MILTON & MILTON
[2016] FamCA 1065
•12 December 2016
FAMILY COURT OF AUSTRALIA
| MILTON & MILTON | [2016] FamCA 1065 |
| FAMILY LAW – PROPERTY – single expert – where the husband seeks an order appointing the single expert – where the application is opposed by the wife – where an order is made deeming the prepared report to be the single expert report pursuant to the Rules – where the balance of interim proceedings are dismissed. FAMILY LAW – LEGAL PRACTITIONERS – conflict of interest – where the wife seeks an order restraining the husband’s solicitors from representing the husband – where the application is opposed by the husband – where the Court does not consider that there is information gained or obtained by the solicitor in question from their dealings with the wife such that the misuse of information might be such as to undermine the due administration of justice. |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) Part 15.5, r 1.04 |
| Black v Taylor [1993] 3 NZLR 403 |
| APPLICANT: | Ms Milton |
| RESPONDENT: | Mr Milton |
| FILE NUMBER: | ADC | 2119 | of | 2016 |
| DATE DELIVERED: | 12 December 2016 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 11 November 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Jordan with Mr Tredrea |
| SOLICITOR FOR THE APPLICANT: | Legal Projects |
| COUNSEL FOR THE RESPONDENT: | Mr Duggan SC with Mr Bullock |
| SOLICITOR FOR THE RESPONDENT: | Howe Jenkin |
Orders
That the report of Mr B of C Accountants dated 2 September 2016 be deemed to be a single expert report pursuant to r 15.44 of the Family Law Rules 2004 (“the Rules”) and pursuant to r 15.45 of the Rules, Mr B be deemed to be a single expert jointly instructed by the parties.
That the Application in a Case filed by the wife on 30 August 2016 be dismissed.
That by 4 pm on 1 February 2017 the wife shall file a Further Amended Initiating Application and the husband an Amended Response providing further and better particulars of the final orders sought by each of the parties.
That the balance of the interim proceedings are dismissed.
That the costs of each of the parties in respect of the interim proceedings are reserved.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Milton & Milton has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: ADC 2119 of 2016
| Ms Milton |
Applicant
And
| Mr Milton |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
By Amended Initiating Application filed 2 November 2016, Ms Milton (“the wife”) seeks final orders by way of settlement of property that the property of the parties including their interest in any entity or asset of the Milton Group be divided equally between the parties.
By Response filed by Mr Milton (“the husband”) on 2 August 2016, he consented to the final orders as sought by the wife and in addition sought such other consequential orders as may be necessary “to give effect to an equal division of the assets of the parties”.
Whilst it appears uncontroversial that the parties have reached an in-principal agreement as to property settlement, they are not yet agreed as to the terms and conditions of any settlement.
A reference to the Milton Group includes a reference to the following entities:-
·D Pty Ltd;
·E Pty Ltd;
·F Pty Ltd;
·G Pty Ltd;
·H Pty Ltd (“H”);
·Milton Pty Ltd;
·I Trust; and
·Milton Family Trust
BACKGROUND
The husband was born in 1962 and the wife was born in 1969.
The parties met in or about 1987. Both parties are qualified agriculturalists.
The parties were married in 1991 and separated on 7 December 2015.
There are two adult children of the marriage.
The parties are producers and exporters. Their business is best described as one involving vertical integration in that the business operation under the name of “H” involves production, distribution and marketing.
Whilst there is no agreement as to value and some contention as to the extent of annual revenue, the parties are agreed that H in particular and the Milton Group in general is a highly successful enterprise with an annual revenue of many millions of dollars.
Jointly or severally, the parties are directors, co-directors and the exclusive shareholders in each of the entities comprising the Milton Group. The parties and their children are the primary beneficiaries of the trusts.
There are a number of employees that assist the operation and success of the Milton Group both at an executive and mid-range level.
The financial statements filed by each of the parties confirm that the parties interest in the Milton Group represents the dominant asset supplemented by their interest in the former matrimonial home and the substantial superannuation entitlements that each of the parties hold.
