McMillan & McMillan
[2000] FamCA 1046
•6 September 2000
[2000] FamCA 1046
FAMILY LAW ACT 1975
IN THE FULL COURT
OF THE FAMILY COURT OF AUSTRALIA
AT MELBOURNE
Appeal No. SA 53 of 1999
SA 59L of 1999
File No. DG 3491 of 1998
IN THE MATTER OF:
LINDA PATRICIA McMILLAN
Appellant Wife
- and -
KEVIN DOUGLAS McMILLAN
Respondent Husband
REASONS FOR JUDGMENT
BEFORE: Finn, Kay and Moore JJ
HEARD: 6th day of October 1999
JUDGMENT: 6th day of September 2000
APPEARANCES:
Mr. G Hammet of Counsel (instructed by Simon Parsons & Co., Solicitors, 165 Princes Highway, MORWELL, VIC, 3840) appeared on behalf of the Appellant Wife.
Mr. R Weil of Counsel (instructed by Newmans, Solicitors, 136 Commercial Road, MORWELL, VIC, 3840) appeared on behalf of the Respondent Husband.
APPEAL SUMMARY
MATTER: McMILLAN
NUMBER: SA 53 of 1999, SA 59L of 1999 (DG 3491 of 1998)
CORAM: Finn, Kay and Moore JJ.
DATE OF HEARING: 6 October 1999
DATE OF JUDGMENT: 6 September 2000
CATCHWORDS: Restraining order against solicitors - Clerk of one party's solicitors now employed by other party's solicitor - confidential information - O.37 rr.1 and 2, O.4 r.4 Family Law Rules -
McGillivray v Mitchell (1998) FLC 92-818,
Thevenaz (1986) FLC 91-748,
Mills v. Day Dawn Block Gold Mining Company Limited; In re Marsland (1882) QLJ 62,
Stewart (Lindenmayer J.,17 April 1997, unreported),
D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118, Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831,
Magro (1989) FLC 92-005,
Sogelease Aust. Ltd. v MacDougall and Ors (Wood J., NSW Supreme Court, 17 July 1986, unreported),
Gagliano (1989) FLC 92-012, Griffis (1991) FLC 92-233, Kossatz (1993) FLC 92-386,
Farrow Mortgage Services Pty Ltd (in liq) v Mendall Properties Pty Ltd and Others [1995] 1 VR 1,
Lord Ashburton v Pape [1913] 2 Ch 469.
This was an appeal by the wife against orders made by Wilczek J. on 18 June 1999 whereby his Honour restrained the wife's solicitors from acting on behalf of the wife in property and parenting proceedings in the Family Court between the wife and the husband. His Honour imposed the restraint because a non-legally qualified law clerk who had previously been employed by the solicitors acting in the proceedings for the husband, and who had in the course of that employment worked on the husband’s case, had moved to work as a secretary to the wife’s solicitor.
The wife appealed on a number of grounds which can be summarised into the following categories:
Adequate reasons for his Honour’s decision.
Jurisdiction to restrain a solicitor from acting for a party.
The test to be applied in determining whether or not conflict of interest exists.
Evidence of a prima facie case of prejudice.
Matters relevant to the determination of prejudice to the husband.
The failure to permit cross-examination of deponents.
Estoppel or delay.
Matters relating to his Honour’s discretion.
Held dismissing the appeal and ordering the wife to pay the husband's costs fixed in the sum of $2000:
It has been accepted in this Court, at least since the decision of Frederico J. in Thevenaz (1986) FLC 91-748, that the Court “has power to make orders restraining a firm of solicitors from continuing to act for one of the parties to proceedings in this Court, if it is of the view that it would be likely that those solicitors may have confidential information relating to the other party to the proceedings arising out of a former relationship of solicitor and client with that party which may be used to the advantage of the present client or to the disadvantage of the former client in the current proceedings”. See also Magro (1989) FLC 92-005, Gagliano (1989) FLC 92-012, Griffis (1991) FLC 92-233, Kossatz (1993) FLC 92-386, and Stewart (Lindenmayer J., 17 April 1997, unreported).
The narrow or English approach which involves a Court only intervening to restrain a solicitor if it is convinced that real mischief and real prejudice will follow if the solicitor is allowed to continue to act (see Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831, Sogelease Aust. Ltd. v MacDougall and Ors (Wood J., NSW Supreme Court, 17 July 1986, unreported), D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118) not followed. (See also Farrow Mortgage Services Pty Ltd (in liq) v Mendall Properties Pty Ltd and Others [1995] 1 VR 1). It is sufficient if a party swears that he or she has conveyed confidential information to his/her solicitors and he or she believes that information may be used to his/her disadvantage in the proceedings; there only needs to be a theoretical risk of prejudice, there need not be proof of prejudice see: Mills v. Day Dawn Block Gold Mining Company Limited; In re Marsland (1882) QLJ 62 and Thevenaz (1986) FLC 91-748.
It was therefore sufficient in the present case that the husband swore in his affidavit that he had spoken to the employee law clerk by telephone and provided him with instructions as to how he wished his matter to be conducted and the position to be put to the wife. The confidential nature of such instructions is obvious. There is at least the theoretical risk that the confidential information given by the husband to the clerk may be disclosed, even inadvertently. It made no difference that the employee was not a qualified lawyer (see the decision of the English Court of Appeal in Lord Ashburton v Pape [1913] 2 Ch 469).
The issue of delay could not be relied upon as a factor for refusing the restraining order in circumstances where objection had been taken on behalf of the husband to the employment by the wife’s solicitors of the law clerk within a couple of weeks after the law clerk's change of employment, although the application for the restraining order was not filed for over 6 months. (See in this regard the observations by the Full Court in McGillivray v Mitchell (1998) FLC 92-818 at [36]).
As to his Honour's failure to permit cross-examination of the deponents, once the Mills approach is adopted (being, that the former client need only swear that he has provided to the solicitor, or the clerk, information which can be classified as confidential and that the Court will not weigh conflicting evidence as to confidence), then there is little room for cross-examination in cases of this type. But in any event whether or not to permit cross-examination is very much a matter for the discretion of the trial Judge (D and Y (1995) FLC 92-581).
There was no substance in the grounds alleging inadequacy of reasons on the part of the trial Judge.
REPORTABLE
Introduction
This is an appeal by Linda Patricia McMillan (to whom we will refer as “the wife”) against orders made by Wilczek J. on 18 June 1999. By those orders, his Honour restrained the wife's solicitors, Messrs. Simon Parsons & Co., from acting on behalf of the wife in certain proceedings in the Family Court between the wife and her former husband, Kevin Douglas McMillan (to whom we will refer as “the husband”).
The reason for the imposition of the restraint was that a non-legally qualified law clerk who had previously been employed by the solicitors acting in the proceedings for the husband, and who had in the course of that employment worked on the husband’s case, had moved to work as a secretary to the wife’s solicitor.
In his orders, his Honour also required the wife to pay the husband's costs of the application for the restraining order.
Factual background
The husband and the wife had separated on 5 February 1997 (after some 19 years of marriage). A decree nisi dissolving their marriage was granted on 10 November 1998.
On 1 March 1999, the wife through her solicitors, Messrs. Simon Parsons & Co., filed an application for final parenting and property settlement orders. On 15 April 1999, the husband through his solicitors, Messrs. Newmans, filed a response to that application.
On 12 May 1999, the husband again through his solicitors, Messrs. Newmans, filed an application (in Form 8) seeking that the wife’s solicitors, Messrs. Simon Parsons & Co., be restrained from acting in the proceedings (which were identified as DG 3491 of 1998, but which for present purposes can be described as the parenting and property settlement proceedings).
In support of this application, the husband filed an affidavit in which he stated (in paragraph 7) that following the separation of the parties, he sought the advice of Newmans Solicitors, and that he has continued to employ that firm to act for him in proceedings between himself and the wife. The husband further stated (in paragraph 8) that at the time he instructed Newmans Solicitors to act on his behalf, that firm had in its employ a Francis Liddicoat-Pitts, whom the husband described as “Senior Law Clerk”. The husband said that he was informed that Mr Pitts continued to be employed by Messrs. Newmans until 13 October 1998, but shortly thereafter commenced in the employ of Messrs. Simon Parsons & Co., the solicitors acting for the wife.
In his affidavit, the husband continued (underlining added):
“9. That during the course of providing instructions to Newmans Solicitors I had occasion to speak directly with Mr Pitts by telephone and did provide instructions to him as to how I wished my matter to be conducted and the position to be put to the wife. That I am informed and verily believe that Mr Pitts typed letters of advice to me in relation to my property and financial settlement. I believe that Mr Pitts had a working knowledge of information and instructions provided by me during his employment with Newmans Solicitors. I believe Mr Pitts was also aware of the advice provided by Messrs Newmans to me as to the likely outcome of these proceedings. I believe Mr Pitts could make those instructions or information available for the use by the Wife against me in the course of these proceedings.
10. That when Mr Pitts commenced employment with Messrs Simon Parsons & Co., I instructed my solicitors to object to Messrs Simon Parsons & Co. continuing to act on behalf of the wife as I believed that Mr Pitts held information concerning my file and its conduct which could be used against me by the Wife or her practitioners. …
11. That Messrs Simon Parsons & Co refused to cease acting on behalf of the Wife …”
9. On 15 June 1999, the wife through her solicitors, Messrs. Simon Parsons & Co., filed a response in which she sought that the husband’s application seeking the restraining order be dismissed (with costs). Various other orders which were relevant to the property settlement proceedings between the parties were also sought in the wife’s response.
10. In support of the wife’s application that the husband’s application for the restraining order be dismissed, Mr Pitts filed an affidavit in which he confirmed that prior to 13 October 1998 he had been employed as a clerk at Newmans Solicitors. He described his duties as involving “typing correspondence, attending to the running of the computers and precedents and software upgrades, collecting and delivering the mail and DX, banking, collating of correspondence, answering telephone calls, both for Ms Newman and for Terry Hill… At no time during my employment with Newmans did I have the sole or joint care and control of my own files…”.
11. Specifically in relation to the husband’s allegations concerning his involvement in the husband’s case, Mr Pitts stated (at Appeal Book pp.82-83):
“6. THAT I have not discussed the McMillan file with anyone at Simon Parsons save and except as it relates to the conflict issue.
7. THAT my involvement with Mr. McMillan was minimal. I did not have any appointments or conferences with him nor do I recall taking any instructions from [him] in relation to any contentious issues.
8. THAT I am very concerned as to the outcome of this matter as if there is found to be a conflict of interest I would be unable to obtain work in any other Solicitors firm in Morwell or for that matter in the Latrobe Valley and the surrounding areas. Secretary and Support Staff move regularly between law firms and to my knowledge this is the first occasion an issue has been made of the same.”
12. When the husband’s application for the restraining order was heard by Wilczek J. on 15 and 17 June 1999, his Honour also had before him affidavits from Ms Norma Elizabeth Newman, who is the principal of the firm Newmans and who has “the care and conduct of the file” on behalf of the husband, and from Ms Jennifer Anne Bowman, the solicitor working with Messrs Simon Parsons & Co., who has “the care and conduct” of the wife’s matter and for whom Mr Pitts has worked as a secretary since 19 October 1998.
13. In her affidavit, Ms Newman said as follows in relation to Mr Pitts’ involvement with the husband’s matter while he was employed by Ms Newman’s firm (at Appeal Book pp.111-112):
“5.That during the conduct of this file, Mr Pitts took telephone instructions from Mr McMillan on 2nd September, 1997 in relation to correspondence forwarded to Mr McMillan and draft proposed correspondence to be forwarded to the Wife’s solicitors. Mr Pitts again took telephone instructions from Mr McMillan on 6th February, 1998. To the best of my knowledge and belief Mr Pitts was responsible for audio-typing correspondence to the Husband and draft correspondence to be forwarded to the Wife’s practitioners in July 1998, although the database reference had not been changed. It is and was the practice in my office for draft correspondence to be typed from audio tape and for me then to check it and print it from my computer screen. Mr Pitts subsequently spoke with Mr McMillan by telephone in relation to the draft correspondence and was authorised by Mr McMillan to forward same to the Wife’s practitioners. Mr Pitts also spoke with Messrs Simon Parsons & Co on 31st August, 1998 and 14th September, 1998 and 22nd September, 1998 seeking a response to the correspondence. Mr Pitts drafted correspondence [to] Mr McMillan’s superannuation fund on 5th August, 1998, and forwarded a copy of the superannuation fund response to Mr McMillan on 14th August, 1998. Mr Pitts drafted correspondence to Mr McMillan on 1st September, 1998 and on 22nd September, 1998. He also drafted correspondence to Messrs Simon Parsons & Co seeking further responses from that firm on 13th August, 1998 and 22nd September, 1998.
