Murdoch and Brown
[2013] FamCA 586
FAMILY COURT OF AUSTRALIA
| MURDOCH & BROWN | [2013] FamCA 586 |
| FAMILY LAW – LEGAL PRACTITIONERS – Conflict of interest – restraint on acting. |
| Family Law Act 1975 (Cth) |
| Grimwade v Meagher [1995] 1 VR 446 Holborow v Rudder [2001] WASCA 91 Macmillan and Macmillan (2000) FLC 93-048 Pond & Thurga (No 2) [2007] FamCA 587 Spincode Pty v Look Software [2001] VSCA 248 Thevenaz (1986) FLC 91-748 |
| APPLICANT: | Ms Murdoch |
| RESPONDENT: | Mr Savva And Mr Gould As Executors of the Estate of the Late Mr Brown |
| FILE NUMBER: | MLC | 9886 | of | 2010 |
| DATE DELIVERED: | 9 August 2013 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 18, 22, 25, July 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Testart |
| SOLICITOR FOR THE APPLICANT: | Kennedy Partners |
| COUNSEL FOR THE RESPONDENT: | Mr Nicholson |
| SOLICITOR FOR THE RESPONDENT: | Schetzer Constantinou |
Orders
That Mr Savva and Mr Gould as Executors of the Estate of the Late Mr Brown be restrained from engaging the firm of Firm X and Mr M, Solicitor of that firm, from acting on behalf of the Estate in proceedings in the Supreme Court of Victoria in its probate jurisdiction.
That should any party seek costs arising out of these orders, such application be made by written submission and filed and served by no later than 30 August 2013 with such submission being endorsed with the fact that it has been so served on the other party and any recipient of such submission have until 13 September 2013 to file and serve any response and such response be endorsed with the fact that it has been so served on the other party and upon receipt of any such application for costs, it or they be determined in chambers.
That all extant applications for final orders are listed to a FIRST DAY before the Honourable Justice Cronin at 10 am on 2 October 2013 for the purposes of listing the matter for final hearing.
That the parties and if represented, their legal practitioners, attend the first day of hearing.
That at the first day of hearing, each party represented by a lawyer have available to them and present to the Court, a statement setting out the costs incurred to that date, what amounts have been paid, from what source payments have been paid and what costs are expected to be incurred until the completion of the final hearing.
That the application in a case filed 16 July 2013 is dismissed save as to the matters referred to in the notation below which part is struck out with a right to reinstate on appropriate notice.
IT IS CERTIFIED:
That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.
AND THE COURT NOTES:
A.It is noted that the applicant wife by her amended application in a case filed 16 July 2013 sought orders in terms of paragraph 5.2, 7, 8 and 9 in the application filed 16 July 2013 and counsel for the executors assured the Court that those matters were being done and to the extent that they are not so done, the wife has liberty to request the matter be relisted for that determination.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Murdoch & Brown has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 9886 of 2010
| Ms Murdoch |
Applicant
And
| Mr Savva And Mr Gould As Executors of the Estate of the Late Mr Brown |
Respondent
REASONS FOR JUDGMENT
Rule 8.03 of the Family Law Rules 2004 provides that a lawyer acting for a party in a case must not act in the case for any other party who has a conflicting interest (emphasis added). The note to that rule says that the rule does not purport to set out all of the situations in which a lawyer may not act for a party (emphasis again added).
In this discrete interlocutory application, the wife who is the applicant, seeks an order against a specific solicitor Mr M. That order is opposed. Mr M is a solicitor who acts on behalf of the respondents who are the executors of the estate of the deceased husband. It is said that Mr M only acts in respect of the executors’ application to the Supreme Court of the Victoria for probate of the husband’s will. It will be observed that there are therefore two proceedings. The solicitors for the respondent executors in the family law proceedings are not commercially (or otherwise) connected with Mr M or his firm.
The facts of this case are unusual and the law complex because of the unusual nature of the dispute.
The amended application in a case by the wife was filed on 16 July 2013. That application sought orders that might generally be described as of an enforcement nature arising out of orders made by the Court in June 2013. Because I accept the assurance of the respondent’s counsel that compliance is in train, it is not necessary for me to deal with those enforcements issues specifically. They do however, become relevant on the issue of the background of this proceeding.
The specific issue requiring determination is the wife’s pursuit of an injunction against a solicitor or as an injunction precluding the respondent’s executors from using him as the “solicitor for the husband’s estate”. The respondents did not file a formal response to the wife’s application but their position was clearly understood as it was articulated by their counsel.
The executors of the husband’s will, and therefore the respondents to the wife’s application, are Mr Savva who is described as a bank manager and Mr Gould who is described as an accountant.
The case has been determined by the parties reading into evidence their respective affidavits and the submissions of counsel both oral and in writing. It is also trite to say that in determining this case, the Court can only make determinations where the facts are largely uncontroversial or where it is clear that in the unusual circumstances of the case, a finding can be otherwise made. I was also considerably assisted by the written submissions of counsel.
