Mark Foys v TVSN
[2000] FCA 1506
•25 OCTOBER 2000
FEDERAL COURT OF AUSTRALIA
Mark Foys v TVSN [2000] FCA 1506
(TVSN v PricewaterhouseCoopers Legal)
LEGAL PRACTITIONERS – Prospectus issued by public company for subscription of shares – large firm of chartered accountants provide audited financial statements, which are incorporated in the prospectus and through a company controlled by such chartered accountants provide investigating accountant’s report also for the purposes of the prospectus – public company becomes respondent to injunction proceedings by applicant claiming title to trade marks and otherwise alleging misleading and deceptive conduct in prospectus – applicant for injunction dismissed but dismissal becomes subject to appeal to Full Court – solicitors for original applicant merge with another firm of solicitors after the hearing of proceedings at first instance and before the hearing of the appeal – latter firm of solicitors have an association already with the large firm of chartered accountants – whether by virtue of pre-existing association between the large firm of chartered accountants with the firm of solicitors with whom the solicitors for the applicant had merged, and by virtue of the merged firm continuing to represent the applicant on the appeal, there had occurred a “changing of sides” who provided the audited financial statements – whether there was confidential information held by the large firm of chartered accountants in relation to which there was a risk of the same becoming held by the merged firm of solicitors.
Legal Profession Act 1987 (NSW) s.486.
National Mutual Holdings Pty Ltd v Sentry Corp (1989) 22 FCR 209.
Murray v Macquarie Bank Ltd (1991) 33 FCR 46.
Prince Jefri Bolkiah v KPMG [1999] 2 AC 222.
Wan v McDonald (1991) 33 FCR 491.
McVeigh v Linen House Pty Limited [1999] VSCA 138.
World Medical Manufacturing Corp v Phillips Ormonde & Fitzpatrick [2000] VSC 196.
Newman v Phillips Fox [1999] WASC 171.
Re a Firm of Solicitors [1992] QB 959.
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1997) 17 WAR 98.MARK FOYS PTY LIMITED v TVSN (PACIFIC) LIMITED
(TVSN (PACIFIC) LIMITED v PRICEWATERHOUSECOOPERS LEGAL)N635 of 2000
CONTI J
25 OCTOBER 2000
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
No N 635 OF 2000
BETWEEN:
MARK FOYS PTY LIMITED (ACN 052 917 183)
APPLICANTAND:
TVSN (PACIFIC) LIMITED (ACN 006 139 991)
RESPONDENTJUDGE:
CONTI, J
DATE OF ORDER:
25 OCTOBER 2000
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.Application filed herein by TVSN (Pacific) Limited as Applicant by way of Notice of Motion be dismissed.
2.TVSN (Pacific) Limited pay the costs of PricewaterhouseCoopers Legal of the Application.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
No N 635 OF 2000
BETWEEN:
MARK FOYS PTY LIMITED (ACN 052 917 183)
APPLICANTAND:
TVSN (PACIFIC) LIMITED (ACN 006 139 991)
RESPONDENT
JUDGE:
CONTI, J
DATE:
25 OCTOBER 2000
PLACE:
SYDNEY
REASONS FOR JUDGMENT
The initial context in which the issue presently before me has arisen comprised proceedings brought in this Court by the Applicant Mark Foys Pty Limited (“Mark Foys”) against the Respondent TVSN (Pacific) Limited (“TVSN”) for an injunction to restrain the use by TVSN in connection with its business operations of the name “Mark Foys”, of any depiction of the Sydney landmark building that housed the old Mark Foy’s department store, and of a logo representing that building, and for an award of damages. Such proceedings were commenced on 29 April 1999, and concluded on 18 November 1999 at first instance after hearing before Whitlam J of this Court. By reserved judgment delivered on 26 May 2000, his Honour dismissed the proceedings. An appeal has been lodged against the dismissal of the proceedings to the Full Court, and the hearing of the appeal is pending. In dismissing such proceedings at first instance, his Honour made the following observations on page 1 of `his Judgment, which provide some insight into the nature of the litigation:
“A striking feature of this case is that the applicant has never traded or carried on any business. Bearing that in mind, the relevant facts appear uncontroversial. The inferences to be drawn from documents are overwhelming, and such discrepancies as there are in witnesses’ recollections are unimportant.”
Subsequent to Notice of Appeal to the Full Court being filed on 16 June 2000 on behalf of Mark Foys by PricewaterhouseCoopers Legal (“PWC Legal”) in their professional capacity by that time as Solicitors for Mark Foys, TVSN has applied to the Court by Notice of Motion to restrain PWC Legal from further representing Mark Foys as Solicitors on the appeal, or alternatively, from so doing whilst TVSN remains a client of the Chartered Accountancy practice of PricewaterhouseCoopers (“PWC Accounting”). The purported basis for TVSN so doing may be summarised as follows:
(i)PWC Accounting are and have been at all material times the auditors of the TVSN Group of companies, and according to TVSN, PWC Accounting additionally render “other accounting services” to such Group which have not been identified by TVSN;
(ii)Financial statements audited by PWC Accounting appeared in a Prospectus dated 6 July 2000 for a public share issue by TVSN;
(iii)PWC Accounting through its controlled company PricewaterhouseCoopers Securities Ltd (“PWC Securities”) undertook the role of Investigating Accountants on behalf of the TVSN Group for the purposes of TVSN’s public share issue, and its report to prospective investors set out in the Prospectus implicitly involved a consideration of the above litigation as then pending at first instance, including certain legal advices which have been placed in evidence before me; no such “other accounting services” on the part of PWC Securities rendered to TVSN have been identified;
(iv)At all material times PWC Accounting, being a partnership conducting a large well known practice as chartered accountants, has been closely associated with and connected to PWC Legal, the latter being a partnership conducting practice as solicitors;
(v)After the conclusion of the hearing at first instance before Whitlam J, there was a change of the solicitors representing Mark Foys in the litigation from Dunhill Madden Butler to PWC Legal;
(vi)Such change came about in the context of the then partners of Dunhill Madden Butler, or at least the majority thereof, including Michael Daniel who had been the partner responsible for the conduct of the litigation on behalf of Mark Foys at first instance, becoming members of the partnership of PWC Legal on and from 1 December 1999.