6.That the file for Mr McMillan includes handwritten notes of instructions received and advice given, including financial calculations as to the effect of various offers to be made to the Wife. During his employment with Messrs Newmans, Mr Pitts had access to the file, and I believe would have perused the file when following up correspondence in respect of the matter or discussing issues with Mr McMillan.
7.That on 14th October, 1998 I sought instructions from Mr McMillan as to the conflict of interest situation given that Mr Pitts was now employed with Messrs Simon Parsons & Co, the solicitors acting for the Wife. I received instructions from Mr McMillan to object to Messrs Simon Parsons & Co continuing to act on behalf of his Wife. …”
14. In her affidavit (sworn 15 June 1999) the solicitor for the wife, Ms Bowden, said in relation to Mr Pitts (at Appeal Book pp. 85-87):
“2.… He commenced work on or about 19th October 1998 as my Secretary. He currently works in the Family Law Department and the Computer Department. I have not discussed the McMillan file with him save and except in relation to the conflict allegations raised by Newmans.
3.I have checked the McMillan file for correspondence from Newmans prior to Mr. Pitts commencing work at Simon Parsons & Co. Now produced and shown to me and marked with the letters “JAB 1” are the following letters received from Newmans:-
(a)Letter dated 21 August 1997 reference MLP:BM 211751;
(b)Letter dated 24 July 1998 reference MLP:BM 211751;
(c)Letter dated 13 August 1998 reference NEN:FCP 211751;
(d)Letter dated 22 September 1998 reference NEN:FCP 211751.
The letters with Mr. Pitts’ reference did not require any legal skills or knowledge of the file. The only letter involving instructions was the letter of 24th July 1998.
4.There was a further letter now produced and shown to me and marked with the letter “JAB 2” dated 23rd October 1998 with Mr. Pitts’ reference. Mr. Pitts had in fact left Newmans at that time.
5.To the best of my knowledge and belief Mr. Pitts has not touched, handled or involved himself in any of the files where Newmans acted on the other side before he left their employ. Now produced and shown to me and marked with the letter “JAB 3” is a copy letter dated 27th October 1998 advising Newmans of this situation.
6.That Mrs. McMillan first came to Simon Parsons & Co. in December 1996. She had therefore been a client of Simon Parsons & Co. for almost two years before Mr. Pitts came to work here.
…
8.There have been other matters which have been before this Honourable Court which were commenced when Mr. Pitts was employed by Newmans and are still current or have been concluded since Mr. Pitts has been employed by Simon Parsons & Co. There has never been objection made by Newmans to the Court to this firm continuing to act in the matters. We refer in particular to the matter of Wawrzik and Robinson Court No. DG 1668 of 1995 and Kearney and Sweeney Court No. 4250 of 1993.
…
10.THAT I have worked with Mr. Pitts for six months and do not consider he would have been competent to advise Mr. McMillan in relation to his property matter.
…
14.THAT from the letters referred to in paragraph 3 hereof the Court will note minimal progress had been made on the file as of October 1998 and substantial work has been done on the matter since that time. To the best of my knowledge there was nothing to prevent Mr. McMillan bringing this Application in October 1998 rather than waiting the seven months.”
The decision of Wilczek J.
15. As already mentioned, the husband’s application was heard by Wilczek J. on 15 and 17 June 1999. On 18 June 1999, his Honour delivered judgment in which he granted the restraining order sought by the husband against the wife’s solicitors, Messrs. Simon Parsons & Co. He also ordered that the wife pay the costs of and incidental to that application.
16. Because one of the wife’s complaints in this appeal is lack of, or inadequacy, of reasons on the part of his Honour for his decision to restrain the wife’s solicitors, it is necessary for us to undertake a full analysis of his reasons, and it is convenient to do this at this early point in our reasons.
17. His Honour commenced his reasons for judgment by outlining the factual background to this case and by referring to the material in the affidavits of the husband, Mr Pitts and Ms Bowden (which we have set out above).
18. His Honour then referred to the decision of the Full Court in McGillivray v Mitchell (1998) FLC 92-818, which he described (correctly it would seem) as “the first decision of the Full Court involving this topic of restraining solicitors from acting”, and to the analysis provided in that decision of the two approaches to the question of when a Court will intervene to prevent a solicitor acting against a former client, being the “narrow” or “English” approach, as against the “broader” or “family law” approach. His Honour described these two approaches in the following way (at Appeal Book p.15):
“The first approach was described as being either the “narrow” or “English approach” with numerous authorities referred to, with a suggestion that a court would only intervene when it is convinced both that a confidence has been reposed in a lawyer by a former client, and that it is probable that this confidence will be used in the subsequent proceedings to the disadvantage of the former client. On that approach the court would ignore theoretical risks.”
“The second approach was referred to as being a “broader” or “Family Law” approach where it was said that the court will intervene if there is “a reasonable apprehension that confidential information has been given to a lawyer by a former client and that there is at least a theoretical possibility that this information might be used to the disadvantage of that client”. To that end earlier decisions were referred to such as that of Justice Frederico in Thevenaz (1986) FLC 91-748, Rourke J. in Margo (sic) (1989) FLC 92-005; Smithers J. in A and B (1990) FLC 92-126; Mullane J. in both Griffiths (sic) (1999) (sic) FLC 92-233 and Kozatz (sic) (1993) FLC 92-386.”
19. After noting that the Full Court in McGillivray v Mitchell had not found it necessary to determine the correctness or otherwise of any particular approach, his Honour went on to explain that a major issue in the McGillivray case had been the issue of “delay”, being whether a person has failed to complain or take any action, once learning that his or her former solicitor is now acting against him or her. His Honour then apparently concluded that delay was not a factor in this case by saying “…in this case…it is clear that a complaint was made as early as the letter from Newmans Solicitors to Simon Parsons & Co. dated 23rd October 1998”.
20. That letter is the first annexure to the husband’s affidavit, and its contents included the following:
“We note that Mr Frank Pitts, Senior Law Clerk, formerly employed with this firm has commenced employment with your firm. Whilst Mr Pitts was in the employ of this firm he had intimate knowledge of our client’s file and instructions in this matter. As such we now consider your firm has a conflict of interest in continuing to act for Mrs McMillan. We are instructed to request that you immediately cease acting for your client…”.
21. A little later in his reasons (after referring at some length to the contents of Ms Newman’s affidavit and after explaining why he had not permitted cross-examination on the affidavits relied on), his Honour returned to the issue of delay, and particularly to the fact that despite Mr Pitts’ commencing work with the wife’s solicitors in October 1998, the husband did not file the application for the restraining order until May 1999. In this regard, his Honour said (at Appeal Book pp. 22-23):
“ Insofar as Mr Wood [for the husband] anticipated that Mr Hammet [for the wife] would nevertheless argue this point, on the basis that it was not until May of 1999 that the husband actually filed an application to this Court, and that that should be seen to represent an undue delay, the submission was (and I consider it a good and sound submission) that after the October 1998 complaints, other steps were taken and that it was not until March 1999 that the wife filed an application, with no application before this Court, of any kind, prior to that date.
Mr Wood made reference to correspondence involving the professional bodies, and I saw no need to go into the details of what specific steps were being taken with those professional bodies. For my purposes, I am of the view, it is sufficient for me to merely note that the husband did not sit on his hands, but steps were being taken to address this problem, and that the first try was by way of taking steps less costly than to immediately launching into litigation.
Nor do I see that if in the meantime, some further attempts were made to try and settle matters overall, that that should prejudice the husband now in his current application.”
In relation to this refusal to allow cross-examination, his Honour said (at Appeal Book pp. 18-21):
“ Some time was taken up in submissions and argument as to the manner in which this case should be dealt with; I indicated that my preliminary view was that the proceedings being of the nature of an interlocutory application, should be dealt with by way of submissions on the material. Mr Hammet [for the wife] was unhappy about that suggested approach and in the course of exchanges at that time it was established that it would not be the case on behalf of the wife that Mr Pitts had never ever been involved in handling the McMillan file at Ms Newman’s office, or had never written a letter, or had never made a phone call.
Thus, as quite self-evident from the affidavit material as a whole, it was clear from the beginning that Mr Pitts (albeit in his own affidavit he states (and I have no reason not to accept his evidence) that he has no specific recollections, was not a person who was only coincidentally present in the legal office of the husband’s solicitors at the time the file had been created, and was being worked upon, but he was a man who, at least to some degree, was involved in a “hands on” position in relation to that file, albeit not in the capacity of a solicitor, and albeit subject to the supervision of a solicitor.
Mr Hammet made an application that I permit oral evidence and cross-examination, specifically that he wished to call Ms Newman to cross-examine her in relation to her affidavit. Accordingly I requested Mr Hammet to explain to me what particular areas such a cross-examination would traverse. Mr Hammet then made a number of submissions with regard to certain parts of the affidavit of Ms Newman and the manner in which he wanted to challenge her. In my view none of those issues would have made any difference whatsoever having regard to the issues that I have to consider. For example, it seemed as if Ms Newman was going to be challenged as to whether Mr Pitts did or did not “take instructions” from clients in general, or from Mr McMillan in particular. I indicated to Mr Hammet that it was not likely to be a profitable exercise to get involved in semantics and what to one person might be a concept of “taking instructions”, to another person may be “noting information” or “taking messages”, and to that end what ultimately was of significant interest to me was whether Mr Pitts had, or had not, had an active involvement, at any time, in Mr McMillan’s file and consequently had been in a position to acquire knowledge about matters in the file.
I should make it clear that from the commencement of the hearing, Mr Wood on behalf of the husband made it clear that the husband’s case was essentially based on the proposition that Mr Pitts had had “access to information”, namely access, directly and indirectly, to Mr McMillan’s file and as such, that is the hub of the problem in this case being information that was capable of being inappropriately shared in quarters where it ought not, thereby creating the conflict of interest or a risk thereof.
With regard to the various matters raised by Mr Hammet as to his reasons of wanting to cross examine Ms Newman, there was one area where I considered, preliminarily, that there may be some justification for permitting Ms Newman to be cross examined. It related to matters raised in paragraph 9.1 of Ms Newman’s affidavit. In that subparagraph she had made reference to a telephone conversation Ms Newman had with a Ms Bowden on 20th April 1999 concerning matters involving the Professional Standards of Victorian Lawyers, and Mr Hammet indicated that he would want to cross examine Ms Newman on a matter that would ultimately become relevant on the issue of “delay”, namely that as late as on or about 20th April 1999, the date referred to in paragraph 9.1, negotiations and open offers of settlement were still forthcoming from Ms Newman’s office. In other words, as I understood the proposition, if negotiations towards settlement were taking place as late as 20th April 1999, then that shows a significant “delay” in taking steps to prevent the wife’s solicitors from acting.
I asked Mr Wood [for the husband] to respond; it is fair to say that I had made it known that my preference would be to deal with this matter without the need for any oral evidence or cross-examination and to that end I sought to explore the possibility of the matters raised by Mr Hammet to be capable of being put to me as agreed facts, and then the matter could proceed by way of submissions only.
The matter was stood down and later I was provided with an aide memoir, in Mr Hammet’s handwriting, as to relevant agreed facts, mainly in relation to the history of contacts between the solicitors and other occurrences and dates perceived to be of importance.”
Then in dealing with the substance of the application before him, his Honour set out in considerable detail the submissions of each Counsel. In relation to the husband’s case, his Honour said (at Appeal Book pp. 23-25):
“ … Mr Wood [for the husband] made it clear that the husband’s case was based on the fact Mr Pitts had access to confidential information at the time he was still working at Ms Newman’s office and that therefore this gives rise to a set of circumstances pursuant to which there is at least a possibility of a conflict as per McGillivray and Mitchell, with the Malleson’s decision referred to therein.
With regard to those concepts canvassed by Mr Wood, he drew my attention to the decision of Justice Frederico in the case of Thevenaz v Thevenaz (1986) F.L.C. 91-748 and in particular the following passage to be found on page 75, 447:“It is my view that in this case Mr Dezarnaulds should not continue to act on behalf of Mrs Dezarnaulds (sic). It may well be the risks were he to do so are more theoretical than practical. However, it is asserted and not contradicted that material in the files does relate to confidences exchanged in the course of the former firm previously acting on behalf of both parties and would embarrass the husband. It is of the utmost importance that justice should not only be done but should appear to be done.” (The emphasis is mine).