INTERIM PROCEEDINGS
Notwithstanding the filing of the Amended Initiating Application, the proceedings were originally commenced by the wife on 9 June 2016. The initial focus of the wife was to seek orders pursuant to the Family Law Act 1975 (Cth) (“the Act”) and the Corporations Act 2001 (Cth) (“the Corporations Act”). The wife summarises her position as follows:-
42.In the 6 months since separation occurred, the Respondent has become increasingly hostile against me personally and with respect to the management of [H Pty Ltd]. It has now reached the stage where our ability to manage [H Pty Ltd] effectively and in accordance with our obligations under the Corporations Act 2001 (Cth) is becoming very difficult.
The interim concerns of the wife were very much focussed upon the management and ongoing business operations fuelled by the wife’s mistrust of the husband and her belief that he was making unilateral business decisions to the potential detriment of the wife. She considered that his conduct was aggressive and bullying. The wife initially sought orders from the Court that would require the board of directors of H Pty Ltd to pass resolutions as set out in a document marked “A” as annexed to the Amending Initiating Application.
The proceedings first came before me on 4 August 2016, with the interim proceedings being adjourned for hearing to 11 November 2016.
At that time it was anticipated that the wife sought the interim orders as set out in the Initiating Application together with an Application in a Case filed 30 August 2016 which repeated the orders sought in paragraph 1 of the interim proceedings. During the period of the adjournment the husband filed an Application in a Case on 12 October 2016 seeking orders that Mr B of C Accountants be deemed to be a single expert pursuant to the Family Law Rules 2004 (“the Rules”).
Additionally, the husband sought that the wife be restrained from directly or indirectly offering for sale her shares in H Pty Ltd.
At the hearing the wife only sought the following order:-
That the husband be restrained and an injunction granted restraining him from providing any or any further instruction to [J Lawyers] in respect of any matter relating to the conduct of proceedings in this Honourable Court and in any matter arising in respect of the membership of the wife or the husband in any entity constitutive of the [Milton Group] or their membership of the Board of Directors of any entity of [Milton Group] or any matter arising under the Corporations Act with respect to the governance or activities of any entity of the [Milton Group].
The order was pressed only in respect of the involvement of [J Lawyers] in relation to the conduct of the current proceedings and not relating to the management or operation of the Milton Group.
The wife did not press all other interim orders.
Upon the wife’s concession that she does not intend to dispose of her shares in H, the only orders on an interim basis pressed by the husband are in the following terms:-
(1)That the report of Mr B of C Accountants dated 2 September 2016 (“the report”) be deemed to be a single expert report pursuant to rule 15.44 of the Family Law Rules 2004 (“the Rules”) and that pursuant to rule 15.45 of the Rules, Mr B gives expert evidence at the trial of this matter.
(2)That, pursuant to Rule 15.48(4) of the Rules, the wife do forthwith file the report with the Court.
(3)That, in the event that the wife has not filed the report by the return date of this application, then the husband be given leave to file the report.
There is no difficulty in respect of the filing of the report. The husband seeks that Mr B be deemed to be the single expert. That is opposed by the wife.
WAS THERE A VALID APPOINTMENT OF A SINGLE EXPERT?
Part 15.5 of the Rules and in particular 15.41 to 15.70 contains the provisions dealing with expert evidence. Part 15 has as its core purpose to ensure that the parties obtain expert evidence only in relation to a significant issue in dispute, to restrict expert evidence to that which is necessary to resolve or determine a case and to ensure that if practicable and without compromising the interests of justice, expert evidence is given on an issue by a single expert witness in order to avoid unnecessary costs from the appointment of more than one witness.
Rule 15.43 sets out the relevant definitions. By reference to the dictionary, an expert is defined to be “an independent person who has relevant specialised knowledge, based on the person’s training, study or experience”.
Heydon JA in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 provided an analysis of the authorities in respect of expert evidence as follows:-
In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of “specialised knowledge”, there must be an identified aspect of the field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be “wholly or substantially based on the witnesses expert knowledge”; so far as the opinion is based on fact “observed” by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on “assumed” or “accepted” facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached, that the expert’s evidence must explain how the field of “specialised knowledge” in which the witness is expert by reason of “training, study or experience” and on which the opinion is “wholly or substantially based” applies to the facts assumed or observed so as to produce the opinion propounded…
Rule 15.59 requires that the expert witness be independent and that the duty of the proposed witness is a duty to the Court and goes beyond any duty to the parties.