The identity of TVSN’s auditors was disclosed in the Prospectus as PWC Accounting, and audited consolidated balance sheets were reproduced in the Prospectus in the usual way. In addition PWC Securities, under the signatures of C.H. Humphrey and W.J. Andrews as so-called “Authorised Representatives”, provided the abovementioned Investigating Accountant’s Report, the scope of which was commissioned in the following terms as set out in the Prospectus:
“You have requested us to prepare an Investigating Accountant’s Report covering the following information:
(a)the historical consolidated results of the Company for the financial periods ended 31 December 1996, 1997 and 1998 set out in Section 8.1.
(b)the adjusted (Australia only) consolidated results of the Company for the quarter ended 31 March 1999 set out in Section 8.1.
(c)the consolidated balance sheet of the Company as at 31 December 1998 set out in Section 8.3.
(d)the Pro Forma consolidated balance sheet of the Company as at 31 December 1998 set out in Section 8.3 assuming that the completion of the Offer had taken place on that date and incorporating various adjustments detailed in Note 1 thereto.
(e)The Directors’ Pro Forma Forecast and Forecast Statutory Result of the Company for the year ending 31 December 1999 and the Directors’ Forecast results for the year ending 31 December 2000 (the “Directors’ Forecasts”) set out in Section 6.”
No explicit reference was thus made to any contents of the Prospectus, including what appears in [4] below, other than the financial results and forecasts above described.
Also set out in the Prospectus were twelve pages of “Additional Information”, which included the following (and only) reference to the legal proceedings described in [1] above:
“10.11 Litigation
Legal proceedings arise from time to time in the course of the Company’s business. Except as set out in this document, the Company does not believe it is engaged in any legal proceedings which would be likely to have a material effect on its business, financial condition, or the results of its operations.
An Australian proprietary company with no trading history has commenced litigation against the Company claiming an account of profits, damages and other specified relief (including transfers of intellectual property rights) in respect of the Company’s use of the name “Mark Foys”. The applicant is alleging unauthorised use of a trademark, passing off and misleading or deceptive conduct in contravention of sections 52 and 53 of the Trade Practices Act 1974 and equivalent provisions of the relevant State Fair Trading Acts. The Company is defending the proceedings. The Board of the Company has taken legal advice and is of the opinion that the Company’s defence to the proceedings is likely to be successful, both because the Company’s application for trademarks containing the words “Mark Foys” were lodged prior to any similar trademark application by the applicant, and because the Company’s application for trademarks containing the words “Mark Foys” were lodged prior to any similar trademark application by the applicant. In addition, the Directors believe that there is nothing misleading or deceptive about the use by the Company of the name “Mark Foys” and may be required to alienate any proprietary rights which it has in that name. The Company may also be liable to pay damages and the costs of the proceedings to the applicant although the amount of damages claimed has not been specified.
The Company has developed a mirror site, iTVSN, which the Company plans to use should the defence of the trademark “MarkFoys.com” prove unsuccessful.”
The foregoing disclosure purported to represent a summary of the nature and implications of the proceedings referred to in [1] above, to the extent that the same were pending at the time of issue of the Prospectus. It will be observed that such summary disclosed legal advice received to the effect that TVSN’s defence of the proceedings was likely to be successful for the reasons there set out.
In the course of the proceedings brought by Mark Foys against TVSN at first instance, Mark Foys served Notice to Produce upon TVSN in relation to all documents commencing from the period from 1 July 1997 which recorded, evidenced or related to:
“1.the ‘legal advice’ referred to in Clause 10.11 of the Prospectus of TVSN Limited dated 6 July 1999.
2.The ‘approval’ by the Mark Foys Family’ referred to in the Prospectus.
3.The Respondent’s knowledge of the Applicant’s prior use of the name ‘Mark Foys’.”
Documents produced in answer to such Notice included the following:
Report of Baldwin Shelston Waters, Patent and Trade Mark Attorneys, dated 11 November 1998;
Report of Bruce & Stewart Lawyers dated 18 December 1998 (the Solicitors acting for TVSN in the proceedings);
Memorandum of Advice of Stephen C.G. Burley of Counsel dated 21 January 1999;
Report of W.S. Gregory & Associates Pty Ltd dated 29 March 1999.
Privilege relating to such advices was unsuccessfully contested by TVSN, and the same were tendered as evidence at the hearing at the first instance, and their respective contents became thus revealed to Mark Foys and Dunhill Madden Butler. Having regard to the publication of a summary of the “legal advice” appearing in the passage of the Prospectus extracted in [4] above, privilege was effectively waived.
Earlier on 18 May 2000, there occurred the event which crystallised the dispute the subject of these Reasons for Judgment. By Deed bearing date 18 May 2000, there was confirmed the formation of a new partnership of Solicitors as at and from 1 December 1999, constituted by the merger of the existing members of PWC Legal and the existing members (or at least most of them) of Dunhill Madden Butler, such new partnership being stipulated by the Deed to bear the continuing designation PWC Legal, and to involve the provision of “legal and related services”. The existing members of PWC Legal immediately before the merger appear to have been those four persons who were the inaugural members of PWC Legal at the time of commencement of the practice of PWC Legal as from 7 April 1999, namely G.L. Lehmann, P.G. Koenig, E.J. Dibbs and R.G. Richard. Registration of the business name “PricewaterhouseCoopers Legal” was effected under the Business Names Act on 28 May 1999, which registered document described the status of the firm as that of “Law Firm”. Additionally, such registered document recorded that the previous principal place of business of PWC Legal had been 201 Kent Street Sydney, and that there had been a change of the business address of PWC Legal to 16 Barrack Street Sydney, which was the place where Dunhill Madden Butler had been conducting its legal practice.
The said Partnership Deed for PWC Legal defines as “Related Firm” the following:
“…PWC Australia, PwCS, the partnership formerly known as Coopers & Lybrand and any person or group of persons, trust, firm or company as the Board may from time to time determine to be associated with the Firm for the purposes of this Deed.”