Mr Wood anticipated that Mr Hammet [for the wife] might argue that some distinctions should be drawn as between Mr Pitts who was and is a law clerk, and not a fully qualified solicitor. If such a proposition was to be put, Mr Wood submitted, then it should not be accepted because it is not so much the question of the qualification of the person, but the fact that the person had access to information, and on that basis the husband was entitled to be, and continue to be, apprehensive as to any ultimate prejudice that he might suffer as a result of such information being inappropriately used or becoming known.
Having regard to the letter from the wife’s solicitors (to which I have referred earlier) of 27th October 1998 saying that a system was in place in the wife’s solicitors office pursuant to which Mr Pitts would “simply not touch” or handle files such as the McMillan file and that that should “allay your fears”, Mr Wood described that as a “Chinese wall” approach and said that this had been looked at and disapproved by Justice Mullane in the case of Griffis (1991) F.L.C. 92-233.
…
In further anticipation of what submissions Mr Hammet might make, Mr Wood urged that, having regard to the two tests or approaches referred to in McGillivray’s case, that I should be drawn to the approach which was described as being the wide or Family Law approach.”
Then in the course of recording the submissions of Counsel for the wife, his Honour provided his own reasons for rejecting those submissions in preference for those made on behalf of the husband. The first matter addressed by his Honour in this context was the distinction between the so-called “narrow” or “English” approach and the “broader” or “family law” approach (see paragraph 18 above) (at Appeal Book p.25):
“ Mr Hammet [for the wife] commenced his submissions by urging that the “narrow” or “English” approach is the one to be preferred.
That submission did ultimately not find favour with me. I note that the Full Court did not see it necessary to rule on which was the preferable approach, nor do I purport to say what might be appropriate in all cases, suffice it to say that on the facts of this case I am taking the view that Family Court proceedings involve a large range of issues, cover a long history of matters, and in that sense are quite different to a single conveyancing transaction, or a single common law claim resulting from an industrial or motor vehicle accident, and confidential information that might have fallen into the hands of a solicitor in relation to such single issue cases. In Family Law matters litigants are required, or feel entitled, to unburden themselves in relation to a whole range of matters and issues, some can be very delicate and extremely personal, and in my view a system must exist where the confidentiality of such information, when shared by a client with a solicitor or those working for that solicitor, is information that the client can feel is secure.”
His Honour next considered and rejected the submission made on behalf of the wife that a distinction should be drawn between the position of a qualified solicitor and a non-legally qualified employee of a solicitor’s firm (at Appeal Book p.26):
“ Another major submissions of Mr Hammet’s was that I should distinguish between what might apply in the situation of a solicitor changing offices, as distinct from the situation of Mr Pitts who was not a fully qualified solicitor but a law clerk. Mr Hammet urged that argument partly and as an off-shoot of the first argument (saying that the narrow English approach is appropriate particularly when the person is a non solicitor), but he also put that as a separate argument.
True it is that most of the reported cases deal with the situations of solicitors. Solicitors who have gone from one office to another, or the partners of solicitors, where it is deemed that a partner has the knowledge of matters handled by another partner even if, in fact, the first partner never handled the relevant file.
There are many differences between fully qualified solicitors and law clerks for various purposes, ranging from matters relating to trust accounts, indemnity insurance, qualifications and the like. However, for the purposes of the issue here, I cannot accept the submissions of Mr Hammet. I agree with the submissions made by Mr Wood that the real mischief is the fact that Mr Pitts, in whatever capacity he held, had had access to information of a confidential nature from the husband and the husband’s file, and it matters little, in my view, whether that information is presently in Mr Pitts’ mind and memory and distinct from on a piece of paper or in a file or whether Mr Pitts is a solicitor of law clerk. Mr Pitts had access to the information and he is now employed by solicitors acting for the wife, and he has an employee/employer relationship with the wife’s solicitors. Accordingly I draw no distinction, on the facts of this case, between Mr Pitts being or not being a fully qualified solicitor.”
Next his Honour considered and again rejected the submission relating to the lack of recollection of the husband’s case on the part of the law clerk in question (at Appeal Book p.27):
“ Another submission of Mr Hammet was that the evidence of Mr Pitts’ is that he does not recall and cannot remember any information that he may have ever had, and therefore there is no risk to the husband of such information being inappropriately made available to the wife. Again I see no merit in that submission. Firstly it does not cater for the problem of perceptions of justice being done, and the system should not be based upon Mr McMillan being called upon to accept Mr Pitts’ word that he has not remembered anything. In any event, sometimes subsequent events occur which trigger off memories of things previously forgotten.”
His Honour next considered a somewhat obscure submission apparently to the effect that because full and frank disclosure is required in family law proceedings, there could be no confidentiality in information given by a client in a family law matter to his or her solicitor or an employee of that solicitor (at Appeal Book p.27):
“ Another submission made by Mr Hammet was based on the proposition that even if Mr McMillan had some information available to him, then that information requires to be disclosed by the husband, either to the Court, or in the course of negotiations, having regard to the fact that the Family Law system requires parties to make full and frank disclosure. I do not see any merit in that submission by Mr Hammet either. Certainly, with regard to Family Law litigation, there is a requirement to make full and frank disclosure such as of one’s financial circumstances in property settlement proceedings and the like. However, there is no obligation to make disclosure of a number of sensitive matters which are contained in solicitor’s files such as advice given by the solicitor as to settlement propositions and/or tactics etc.”
Next his Honour considered the issue of the risk of disclosure to the wife of the husband’s information (at Appeal Book pp.27-28):
“ Another submission by Mr Hammet was to the effect that it is incumbent upon the applicant husband to show, at the very least, a prima facie case of a risk, albeit a theoretical possibility of such a risk, and it was put that the husband in this case has fallen far short in establishing such a prima facie case.
I do not accept that submission. The concept of the “prima facie case”, of course, I have already referred to within the context of Griffis’s case, and is an appropriate one, but I do not agree with Mr Hammet’s proposition that Mr McMillan has not gone far enough here. In my view, it is sufficient on the facts of this case, for Mr McMillan to have established that at relevant times he was and still is involved in property proceedings/negotiations vis a vis his ex wife, that at all relevant times, the solicitors assisting him are Newmans, that at relevant times Mr Pitts worked for Ms Newman and became privy to information having had a “hands on” involvement in Mr McMillan’s file, and now is in the employ of the wife’s solicitors. Surely that satisfies the test that there is at least the theoretical possibility of such information coming into the hands of the wife through her solicitors having regard to Mr Pitts being in employment there.
Mr Hammet returned to the topic of Mr Pitts being a lay person and made a statement which I found quite extraordinary, namely words to the effect: “if a lay person says he has no knowledge, that’s the end of it”, Mr Hammet submitted.”
His Honour then considered whether a conflict of interest was possible in the situation of a law clerk only, as opposed to a solicitor (at Appeal Book pp.28-29):
“ Another submission of Mr Hammet, as I understood it, was that it is not possible to have a conflict of interest in the situation of this McMillan case, because a conflict of interest “can only arise” in a situation involving a solicitor, namely a conflict of duty as between an old client and a new client. In my view that is an argument that only has superficial appeal but cannot stand analysis or scrutiny. The facts in this McMillan case, involving Mr Pitts, a law clerk, is in fact the classic example why I do not consider that submission is sound, and I do not propose to repeat myself on that topic.”
Finally his Honour considered and rejected a range of submissions on a range of matters, notably issues of delay, and prejudice to the husband (at Appeal Book pp.29-30):
“ There were several more submissions by Mr Hammet of a miscellaneous category and nature. For example he indicated that the issues in dispute between the parties in this case are narrow, it involves property settlement matters involving a marriage of about 22 years with modest assets in relation to an equity in a home and superannuation and some chattels, and there are no trusts, no tax problems, no other undue complications and hence, I should ask myself, urged Mr Hammet, what possible prejudice could there be to the husband in relation to any information that he might have conveyed.
Once again I cannot accept that submission of Mr Hammet’s. Whilst the facts in the McMillan case may or may not be of a narrow ambit, such important principles as to whether there is a real and sensible possibility of a conflict of interest, or matters relating to justice being done but also appearing to be done, are not principles that hinge upon whether the pool of assets is a small one or a large one. Certainly, if there is little involved in the dispute, then it is a pity that the parties have found themselves in this position, having to expend costs on side issues, costs which may prove to be significant within the context of a small pool of assets, however the case must be resolved on the basic principles and not by some arbitrary test of the size of the pool of assets.
Mr Hammet did raise the “delay” argument as anticipated by Mr Wood, and I believe I have already dealt with that earlier in these reasons.
Other miscellaneous submissions of Mr Hammet’s included drawing my attention to the provisions of Order 4, Rule 4 of the Family Law Rules (the need for prompt and inexpensive resolution of matters) and Order 37, Rule 1 of the Family Law Rules (re change of solicitor), and these, in my opinion, were not matters of further assistance, one way or the other.
Yet another submission of Mr Hammet related to drawing my attention to paragraph 9 of the husband’s affidavit (which I have already quoted in full on page 3 of these reasons) and making such criticisms as pointing to the husband having said that he is “informed” and “verily believes” that Mr Pitts typed letters of advice to the husband. Mr Hammet, as I understood his submission, suggested that that was not good enough, particularly having regard to Mr Pitts’ affidavit, in paragraph 3, where he says: “I do not recall receiving any instructions from him…”.
Perhaps Mr Hammet had forgotten that more of that topic was to be found in paragraph 5 of the affidavit of Ms Newman where she, with considerable detail, set out a number of examples of specific involvement by Mr Pitts on the McMillan file, quoting dates and quoting the nature of involvement; and, as I indicated before, I do not intend to concern myself with whether a particular type of involvement is to be categorised as “taking instructions” as distinct from drafting a document, or passing on messages, or giving advice, or noting advice, or whatever – it all amounts to the handling of information, and it would be a most unusual file which would not contain some confidential information.”
Immediately thereafter his Honour concluded his judgment with the brief statement (at Appeal Book p.31) that:
“ In all the circumstances I consider the appropriate orders to be those sought by the applicant husband in his Form 8 Application filed 12th May 1999.”
The grounds of appeal directed to the restraining order and the supporting submissions
The wife’s Notice of Appeal contained five grounds of appeal directed to the order restraining the wife’s solicitors. Most of those grounds contained numerous particulars of alleged errors on the part of Wilczek J. However, in his written summary of argument, Counsel for the wife, Mr Hammet, was able to group the various grounds, and/or the particulars contained in them, into eight categories under the following headings:
Adequate reasons for his Honour’s decision.
Jurisdiction to restrain a solicitor from acting for a party.
The test to be applied in determining whether or not conflict of interest exists.
Evidence of a prima facie case of prejudice.
Matters relevant to the determination of prejudice to the husband.
The failure to permit cross-examination of deponents.
Estoppel or delay.
Matters relating to his Honour’s discretion.
Counsel for the wife then directed his oral arguments to these groups of issues, rather than to the grounds of appeal as drafted. We will follow a similar approach, although many of the eight matters can conveniently be considered in combination with one or more other matters. We will deal first with the issue of adequacy of reasons before moving to consider the essential issue in this case, being the grant of the restraining order. We will then deal with any remaining issues raised on behalf of the appellant wife.
Adequacy of reasons
As we understood the written and oral submissions of Counsel for the wife, the complaint regarding the adequacy of his Honour’s reasons is not directed to his Honour’s overall conclusion that the wife’s solicitors should be restrained from continuing to act in the proceedings. Indeed it should be self-evident from our above analysis of his Honour’s reasons, particularly those passages where his Honour dealt with the submissions made to him by Counsel for the wife in opposition to the grant of the injunction, that there could be no substance in such a complaint.
Rather, the complaint would seem to be that his Honour did not give any, or any adequate, reasons in relation to the following matters, which were enumerated in the written submissions of Counsel for the wife:
“1.The source of power to restrain a solicitor from acting for a party.
2.As to the reason why no distinction would be drawn between a solicitor and any other person who had “access to information”.
3.As to why limited cross-examination of witnesses was not permitted in order to establish precisely what were the facts in this case.
4.As to what constitutes a “prima facie case” in respect of the husband alleging prejudice to him.
5.As to the reason why “access to information” was a test in respect of applications to restrain a solicitor from acting for a party.