I am satisfied that to the extent that there is any issue as to the appropriate level of qualification, experience and knowledge of Mr B, he is appropriately qualified to give expert evidence.
The contention between the parties arises from the inability of a party to tender a report or adduce evidence from another expert witness if a single expert witness has been appointed whether jointly by the parties or by order of the Court. Such separate adversarial evidence can be called only with the Court’s permission as provided for in r 15.49.
There are three circumstances which individually may allow the tender of further evidence from another expert witness on an issue already addressed by a single expert witness:-
·There is a substantial body of opinion contrary to any opinion given by the single expert witness and that the contrary opinion is or may be necessary for determining the issue;
·Another expert witness knows of matters not known to the single expert witness, that may be necessary for determining the issue; or
·There is another special reason for adducing evidence from another expert witness.
The proceedings between the parties are at an embryotic stage.
Notwithstanding that the parties have agreed the basis upon which their property can be settled, they have neither engaged in mediation nor have they had the advantage of a financial conciliation conference pursuant to Chapter 12 of the Rules. Neither party has sought to file the accountant’s report and the immediate issue is not whether leave should be given for the wife to rely upon her own separate adversarial evidence, but rather, the status of Mr B.
A “single expert witness” is defined as an “expert witness appointed by agreement between the parties or by the Court to give evidence or prepare a report on an issue”.
The appointment of a single expert witness must be seen against the purpose of Part 15.5 which is to:-
·Oblige the parties to obtain expert evidence only in relation to a single issue in dispute;
·Restrict evidence which is necessary to resolve a case;
·Subject to the interests of justice, ensure that expert evidence is given;
·Avoid further costs arising from the appointment of more than one expert witness.
It is not controversial that the wife considered that it may well be advantageous to the parties and assist in their settlement discussions to instruct Mr B.
In a joint letter of instruction dated 4 April 2016, the following summary of intention appears at paragraphs 4 and 5 of the letter of instruction:-
4.This firm [Legal Projects] jointly with Howe Jenkin hereby wishes to consider appointing you as a single expert witness to prepare a written valuation of the various companies and entities within the [H] Group of Companies and Entities.
5.Both firms understand [C Accountants] has previously acted for the [H] Group of Companies. In the circumstances, it is likely that your firm is in possession of a significant amount of financial material up to and including the end of the 2012/13 financial year. Please confirm this is the case.
It appears that the parties considered there would be advantage in C Accountants and therefore Mr B undertaking the valuation based upon the “significant amount of financial material” held by Mr B’s firm.
The purpose of the valuation was to assist in the parties “exploring reaching a property settlement” arising from the breakdown of their marriage, which will involve an equal division of the fair market value of the H Group of companies and entities.
Importantly, paragraph 13 provides:-
In the event that you are formerly instructed to prepare a written valuation, you will need to be aware of Rule 15.5 of the Family Law Rules 2004 as to expert evidence and the appointment of a single expert witness in the Family Court. We enclose the relevant rules for your reference.
By letter from C Accountants dated 8 April 2016, the following confirmation is contained:-
We acknowledge the jointly appointed single expert approach to the valuation exercise referred in your letter, and that it is to be conducted in accordance with the various rules and guidelines under the Family Law Rules 2004. In addition, we confirm all enquiries concerning the exercise would involve joint communication. In any case, all sources of information would be disclosed in any report.
By joint letter dated 16 June 2016, instructions were given to Mr B that the valuation exercise should proceed with a request that the expert adopt a particular valuation methodology with each of the parties requesting certain matters be considered.
