
demonstrates a lack of fairness and calls on the husband to gaze into a crystal ball. … (There) was never any hint at the time of the conference in question that Mr Koutsoupias might represent the wife one day soon; there was never a clue that any comments or reactions made by the husband … might one day fortify the wife's appointed representative and, ultimately, the wife's case.
Paragraph 23 of Mr Koutsoupias’ affidavit is as follows:
… it appeared to me and continues to appear to me that (the husband's) consent and full disclosures in front of (the wife) go to show that discussions had not reached a point at which a perception of conflict could reasonably be held.
To the extent that it is possible to understand the point that
Mr Koutsoupias is endeavouring to make in this paragraph (and assuming that the matters deposed to in the paragraph are somehow relevant and admissible), I agree with Mr Mort.
Conclusion
It was conceded in WS that the husband made his objection known to Mr Koutsoupias at an early date (and that, as a result, no issue of delay arises), and that it is neither necessary nor desirable for the Court to go behind the husband's version of events regarding his dealings with Mr Koutsoupias. It was also conceded that a single consultation between the husband and Mr Koutsoupias could theoretically provide the basis for a conflict of interest to arise.
In my opinion, a fair minded, reasonably informed member of the public would have no hesitation in concluding that the proper administration of justice requires that Mr Koutsoupias should be prevented from acting for the wife. The interests of the protection of the integrity of the judicial process and the due administration of justice (including the appearance of justice) dictate such a conclusion – which, in all the circumstances of the present case, is inevitable.
It is inevitable that Mr Koutsoupias should be prevented from acting for the wife even when regard is had to:
a)the fact that the Court’s power to restrain a legal practitioner from acting for a party to litigation is exceptional; and
b)the weight to be given to the public interest in a litigant not being deprived of his or her lawyer of choice without a good reason.
I find that there is a real risk of lack of objectivity if Mr Koutsoupias were to continue to act for the wife. Put another way, I find that there exists a fair and reasonable perception that Mr Koutsoupias may not now be able to exercise the independent judgement that is required of him as legal representative for the wife and as an officer of the court. Indeed, that lack of objectivity and impaired independent judgement has already manifested itself in the evidence contained in
Mr Koutsoupias’ affidavit.
I find that there is a strong possibility that Mr Koutsoupias will become a witness in the proceedings, and that the proceedings are likely to involve an evaluation of his conduct during the conference on
21 September 2009. Further, Mr Koutsoupias has already felt impelled to justify or defend his conduct in representing the wife. As well, there is no doubt that his credibility could be at stake.
The "getting to know you" factors would not be sufficient in themselves to justify a decision to restrain Mr Koutsoupias from acting for the wife, but those factors serve to reinforce the conclusions that I have reached in these Reasons. Although Mr Koutsoupias’ relationship with the husband and the wife was not built up over an extended period of time, he saw them both – in the role of their legal adviser – at a time of obvious tension for each of them. It is understandable that the husband would feel anxiety about Mr Koutsoupias’ role as the wife's legal representative, and that he would perceive him as being in a position of unfair superiority.
I find that the husband has indeed raised a prima facie case that he provided confidential information to Mr Koutsoupias, and that
Mr Koutsoupias purported to provide him with legal advice based on that information.[33] I find, as well, that the confidential information could be used to the advantage of the wife (and the disadvantage of the husband). Indeed, the matters deposed to in Mr Koutsoupias’ affidavit reveal that the information has already been used in this way.
[33] See, for example, paragraphs 19 and 20 of the husband’s affidavit sworn 11 October 2010.
In all the circumstances, I conclude that Mr Koutsoupias should no longer act for the wife in these proceedings.
Orders
I shall hear counsel as to the orders (if any) that may be necessary to give effect to the conclusion that I have reached in the preceding paragraph.
I certify that the preceding sixty-eight (68) paragraphs are a true copy of the reasons for judgment of Walters FM
Date: 5 January 2011
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