6.As to why even if the husband could show some prejudice that in the exercise of His Honour’s discretion the husband’s application would fail. (sic)
7.As to why Order 4, Rule 4 and Order 47 (sic), Rule 1 were not matters of “assistance” to His Honour.”
It may well be true that his Honour did not provide reasons for each of the seven above-listed observations or conclusions, all of which can be found expressly or by implication in his judgment. However, given that it is not the law that a judge must provide reasons for every finding of fact or conclusion of law, it seems to us that a challenge to these various observations or conclusions which fell from his Honour, based on an inadequacy of reasons on his part, is misconceived. Rather the question is whether his Honour was wrong (in the appellate sense) in any of these observations or conclusions. We will endeavour to answer that question in the course of this judgment.
The restraining order against the wife’s solicitors
We turn then to the essential issue in this case, being whether his Honour erred in making the restraining order against the wife’s solicitors on the basis that that firm now employed as a secretary (to the solicitor who has the carriage of the wife’s matter) a non-legally qualified clerk who had, when employed by the solicitors for the husband, taken instructions from the husband in relation to his proceedings against the wife.
It has been accepted in this Court, at least since the decision in June 1986 of Frederico J. in Thevenaz (1986) FLC 91-748, that the Court “has power to make orders restraining a firm of solicitors from continuing to act for one of the parties to proceedings in this Court, if it is of the view that it would be likely that those solicitors may have confidential information relating to the other party to the proceedings arising out of a former relationship of solicitor and client with that party which may be used to the advantage of the present client or to the disadvantage of the former client in the current proceedings” (per Lindenmayer J. in the unreported decision of Stewart (17 April 1997)).
We will refer shortly to the decision in Thevenaz, to decisions which have followed it, and to the areas of uncertainty which have marked this area of the law. Before doing so, however, we must emphasise that this case is not about a solicitor who has previously acted for the husband, and is now a member of, or employed by, a firm of solicitors acting for the wife. Rather it is about a clerk or secretary who is not legally qualified, but who, according to the husband’s evidence, has been the recipient of instructions from the husband about how he wants his case against the wife conducted, and who now works as a secretary to the wife’s solicitor, with the result that the husband believes that the information which the clerk has could be used against the husband in the proceedings against the wife.
Accordingly, it might be said that the authorities concerning the Court’s power to restrain a solicitor from acting for a former client have no relevance to this case. Nevertheless, given the apparent dearth of authority on the exact problem which arises in this case, we see value in commencing our consideration of the problem with a discussion of the principles concerning solicitors acting against former clients in family law matters. These were certainly the principles against the background of which the trial Judge reached his decision in this case.
Authorities concerning restraints on legal practitioners
In Thevenaz, Frederico J was prepared (if required) to restrain a solicitor, Mr Dezarnaulds, from acting on behalf of the wife in property settlement proceedings against the husband where that solicitor had previously been in partnership with another solicitor, Mr Halliday, who had handled conveyancing matters for the husband and the wife. In the course of his reasons for judgment, Frederico J. said (at 75,446-75,447):
“The problem, however, is that it is the practitioner's duty to put at his client's disposal, not only his skill but also his relevant knowledge, and if he is not prepared to make that knowledge available, he should not act. (See Spector v. Ageda (1973) 1 Ch. 30.) Mr Dezarnaulds is thus under a duty to make available to his client such information as may appear from the files of the parties formerly kept by Mr Halliday which are in Mr Dezarnaulds’ possession or power.
In the Full Court of Queensland in Mills v. Day Dawn Block Gold Mining Company Ltd.; In re Marsland (1882) Q.L.J. 62 at p. 63 Lilley C.J. said:
“It was the duty of the attorney not to place himself in such a relation as might lead to there being even an unwitting breach of duty. Here they found a man retained by a party who was in direct opposition to the interest of his client, an interest upon which he had previously actually advised, and Mr Mills was therefore entitled to the protection of the court. Upon the main question, whether any confidence had in fact been imparted to Mr Marsland by Mr Mills, there was a conflict of testimony. If they (the judges) were to insist upon actual proof of the existence of such confidence, and to insist upon knowing what it was, and whether it was likely to prejudice a client's interests, they would compel him to strip himself of the protection which the court usually afforded, and the whole mischief he wished to avoid might arise.”
Thus “a practitioner who wishes to cease acting for one party and to continue to act for the other party will be restrained from doing so by the court if there is any evidence that confidential communications have been made to him by the party for whom he is ceasing to act. In such a case the court will not weigh conflicting evidence as to confidence. It will act upon the evidence of the client who swears that he has made the confidential communication”. (See Legal Profession Law and Practice in Victoria (Gifford) 1980 ed. at p. 356.)
I must say that at first sight it appeared to me that in a case of this nature the matter should be resolved by the relevant Law Society. However, although Mr Dezarnaulds is entitled to practise in the Family Court of Australia pursuant to the provisions of Pt VIIIA of the Judiciary Act 1903, he has not sought to argue that the Court lacks power to restrain a solicitor from acting on behalf of a client. Every court has control of its own procedure and it is apparent from the decision in Mills’ case to which I have referred, and from other cases arising in somewhat differing circumstances, that the Court has the power to restrain.
It is my view that in this case Mr Dezarnaulds should not continue to act on behalf of Mrs Thevenaz. It may well be that the risks were he to do so are more theoretical than practical. However, it is asserted and not contradicted that material in the files does relate to confidences exchanged in the course of the former firm previously acting on behalf of both parties and would embarrass the husband. It is of the utmost importance that justice should not only be done but should appear to be done. In the circumstances of the present case, there is a risk which may well be merely theoretical but still exists, that justice might not appear to be done.”
Before referring to the decisions of this Court made subsequent to the decision in Thevenaz, there is probably value in our quoting at greater length (than did Frederico J. in Thevenaz) from the main judgment of the Full Court of the Supreme Court of Queensland in Mills v. Day Dawn Block Gold Mining Company Limited; In re Marsland (1882) QLJ 62, being the judgment of Lilley CJ. This is because of the reliance which this Court has placed on the decision in Mills in the development of this Court’s approach to the question of when a solicitor will be restrained from acting against a former client (or a former client of his or her partner or employee). The significant feature of this approach is that for the client to succeed, he or she need only give evidence that he or she has imparted information of a confidential nature to the practitioner in question and that there is at least a theoretical possibility that it could be used against him or her. The relevant passages from the decision of Lilley CJ are (at 62-63):
“… It appeared that Mr. Marsland had been acting as the town agent of the country attorney who had been retained by Mr. Mills, the plaintiff in this case. He was not merely town agent, but seemed to have been active in the investigation of the plaintiff's claim, and proceeded so far in the matter as to give an opinion on it.
…
His Honour did not think for a moment that Mr Marsland would conscientiously do any wrong, but it might happen that in an unguarded moment he might let fall something which would injure the interest of Mr. Mills, and which would amount to a breach, although an unwitting breach of his duty. It was needless, after the numerous cases cited, to review the authorities for the purpose of showing jurisdiction. It rested on this, the court kept a firm control over all its officers, and would restrain them from doing anything inconsistent with their duty to their clients. It was the duty of the attorney not to place himself in such a relation as might lead to there being even an unwitting breach of duty. Here they found a man retained by a party who was in direct opposition to the interest of his client, an interest upon which he had previously actually advised, and Mr. Mills was therefore entitled to the protection of the court. Upon the main question, whether any confidence had in fact been imparted to Mr. Marsland by Mr. Mills, there was a conflict of testimony. If they (the judges) were to insist upon actual proof of the existence of such confidence, and to insist upon knowing what it was, and whether it was likely to prejudice a client's interests, they would compel him to strip himself of the protection which the court usually afforded, and the whole mischief he wished to avoid might arise. As it seemed to him, on the one side the client insisted on oath that he had imparted confidence to Mr. Marsland; and, on the other side, the solicitor said, “I have no confidence.” How could the court decide it? If they took the oath of the attorney against the oath of the client, and refused the protection which the client sought, why, then, the matter might proceed, and the mischief which the client feared might arise, and the court could afford no remedy. In cases of this kind less mischief would accrue through granting the protection sought than in accepting the oath of the attorney against the client. The client's interest should prevail, and the judge should refuse to determine the matter on the conflicting testimony of affidavits.”
Shortly after it was given, the decision in Thevenaz was the subject of consideration by Bryson J. in the Equity Division of the Supreme Court of New South Wales in the case of D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118. The facts of that case are not important for present purposes. However, the following passages from his Honour’s judgment, where he preferred the approach of the English Court of Appeal in Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831 over the approach of the Queensland Full Court in Mills (which Frederico J. had of course followed in Thevenaz), but where he explained the decision of Thevenaz in the context of the circumstances of family law litigation, are important to an understanding of the issues which arise in this area (at 122-123):
“In my view the legal basis on which the court should act in restraining solicitors from acting for the opposite side after acting for one party before or during litigation appears from statements in the Court of Appeal of England in Rakusen vEllis, Munday & Clarke [1912] 1 Ch 831. Cozens-Hardy MR said (at 835)
“… we must treat each of these cases, not as a matter of form, not as a matter to be decided on the mere proof of a former acting for a client, but as a matter of substance, before we allow the special jurisdiction over solicitors to be invoked, we must be satisfied that real mischief and real prejudice will in all human probability result if the solicitor is allowed to act.”
Fletcher Moulton LJ clearly stated the need to look at the facts of each case to discern what protection for confidential information is appropriate (see at 839-841). He said (at 841): “As a general rule the Court will not interfere unless there be a case where mischief is rightly anticipated.” Buckley LJ also showed the need to refer to the particular circumstances (at 842). It was submitted that I should not follow this decision because it does not, as the submission was, give sufficient weight to the fact that the knowledge of one partner is available to and should be attributed to all partners. I think that Rakusen’s case points the way I should go, although there was in that case the important element of identity of the former client with the later opponent. The existence of a proved risk of misuse of confidential information appears to me to be very important if the plaintiff is to succeed.
Where confidential information has been communicated by a client to a solicitor and is relevant to litigation in which that client is now engaged and is still available to the solicitor, the court should take a cautious approach to any proposal that it should allow the solicitor to act against that client: the considerations are much the same whether the information was communicated in the course of the litigation itself or in earlier business and whether or not the solicitor is a sole practitioner or is one of a number of partners or was employed by a principal. I would think that the court would not usually undertake attempts to build walls around information in the office of a partnership, even a very large partnership, by accepting undertakings or imposing injunctions as to who should be concerned in the conduct of litigation or as to whether communications should be made among partners or their employees. The new client would have to join in such an arrangement and give up his right to the information held by such parties and staff as held it. Enforcement by the court would be extremely difficult and it is not realistic to place reliance on such arrangements in relation to people with opportunities for daily contact over long periods, as wordless communication can take place inadvertently and without explicit expression, by attitudes, facial expression or even by avoiding people one is accustomed to see, even by people who sincerely intend to conform to control. Here in Sydney and now there is a thriving diverse and talented legal profession and the court need not fear that a litigant who is deprived of the services of one firm will not be able to retain adequate representation.
Cautious conduct by the court is appropriate because the spectacle or the appearance that a lawyer can readily change sides is very subversive of the appearance that justice is being done. The appearance which matters is the appearance presented to a reasonable observer who knows and is prepared to understand the facts. The court should weigh the facts and assess the risks in the eye of reality, theoretical risks should be disregarded and when as here there is no confidential information available and there never was a relationship of solicitor and client with any partner the appearance of the matter is not a basis for the court to assume control over the retainer.
A more rigid rule than that stated in Rakusen’s case has been applied at other times: the Court of Appeal mentioned Irish cases which had been cited to them and counsel cited Mills v Day Dawn Block Gold Mining Co Ltd (1882) 1 QLJ 62 to me. However the Court of Appeal was aware of and deliberately did not adopt a more rigid rule and I do not think that I should. It would seem that in deciding the degree of control which it should adopt each court must to some extent interpret its own times and manners and the conduct which it should expect from or even fear from its practitioners. Some ages and some classes of business could well require a more ready apprehension of mischief than the Court of Appeal of England thought appropriate in 1912 or than I think appropriate here and now.
