Marlay and Marlay
[2008] FMCAfam 71
•1 February 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MARLAY & MARLAY | [2008] FMCAfam 71 |
| FAMILY LAW – Property – confidential information and conflict-of-interest – wife seeks orders restraining brother-in-law acting as solicitor for husband – tests applied – discretion. |
| McGillivray v Mitchell [1998] FLC 92-818 Bowen v Stott [2004] WASC94 Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404 Grimwade v Meagher [1995] 1 VR 446 Kossatz and Kossatz (1993) FLC 92-386 |
| Applicant: | MR MARLAY |
| Respondent: | MS MARLAY |
| File Number: | CSC 526 of 2007 |
| Judgment of: | Coates FM |
| Hearing date: | 15 October 2007 |
| Date of Last Submission: | 15 October 2007 |
| Delivered at: | Cairns |
| Delivered on: | 1 February 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mrs Pack SC |
| Solicitors for the Applicant: | M Lawyers |
| Counsel for the Respondent: | Mrs Pagani |
| Solicitors for the Respondent: | Miller Harris Lawyers |
ORDERS
The application by the wife to restrain M Lawyers acting for the husband is dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Marlay & Marlay is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CAIRNS |
CSC 526 of 2007
| MR MARLAY |
Applicant
And
| MS MARLAY |
Respondent
REASONS FOR JUDGMENT
Note: To avoid confusion, I will refer to Mr Marlay as the father or husband and to Mr M as Mr M.
Wife’s case
Ms Marlay is the respondent mother/wife in parenting and property proceedings. She wants the law firm acting for the applicant father/husband restrained from acting in the proceedings, because the firm’s principal is her husband’s brother, her brother-in-law.
She claims her case will be prejudiced because her brother-in-law, solicitor Mr M, has conflicts of interest with her, being:
a)He knows her confidential information because he acted for her in the past;
b)He will be a witness in both parenting and property matters; and
c)He has a financial interest in the outcome of property proceedings due to his interests in various property developments, part of which may be intertwined with marital property;
The wife’s evidence is:
a)
Mr M and his law firm(s) acted as her solicitor for about
20 years;
b)His current law firm, M Lawyers, acted in a matter relating to an issue concerning a child of the marriage;
c)M Lawyers acted in transactions including the sale of a hairdressing salon, construction of the parties’ wills, purchase of land at G, purchase of land at E, transfer of Property S from the husband’s name to joint names, the purchase and building of a K residence and as trustee for land in the name of two of the children of the marriage.
d)She said she was involved socially with Mr M and his family and was a close friend of his wife for about 14 years;
e)She said Mr M knew intimate details about her and her children and the relationship between herself and the husband over 20 years;
f)She said Mr M had possession of some of her personal letters without her knowledge, some of which are exhibited to an affidavit of the husband;
g)She said Mr M, the husband and their father Mr F and their respective companies have ownership interests in the R Shopping Centre and Mr M acted in the purchase of land. She says as the shopping centre is part of the marital assets, Mr M may have to give evidence.
h)She further stated that she had not had time to consider the issue of Mr M acting when the application was made by the husband for parenting orders because the matter was brought on as an urgent matter.
The husband did not give evidence for this application.
Mr M’s evidence was to the effect that he had not provided legal advice to the husband
“in respect of the matrimonial matter currently before the Federal Magistrates Court (or any issue to be decided in it) and nor have I ever received instructions from him to act on his behalf in that proceeding.
I have received no confidential information from Ms Marlay, the use or disclosure of which could prejudice or affect, whether adversely or otherwise, Ms Marlay in the matrimonial proceedings currently before the Federal Magistrates Court”
He confirmed that he or his firm had acted for the wife and the husband together over many years in relation to commercial transactions, conveyancing, preparation of wills and for a child of the marriage.
He said he had regularly socialised with the wife over the course of the marriage.
As to possession of personal letters, Mr M stated that the husband provided him with an unopened packet of documents, which he provided to the husband’s solicitor, his employee.
He said he did not act for the husband or give legal advice to his employee, Ms Rosemary Davies, who was the husband’s solicitor.
Counsel for the wife, Mrs Pagani, put forward a case based on the premise that Ms Davies and M Lawyers should be restrained because of the possibility they would be able to use confidential information, gained from the wife, to disadvantage her and this was a conflict of interest for the solicitor.
Husband’s case
Counsel for the husband Mrs Pack SC submitted that the wife’s evidence did not identify the prejudice she claimed she would suffer should Mr M’s firm be allowed to stay on the record for he husband.