The reference to “the Board” is to the board of directors established pursuant to Clause 5 of the Partnership Deed of 18 May 2000 for PWC Legal. Such expression “Related Firm” appears in clauses 12.1 to 12.3 of the Partnership Deed extracted below. The reference to “PwC Australia” is to the partners of PricewaterhouseCoopers (ie the firm name abbreviated in this Judgment to PWC Accounting) constituted by a Deed dated 8 April 1997, and its predecessor firms, and the reference to PwCS is to the discretionary trust known as the “PricewaterhouseCoopers Services Trust” established by deed dated 17 December 1992. The said Partnership Deed relating to PWC Legal of 18 May 2000 provided by Clause 6.7 thereof that the National Managing Partner would initially be P.G. Koenig (identified in [6] above), and by clause 6.11 for Mr Koenig’s duties to include “liaison with other members of any international legal network of which the Firm becomes a member”.
Clause 12 of the said Partnership Deed of 18 May 2000 for PWC Legal relates to “Obligations of Partners; sub-clauses 12.1, 12.2 and 12.3 stipulate as follows:
“12.1 Application to business of Firm
Subject to Clause 19, each Partner shall at all times wholly and exclusively employ himself or herself in the practice and concern of the Firm and Related Firms and shall diligently and faithfully employ himself or herself in carrying on the same in the interests of the Firm in accordance with such standards, policies and rules governing the activities of the Firm as are adopted by the Board.
12.2Company with management directions
Each Partner shall observe the directions of the Board and all others concerned with the management of the Firm provided that such directions are reasonable. Without prejudice to the generality of the foregoing, such directions may include:
(a)relocation to another office of the Firm or a Related Firm provided that such request is reasonable given the personal circumstances of the Partner;
(b)compliance with administrative rules as may be prescribed from time to time; or
(c)entering into any arrangements to guarantee or act as surety in respect of the obligations of the Firm or Related Firms provided that shortly before or as soon as possible after the retirement of any Partner who has entered into any such arrangements the Board shall (if permitted in accordance with the terms of such arrangement) nominate another Partner to enter into such arrangement in place of such original Partner.
12.3Comply with rules and policies
Each partner shall observe:
(a)such Regulatory Rules as are applicable to the Partner, the Firm, its practice or
(b)such rules as the Board may from time to time have in force including for the purpose of:
(i)establishing and maintaining the independence of the Firm in relation to clients of the Firm and of Related Firms and others; or
(ii)ensuring that all information acquired in the course of professional work and all information concerning the affairs of the Firm and the Related Firms which is not a matter of public knowledge or readily available to members of the public is treated as strictly confidential and is neither used nor appears to be used for his or her personal advantage or for the advantage of a third party or for any purpose which the Board shall consider not to be in the interests of the Firm or the Related Firms; and
(c)all lawful policies of PwC Australia to the extent appropriate to the Firm and consistent with applicable legislation and Regulatory Rules.”
Clause 17 of the said Partnership Deed for PWC Legal concerns the “Relationship with PWC Australia”, and sub-clauses 17.1, 17.2 and 17.3 stipulate as follows:
“17.1 Independence of Firm
The Partners alone are:
(a)responsible for, control and are empowered to conduct the Firm’s business; and
(b)entitled to the receipts and income of the Firm.
17.2Association with PwC Australia
The Firm is nevertheless associated with PwC Australia both through some commonality of clientele and by reason of the common name “PricewaterhouseCoopers” and accordingly any Partner appointed to be the Chairman, a National managing partner, an Office Managing Partner or a member of the Board shall be appointed only after consultation with the TLS Line of Service Leader of PwC Australia (if that person is not also a Partner in the Firm) or such other person as the Board of Partners of PwC Australia determines.
17.3Alteration ineffective without consent
Any purported alteration of this deed which has the effect of removing or in any way relaxing any of the restrictions of Clauses 8.4, 12.3(c), 17.2, 17.3 and 17.4 shall be of no effect unless the alteration has been approved by PwC Australia. This Clause shall cease to have effect if at any vote of PwC Australia Principals in relation to the election of that firm’s Board of Partners or elected management positions the Partners have not been given a vote as if they were PwCA Principals.”
An ASIC search was conducted on 15 August 2000 by TVSN’s Solicitors in relation to the corporation PricewaterhouseCoopers Securities Limited, which I have been already referring to as PWC Securities. This disclosed as its registered office Level 1 201 Sussex Street Sydney and as its then current directors A.M. Coleman, G.L. Crampton, I.A. Armstrong, T.G. Fenton, R.A. Higham, T.W. Cox and N.A. Behrens, and as members D.W. Smithers, G.L. Crampton, W.R. Lonergan, A.S. Wehby and Coopers & Lybrand (A.C.T.) Pty Limited. A Law Society registration data base search conducted by TVSN’s Solicitors on the same day disclosed as current “New South Wales Lawyers” Elizabeth Dibbs, Geoffrey Lehmann, Paul Koenig and Rodney Richard being the persons already identified in [6] above. Thus no member of PWC Legal appears to have held office as a director or to have been a member of PWC Securities, and all directors and members of PWC Securities were apparently representatives of PWC Accounting. A further ASIC search was conducted on the same day in relation to PricewaterhouseCoopers Services Pty Ltd (PWC Services), which disclosed as its registered office and principal place of business Level 1 201 Sussex Street Sydney and as its then current directors S.J. Bowles, D.P. Craig, I.R. Riley and E.J. Dibbs. Ms Dibbs is a partner in PWC Legal [see 6 above].
Soon after the Judgment of Whitlam J was handed down on 26 May 2000, Mr Daniel (by then having become a partner of PWC Legal) telephoned Mr W.J. Andrews, one of the signatories to the Investigating Accountant’s Report (see [3] above), and enquired as to whether TVSN had any difficulty with PWC Legal continuing to act for Mark Foys in any appeal from the Judgment at first instance. Mr Andrews rang back and reported that he had made enquires of the Managing Director of TVSN, who said that “at that point”, TVSN did not have a problem with PWC Legal so doing, but that the position might change in the future. However by letter dated 4 August 2000, TVSN’s Solicitors notified PWC Legal of formal objection to its further acting for Mark Foys, citing the following reasons.