There was recent consideration of the circumstances in which a solicitor would be restrained from acting for a former client by the Family Court of Australia (Frederico J) in In the Marriage of Thevenaz (1986) FLC 91-748; 11 Fam LR 95. That Court took the view that restraint is justified if there is a risk that confidential communications on relevant matters have been made by the party for whom the solicitor has ceased to act, even if the risk may be more theoretical than practical. It seems natural that a particularly careful view would be taken in family law business, as such litigation tends to be about highly confidential facts and a very wide range of facts and circumstances can conceivably be relevant; the sensitivity which even the most reasonable people feel about such litigation when they are engaged in it calls for careful measures to secure not only that justice is done but also that it is apparent that it is done, an appearance which would not survive any general impression that lawyers can readily change sides.”
In what appears to be the next reported decision of this Court on this topic, Rourke J. in Magro (1989) FLC 92-005 was prepared to restrain the solicitor for the husband, Mr M, from continuing to act for the husband in property settlement proceedings where a solicitor who had once acted for the wife in those proceedings had now been employed by Mr M’s firm but was in no way involved in the proceedings between the husband and the wife. His Honour appears to have considered that this was a stronger case for the grant of a restraining order than in Thevenaz when he said (at 77,187-77,188):
“… It is abundantly clear that the nexus between Mr D in Thevenaz's case and the husband via Mr D's former partner was far more tenuous than the situation affecting the applicant wife in these proceedings. Mr B is the wife's former solicitor retained by her in the presently pending, and bitterly contested, property proceedings. His professional activities on her behalf were of considerable depth and involved not only 75 pages of written instructions but also further privileged communications conveyed in conference and in the course of numerous telephone attendances. As the wife herself pointed out in a somewhat emotional outburst in the witness box:
“He (i.e. Mr B) knows my whole life and my past history” (or words to that effect).
The same Mr B is now in the employ of the husband's solicitor who, recognising the potential duty-interest conflict, has undertaken not to confer with his employee concerning the matter. Mr B, in an affidavit sworn 28 November 1988, has given the Court a reciprocal undertaking. There is no evidence before me of any breach of these undertakings, and I am prepared to assume in favour of both Mr M and Mr B that each is an honourable and respected legal practitioner whose professional integrity is not in question.
Even on these assumptions, if I follow the reasoning of Frederico J. in Thevenaz it is the appearance of justice not being done which is the determinant, and not the probability. If this be the correct principle the injunctive relief sought in the present proceedings is prima facie irresistible.”
However, Rourke J. then went on to recognise that Bryson J.’s decision in D & J Constructions and an earlier unreported decision of Wood J. of the New South Wales Supreme Court in Sogelease Aust. Ltd. v MacDougall and Ors (17 July 1986) might complicate the question because both espoused the principle enunciated in Rakusen “that before the Court will intervene by way of injunction to restrain a solicitor from acting, it must be convinced of the existence of a confidence reposed in that solicitor by a former client and of the probability of its being abused”.
Ultimately Rourke J. found it unnecessary to resolve the apparent conflict of principle between D & J Constructions and Sogelease on the one hand and Thevenaz on the other. This was because he was satisfied that the conditions for injunctive relief as formulated in Rakusen had been met in the case before him.
However in the course of his reasons for judgment, Rourke J. made the following observations concerning the shortcomings of undertakings by members or employees of firms of solicitors not to divulge confidential information, and also concerning the particular difficulties and sensitivities which arise in the family law area (at 77,191):
“If one scrutinises the undertakings individually given by Mr M and Mr B in relation to their future conduct in these proceedings, those undertakings amount to just the sort of artificial “walls around information in the office of a partnership” referred to by Bryson J. in [D & J Constructions]. With the best will in the world, it would be difficult in my view for Mr M not to stumble upon some confidential information possessed by his tight-lipped and ethical employee. A letter from the Law Society of New South Wales addressed to Mr B and marked PRIVATE AND CONFIDENTIAL concerning this very matter has already found its way into Mr M's hands prior to Mr B's seeing it and has been respondent to, not by Mr B, but by his employer.
It is cogently argued by counsel for the husband in reliance upon the Rakusen formulation of principle that no breach of confidence has been demonstrated by the wife. The wife could not, for example, point to any affidavits sworn in the husband's case which contain material emanating from her confidences to Mr B. Nor was the wife able to specify what particular confidence imparted to Mr B endangers her forensically in these proceedings. Counsel for the husband argues from this that the Court cannot be satisfied that “real mischief and real prejudice will in all human probability result if the solicitor is allowed to act” (to employ the words used by Cozens-Hardy M.R. in Rakusen).
The answer to this contention appears to me to lie in the peculiar quality of family law litigation to which reference was made by Bryson J. in D. & J. Constructions Pty. Ltd. Particularly in a proceeding involving the wealth of issues identified above, it is reasonable to infer that Mr B, by dint of his lengthy retainer, is in possession of at least some privileged material belonging to the wife which could be put to good use by the husband. This might only consist of impressions of the wife's personality gained after many hours of confidence, which could be exploited by a skilful advocate presented with those impressions. In these circumstances the appearance of justice will, to borrow Bryson J.'s words, not long "survive any general impression that lawyers can readily change sides". On any objective view of the matter the wife's position in these proceedings has been undermined ever since Mr B entered the employ of those representing her husband. The circumstance that Mr B has retained the photocopy document relating to the proprietary company can only serve to reinforce the wife's perception of prejudice.”
Shortly after Rourke J.’s decision in Magro, Renaud J. in Gagliano (1989) FLC 92-012 also carried out a review of the various authorities to which we have already referred, and drew attention to the apparent conflict between Mills and Thevenaz on the one hand and Rakusen on the other. The peculiar facts of Gagliano and her Honour’s ultimate decision do not need to be discussed for present purposes. But what is important is her Honour’s view that in reaching her ultimate decision, she had to weigh the possibility of injustice to the husband in that case if his solicitor was not permitted to continue to act, against what her Honour described as “the real risk of prejudice and apparent injustice to the wife” if those solicitors continued to act.
Subsequently in Griffis (1991) FLC 92-233, Mullane J. restrained the wife’s solicitor from further acting for the wife in property settlement proceedings against the husband in circumstances where that solicitor had previously advised both the husband and the wife in connection with their business affairs. In his reasons for judgment, Mullane J. carried out a comprehensive review of a solicitor’s duty to make his relevant knowledge available to his client and to preserve the confidentiality of information received from the client (even after the solicitor/client relationship has ceased). Then in proceeding to discuss the remedies available to a client to prevent the disclosure or use by the solicitor of confidential information, his Honour referred to the two leading decisions in the area, being Mills and Rakusen, and his Honour expressed a preference for the approach in Mills.
In his subsequent decision in Kossatz (1993) FLC 92-386, Mullane J. provided the following useful, concise summary of his decision in Griffis and of his reasons for preferring the Mills approach over the Rakusen approach (at 79,987):
“In Griffis and Griffis (1991) FLC ¶92-233 I referred at length to the law in relation to a solicitor's duty of confidence and to the power of courts to restrain a solicitor from acting in breach of that duty. I there referred to the different approaches adopted by the English Court of Appeal in Rakusen v Ellis, Munday and Clarke [1912] 1 Ch 831 and the Full Court of the Queensland Supreme Court in Mills v Day Dawn Block Gold Mining Co Ltd [1882] Qld 62. The approach in Rakusen is that the client seeking the injunction must prove a “probability of mischief” - a likelihood of confidential information being disclosed or used to the client's prejudice. The approach in Mills is a stricter approach that a court should restrain an attorney who places himself “in such a relationship as might lead to there being even an unwitting breach of duty”.
I preferred the Mills test in Griffis on the basis that unlike Rakusen it is consistent with the public interest and the subsequent developments in the law as described in the judgment. I also preferred the approach in Mills that the applicant client need not prove the content of the confidence; but only a prima facie case that the information imparted was confidential.”
His Honour then went on in Kossatz to refer to developments in the United States and more particularly in Canada and England (at 79,987-79,988):
The decision in Griffis on these two points is also more in line with the way the law has evolved in the United States (see “Conflicts of Interest in the Legal Profession” [1981] 94 Harvard Law Review 1244 espec. 1315 et seq), and in Canada (see Supreme Court of Canada in Martin v MacDonald Estate [Gray] [1991] Western Weekly Reports 705).
In Martin v MacDonald Estate the bench of seven were unanimous in rejecting Rakusen in favour of a stricter approach. The majority adopted an approach that the lawyer would be restrained unless a reasonably informed person would be satisfied that no use of confidential information would occur. The first question was whether the lawyer received confidential information attributable to the solicitor-client relationship and relevant to the matter at hand. The second question was whether there was a risk that such information would be used to the prejudice of the former client.
In answering the first question the majority adopted an even stricter approach than the Mills test of prima facie proof of confidential information. They held that the former client need only prove that the prior solicitor-client relationship is sufficiently related to the retainer from which it is sought to remove the solicitor. The court would then infer confidential information was imparted unless the solicitor established (without revealing the specifics of any confidence) that no information was imparted which could be relevant.
The three Judges in the minority emphasised the public interest in preserving the appearance of justice, fairness and the integrity of the justice system. They held that once the former client establishes a lawyer had a substantial involvement with that client in an ongoing contentious matter, there is an inrebuttable (sic) presumption that his knowledge of the matter, including confidential information, has become knowledge of any new firm to which he moves and any such firm will be restrained from acting against that former client in that matter.
Rakusen has also been considered recently by the English Court of Appeal in In
re A Firm of Solicitors [1991] 1 QB 959. All three of the Judges agreed with the rejection by Rakusen of the proposition that there is an absolute rule that “a solicitor who has acted in a particular matter ... cannot act for the opposite party”. The majority (Parker LJ and Sir David Croom-Johnson) held that the principle to be extracted and applied from the judgments in Rakusen is that where a reasonable man with knowledge of the facts would say “If I were in the position of the objector I would be concerned that, however unwittingly or innocently, information gained while the solicitor was acting for me, might be used against me”, the court should intervene (at pp. 969 and 978).Sir David Croom-Johnson did not concur with Parker LJ in his view (at pp. 969-970) that the court should enforce the English Law Society principle in its “Guide to the Professional Conduct of Solicitors 1990” that “If a solicitor or firm of solicitors has acquired relevant (confidential) knowledge concerning a former client during the course of acting for him, he or it must not accept instructions to act against him”. Sir David Croom-Johnson took the view that such principle was advice on conduct and ethics going beyond the legal requirement (p. 972).
Parker LJ expressly rejected the test enunciated by Cozens-Hardy MR in Rakusen (with whom Fletcher-Moulton LJ agreed) that the court “must be satisfied that real mischief and real prejudice will in all human probability result if the solicitor is allowed to act”. His Lordship also distinguished Rakusen on the basis that the Court of Appeal there allowed the solicitor to continue to act only because of the particular and unusual undertakings there given and would not otherwise have done so (p. 968).
Staughton LJ (dissenting) adopted Rakusen as authority that: “Before the Court will interfere ... there must be some degree of likelihood of mischief, that is to say of the confidential information imparted by the former client being used for the benefit of the new client”. His Lordship referred to the alleged duty of a solicitor to make his knowledge available to his new client. He noted that the new client had released the solicitors from such duty. He referred to Moody v Cox and Hatt [1917] 2 Ch 71 and held that it was not authority that such a duty applied in a large partnership to require it to disclose to the new client relevant knowledge possessed by its partners or staff. But it appears that His Lordship was not referred to and did not consider more recent decisions in this area of the law including Spector v Ageda [1973] Ch 30.”
Finally, at least for present purposes, Mullane J. in Kossatz repeated his preference for the Mills test (at 79,988-78,989):
“I was not referred to any Australia authority since Griffis and Griffis (1991) FLC ¶92-233 which placed doubt on the conclusion in Griffis that an Australian Court should not follow Rakusen but should prefer the test in Mills v Day Dawn Block Gold Mining Co Ltd that the court would restrain lawyers “from doing anything inconsistent with their duty to their clients”, and it is “the duty of the attorney not to place himself in such a relationship as might lead to there being even an unwitting breach of duty”. The Canadian and American developments in this area of the law provide more support for the Mills test than for Rakusen and the English Court of Appeal decision in In re A Firm of Solicitors places an interpretation on Rakusen which although not agreeing with the Mills test is much stricter than what had hitherto been the accepted interpretation of Rakusen.”