In particular, the wife sought that the valuer bring to account the following:-
2.1The valuation of the shareholders’ interests in the [H Group] is to include:-
2.1.1The value of the operating business and brands if sold from the operating entity (excluding properties, inventory and debtors);
2.1.2The value of the properties if sold from the property-owning entity;
2.1.3The value of inventory-cost price notwithstanding fluctuations throughout the year and in addition to the sale of the business and brands;
2.1.4The existing debtors would continue to be collected by the operating entities and not sold as part of the above;
2.1.5The value of the above is to then flow through to the entities as cash; and
2.1.6The value of the Group of Companies to exiting shareholders (s) could then be calculated by assessing any other assets, debts and tax consequences.
It is noted that the proceedings were commenced on 9 June 2016 and as such there is little doubt that the focus of the correspondence of 16 June 2016 to C Accountants was in furtherance of the previous instructions as contained in the letter of 4 April 2016.
An extract of the report prepared by Mr B dated 2 September 2016 appears as annexure “NM2-F” to the husband’s affidavit filed 13 September 2016.
Under the heading “Instructions and Scope” Mr B acknowledges that he has been jointly engaged by the solicitors acting for the parties and that the purpose was to “act as an independent single expert in relation to a valuation of their equity interests in the Milton Family Group held by each of [Mr Milton] and [Ms Milton], for the purposes of reaching a matrimonial property settlement”.
Mr B acknowledged that the report is prepared in compliance with Division 15.5.4, 15.5.5 and 15.5.6 of the Rules.
Upon the wife receiving the Mr B report, her solicitors forwarded correspondence to the husband’s solicitors on 5 September 2016 being annexure “T” to the husband’s affidavit of 12 October 2016.
The correspondence acknowledges that Mr B was requested to prepare a report but seeks to redefine the parameters of the instruction to him in the following terms:-
(1)to confirm the valuation report resulted from an agreed request between the parties in an informal attempt to reach agreement on property settlement; and
(2)to make it explicit that the valuation report is not a report pursuant to Rule 15.48 of the Family Court (sic) Rules 2004.
The wife counters the husband’s submission by referring to correspondence from the husband’s solicitors of 21 April 2016 which proposed to alter the “purpose of the valuation as set out in the first letter”.
The significance of the correspondence arises from the wife’s assertion that she understood the correspondence to be a variation to the agree position namely, that it would be H that would appoint Mr B rather than the parties. There was no agreement by the wife to the proposal and there is no evidence that suggests either party corresponded with Mr B with altered instructions.
The main purpose of the Rules is as set out in r 1.04 which provides:-
The main purpose of these Rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case.
The wife complains that Mr B did not prepare his report canvassing matters that each of the parties considered might be relevant to the valuation process.
It seems to me that the first step is to determine whether an expert should be deemed to be a single expert and then look to the Rules to consider what options are available if a party is aggrieved by a report prepared by a single expert, in particular as to expertise or methodology.
The Rules provide for the clarification of a single expert witness report by way of conference (r 15.64B), questions to a single expert (r 15.65), single expert witness answers (r 15.66) and upon application, leave to a party to adduce separate adversarial evidence from another expert.
The wife raises discussion and communication with a firm that acts as brokers for the sale of businesses and related assets.
It is a reasonable interpretation of the matters set out by the wife in paragraphs 31 to 37 of her affidavit filed 2 November 2016 that the advice received from the brokers suggested that a value significantly more than the B valuation determined as being representative of the parties interest in H could be obtained.
The wife foreshadows that she would seek leave to appoint another expert witness pursuant to r 15.49.
There is no application to that effect. The wife is strongly opposed to Mr B being deemed to be the single expert and his report being received by the parties as a report pursuant to r 15.44.
Conclusion
Whilst there may be some basis for the wife’s argument that her nomination of Mr B as a valuer was made prior to the commencement of proceedings, subsequent correspondence received after she had filed her Initiating Application leads inevitably to the conclusion that the parties had reached an agreement in terms of the basis for a settlement of property but needed a valuation in order to assist them to determined how that may go forward.
The wife considered that the discussions could only occur against the background or proceedings having been commenced and it was upon that foundation that Mr B was instructed to prepare a report and that he did so based upon the parameters as set out in the original letter of instruction.
It is difficult to see how the wife could resile from the clear position as adopted in the initial letter of instruction, with those instructions confirmed following the issue of proceedings and the parties receiving the report by Mr B following his acknowledgement of the basis of his instructions.