“1. Pricewaterhousecoopers were and are auditors of our client;
2.Pricewaterhousecoopers were the accountants which participated in very great detail in the preparation of the Prospectus last year for the float of our client on the stock exchange;
3.During the preparation of the Prospectus, Pricewaterhousecoopers reviewed in detail counsel’s advices and the advices of this firm in relation to this dispute, and also officers of Pricewaterhousecoopers contacted the writer on several occasions to discuss the matter, for the purposes of preparing the words which did appear in the Prospectus touching on this litigation; and
4.Your client has threatened litigation against our client in relation to the words which appear in the Prospectus (and therefore by implication those parties who were involved in the preparation of it) concerning the use of the business names the subject of the appeal.”
On 9 August 2000 PWC Legal replied in the following terms:
“We do not understand the basis of your objection to us acting any further for Mark Foys Pty Limited in this appeal.
Whilst we accept your numbered paragraphs 1 and 2 (ie those extracted in [11] above), your letter seems to proceed on the false assumption that this firm has access to confidential information and documentation held by the professional services firm PricewaterhouseCoopers.
In any event, as we understand it, all of counsel’s advices and the advices of your firm in relation to this dispute were produced prior to the trial, as a result of a notice to produce, following your unsuccessful claim of legal professional privilege.
Prior to preparing the notice of appeal, we made inquiries as to whether either Mark Foys Pty Limited or TVSN Limited would object to us acting in the appeal in the light of our new association with PricewaterhouseCoopers. We were informed that neither had an objection.
Are you asserting that we are acting other than in the interests of our client and consistently with our duty to the Court? If so, how?”
On the same day TVSN’s Solicitors wrote back as follows (inter alia):
“… there is no circumstance which justifies your firm, having issued letters of demand to our client and its directors making allegations of breaches of the Trade Practices Act and the Corporations Law in relation to the preparation of the Prospectus (and by implication against my client’s advisors which included Pricewaterhousecoopers), continuing to act in the interests of Mark Foys Pty Limited whilst those allegations remain alive.
If your client is willing to withdraw forever those allegations then please say so. If your client is not willing to withdraw forever those allegations, then as Pricewaterhousecoopers may become either a defendant or a cross-defendant to such threatened proceedings, we must ask that you cease to act.”
The reference in TVSN’s above letter to “Pricewaterhousecoopers” would have been to PWC Accounting.
The correspondence concluded with the response of PWC Legal of 11 August 1990 that “We are not aware of any allegations against PricewaterhouseCoopers which you seek to have withdrawn”. In the events which have happened, PWC Legal was not joined in the proceedings between Mark Foys and TVSN, whether as a “defendant or cross-defendant”, nor was PWC Accounting or PWC Securities.
At least by 29 August 2000, the “PricewaterhouseCoopers Australia” website was speaking of its “Tax and Legal Services”, and of its “Locations : New South Wales” as including “Sydney (Head Office) PricewaterhouseCoopers 201 Sussex Street Sydney New South Wales 1171”, and of “PricewaterhouseCoopers Legal 16 Barrack Street Sydney New South Wales 2000”, and of “LANDWELL” in terms of “… a leading provider of international legal services to organisations around the world… the correspondent legal practice of PricewaterhouseCoopers”, and further stating that “Our lawyers are business consultants as well as experts in the law. Working with specialists in PricewaterhouseCoopers, we provide our clients with complete, integrated solutions, from planning through to implementation and review”. The “Our People” icon of the PWC Legal website provided information in relation to its partners John Churchill, Andrew Wallis, Stephen Loosely, Kevin Shields, Ian Johnston and Andrew Petersen, using expressions varying from “PricewaterhouseCoopers global network”, “providing non-legal solutions”, “Operating under the umbrella of the PricewaterhouseCoopers International network”, “works in tandem with the Pricewaterhousecoopers indirect Tax Specialists”, “providing a truly holistic custom tailored service”, “PricewaterhouseCoopers indirect tax specialists”, and “PricewaterhouseCoopers global consulting network”.
PWC Legal has provided the following explanation in evidence as to the relationship between PWC Legal and PW Accounting, namely that the partnership of PWC Legal, though having an association with PWC Accounting, has at all times been and remained separate from PWC Accounting, and that there has been no access, pursuant to such association, to the client records and files of the partners and employees PWC Legal and PWC Accounting, and vice verse, in the absence of specific arrangements on a client by client basis, and further that no such arrangement exists in respect of the parties to the subject proceedings (such parties being of course Mark Foys and TVSN). Such explanation is consistent with Clauses 12.3 and 17.1 of the Partnership Deed extracted in [8-9] above.
The following additional matters and circumstances have been disclosed by PWC Legal to the Court on affidavit and in viva voce testimony:
(i)One partner of PWC Accounting Paul Koenig has been and still is a partner also of PWC Legal (see [10] above), for the reason that “… he is able to perform a high level management role in each of the partnerships”; indeed Mr Koenig is presently the National Managing Partner of PWC Legal, as well as being “the line of service leader for the Tax and Legal Services Line of Business within PricewaterhouseCoopers” (ie PWC Accounting); he is not nor has been however involved in advising either Mark Foys or TVSN, nor does he have knowledge of any confidential information of either Mark Foys or TVSN relevant to the present proceedings.
(ii)It is the practice of PWC Legal to undertake “conflict checks when clients become involved with the firm or upon taking on new work for existing clients”, and in so doing “to search the present clients for PricewaterhouseCoopers Australia”, and to resolve “possible conflict” issues at partnership level.
There is no doubt as to the jurisdiction of the Federal Court to determine the issue the subject of TVSN’s Notice of Motion in the context of the proceedings brought by Mark Foys against TVSN, and in particular the present appeal from the final determination thereof at first instance: National Mutual Holdings Pty Ltd v Sentry Corp (1989) 22 FCR 209 at 233; Murray v Macquarie Bank Ltd (1991) 33 FCR 46 at 49.
TVSN has framed its case in address primarily upon the basis that, having regard to the structure of PWC Legal and its relationship with PWC Accounting, and to the sharing of information between them, there is a conflict of duty of a kind which renders disqualification of PWC Legal to act as Solicitors for TVSN on the pending appeal to the Full Court from the Judgment of Whitlam J as “absolute”. TVSN invokes at the forefront of its submissions the following statement of principle enunciated in Prince Jefri Bolkiah v KPMG [1999] 2 A.C. 222 at 234-5 (per Lord Millett with whom the other Law Lords agreed) as follows:
“A man cannot without the consent of both clients act for one client while his partner is acting for another in the opposite interest. His disqualification has nothing to do with the confidentiality of client information. It is based on the inescapable conflict of interest which is inherent in the situation….”