Further support for the view that the Rakusen test should no longer be applied can be found in the decision of Hayne J. in Farrow Mortgage Services Pty Ltd (in liq) v Mendall Properties Pty Ltd and Others [1995] 1 VR 1, when as a member of the Supreme Court of Victoria, his Honour said (at 4-5):
“What degree of likelihood of mischief resulting from the continued employment of the solicitor must be shown to exist before injunction will go has been a matter of controversy since Rakusen’s case. A number of cases have considered whether it is necessary to go so far as Cozens-Hardy M.R. suggested when he spoke of demonstrating that real mischief and real prejudice “will in all human probability result” or whether it is sufficient to conclude (as Buckley L.J. suggested) that it is “reasonably necessary” to restrain the employment of the solicitor.
In Re a Firm of Solicitors [1992] Q.B. 959, Parker L.J. had no hesitation in rejecting the test propounded by Cozens-Hardy M.R. and, having regard to what had been said not only in Rakusen’s case but also in Re a Solicitor (1987) 131 S.J. 1063 and David Lee & Co. (Lincoln) Ltd. v. Coward Chance (A Firm) [1991] Ch. 259 suggested that the proper approach “is to consider whether a reasonable man informed of the facts might reasonably anticipate such a danger” [scil. a danger of breach of the duty not to communicate confidential information]. A similar approach was adopted by Ipp J. in Mallesons Stephen Jaques v. KPMG PeatMarwick (1990) 4 W.A.R. 357 at 362-3 where his Honour spoke of the test in terms of whether:
…there is a real and sensible possibility that his [the solicitor’s] interest in advancing the case of the new client might conflict with his duty to keep information given to him by the former client confidential, or to refrain from using that information to the detriment of the former client…
(See also Carindale Country Club Estate Pty. Ltd. v. Astill (1993) 115 A.L.R. 112; Fruehauf Finance Corporation Pty. Ltd. v Feez Ruthning [1991] 1 Qd. R. 558.)
The Full Court in Macquarie Bank Ltd. v Myer [1994] 1 V.R. 350 did not find it necessary to determine the division of opinion that may be said to be revealed by the cases that I have mentioned and by other cases in which the point has arisen such as Mills v. Day Dawn Block Gold Mining Co. Ltd. (1882) 1 Q.L.J. 62; In the Marriage of Thevenaz (1986) 86 (sic) Fam. L.R. 10; In the marriage of A & B (1990) 13 Fam. L.R. 798; In the Marriage of Griffis (1991) Aust F.L.C. 78-592 (sic); National Mutual Holdings Pty. Ltd. v. The Sentry Corporation (1989) 22 F.C.R. 209; D. & J. Constructions Pty. Ltd. v. Head (1987) 9 N.S.W.L.R. 118; Wan v. McDonald (1992) 33 F.C.R 491 and Australian Commercial Research and Development Ltd. v. Hampson [1991] 1 Qd. R. 508.
The plaintiff submitted that whether the test to be applied was one of demonstrating that real mischief and real prejudice would in all human probability result if J.M. Smith & Emmerton were allowed to continue to act or some other, lesser test, the firm should be restrained.
In my opinion the weight of authority, especially more recent authority such as the Malleson’s case and Re a Firm of Solicitors, clearly supports the view that the test to be applied in resolving an application of the present kind is not that put forward by Cozens-Hardy M.R. in Rakusen’s case but is a less stringent test. Although it is necessary to be acutely conscious of the fact that the court is asked to interfere with the right of a litigant to be represented by the solicitor of the litigant’s choice, it is not necessary to conclude that harm is inevitable (or well nigh inevitable) before acting to restrain a possible breach of the duty that a solicitor owes to clients and former clients to keep confidential information given to the solicitor in confidence and not use that information against the interests of the client who gave it to the solicitor. For present purposes I do not need to consider whether anything turns on the differences in expression of the test as given by Parker L.J. and Ipp J. It is enough to say that I consider that injunction should go if there is a real and sensible possibility of the misuse of confidential information.”
The test propounded by Hayne J. of “a real and sensible possibility of the misuse of confidential information” does not go as far as, or is not as strict as, the test propounded by Frederico J. in Thevenaz of even a theoretical risk of the misuse of the confidential information. To the extent that it is necessary in this case for us to express a concluded view (which it was not for the Full Court in McGillivray v Mitchell) we would support the application in this jurisdiction of the approach of Frederico J. in Thevenaz (following Mills) which was adopted by Mullane J. in Griffis and in Kossatz (and also by Lindenmayer J. in the unreported case of Stewart to which we will shortly refer). We would do so for the reasons related to the sensitive nature of the jurisdiction which were referred to by Bryson J. in D & J Constructions and by Rourke J. in Magro, and indeed also by Wilczek J. in the present case.
Before leaving these authorities, reference should also be made to the views expressed by Mullane J. in Griffis as to what degree of proof of the passage of confidential information a former client has to establish in order to have that information protected. His Honour’s view, relying again on Mills and Thevenaz, was that the client need only prove “a prima facie case as to confidential material, the disclosure or use of which by the solicitors in the course of the conduct of the current proceedings for the present client would be prejudicial to the applicant”. His Honour’s reasons were as follows (at 78,600-78,601):
“There was another important point made by the Queensland Full Court in the decision of Mills v Day Dawn Block Gold Mining Co Ltd. As to proof of the confidence, their Honours (at page 63) took the view that where there was a conflict between the solicitor and former client as to whether a confidence had been imparted, if the judges:
“. . . were to insist upon actual proof of the existence of such confidence and to insist upon knowing what it was and whether it was likely to prejudice a client's interests, they would compel him to strip himself of the protection which the court usually afforded and the whole mischief he wished to avoid might arise . . . on the one side the client insisted that he had imparted confidence to Mr Marsland; and on the other side, the solicitor said ‘I have no confidence’. How could the court decide it? If they took the oath of the attorney against the oath of the client and refused the protection which the client sought, why, then, the matter might proceed, and the mischief which the client feared might arise and the court could afford no remedy. In cases of this kind less mischief would accrue through granting the protection sought than in accepting the oath of the attorney against the client. The client's interests should prevail, and the judge should refuse to determine the matter on the conflicting testimony of the affidavits.”
And: “It was not for the judge to determine the conflict of facts but that he should have decided that the client had made out a prima facie case for his protection.”
At page 64 they said “If there was any evidence of confidential communication such as there was here the court would not enter upon a judicial enquiry whether it was true or false”. The court would not ask for detailed disclosure where there was evidence of confidence and “[t]he court would not weigh conflicting testimony as to confidence when the client swears he has made confidential communications”.
The point did not arise in Rakusen as it was not in issue that there was a confidence which had been given to the solicitor's partner by Mr Rakusen, and which could be used to the prejudice of Mr Rakusen in proceedings in which the solicitor was acting for Mr Rakusen's former employer.
The Australian courts have not generally followed this aspect of the Mills decision. It has not usually been discussed but in the D and J Constructions case, (at page 124) Bryson J expressed reserve about such an approach.
Generally, instead of accepting a prima facie case as to the confidentiality of information the Australian courts have indulged in weighing conflicting testimony of the solicitor and his confider. The injunction proceedings have thus in many cases been a venue for the solicitor to disclose confidential information of the confider without his consent by way of establishing that such information is not, despite the general damage of its disclosure, such as would cause particular damage by use for, or disclosure to, the new client in the course of conducting litigation against the confider.
Wills, instruction sheets, tax returns, correspondence between solicitors and clients, advices to clients, advices by barristers, and statements taken by solicitors from clients or officers of client companies, have all been placed in evidence in the course of such proceedings so that the proceedings themselves become a mischief of their own in terms of solicitor/client confidences and the public policy considerations behind them. Resort has even been had to conducting proceedings in camera and confidentiality orders made in an attempt to minimise damage and prejudice to the former client from the proceedings themselves e.g. see Mallesons Stephen Jaques v KPMG Peat Marwick (at page 6).
The very nature of the proceedings and the perversity of the courts allowing the hearing of such an application to become the venue for lengthy and detailed evidence by the solicitor of information which he received in confidence, or at least the former client alleges was received in confidence, are matters which strongly support the approach of the Queensland Full Court in the Mills case and of Frederico J in Thevenaz. So do the public policies so often declared by the courts that justice must be seen to be done, and the fact that the duty of confidentiality is based in part on the need for public confidence in legal representation and the legal system.
For these reasons the court should follow the approach in Mills that the former client be required only to prove a prima facie case as to confidential material, the disclosure or use of which by the solicitor in the course of the conduct of the current proceedings for the present client would be prejudicial to the applicant.”
Finally in this review of the cases decided to date, we draw attention to the fact that in the unreported decision of Stewart (17 April 1997), Lindenmayer J. quoted at length from the decisions of Mullane J. in Griffis and Kossatz, and went on to accept Mullane J.’s exposition of the law. Lindenmayer J. was also prepared to follow Mills, as this extract from his judgment shows (underlining added):
“I generally agree with and adopt the analysis of the law which fell from Mullane J in those two cases, and I propose to follow it. In the circumstances of this case, it seems to me that the wife does raise a prima facie case that the solicitors have received from her, during the previous retention of them by the husband and wife, confidential information which may, even quite inadvertently, be used to the advantage of the husband or to the disadvantage of the wife in these current proceedings.
As I have said, she claims to have conveyed confidential information to Ms Maria DeDonatis in relation to a number of matters including, it would seem, her marriage difficulties with the husband, and some allegations by him of infidelity by her and, of course, there was also an involvement by the solicitors at that time in the business affairs of the parties, in the sense that they must have received some information about their general business operations and they may well have received information about the sort of work which each of the parties claimed to do in the business.
Now, all of those matters may be of some relevance, ultimately, to the proceedings in this jurisdiction. As I have said, although the essential facts are denied by Ms DeDonatis, on the basis and the decision and the dicta of the Full Court of Queensland in the Mills case, adopted by Mullane J in Griffis, I am of the opinion that it is not appropriate for me, at this point, to enter into any examination of where the truth lies or to attempt to try an issue of fact about those matters. 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. Accordingly, I propose to accede to the application of the wife.”
The present case of a non-legally qualified employee
In the present case, had the clerk/secretary in question, Mr Pitts, been an employed solicitor, we would have no hesitation in concluding (having regard particularly to the decision in Magro where the facts were not dissimilar from the present case, and to the test as formulated by Lindenmayer J. in Stewart in the passage which we have just quoted) that it was certainly open to Wilczek J. to grant the restraining order against the wife’s solicitors.
We take this view because the husband has sworn in his affidavit that he had spoken to Mr Pitts by telephone and provided him with instructions as to how he wished his matter to be conducted and the position to be put to the wife. The confidential nature of such instructions is obvious. Further, the husband claims that such instructions or information could be used against him in the course of the proceedings. If this in fact happened, the husband would clearly be prejudiced (if indeed prejudice needs to be established given the view taken in Mills and adopted in Thevenaz, Kossatz and Stewart).
Despite the assurances of Mr Pitts’ present principal, Ms Bowden, that the proceedings between the husband and the wife have not been discussed with Mr Pitts, and that he has done, and will do, no work in connection with that proceeding, there must remain at least the theoretical risk that the confidential information given by the husband to Mr Pitts may be disclosed, even inadvertently.
In our opinion therefore, were Mr Pitts legally qualified, the case would clearly be covered by the principles contained in Mills, Thevenaz, Griffis, Kossatz and Stewart. The question remains, however, whether it makes any difference that Mr Pitts is not a qualified lawyer, and thus not bound by the duties which a lawyer owes to his client (as discussed by Mullane J. in Griffis), being the duty to make all his relevant knowledge available to the client and the duty to preserve the confidentiality of information received from the client.
We agree with Wilczek J. that it should make no difference that Mr Pitts is not a qualified lawyer. It is true that not being qualified, he is not bound by the professional duties to which we have just referred. However, the analogy used by Wilczek J. between what is in Mr Pitts’ mind and what might be on a solicitor’s file has validity. There can be little doubt that had the wife’s solicitors come into possession of the file of the solicitors for the husband (say, for example, by the purchase of the latter’s practice), then they could not have continued to act.