If there are aspects of the B report that the wife would seek to challenge, then the Rules provide ample opportunity to do so.
Given my determination that Mr B should be considered as the single expert in the proceedings and his report a single expert report, I do not consider that the wife has done more than foreshadow her intention to seek the Court’s permission to adduce separate adversarial evidence.
It is a matter for the wife to determine the extent to which she would seek Mr B to reconsider and reassess his valuation outcome either by way of conference or specific questions.
LEGAL PRACTITIONERS – CONFLICT OF INTEREST
The wife seeks that the husband be restrained from providing any or any further instructions to J Lawyers in respect of the conduct of these proceedings. As was the subject of earlier comment, the wife does not pursue an injunction:
… in relation to any matter arising in respect of the membership of the wife or the husband in any entity constitutive of the Milton Group or their membership of the Board of Directors of any entity of the Milton Group or any matter arising under the Corporations Act with respect to the governance or activities of any entity of the Milton Group.
This represents a significant concession on the part of the wife.
The Summary of Argument prepared on behalf of the wife sought to conflate the “commercial” and “matrimonial” aspects of the proceedings.
Through counsel, the wife has now abandoned the “commercial” aspect of the interim proceedings and now does not seek any determination by the Court as to whether a resolution in terms of annexure “A” to her Amended Initiating Application should be made.
The written submissions assert that J Lawyers cannot act for the husband for the following reasons:-
(a)because of the risk of their misuse of confidential information given by her to them;
(b)because a fair minded, reasonably informed member of the public would conclude that the proper administration of justice requires that [J Lawyers] be prevented from acting for the husband in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice.
In Onisforou & Onisforou (2015) FLC 93-666 the Full Court said at [20]:-
There are three established categories on the basis of which solicitors may be restrained from acting against their client or former client. They are: breach of confidence, breach of fiduciary duty and the inherent jurisdiction of court over its officers and to control its process. Each category has its own principles which guide its operation. The third category may be involved in conjunction with either of the first two so that there is clearly an overlap: nonetheless, the basis for the exercise of the jurisdiction in each is different (Kallinicos v Hunt [2005] NSWSC 1181).
Similar consideration was given by Brooking JA in Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501 at 52-58 where his Honour considered that there were three grounds for restraining a solicitor or counsel from continuing to represent a party:-
·The ability to misuse confidential information;
·The breach of fiduciary duty not to act against a client;
·That solicitors and counsel are officers of the court.
At page 65 line 8 of the transcript, the wife’s counsel did not press either a breach of confidence or a breach of fiduciary duty as the basis for the injunction sought. The focus of the application was the inherent jurisdiction of the Court and in particular the “getting to know you factors”. I am therefore not obliged to consider whether there has been a risk of the misuse of confidential information or breach of fiduciary duty.
The wife made her objection to the husband continuing to instruct J Lawyers known at an early stage. There is no suggestion that she delayed in conveying her opposition and objection, nor is it suggested on behalf of the husband that there has been any delay on behalf of the wife which would amount to a waiver.
The basis of the wife’s application to restrain the husband by focus upon the Court’s inherent jurisdiction is centred upon the involvement of J Lawyers in the Milton Pearson litigation, testamentary matters relating to the provisions of the parties wills and the L litigation.
The husband opposes the wife’s application on the basis as set out in paragraph 316.1.1 of his affidavit filed 2 August 2016:-
I have depended heavily upon [Mr K] and several of his colleagues at [J Lawyers] since this situation arose. I have strong and established working relationships with them and consider them trusted advisors. They have been extremely helpful to me in navigating my way as director and CEO through the many commercial issues [Ms Milton] has raised, both in correspondence and through her conduct over the past 6 months, and I rely on their advice to be confident that I am doing all that I can to further [H’s] best interests in challenging circumstances.
What is not made clear by the husband is the extent to which J Lawyers are instructed as to the general commercial and governance issues that affect the Milton (and H) Group of companies from time to time.