The contended basis for application of such statement of principle is that PWC Legal, PWC Securities and PWC Accounting are so connected and associated in their relationship as to be in substance and reality jointly involved in the provision of legal and accounting services, notwithstanding that PWC Legal has its own discrete Partnership Deed [6-9], as doubtless I would assume to be the case also in relation to PWC Accounting, and notwithstanding that PWC Securities is an incorporated company, with the consequence that there is an inherent conflict between the duty of PWC Legal in representing Mark Foys as the appellant in the pending appeal with the duty of PWC Accounting and PWC Securities in the provision of accounting services to TVSN as the respondent in the pending appeal. I should interpolate to record that neither PWC Accounting or PWC Securities have been made parties to this Motion presently before me, the sole Respondent to the Motion being PWC Legal. It is tolerably clear, from what I have recounted from the evidence before me in [6-12], that there is and has been at all times material to the present dispute, a professional connection or association between PWC Legal on the one hand and PWC Accounting on the other. Whether such connection or association is and has been such as to constitute the conflict or likely conflict of duties contended on behalf of TVSN is of course a controversial matter. By “likely”, I refer to the concepts of “real and appreciable risk” and “real and sensible” enunciated in the authorities referred to in this Judgment.
TVSN does not put its case for an injunction against PWC Legal upon the basis of specifically identifiable confidential information, other than the four written advices referred to in [5] above. Subject to the significance or otherwise of such four professional advices, the fact of the prior and ongoing role of PWC Accounting as auditors of TVSN is not material to the present Motion. TVSN accepts as relevantly applicable to the present circumstances under scrutiny the following general postulation of Lord Millett in Bolkiah, so far as audit services in principle are concerned as follows (at 235):
“There is a clear distinction between the position of a solicitor and an auditor. The large accountancy firms commonly carry out the audit of clients who are in competition with one another. The identity of their audit clients is publicly acknowledged. Their clients are taken to consent to their auditors acting for competing clients, though they must of course keep confidential the information obtained from their respective clients. This was the basis on which the Privy Council decided Kelly v Cooper [1993] A.C. 205 in relation to estate agents.”
Moreover, the information contained in the Investigating Accountant’s Report of PWC Securities contained in the Prospectus (extracted at [3] above) may sensibly be regarded as information publicly known and/or available. In Bolkiah as a matter for significant comparison, what KPMG had provided to Prince Jefri Bolkiah were litigation support services (234D), which may be distinguished in principle from the audit services, and from investigative accountancy reporting contained in a prospectus. No litigation support services were provided by PWC Accounting or PWC Securities to TVSN. So far as the abovementioned four written advices are concerned, in the light of the same coming into the possession of Mark Foys and Dunhill Madden Butler in the circumstances described in [5] above, the same can no longer be regarded as confidential, at least so far as Mark Foys and its solicitors are concerned.
TVSN has sought to circumvent the absence of identification on its part of confidential information (other than the legal advices in [5] above) with the proposition that the conduct of PWC Legal in assuming legal representation for Mark Foys in the appeal proceedings in the place of Dunhill Madden Butler, by reason of PWC Legal’s association and connection with PWC Accounting and PWC Securities and the professional association in turn of PWC Accounting and PWC Securities with TVSN, constitutes breach of the duty of loyalty owed to TVSN in the sense or senses discussed in the three authorities referred to below. In the judgment of Burchett J of this Court in Wan v McDonald (1991) 33 FCR 491 at 512-3, the expressions “a solicitor’s duty of loyalty” and “stained by the appearance of disloyalty” appear in the following context:
“Counsel for Mr Donald McDonald placed reliance upon Australian Commercial Research and Development Ltd v Hampson [1991] 1 Qd R 508, in which Mackenzie J followed the well-known decision Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 931 and the decision of Bryson J in D & J Constructions Pty Ltd v Head (t/as Clayton Utz) (1987) 9 NSWLR 118. Rakusen (supra) and D & J Constructions (supra) were both cases where one partner in a firm of solicitors had acted for a party to litigation in the past, and another partner desired to act for the other side, there being no reason shown to believe that in fact information confidential to the former client would become available in the litigation to the latter. The emphasis in the judgments was placed on the solicitor’s duty to safeguard confidential information of his client. But there are at least two other aspects of the problem to which attention has more recently been drawn; a solicitor’s duty of loyalty, which cannot be treated as extinguished by the mere termination of the period of his retainer, and the important consideration of public policy which gives a special quality to the relationship of solicitor and client that the law will not generally permit to be stained by the appearance of disloyalty.”
The foregoing passage was apparently part of a line of authority to which the Victorian Court of Appeal (Callaway and Batt JJA) subsequently referred in McVeigh v Linen House Pty Limited [1999] VSCA 138 in the following passage in [23] of their joint judgment:
“The authorities establish that a court will restrain a solicitor from acting for a litigant not only in order to prevent a disclosure of confidences of a client or former client, but also to ensure that the solicitor’s duty of loyalty to the former client is respected, notwithstanding termination of a retainer, and to uphold as a matter of public policy the special relationship of solicitor and client.”
More recently still the Victorian Supreme Court (Gillard J) in World Medical Manufacturing Corporation v Phillips Ormone & Fitzpatrick [2000] VSC 196, discussed the cognate notion of a solicitor “changing sides” in the following context:
“84.The cases in this area which go back as far as Cholmondley v Lord Clinton (1815) 19 Ves 261; 34 ER 575 discuss a number of bases for the jurisdiction to restrain solicitors from acting in litigation against a former client.
85.First, that the relationship between a solicitor and client is one of confidence and this relationship of confidence obliges a solicitor not to reveal any information obtained during the course of that relationship without the express or implied approval and consent of the client. In addition, some of the information may be protected from disclosure because of legal professional privilege.
Secondly, the relationship between solicitor and client is a fiduciary one and this imposes obligations of trust, integrity and confidence.