We were not referred to any authority on the position of unqualified staff changing employment with solicitors’ firms. However, some assistance can be gained from the decision of the English Court of Appeal in Lord Ashburton v Pape [1913] 2 Ch 469. The facts of that case, and the principles which emerge from it which are of assistance in the determination of this case, are conveniently stated in the following passage from the judgment of Swinfen Eady LJ (who was in agreement with the judgments of Cozens-Hardy MR and Kennedy LJ) (at 474-475) (underlining added):
“I am of the same opinion. The facts here are not in dispute. Lord Ashburton wrote letters to his solicitor, Mr. Nocton, which certainly are privileged prima facie. Mr. Nocton had in his employ a clerk named Brooks. The clerk of a solicitor is in a confidential position. His duty is not to disclose his master’s business, the client’s business, and certainly to carefully guard his master’s papers. Brooks the clerk, in this case apparently having regard to a subpoena duces tecum served upon him personally (why it came to be served upon him instead of his employer in whose legal custody the letters were does not appear), took the letters written by Lord Ashburton to Nocton, and attended the Bankruptcy Court with them; he was not called on his subpoena, but gave up possession of the letters to Pape [a bankrupt whose discharge was opposed by Lord Ashburton]. Such an act on the part of Brooks is perfectly indefensible; it was a gross breach of his duty. Pape having thus obtained possession of the letters has proceeded to copy them and still retains the copies in his possession. The principle upon which the Court of Chancery has acted for many years has been to restrain the publication of confidential information improperly or surreptitiously obtained or of information imparted in confidence which ought not to be divulged.”
It might be said that Ashburton v Pape would do no more than support the grant of an injunction against Mr Pitts. But, it does establish “the confidential position” of a solicitor’s clerk.
However when regard is had to that authority concerning the confidential position of a solicitor’s clerk, and to principles relevant to restraint of solicitors acting against former clients in the family law area, to the particular sensitivities in that area of the law (as recognised by Bryson J. in D & J Constructions and by Rourke J. in Magro), and to the need to maintain public confidence in the legal system, we have little hesitation in concluding that it was open to Wilczek J. to restrain the wife’s solicitors from acting in the matter on the basis of their employment of Mr Pitts.
Particularly in relation to the need to maintain public confidence in the legal system, we would adopt, with respect, the following passage from the minority judgment of the Supreme Court of Canada in Martin v MacDonald Estate (Gray) [1991] 1 WWR 705, which was a decision arising out of an employed solicitor changing firms, although not in the family law jurisdiction (at 728-729):
“… Neither the merger of law firms nor the mobility of lawyers can be permitted to adversely affect the public’s confidence in the judicial system. At this time, when the work of the courts is having a very significant impact upon the lives and affairs of all Canadians, it is fundamentally important that justice not only be done but appear to be done in the eyes of the public.
My colleague stated that this appeal called for the balancing of three competing values, namely: the maintenance and integrity of our system of justice; the right of litigants not to be lightly deprived of their chosen counsel; and the desirability of permitting reasonable mobility in the legal profession.
Of these factors, the most important and compelling is the preservation of the integrity of our system of justice. The necessity of selecting new counsel will certainly be inconvenient, unsettling and worrisome to clients. Reasonable mobility may well be important to lawyers. However, the integrity of the judicial system is of such fundamental importance to our country, and indeed to all free and democratic societies, that it must be the predominant consideration in any balancing of these three factors.
Lawyers are an integral and vitally important part of our system of justice. It is they who prepare and put their clients’ cases before courts and tribunals. 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 of 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.”
In our view, it cannot be said that these important considerations cease to apply when the disclosures by the client have been made not to a lawyer, but only to a non-legally qualified member of the lawyer’s staff.
Specific matters raised by the appellant
Notwithstanding our above consideration of the general question whether Wilczek J. was correct in restraining the wife’s solicitors from further acting in this matter and our conclusion that it was open to his Honour to grant the restraining order, we will now consider each of the detailed submissions put on behalf of the wife in opposition to that order.
Under the heading Jurisdiction to restrain a solicitor from acting for a party, the following submissions were made by Counsel for the wife:
“1.A conflict of interest can only arise when a solicitor having acted for a party acts for another party and by reason of the solicitor’s obligation to his new client there is prejudice to the solicitor’s old client.
2.In this case Messrs. Simon Parsons & Co. had never acted for the husband.
3.Mr. Pitts the new employee of the wife’s solicitor was a lay person who was not a solicitor and had not been a partner with the husband’s current solicitor.
…
7.A solicitor is always able to act against a former client provided no conflict of interest exists. The solicitors for the wife had never acted in any matter for the husband. A conflict of interest arises because of the solicitor’s duty to his new client which involves the passing on of information acquired from his former client to his new client to the prejudice of his former client. This is the basis of the rule for restraining a solicitor from acting for a particular party. The rule has no application unless the wife’s solicitors had acted for the husband previously and there was prima facie proof of a prejudice.
8.That Mr. Pitts was not a solicitor or a former partner of the husband’s solicitor is fatal to the husband’s application to restrain the wife’s solicitor from acting for the wife.”
To the extent that those submissions assert that the restraining order could not be made because Mr Pitts was not legally qualified, that matter has been considered and determined by us in our earlier discussion. It should also be clear from that discussion that it is of no significance that the firm of Messrs Simon Parsons & Co. had never acted for the husband.
As to the assertions in these submissions of the need to establish or prove prejudice to the husband, if there is such a need (which, as we will discuss in the context of later submissions, we do not accept), we consider that it is self-evident that the husband would at least be at the risk of prejudice if his instructions to Mr Pitts were to be used against him.
To the extent that these submissions are directed to the same matter which was put to his Honour (see paragraph 30 above), being the size of the pool, we agree with his Honour that the operation of the important principles here in issue cannot depend on the value of the property which is the subject of the litigation.
Next it was submitted that “the power”, and we assume what is really intended to be said here is “the only power”, “to restrain a solicitor from acting for a party on the basis of a conflict of interest is contained in O 37 Rule 2” of the Family Law Rules. That rule provides:
“A legal practitioner shall not in any proceedings represent or act for any 2 or more parties having adverse interests in the proceedings.”
We do not accept that the existence of this rule means that the only ground on which this Court may enjoin a legal practitioner from acting in proceedings is where the practitioner attempts to act for more than one party with different interests. With respect, such an interpretation would seem to mean that there was no power in the Court to have made the orders in cases such as Thevenaz, Magro, Griffis, Kossatz and Stewart. In none of those cases was the situation limited to the simple situation where a solicitor was attempting to act in the one proceeding for parties with adverse interests.
We note in this regard that a similar provision to O.37 r.2 exists in O.45 r.2 of the Federal Court Rules which is in the following terms:
“Where a solicitor or his partner acts as solicitor for any party to any proceeding, or is a party to any proceeding, that solicitor shall not, without the leave of the Court, act for any other party to the proceedings not in the same interest.”
In National Mutual Holdings Pty Ltd v Sentry Corporation (1989) 87 ALR 539, Gummow J in considering, inter alia, an application by a party to restrain its former solicitor from acting against that party in certain proceedings, referred to the provisions of O.45 r.2 (and also to O.45 r.3 which is concerned with change of solicitors) and went on to make it clear that that rule did not restrict the Federal Court’s power to control legal practitioners in proceedings before it (at 563):
“No specific provision is made whereby, on the application of one party, the court may enjoin his former solicitor from continuing to act as solicitor for the other party to current proceedings on the footing of breach of contract or fiduciary obligation. However, such proceedings, whether founded in contract or apprehended breach of fiduciary duty, no doubt would arise in the course of and form part of the matter which attracted the jurisdiction of the court: cf Darling Downs Investments Pty Ltd v Ellwood (1988) 18 FCR 510; 80 ALR 203.”
We thus consider that there is no substance in the submission concerning the operation of O.37 r.2.
For the same reasons, we consider that there is no substance in any submission based on O.37 r.1 which is concerned with change of solicitors (and the Federal Court counterpart which was also referred to by Gummow J. in Sentry Corporation). We consider that Wilczek J. was correct in concluding that O.37 r.1 was of no assistance to him.
In this context it is convenient to say that we consider his Honour was also correct in concluding that O.4 r.4 of the Family Law Rules was of no assistance to him. That rule provides that a court “exercising jurisdiction under these Rules shall have regard to the need to provide a prompt and inexpensive resolution of the matters in issue between the parties”.
This is no more than a general directive. It cannot overrule or displace long-established general legal principles which emerge from the various authorities which we have discussed above.
The next submissions made on behalf of the wife in this context of the jurisdiction to restrain solicitors were:
“5.A litigant is always vulnerable to information given by a third party or acquired by a third party to the detriment of that particular litigant whether or not that information or evidence was given by the litigant to the informant or other third party as a matter of confidence or privilege. Privileged information can be compelled to be given by subpoena to third parties. The use by the other party’s solicitor of such information or knowledge is not a ground for restraining that solicitor from acting for his client.
6.Mr. Pitts is in the same position (except that he does not have any knowledge to the prejudice of the husband) as any other person who could be a witness or otherwise assist in the preparation of the wife’s case.”
Much could probably be said in opposition to these submissions. It is sufficient that we dispose of them by saying that we are satisfied, having regard particularly to the decision in Ashburton v Pape, that as a clerk to the husband’s solicitor, Mr Pitts, was in a special position of confidence. (See also Cordery on Solicitors Seventh Edition pp.3 and 319).
Under the heading of The test to be applied in determining whether or not conflict of interest exists, the following submissions were made:
“1.… that the “narrow” or “English” approach is to be preferred namely that prejudicial facts are known and that those facts would in all probability be used to the disadvantage of the former client.
2.The “broader” or “Family Court” approach is not to be preferred.”
Again we have already discussed the two approaches to the question of when a solicitor who has received confidential information from a client will be restrained from acting against that client. We have concluded that to the extent that it is necessary for us to determine that matter in this case, the broader approach based on Mills is to be preferred.
In relation to the question of the test to be applied in determining whether or not conflict of interest exists, it was next submitted, on the basis that the broader approach was adopted, that that approach
“is confined to the position that there is prejudicial information and it may be used. The prejudicial information that exists is nonetheless proved.”
In a similar vein, but under the heading Evidence of a prima facie case of prejudice, it was submitted:
“1.That there needs to be positive proof of a prima facie case of prejudice.
2.In this matter there was no proof of evidence to support a prima facie case. The evidence before the court consisted of broad allegations giving rise to speculation only. No prejudice could be found on the material.”
Again, as earlier indicated, we adopt what was said by Mullane J. in Griffis, in reliance on Mills and Thevenaz, that the client need only prove “a prima facie case as to confidential material, the disclosure or use of which by the solicitor in the course of the conduct of the current proceedings for the present client would be prejudicial to the applicant”.
In other words, the client need only give evidence that he has provided confidential information to the solicitor (or in this case, the law clerk/secretary). The client does not have to divulge the content of that information. (See Mills and also Lindenmayer J. in Stewart). In the present case, we consider it sufficient, as we said earlier, that the husband has sworn that he had given instructions to Mr Pitts as to how he wished his “matter to be conducted and the position to be put to the wife”. It is obvious that such matters would come within the description of “confidential information”.
As to the question of “prejudice”, it is true that the husband never alleged actual “prejudice” in the sense of using that word in his affidavit. However, he did state that the information could be “used against” him in the proceedings. That must be prejudice. In any event, a careful reading of the relevant passage from Mills (see paragraph 42 above) shows that the Court should not require proof of prejudice. (Again see Lindenmayer J. in Stewart).
It was, however, asserted in the submissions of Counsel for the wife that matters relevant to the determination of prejudice to the husband would include the following matters:
“1.The actual evidence in support of a prima facie case of prejudice.
2.The doctrine of full and frank disclosure.
3.The individual facts of a particular case.
4A combination of the doctrine of full and frank disclosure and the simplistic nature of the facts of this case result in there not being a prejudice to the husband in this case.”
It is unnecessary for us to say very much more about these matters, given the doubts that we have expressed, in the light of the decisions in Mills and Stewart, about the necessity to establish actual prejudice, and given also what we have said about the application of important legal principles regardless of the value of the property which is the subject of the proceedings.
As to the relevance of the duty of full and frank disclosure, we cannot see how that duty on the part of a party to family law proceedings can be relied upon to override the duty of confidence which lawyers and their employees have to their clients. The two duties must be able to co-exist.
Finally in relation to the test to be applied in determining whether or not a conflict of interest exists, it was submitted for the wife that:
· “ ‘Access to information’ is not a test of whether a conflict of interest has arisen.”