It is on the basis that the husband would wish to instruct J Lawyers only in respect of issues that have arisen as a result of the proceedings ongoing in this Court. To some extent the likely involvement of J Lawyers in the future is diminished by the wife discontinuing her application seeking orders that specific resolutions be made by the board of directors of H.
It is not suggested either by the wife or the husband that J Lawyers in the day to day corporate governance and business operation of the Milton Group. If that were to be the case different considerations would apply. The husband’s opposition to the orders sought by the wife is predicated upon the basis that they provide advice to the husband in respect of these proceedings but not to the Milton Group or any of its composite entities, in particular H.
In Pond & Thurga (No 2) [2007] FamCA 587 O’Ryan J referred to the consideration of Young J in Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404 at [218] quoting paragraph [31] of Young J’s judgment:-
In the course of his examination of the authorities, Brereton J referred to the observations of Bergin J in Mitchell v Paton Holdings Pty Ltd [2000] NSWSC 1015 (‘Mitchell’), Heenan J in Holborow v MacDonald Rudder [2002] WASC 265 (Holborow) and Hasluck J in Bowen v Stott. In Mitchell, Bergin J stated that, as an incident of its inherent jurisdiction, the court may decide upon the propriety of a legal practitioner representing a party in a particular case to ensure justice and the appearance of justice: at [34]. In Holborow Heenan J said that this power had been invoked in cases where there was a potential that the legal practitioner might be a witness; where the subject matter of the litigation was likely to involve an evaluation of the conduct of the solicitor; and where the efficacy of the documents prepared by the solicitor was likely to be in issue: at [23]. In Bowen v Stott, Hasluck J said that it may be appropriate to invoke the inherent power in cases where the solicitor has some direct pecuniary interest in the outcome of the case, where the solicitor might feel impelled to justify or defend his conduct in representing a client, or where the practitioners credibility is at stake as a potential witness: at [47], [53] and [55].
There is no disagreement with the following statement by Brereton J in Kallinicos v Hunt (2005) 64 NSWLR 561 at [76]:-
The test to be applied to this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice…
Counsel for the wife referred to the decision of the Court of Appeal of the Supreme Court of Western Australia in Ismail-Zai v State of Western Australia (2007) 34 WAR 379. Paragraphs 30 to 35 provide a convenient review of the relevant authorities and the principles which underpin the need for the Court to reinforce public confidence in the proper administration of justice.
Counsel highlighted [33] of the judgment as being pertinent not just to family law matters in general, but as support for the wife’s application.
The Court of Appeal referred to the decision of Black v Taylor [1993] 3 NZLR 403 which considered the treatment of information that could not be considered as confidential in the manner as referred to in Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222. That case involved a solicitor who had information arising from a previous retainer.
That is not what is the basis of the wife’s application in these proceedings. In Black v Taylor (supra) at page 406 Cooke P said:-
… approaching the case by considering simply the danger of misuse of confidential information, I do not think that [the primary judge] has been shown to have been wrong in his view that the practitioner … is definitely disqualified that the reasonably informed person would not be satisfied that no use of confidential information would occur. Further, I would adopt another passage at p 48 in the Judge’s reasons:
Last, the lawyer (and particular the family solicitor) gets to know personalities. He gets to know something, and often a good deal, of a former client’s weakness, fears and reactions. It is as much information passed on as is verbal or written description. Like all information, it can be misused for another person. There could be cases, perhaps with a former client’s witness’ credibility crucial, where such knowledge of personality inevitably acquired by virtue of the former solicitor/client relationship could amount to a real information consideration. There will be cases where a former client’s very real fears that he will be cross examined from a position of unfair superiority should be given due consideration.
Counsel for the wife summarised the issue as “getting to know you factors”. It was conceded that they are not confidential information, but in the circumstances of this case, the involvement by J Lawyers and the parties both in respect of their personal affairs, but also in respect of corporation litigation where the information as to the personality of the wife could be misused or used to her disadvantage in the proceedings.