The third basis for the jurisdiction is what could be described as the “administration of justice factor”. As I said in the Yunghanns case – “It is vital to the proper administration of justice that clients are confident in the expectation that their confidence and trust will be maintained. To permit a legal practitioner to put that obligation at risk by permitting him to act against his former client requires the court to approach the task with caution. To permit a legal practitioner to change sides is an act which cuts across what the average person would consider was right and proper and has the potential to bring the legal profession into disrepute.”
Counsel’s submissions for TVSN in oral address formulated the breach of loyalty here said to be involved as follows:
“I put it on two bases, two of three bases, duty of loyalty in the fiduciary sense, and alternatively, on the basis of the interests of the Court in the administration of justice….”
In other words, Counsel framed as here applicable a breach of loyalty arising first out of the fiduciary relationship between solicitor and client and secondly of the principle of administration of justice that a solicitor should not “change sides”. It therefore becomes necessary to consider the nature and context of the fiduciary duty, if any, owed by PWC Legal to TVSN in the circumstances of this matter, particularly in relation to the possession or otherwise of confidential information, and whether there has occurred any “changing of sides” in a relevant sense giving rise to conflicts of “duty and duty”, the description adopted by TVSN. In relation to such third basis referred to in World Medical Manufacturing above, the Court has of course an inherent role or function in controlling the conduct of solicitors as officers of the Court, but in so far as a solicitor’s conduct adversely relates to or affects his or her client, it will normally be the case that the behaviour in question is concerned with the solicitor’s duty to the client. In the unusual circumstances of the present case, I would take as the appropriate starting point the following dicta of the NSW Court of Appeal in Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at 45, which encapsulates the nature of the solicitor and client relationship, and its implications in terms of fiduciary duties and breaches thereof:
“Even in the case of a solicitor client relationship long accepted as a status based fiduciary relationship, the duty is not derived from the status. As in all such cases, the duty is derived from what the solicitor undertakes, or is deemed to have undertaken, to do in the particular circumstances. Not every aspect of a solicitor client relationship is fiduciary. Conduct which may fall within the fiduciary component of the relationship of solicitor and client in one case, may not fall within the fiduciary component in another…. [the duties of] confidence and influence [which equity will preserve and protect] are not always so pervasive as to require equitable intervention in every facet of the relationship.”
The task confronting TVSN of postulating a spectre of disloyalty on the part of PWC Legal in the circumstances here being addressed is a formidable one. The firm of Dunhill Madden Butler, and in particular the partner Mr Daniel, had never acted professionally for TVSN. Coudert Brothers acted as solicitors for TVSN in connection with the issue of the Prospectus [3], and Bruce and Stewart Commercial Practice acted as solicitors for TVSN in the proceedings brought by Mark Foys against TVSN at first instance, and continue to act for TVSN on the pending appeal. PWC Legal have never acted as solicitors for TVSN. So far as PWC Legal are concerned, no “change of sides” has therefore occurred, except in some imputed way if it can be shown that PWC Legal and PWC Accounting (together with PWC Securities) are essentially the same entity for the purposes of assessing conflicts of duty. When Burchett J made the following observations in Wan at 515 in relation to amalgamation of firms of solicitors, he thereby recognised that distinctions may need to be drawn when it comes to characterising issues of loyalty in any context of alleged “changing of sides”:
“If the focus of attention is shifted, from the case of an amalgamation of firms or other change in partnership (where the question arises out of the relationship, but the solicitor actually handling the matter has never acted for the other party), to the case of a solicitor who has acted for both parties continuing to act for one of them after the conflict has arisen, the issues of loyalty and propriety seem to me to loom more largely.”
The illustration his Honour was there drawing by reference to amalgamation of firms of solicitors is even narrower than the circumstances here prevailing. PWC Legal had never previously acted for TVSN prior to Mr Daniel and his former Dunhill Madden Butler partners joining PWC Legal, nor has PWC Legal done so subsequently. Moreover PWC Legal emphasised to TVSN’s Solicitors from the outset that PWC Legal was not possessed of any confidential information which might be held by PWC Accounting (and by implication by PWC Securities having regard to its relationship with PWC Accounting) see [11] above. For the reasons I have earlier given, that was a truthful stance to have adopted. I have encountered no basis for doubting such an unequivocal assertion. The citation by Counsel for TVSN of the expression “stained by the appearance of disloyalty” from the passage in Wan at 513 is clearly less apposite to the present circumstances involving PWC Legal than to the situation of an amalgamation of two legal firms, one of which had previously acted for the entity asserting breach of duty, which the above passage in Wan at 515 seeks to exemplify.
Because of the complex nature of the circumstances relevantly involved, I will record below the essence of the written submissions furnished by Counsel for TVSN, and respond to the same individually. These submissions took the form of paragraphs (a) to (j) which I will also cite for ease of reference:
“(a)TVSN is a client of PricewaterhouseCoopers (“PWC”) in relation to audit services and other accounting services.”
There is no evidence as to what such “other accounting services” might have been, apart from the Investigating Accountant’s Report the scope of which is extracted in [3] above, which Report was prepared for the purpose only of the Prospectus issued more than a year ago on 17 July 1999. That being the case, I do not assign any significance to the contention as to “other accounting services”. As to “audit services”, it suffices to adopt the extract from Bolkiah in [17] above, which places the same in a special category for purposes such as are here involved, which I see no reason not to similarly adopt, in the absence of evidence to the contrary. It follows that paragraph (a) above provides no assistance for TVSN in terms of establishing the existence of confidential information attracting injunctive relief, and thus of any breach of fiduciary duty relating thereto.
“(b)TVSN is a client of and has a continuing relationship with PricewaterhouseCoopers Securities Ltd (“PWCS”) as its investigating accountant for the purpose of the preparation of a prospectus dated 6 July 1999 and other activities.”
There is no evidence as to any such “continuing relationship” between TVSN and PWC Securities, the Investigating Accountants Report having been prepared for the single purpose of the Prospectus. The submission does not identify the existence of any such “other activities”, and there is no evidence before me which might assist in that regard.
“(c)Through its legal advisers, TVSN has provided to PWC and PWCS various legal advices, which advices concern the subject matter of the proceedings presently before the Court, namely the right to use the name “Mark Foys” in conjunction with TVSN’s business activities as a retailer.”
Such “various legal advices” ceased to be confidential information in the circumstances described in [4-5] above. By reason of the production of the same to the Court, the same became examinable by Mark Foys as Applicant in the main proceedings.