She said the wife’s evidence was that Mr M had previously acted on joint instructions and there could be no prejudice from prior dealings with the solicitor when the instructions were given jointly.
The main thrust of the husband’s case was that:
a) the wife’s case was based on speculation as to prejudice, not evidence; and
b) she had delayed in bringing this application and her excuse that she was preoccupied with the urgent children’s application could not be made out because documents admitted as exhibit one were against her claims that she was otherwise preoccupied with the children’s issues.
Before dealing with the main issues of speculation and delay, I will deal with two short matters.
Firstly, social contact alone seems to provide no legal basis to restrain a lawyer from acting – see Kossatz and Kossatz (1993) FLC 92-386. Although in that case contact was infrequent, the wife in this application would have to show the prejudice she would suffer because of social contact. I will come back to this issue from a different perspective.
Secondly, I did not understand the wife’s claim that information gained by Mr M in relation to legal advice involving one of the children, not related to these matters, would and could prejudice the wife’s case. No explanation was given.
On the issue of delay, Mrs Pack said the order and timing of events must be considered.
A schedule of events assists in understanding what has occurred:
a)On 3 May 2007 M Lawyers sent its initial letter to Miller Harris Lawyers, solicitors for the mother;
b)On 4 May 2007 Miller Harris Lawyers responded;
c)On 11 May 2007, M Lawyers sent a letter to Miller Harris Lawyers in relation to property issues;
d)
On 1 June 2007 Miller Harris responded with no objections to
M Lawyers acting;
e)On 6 June 2007 the father filed his application in relation to childrens issues. He sought shared care. The document clearly identified M Lawyers as the father’s solicitors;
f)On 22 June 2007 the wife responded. No reference was made concerning the father’s solicitors;
g)On 25 June 2007 she filed an amended response. No reference was made concerning the father’s solicitors;
h)On 26 July 2007 Mr M filed an affidavit of evidence;
i)On 6 August 2007 the mother attended at the office of M Lawyers to inspect documents. No reference was made concerning the father’s solicitors;
j)
On 29 August 2007, a letter from the wife’s solicitors put
M Lawyers on notice that this application to restrain them acting in the matter would be made. It also gave notice that a property application would be filed;
k)On 25 September 2007 the mother filed an application in a case to restrain Mr M and his law firm from acting for the father.
The letters of 3 and 4 May 2007 can possibly be put aside because of reference to an agreement being reached over the children, however, that position changed from 6 June 2007 when the father made his application on children’s issues.
Both counsel referred me to relevant cases.
Mrs Pack said delay, as identified by the Full Court of the Family Court in McGillivray v Mitchell [1998] FLC 92-818 was fatal to the wife’s case.
She submitted that exhibit one, a bundle of correspondence, shows that in May 2007 the parties were giving instructions to their lawyers as to the property pool and valuations.
A letter dated 11 May 2007 from M Lawyers to the wife’s solicitors, Miller Harris Lawyers, deals with property issues. There was no allegation then that Mr M’s firm should not be acting.
Exhibit one contains further correspondence of a detailed nature between the firms of solicitors seeking the usual documents disclosed in preparation for property proceedings.
McGillivray v Mitchell outlined two approaches courts may take to confidential information:
a)The narrow approach allowed court intervention when it was shown that a confidence had been reposed in a lawyer and it was probable that this confidence would be used.
b)The broad approach allowed court intervention when there was simply a reasonable apprehension that confidential information had passed to a lawyer from a former client and there was at least a theoretical possibility that the information might be used to disadvantage the client.
The Court, made up of Ellis, Baker and Finn JJ, did not determine which approach was correct. They held they had discretion to restrain and in that particular case, as the husband failed to protest at or close to the time he became aware of the practitioner’s involvement in proceedings, no restraining order was made.
The discretion has been identified in a number of cases.
In Bowen v Stott [2004] WASC94, it was held that a court has an inherent power and control over the conduct of an officer of the court.
Young J of the Federal Court in Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404 gave an informative history and analysis of the decisions leading to the confirmation of the discretion.
The inherent jurisdiction existed to preserve the proper administration of justice and there was an objective test to be applied in the context of such a case, which was whether a fair minded, reasonably informed member of the public would conclude that the proper administration of justice required that counsel should be prevented from acting, but at all times giving due weight to the public interest in that the litigant should not be deprived of his or her choice of counsel without good cause.
McGillivray did not confirm the test to be imposed in family law proceedings although a line of single judge decisions have held to the broad approach.
As in the case of McGillivray I do not have to decide which approach is to be applied regarding confidential information - whether it be the narrow or the broad test.