At [35] of Ismail-Zai v State of Western Australia (supra) the court sought to qualify the extent and reach of the inherent power of the Court in the following terms:-
The courts have often remarked that the inherent supervisory jurisdiction in this respect is an exceptional one and that it should be exercised with circumspection and caution: Black at 406 per Cooke P; Mitchell v Pattern Holdings Pty Ltd [2000] NSWSC 1015 at [34] per Bergin J; Kallinicos at [76] per Brereton J; Geveran Trading Co Ltd v Skjevesland [2003] 1 WLR 912…
Senior counsel for the husband referred to the remarks of Heerey J in Mintel International Group Ltd v Mintel (Australia) Pty Ltd & Another (2000) 181 ALR 78.
His Honour was concerned with the involvement and conduct of counsel in acting for one party in circumstances where he had acted for the other party in earlier litigation. It was argued that whilst not falling into the category of confidential information, counsel had an unfair advantage. Reference was made to the decision of Yunghanns v Elfic Ltd (unreported, Supreme Court of Victoria, Gillard J, 3 July 1978) where his Honour referred to the “getting to know you factors”. His Honour referred with approval to the remarks of Bryson J in D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118 at [123] that:-
… 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 who is prepared to understand the facts.
In Mintel (supra) at [44] Heerey J sought to temper and restrict the scope and reach of the remarks of Gillard J in Yunghanns (supra):-
In so far as reliance is placed on the “getting to know you” principle, a moment’s consideration of the way that litigation is conducted in Australia shows that this cannot be accepted too literally, especially in relation to counsel…
At [43] his Honour said the following:-
While I respectfully accepted as good law the authorities that have been mentioned (all of which concerned solicitors rather than counsel), these principles of course have to be applied in particular context of the present case. The brief summary of the complex facts in Yunghanns is sufficient to show how different it is from the present case. In the abstract, it may be understandable that there is criticism of lawyers who “change sides”. But that cannot literally mean that once a lawyer, be it a solicitor or barrister, has acted professionally for a particular client, the lawyer is forever after prevented from opposing that client in subsequent litigation.
It is not controversial that the factual matrix that underpinned the decision in Yunghanns (supra) was complex and exceptional. The involvement with the aggrieved party was extensive and longstanding. It is argued that the relationship between J Lawyers and the parties either personally or in terms of corporate assistance and litigation was not extensive and did not involve dealings with the wife which would have so revealed her personality that an unfair advantage would not be presented to the husband by him having retained the services of the solicitors.
It is not insignificant to the determination of the application that whilst the parties agree that their property should be divided equally between them, neither party has particularised the orders that they seek. Whilst it was initially argued that the wife was concerned as to the corporate governance of H during the period that the parties sought to resolve their differences, any formality in respect of those concerns is no longer pursued.
It seems that the options for a resolution of the current litigation are narrow. If it is accepted that the principal asset is as to the value of the parties interest in H would represent the most significant interest of the parties, it then appears that either as part of a resolution of the litigation, either the husband or the wife will retain H or the business and its various components will be sold.
Each of the parties have been involved from the very earliest stage in the development of what has now become a successful and valuable business enterprise.
Whilst the subject of dispute as to the status of the single expert and his valuation of the H enterprise, nonetheless there would appear to be sufficient information available to each of the parties to formulate with some confidence the orders that they each seek.
The parameters of the litigation must of necessity define the extent to which the husband would be assisted by his solicitors.
At page 67 line 24 of the transcript the following concession appears by the wife’s counsel:-
There is no question that if the husband, in his capacity as a director of the …group of companies wants advice upon a distribution and licencing agreement with the United States distributor, he could, of course, if he so chose, obtain advice from [J Lawyers]. No issue with that. Many other contractual matters – if there was a – if advice was sought upon a supply contract from a [producer] to the [business], for example no issue that J Lawyers could not act in that case, not seeking to expand the matter any further. But in relation to these Family Court proceedings, your Honour, the wife takes the point. In fairness, she has not only taken it from day one. She has taken it from either the end of last year or the beginning of this year and made the point very clearly. And it’s simply not fair that J Lawyers be used against her, given the background of their involvement with both of the parties and the … group of companies.