“(d)by reason of the recent acquisition of Dunhill Madden Butler (“DMB”) by the PricewaterhouseCoopers’ ‘group’ PWCL has commenced acting for Mark Foys.”
The partners of Dunhill Madden Butler, or at least the majority thereof, became partners in PWC Legal in the circumstances described in [2(vi)] and [6] above, as a result of which PWC Legal commenced to act for Mark Foys from 1 December 1999. It is both inaccurate and inappropriate to speak of the PricewaterhouseCoopers “group”, the same not being postulated as a legal characterisation or notion, as occurs in the case of a group of corporations. As to the constituent basis of a partnership, in paragraph 2.07 of Lindley & Banks On Partnership (17th ed) para 207, the following appears:
“Partnership a contractual relationship
Partnership, although often called a contract, is more accurately described as a relationship resulting from a contract. This was made clear in the original statutory definition introduced into the House of Lords but not, ultimately, in the Act itself. Nevertheless, the origin of the relationship in an agreement, whether express or implied, was clearly established before the Act and may legitimately be inferred from its provisions.”
The relationship between the partners of PWC Legal is governed by a contract in the form of the Partnership Deed referred to in [6-9] above. It is inconceivable that there is not a similarly comprehensive deed governing the relationship between the partners of PWC Accounting. PWC Securities is for its part of course an incorporated entity. Such purported designation of “group” aside, the critical issue is the imputation or otherwise knowledge of confidential information held by PWC Accounting and/or PWC Securities to PWC Legal. As I have earlier pointed out in [16] above, it is readily apparent from the evidence before me in [6-12] that there is, and has been at all times material to the present dispute, a connection of association, speaking imprecisely, between PWC Legal on the one hand and PWC Accounting and/or PWC Securities on the other hand, but it does not follow that a partner of PWC Legal has an entitlement to access confidential information in the possession of PWC Accounting and/or PWC Securities, or vice versa. On the contrary, see the second paragraph of PWC Legal’s letter of 9 August 2000 to TVSN’s Solicitors [11], and the evidence summarised in [13] and [14(ii)] above. The existence of associations between partnerships and companies, whether operating in the same or complimentary fields of endeavour, obviously does not import entitlement, without more, to access by one partnership or company to the confidential information of another. Promotional expressions attributable to PWC Legal such as “Working with specialists in PricewaterhouseCoopers, we provide our clients with complete, integrated solutions, from planning through to implementation and review”, and others extracted in [12] above, do not evince conclusions as to legal entitlement or access to confidential information belonging to another PricewaterhouseCoopers organisation or entity having the custody of such information. In Newman v Phillips Fox [1999] WASC 171, the Supreme Court of Western Australia (Steytler J) stated at [29] that “there is now a substantial body of authority which suggests that, in a case such as the present, the knowledge of those joining the new firm should not automatically be imputed or attributed to other lawyers at that firm”, and the converse must also be true in relation to any attribution to incoming members of the knowledge of existing members of the firm. Moreover particularly in relation to large law firms, and the same must be true also of large chartered accountancy firms, Steytler J adopted as a guiding rule of practicality the following dictum of Staughter LJ in Re A Firm of Solicitors [1992] QB 959 at 973 (though His Lordship was in dissent in the result):
“I cannot detect in that case any authority for the proposition that a large firm of many partners is obliged to disclose to each client any knowledge relevant to his affairs that may be possessed by any of its partners or staff. Nor do I think it right to enlarge the law to that extent, quite apart from the authority of Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831. There has no doubt been a change in the way that many solicitors practice since 1912. In Rakusen’s case Mr Munday and Mr Clarke were the only partners in the firm; they were in the habit of doing business separately and without any knowledge of each other’s clients, and each of them had the exclusive services of some of the clerks. There are, of course, still many sole practitioners or small firms today. But there are also giants with a hundred partners and more, employing large numbers of assistant solicitors and articled clerks, as I shall still call them. The solicitors in the present case comprised 107 partners at the last count. It seems to me impracticable and even absurd to say that they are under a duty to reveal to each client, and use for his benefit, any knowledge possessed by any one of their partners or staff. I would not hold that to be the law.”
“(e)the partner responsible for the matter was a partner of DMB and is now a partner of PWCL.”
This is not of course a matter in dispute: see [2(vi)] and [6] above.
“(f) PWC and PWCL and PWCS and PWCL are related to the extent that:
(i)there is at least some commonality of directors;
(ii)some commonality of the ownership of the PWCL business name;
(iii)until recently, each of them carried on business in the same premises (with two of the owners of the business name continuing to carry on business of the PWC & PWCS business address);
(iv)there are various representations of the PWCL website to the effect that PWCL partners work closely with PWC and other PWC entities and have available to themselves the resources of PWC and the other entitles;”
As to (i) and (ii), there is commonality of one partner to PWC Legal and PWC Accounting, namely Mr Koenig (see [6] and [14(i)]), but as stated in [14(i)], he has not been involved in advising Mark Foys or TVSN, nor has knowledge of any confidential information in relation to the subject proceedings between Mark Foys and TVSN, which is not unsurprising in addition to the unique nature of his functions of office. No partner of PWC Legal appears to have been a director or member of PWC Securities (see [10] above).
As to (iii), the situation as to business addresses is somewhat confusing. The change of the principal place of business of PWC Legal to 16 Barrack Street occurred on 28 May 1999, though the new partnership involving former Dunhill Madden Butler took effect from 1 December 1999 [6]. As indicated in [6], the documentary evidence adduced by TVSN indicates that the previous principal place of address of PWC Legal was 201 Kent Street. Let me assume that such nomination of address was erroneous and that the place should have been disclosed as 201 Sussex Street. Since 16 Barrack Street Sydney had been the place of business of Dunhill Madden Butler prior to the merger with PWC Legal, and Dunhill Madden Butler contributed more members to the partnership of PWC Legal, it must be highly unlikely that the Dunhill Madden Butler partnership entrants to PWC Legal would have uprooted the Dunhill Madden Butler infrastructure for about six months from 16 Barrack Street, with all the costly logistical practicalities thereby involved, and then returned to 16 Barrack Street. In all events, Senior Counsel for PWC Legal disclosed to the Court that PWC Legal will shortly be moving its place of business to 201 Sussex Street Sydney, being the building in which PWC Accounting has for some years occupied but that it will occupy different floors and have different security systems to PWC Accounting. The response of TVSN in address in reply that such move would produce “a heightened risk”. The problem for TVSN on the present Motion remains however as to what confidential information (if any) is supposedly at risk. That problem being in my opinion inseparable, no question as to “Chinese Walls” arises.