In the McGillivray case, the practitioner was not restrained because the applicant delayed in putting concerns before the court.
That is the same hurdle for the wife in this matter because she delayed in bringing this application.
The evidence is that the wife knew from or about 11 May 2007
M Lawyers were acting in property matters and almost a month later that the firm was acting in the children’s matters, although that could have been anticipated. It then took more than two months to give notice of this application, so it is about three months from the time the first correspondence from M Lawyers was received by her.
Real concerns would have been evident so early in the property negotiations that objections to Mr M’s firm would have been outlined in the correspondence at an early stage, even at the negotiation stage. The same can be said when the children’s application was made on
6 June 2007.
I accept Mrs Pack’s submission that exhibit one shows that the wife was not pre-occupied with the children’s issues because it was brought on as an urgent matter. The exhibit carries correspondence dated from 11 May 2007 to 25 September 2007. Interim orders for the children were made on 25 June 2007 and her notice for restraint of M Lawyers was not made until 29 August 2007.
The urgency of the children’s matter could have another effect – that the wife would object to her brother-in-law’s firm acting for the husband if she held deep conviction that his firm should not be acting.
I do not accept the wife’s evidence that she was
“appalled when reading [Mr M’s] affidavit, to see he has become involved in the children’s matter
as evidence assisting her in this application. She may well have been appalled personally, but she knew from May that his firm was acting for the husband in property matters and from June that his firm was acting in the children’s matters.
In any case the 26 July 2007 affidavit of Mr M she refers to contains hearsay evidence which, coming from a lawyer is surprising, but does not appear to advance the father’s propositions relating to the children.
As an example, at paragraph 6 he gives evidence of seeing the husband leave a meeting early to transport his children to or from school. All he could say of course was that he saw the father leave a meeting at a certain time and any words used by the father.
At paragraph 12 he says he was aware that the mother endeavoured to separate from the husband and he quotes words she used from a telephone conversation. Mr M appears to be telling the Court that he knows what is in the mother’s mind. If that is what he is doing, he as a solicitor knows he cannot do that.
Decisions on these factual issues are matters for trial but they appear to be inadmissible statements.
The difference between the McGillivray case and this case is that solicitor M is the wife’s brother-in-law. I cannot see a conflict of interest professionally because:
a)Delay has been fatal to the wife’s application and
b)She cannot show the actual prejudice. She is speculating that she would be prejudiced.
But does the close family relationship bar Mr M’s firm? Mullane J in Kossatz , in the fourth last paragraph, states:
“Mr Bartfield for the wife conceded that he was unable to provide any authority that knowledge of a lawyer obtained through social contact with a party to proceedings can base an order restraining him from acting against such party in the proceedings. Clearly such a lawyer is free to be a witness or adviser in respect of such knowledge and thereby assist an opposing party to the proceedings”.
This does not appear to bar a lawyer on the ground of social contact because of a close family connection. Again, in my opinion, the applicant would have to show the prejudice or possibility of prejudice is real.
But the discretion to restrain a lawyer allows a decision based on the proper administration of justice and what a fair minded, reasonably informed member of the public would conclude.
The key words are a “reasonably informed” member of the public.
On the evidence before the Court, there is nothing to suggest that Mr M is in a position to offer his brother any advantage over the facts-in-issue because of the knowledge he may have of family affairs. As determined, the wife did not act to have the firm restrained until months after negotiations began and the first application was filed, knowing that Mr M’s firm was acting for the husband. She did not see a problem then and has not raised sufficient evidence of a problem now.
The “fair minded” test applies to some advantage the other party would receive to the detriment of the party seeking the restraint order. It does not, I think, apply to an assessment of Mr M’s moral position to allow his firm to act for his brother. That is a decision for him in bitter family proceedings.
If Mr M is to be a witness as to property issues, that would most likely bar his firm from acting and no doubt he has considered this matter.
An issue may also arise as to legal professional privilege, but Mr M says he, personally, is not acting for his brother.
Fair mindedness on the part of a bystander would also go to tactics employed and whether the bitterness of the dispute saw instructions given to Mr M’s firm to bring, for example, applications or submissions calculated to intimidate, harass or delay the wife in having the proceedings decided. That may be an indication of lack of objectivity if the firm was to act, an issue identified by Young J in Geelong School Supplies after considering issues identified in Grimwade v Meagher [1995] 1 VR 446. If that were to occur, I would then consider whether I was required to make a decision to preserve the proper administration of justice.
I will not restrain Mr M’s firm.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of Coates FM
Associate: Erin Firns
Date: 1 February 2008
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