It is not my assessment of the evidence as presented or in respect of the submissions of senior counsel that the involvement of J Lawyers is intended to span general legal advice to the Milton Group of companies or H in particular. If that were the case it would be difficult to see how the solicitors could act to assist in the good governance and beneficial interest of the business and therefore the parties, but then to assist the husband in the current litigation against the wife.
If that were to be the case, I would consider that the test in Kallinicos (supra) would be satisfied in that “a fair minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting”.
I am reinforced in that view by the submissions of senior counsel for the husband who sought to put into context the involvement of the parties and J Lawyers in the Milton Pearson litigation. The purpose was to highlight the stark difference between the relatively modest involvement in the affairs of the parties by the solicitors as compared to the extensive involvement by solicitors in the decision of Yunghanns (supra).
Milton Pearson litigation
The wife refers to the litigation in around 2005 and 2006 in respect of the parties capacity as directors of the predecessor to H. She asserts that in the course of the proceedings, J Lawyers sought and obtain instructions from the wife, discussed the litigation strategy and in her opinion “would have formed a view on how I respond to the pressures and rigors of litigation”.
The husband disputes the wife’s assertion of significant involvement either in the litigation or in relation to J Lawyers. The husband says that consistent with the delineation of areas of responsibility, the husband instructed the solicitors on behalf of the parties and including the wife.
The wife does not provide details of the extent of her involvement with the solicitors and there is nothing that would assist the Court in understanding the information and conduct that may have been displayed by the wife which would enable the solicitors to “have formed a view of how I respond to the pressures and rigors of litigation”.
L litigation
The wife refers to this litigation and summarises the proceedings as “an application for both legal costs and compensation for H and my time spent in preparing and providing evidence in connection with same”. No further evidence is provided by the wife as to the extent, if any, of her involvement with the solicitors.
The husband denies that the litigation involved the H companies but rather was to do a minor corollary of the Milton Pearson litigation.
Estate planning work
The wife asserts that J Lawyers were retained to amend the wills of the parties in June 2008 and that she gave instructions to them in respect of a power of attorney and guardianship documents. She makes the point that copies of these documents are still apparently held by J Lawyers.
The husband confirms the involvement of J Lawyers in respect of testamentary matters but seeks to place the parties involvement with J Lawyers in context. The work in question was to remove a former business partner from their wills consequent upon the Milton Pearson litigation.
The wife does not provide evidence as to the extent of her engagement with J Lawyers and what aspects of her involvement and presentation may provide them with an understanding of the wife’s presentation which could be considered as an unfair advantage to the husband.
To place the matter into context, issue relating to the “getting to know you factors” are in all probability better known to the parties in respect of the other than the solicitors.
I bring to account the matters as set out by the husband at paragraph 316.1 of his affidavit filed 2 August 2016 and in particular that J Lawyers have assisted the husband in respect of the litigation commenced by the wife. Paragraph 316.1.1 the following is stated:-
…I have strong and established working relationships with them and consider them trusted advisors. They have been extremely helpful to me in navigating my way as a director and CEO through the many commercial issues [Ms Milton] has raised, both in correspondence and through her conduct over the past 6 months, and I rely on their advice to be confident that I am doing all that I can to further [H’s] best interests in challenging circumstances.
On the basis that the advice provided by H is to the husband in respect of the current litigation and not to the Milton Group generally or H in particular, I do not consider that there is information gained or obtained by J Lawyers from their dealings with the wife such that the misuse of that information might be such as to undermine the due administration of justice.
Particulars of the orders sought by each of the parties
I do not consider that either of the parties would be prejudiced or disadvantaged by being required to particularise the orders sought by way of property settlement. Each of the parties has legal representation at the highest level and their knowledge of the Milton Group now assisted by the presentation of a valuation report by the single expert and the wife’s own investigations would clearly enable the parties to determine the orders that each of them seek.
In any event, in respect of the matter going forward the Court’s consideration in terms of matters of conciliation or the parties separate actions by way of mediation would be enhanced by each of them understanding the orders sought by the other.
I make orders as appear at the commencement of these reasons.
I certify that the preceding one hundred and fifteen (115) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 12 December 2016.
Associate:
Date: 12 December 2016
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