As to (iv), having regard to what has been extracted from such website as summarised in [12] above, such a conclusion may be drawn in relation to the description “closely”. There is no evidence however as to sharing of “resources” in any physical sense, except possibly in relation to intellectual property, and no issue can arise in any event in relation thereto until the existence of confidential information can be established.
“(g)during the time that DMB acted for Mark Foys, a demand was made against TVSN which, on its face, suggested a contravention of the Corporations Law and/or the Trade Practices Act by reason of statements contained in the Prospectus by persons which necessarily included PWC and/or PWCS (“the Demand”).
(h) the Demand has not been withdrawn.
(i)if Mark Foys is successful on its appeal, the issues adverted to in the Demand may need to be litigated and PWC and/or PWCS would be likely to be brought in as parties, not necessarily by reason of any action taken by TVSN;”
The demand took the form of a letter dated 21 July 1999 from Dunhill Madden Butler on behalf of Mark Foys addressed to TVSN’s Solicitors Bruce & Stewart. It asserted the engagement by TVSN in misleading and deceptive conduct and requested undertakings, including the correction of relevant material in the Prospectus (ie what is extracted in [4] above. There is no suggestion in the evidence that PWC Accounting or PWC Securities was involved in or responsible for the drafting of that paragraph of the Prospectus as appears in [4] above. The likelihood is that [4] was prepared by Coudert Brothers, the Solicitors referred to in the Prospectus (see [21] above). Such kind of prospectus material would normally be outside the scope of provision of audit services, and as to PWC Securities, what is described in the Prospectus as the information covered by the Investigating Accountant’s Report would not suggest that PWC Securities was involved in preparing or vouching that which appeared in [4] above separately from that Report. Neither PWC Accounting nor PWC Securities were of course joined in the proceedings as cross-respondents. For all these reasons there is no substance in the submissions constituted by the above three paragraphs of the TVSN submissions. I put aside the absence of any relief sought in the Appeal by way of new trial, and the implications of Anshun estoppel, which would constitute further obstacles in TVSN’s path. Speculation as to joining PWC Accounting and/or PWC Securities in any such further proceedings following disposal of the Appeal on such an unspecific and unexplained bases provides no basis for relief by reference to any grounds of intervention discussed in the authorities reviewed in [18] above.
Presumably “the same entity” referred to in paragraph (j) above is some form of combination of PWC Accounting, PWC Securities and PWC Accounting. It is trite law that a partnership is a relation resulting from a contract (Lindley & Banks on Partnership (17th ed) para 2.07). No contractual basis has been advanced by TVSN to demonstrate that there exists any contractual relationship between the partners of PWC Legal and PWC Accounting such as might conceivably support the proposition, or for that matter a sub-partnership involving any one or more members of PWC Legal and PWC Accounting respectively (Lindley para 5.75). Nothing contained in the preceding paragraphs (a) to (i) of the TVSN submissions already addressed supports any such propositions, being propositions which are also inconsistent with the Deed of Partnership dated 18 May 2000 relating to PWC Legal already referred to in [6-9] above. Moreover, the means whereby PWC Securities as an incorporated entity could be brought into this purported “same entity” equation or concept remains unexplained. The fact that the Solicitors’ Rules promulgated under the Legal Profession Act 1987 (NSW), and section 48G thereof in particular, recognise “multi-disciplinary partnerships”, that is to say, the conduct of a legal practice by a legal practitioner holding a New South Wales practising certificate in partnership with persons who provide other services in addition to legal services is not to the point, unless all such other persons are legal practitioners and non-legal practitioners are truly partners according to law.
TVSN further submits as follows:
“It is for [PWC Legal] as a member of the PricewaterhouseCoopers’ ‘group’ to demonstrate that there is:
(a)no linkage between PWCL and the rest of PWC such that there cannot be said to be a conflict of duty and duty; and
(b)no risk or no increased risk of the use of confidential information.
In the circumstances, it is submitted that a rebuttable presumption has arisen which is for PWCL to dislodge.”
I make the preliminary observation that the submission does not specify what “linkage” was present upon which any such conflict arose, nor does it specify what confidential information is the subject of use or risk of use. In any event, a rebuttable presumption has not arisen in the circumstances of this case. The doctrine of rebuttable presumption is only required to be addressed in circumstances where one partner is in possession of confidential information of a client or former client. The only confidential information which has been identified by evidence adduced in the Motion concerns the “various legal advices” the subject of paragraph (c) in [21] above. I have determined that there is no basis for the proposition that such legal advices remain confidential, having regard to the subsequent events which thereafter ensued [4]. As to confidential information supposedly obtained by PWC Accounting in the course of its audit services rendered to TVSN, see [17] above, and as to confidential information supposedly obtained by PWC Securities, the same falls for no different consideration than that applicable to PWC Accounting. It is therefore unnecessary to discuss the implications as to rebutting presumptions in the context of solicitors’ or chartered accountants’ partnership (Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1997) 17 WAR 98 (at p108). If it had become necessary so to do, the evidence which I have recounted in [13] and [14(ii)] could well have sufficed to relevantly rebut in the unusual circumstances of this case, particularly in the light of what was observed in Bolkiah at [17].
In the result, this Motion fails, essentially because of the failure of TVSN to establish the existence of confidential information, and of events constituting “changing sides” as that expression has been used in the authorities.
The Notice of Motion of TVSN (Pacific) Limited should be dismissed.
I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti. Associate:
Dated: 25 October 2000
Counsel for the Applicant: Mr F.M. Douglas QC & Ms S.J. Goddard Solicitor for the Applicant: PricewaterhouseCoopers Legal Counsel for the Respondent: Mr M Green Solicitor for the Respondent: Bruce & Stewart Lawyers Date of Hearing: 30-31 August 2000 Date of Judgment: 25 October 2000
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