· “In respect of persons who are not solicitors (if there is jurisdiction to make orders in those circumstances to restrain a solicitor, which is denied by the appellant) the concept of “access to information” is too broad and is open to mischief if there is no cross-examination. A solicitor should not be put at risk of an application because of a change of employment of a temporary solicitor (whether or not he has actual knowledge) or change of employment of temporary employees or secretaries, third parties performing their employment such as security firms, or cleaners or bankers. …”
It is true that in a number of places in his reasons, Wilczek J. referred to the fact that Mr Pitts “had access to information of a confidential nature from the husband”. We accept that the mere fact of access to confidential information is not the test. Rather the issue is whether the former client actually imparted confidential information to a solicitor (or clerk) who is now employed by the solicitors acting on the other side of the litigation. The husband has sworn that he did convey directly to Mr Pitts information which we have accepted comes within the category of confidential information. Accordingly this error on the part of his Honour would make no difference to the outcome of this appeal in the sense that were we to consider that we should re-exercise the discretion vested in his Honour because of this mistake on the part of his Honour, we would also grant the restraining order.
The remaining groups of matters in the wife’s submissions which directly attack his Honour’s decision to make the restraining order in this case, can all be seen as going to the question of whether his Honour should ultimately have exercised the discretion to make that order. The principal matters relied upon in support of the assertion that the discretion should not have been exercised in this case are:
the fact of the delay of seven months between the time when the husband became aware that Mr Pitts had taken up employment with the wife’s solicitors and the filing of the application for the restraining order;
the relative simplicity of the case;
the duty of full and frank disclosure imposed on the husband;
the expressions of opinion as to ethical considerations;
the fact that the application to restrain the wife’s solicitors may not have been bona fide and may have been made for other purposes;
the fact that the wife had confidence in her solicitors and did not wish to incur the expense of instructing other solicitors; and
the fact that this case apparently arose in a country town, with the result that the restraining order granted in this case would in practical terms result in a restraint of trade by employees of legal firms.
We have already discussed the issues of the duty on the part of the husband to make full and frank disclosure, and of the relative simplicity of this case in terms of the value of the subject matter of the proceedings. We need not say more about those issues.
As to the issue of the seven months’ delay between the husband becoming aware of Mr Pitts’ change of employment and the institution of the proceedings for the restraining order, we consider that his Honour was correct in concluding that delay could not be relied upon as a factor for refusing the restraining order in circumstances where objection had been taken on behalf of the husband to the employment by the wife’s solicitors of Mr Pitts as early as the letter of 23 October 1998. (See in this regard the observations by the Full Court in McGillivray v Mitchell at [36] as to the need for a family law litigant who has a genuine concern about a former legal adviser subsequently acting against that litigant, to take the point, at least in correspondence with the other side, at the earliest possible opportunity.). In addition, his Honour had regard (correctly in our opinion) to the fact that steps were taken to resolve the matter through professional bodies, and the fact also that the application in the substantive proceedings was only filed by the wife in March 1999.
As to the issue of the husband’s motives in applying for the restraining order, we consider, having regard particularly to the emotions which are generally involved in family law proceedings, that it would only be in a case where there was the most cogent evidence as to mala fides on the part of the applicant, that such a consideration should influence the exercise of the discretion as to whether or not to grant the restraining order. We are not satisfied that this is so in the present case.
We understand the reference in the wife’s written submissions to “expressions of opinion as to ethical considerations” to refer to evidence which was before his Honour as to the opinions expressed by professional bodies. We are not satisfied that his Honour was in fact influenced by this evidence. Indeed it would seem that he ignored this material, given the passage in his judgment where he said (at Appeal Book pp.22-23):
“… I saw no need to go into the details of what specific steps were being taken with those professional bodies.”
As to the matter of the undoubted inconvenience and cost which the restraining order would cause to the wife, this was a matter to which his Honour was, at least if there was relevant evidence before him, certainly required to have regard. (See Renaud J. in Gagliano). It would seem on the face of his reasons that he did not do so. This apparent omission may well be explained by the fact that there seems to have been no evidence of any inconvenience to the wife before his Honour. It might validly be said that some inconvenience to the wife would have to be assumed. However, even if we were to make this assumption, on a re-exercise of the discretion made necessary because of his Honour’s failure to make express reference to the detriment to the wife of the restraining order which he was being asked to make, we would reach the same conclusion as did his Honour.
As to implications for employment in legal firms in small country towns, such concerns must give way to maintenance of integrity of the legal system as a whole. But in any event, we query how significant an issue this was, given the evidence of the wife’s solicitor that in a number of other cases in which Mr Pitts had been involved while in his previous employment, no point had been taken.
The failure to permit cross-examination of the deponents
We have earlier (at paragraph 22 above) set out his Honour’s very full explanation as to why he did not permit cross-examination of the deponents of the affidavits in this case. In challenging his Honour’s decision in this regard, Counsel for the wife made the following written submissions:
“1.That allegations of prejudice should be tested by cross-examination in order to avoid mala fide applications being made or applications being made in pursuit of some other purpose.
2.To establish precisely what are the facts in each given case.
3.To establish whether or not a prima facie case does exist.
4.To resolve disputes of facts that are relevant.
5.In this case it was relevant to establish all of the context of the telephone conversation that occurred on 20 April 1999 and the fact that the husband’s solicitors continued their conduct of the proceedings towards a settlement or trial notwithstanding the protest made in October 1998.”
It seems to us however that once the Mills approach is adopted (being, that the former client need only swear that he has provided to the solicitor, or the clerk, information which can be classified as confidential and that the Court will not weigh conflicting evidence as to confidence), then there is little room for cross-examination in cases of the present type. (See also in this regard what was said by Mullane J. in Griffis quoted in paragraph 55 above).
In any event, however, as the Full Court has made clear in the following passage from its reasons in D and Y (1995) FLC 92-581, whether or not to permit cross-examination in a case (whether the case be of an interlocutory nature or not) is very much a matter of discretion (at 81,765):
“We now turn to the argument that his Honour unduly limited and prevented cross examination.
As Collins’ case [(190) FLC 92-149] and Re B [English Court of Appeal - [1994] 2 FLR 1] … show, the question of whether and when cross examination should be allowed is very much a matter of discretion, applying the principles to which we have referred.
There is, on occasion, too much of a tendency in this jurisdiction to expect that every issue should be the subject of extensive and often unnecessary cross examination.
This is very much the case in interlocutory matters and particularly in interim custody proceedings but it also extends to proceedings such as this which is not a full custody hearing but rather a preliminary hearing to determine whether a full custody hearing should take place.We think that there was more than sufficient material before his Honour to enable him to arrive at his decision in this case and that he was in no sense obliged, either to permit cross examination of Mr G, the husband and Ms Y, before the cross examination of Dr CH, or at all.”
In the present case, his Honour clearly gave careful consideration to whether he should permit cross-examination, particularly on certain issues. Ultimately he decided that he should not do so. We see no basis for interfering with his exercise of discretion in this regard.
Conclusion in relation to the appeal against the restraining order
In summary therefore, and for the reasons which we have given, we consider that there is no substance in the appeal against the order restraining the wife’s solicitors from further acting in the proceedings in question, and accordingly we would dismiss the appeal in so far as it is directed to this order.
The question of the need for leave to appeal
A question arose before us as to whether the wife needed leave to bring this appeal. The basis for this question appeared, at least in part, to be that Wilczek J. had, at the commencement of the discussion in his reasons for judgment as to whether he would allow cross-examination, referred to the proceedings as being in “the nature of an interlocutory application”.
In our view, no purpose would be served by this Full Court embarking yet again on an examination of the question of when leave to appeal is necessary – this having recently been done in the decisions of Bruce F McLaren Holdings Pty Ltd & Ors v McLaren and McLaren (2000) FLC 93-030, and Joachim (Full Court of the Family Court of Australia, 16 June 2000, to be reported).
In our assessment, the better view is that his Honour’s order restraining the wife’s solicitors from acting is a final order, and as such, leave to appeal it is not required. We note that no suggestion that leave to appeal was required seems to have been raised in McGillivray v Mitchell (where the appeal was against the dismissal of an application for an order restraining legal practitioners who had previously acted for the husband from now acting for the wife).
The appeal against the costs order and the order reserving liberty to apply further in relation to costs
Following Wilczek J.’s delivery of his reasons for judgment in respect of the restraining order on 18 June 1999, Counsel for the husband made an oral application for costs directed both to the wife and to the wife’s solicitors, Messrs Simon Parsons & Co. (pursuant to O.38 r.36 of the Family Law Rules). (See transcript at Appeal Book p.248).
In the event, his Honour would not deal with the application in so far as it was directed to the solicitors apparently because of concerns about notice to the solicitors and also whether Counsel for the wife could appear for them. (See transcript at Appeal Book pp.249-250).
However, his Honour did make an order in the following terms:
“5.That the question of whether the costs referred to in Order (4) herein, or any part of such costs, be paid by the wife to the husband, or to be paid by the wife’s solicitors, be reserved and that there be general liberty to apply in relation to that question.”
In her Notice of Appeal, the wife purports to appeal this order, alleging error or misdirection, or failure to take into account certain matters, on the part of his Honour in making the order. We see no value in elaborating the matters which the relevant ground of appeal asserts were not taken into account by his Honour. Rather a somewhat better understanding of the wife’s complaints in this regard can perhaps be gained by reference to the written submissions put on her behalf in support of this ground. Those submissions are as follows:
“1.That application should have been dismissed.
2.The discussion as to costs is found at the transcript of 18 June 1999 at various places from page 9 to page 24.
3.The fact that the husband may not wish to recover his costs or is not able to recover his costs against the wife due to financial or other considerations is not a valid consideration for reserving the right to the husband to seek an order for costs against the wife’s solicitor.
4.The fact that the wife’s solicitors gave advice to proceed to resist the husband’s application would not in particular circumstances be improper or unusual.
5.The case put on behalf of the wife had merit and was capable of argument.
6.His Honour failed to give adequate reasons for his decision.”
Overall we consider that these submissions have no substance, and that the appeal against Order 5 should be dismissed. In our view, the husband was entitled to make the application against the solicitors for the wife given the nature of the main application which his Honour had determined in the husband’s favour. However, it was then perfectly proper for his Honour to in effect leave that application in abeyance until he was satisfied that those solicitors had proper notice of the application, and perhaps more importantly, were separately represented.
Having determined that he would not deal that day with the application against the solicitors, his Honour did however, proceed to hear and determine the application against the wife that she pay the husband’s costs of his successful application for the restraining order.
Ultimately his Honour determined that the wife should pay the husband’s costs. Unfortunately, he did not publish any reasons for this order other than to say that he believed that he had “sufficiently exposed [his] thinking in the exchanges that have taken place” and that he did “not believe [he needed] to add anything further”. He went on to say that he thought that “it is an appropriate situation for the making of an order for costs”. (See transcript at Appeal Book p.258).
By her Notice of Appeal, the wife also appeals the costs order made against her. Her grounds as set out both in the relevant Ground and in her Counsel’s written submissions assert error on the part of his Honour essentially in failing to give adequate reasons; in failing to consider all of the matters set out in s.117 of the Family Law Act 1975 (including the financial circumstances of the parties); and in failing to have regard to the public interest in the case.
It would no doubt have been of greater assistance to the parties and to ourselves had his Honour published some short separate reasons. However it is clear from the transcript (at Appeal Book p.256) that the basis of the husband’s application was that he had been wholly successful in his application for the restraining order. Thereafter his Honour proceeded to explore in some detail, particularly with Counsel for the respondent wife, the financial circumstances of the parties (see transcript at Appeal Book pp.257-258). Some reference was also made in the course of discussion between his Honour and Counsel as to the public interest aspect of the case.
While we reiterate that it would have been preferable had his Honour delivered separate short reasons for his decision in relation to costs, we have no difficulty in understanding from the transcript what were the relevant “s.117” matters relied on by both sides and what were his Honour’s reasons for making the order. Accordingly, and having regard to the highly discretionary nature of costs orders (see for example, Pennisi (1997) FLC 92-774), we would dismiss the wife’s appeal against the costs order.
Costs of the appeal
At the conclusion of the hearing of the appeal, we invited and received submissions in relation to the costs of the appeal.
In the event that the appeal was to be dismissed, the husband sought that the wife should pay his costs. On balance, we consider that the circumstances justify an order for costs in the husband’s favour, which in order to save further costs, we would fix at $2,000. This order must of course be formally directed to the wife. It would, however, seem appropriate that her solicitors consider some indemnification of the wife, given their interest in the matter.
Orders
That the appeal against the orders of the Honourable Justice Wilczek made 18 June 1999 be dismissed.
That the wife pay the husband’s costs of and incidental to the appeal, with such costs being fixed at $2,000.
I certify that the preceding 120 paragraphs
are a true copy of the reasons for judgment
of this Honourable Full Court
…………………………
Associate
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