It is important to understand the background of the relationship of the husband and the wife and its demise. Mr Brown married Ms Murdoch in February 2002. From that marriage, there are two children aged 10 and seven. Mr Brown and Ms Murdoch separated in July 2010. Only months later, Mr Brown was charged with criminal offences of a violent nature against Ms Murdoch. Despite that, although not living as a couple, Mr Brown and Ms Murdoch resumed living under one roof and parented their children amicably.
In around October 2010, Mr Brown had filed an application seeking orders including property division orders in this Court. The parties were negotiating a resolution of their parenting and property disputes.
In February 2013, Mr Brown was diagnosed with pancreatic cancer and given a prognosis that he would live between six months and two years. Sadly, he died in May 2013.
Such was the improvement in the parties’ relationship that upon being diagnosed with cancer, Mr Brown nominated the wife as his medical attorney under power.
The family was then living in a property that was described as the former matrimonial home but it would seem that it was registered to Mr Brown as the sole proprietor.
As part of the planning for Mr Brown’s death, the wife and he jointly purchased the property in B Street, Suburb T. How that arose, adds to the complexity of this discrete issue. Although the family home had belonged in law to Mr Brown, both he and Ms Murdoch jointly owned another property at S Street, Suburb T.
In December 2012 and therefore prior to the diagnosis of the cancer, the parties attended a discussion with their respective legal practitioners at which a variety of agreements was reached although it would be fair to say that not all matters were concluded with specificity. Discussions went on. Amongst the matters that were agreed were that the parties would sell their former matrimonial home and use the proceeds of the sale to buy the wife a house. That house was to be one in which the wife was to be the beneficial owner without encumbrances. The second property in S Street was to be sold and the proceeds advanced towards the acquisition of this new home. Mr Brown’s business was to be sold and from the proceeds, the wife was to be paid half a million dollars. A variety of other orders was made in relation to day to day financial support and the continuation of the children’s private education at Mr Brown’s expense.
In February or thereafter when the cancer diagnosis arose, the husband and the wife discussed the purchase of a property which would enable him to be cared for as his condition progressed having regard to the nature of the diagnosis. It was intended that the arrangement would also enable Mr Brown to spend considerable time with the children but in the house in some type of “granny flat”. Arising out of those discussions, the B Street property was chosen.
Having made the decisions to purchase the B Street property, the former matrimonial home was sold and settlement of that occurred on 16 April 2013. After the payment of significant liabilities, $1.415 million was left.
Whilst the husband and the wife both had solicitors acting for them separately in the extant family proceedings, Mr Brown consulted Mr M in relation to his will after the diagnosis of pancreatic cancer. Indeed, an additional document that seems to have been prepared was an enduring power of attorney (Medical Treatment) that document was executed in February 2013. I am unsure whether Mr M drew that but I suspect he did.
The wife began caring for the husband. She was significantly involved in taking him to medical appointments and visiting him in hospital.
In April 2013 and with all of those matters occurring, Mr Brown executed the fresh will. Amongst other things, the will provided that the executors could, if they wished, appoint Mr M as the solicitor for the estate. It is also clear from the will, which is now in evidence, that the family law proceedings were still unresolved but a series of testator’s directions (albeit somewhat grammatically confusing) was set in place to cover the acquisition of the new home and the sale of the two other properties. In essence, as I understand the will, the parties’ children become absolutely entitled to the residue of the estate upon attaining the age of 21 years but should they fail to attain that age, the residue passes to the wife.
It is clear that by the time that the will was prepared, the parties were well advanced in their negotiations in the family law proceedings.
The contract of sale for the purchase of this new home was also in evidence and the nominated legal practitioner for both the wife and the husband was Mr M’s legal firm.
It was the wife’s evidence that on numerous occasions, Mr Brown told both her and his executors that his plan was to apply $700,000 from the proceeds of the sale of the former matrimonial home to the purchase of this new home and then to borrow the balance from his bankers. That borrowing would have been approximately $2.3 million. It was the wife’s evidence and not challenged by the executors, that the husband intended that he would pay the mortgage payments whilst he marketed and ultimately sold the other property which was jointly owned.
Early in May 2013, Mr Brown died. It will be evident that the contract of sale to purchase the new home by then had been executed but had not settled. On 15 May 2013, the executors were substituted in the family law proceedings for the husband. There has been some controversy about the validity of that order but my reasons otherwise given in this proceeding relate to that order.
It would seem that almost immediately after the death of the husband, Mr M was acting as solicitor for the estate. In a letter dated 16 May 2013, written by Mr M, which needs careful consideration, it was said by Mr M’s firm “we comment as follows”:
(a)it is difficult for our office to get instructions from your client (the wife) in a timely fashion (which this matter now requires); and
(b)the interests of your client and the Estate in this matter may not always be aligned;
(c)as Executors of the Estate are yet to be appointed we are precluded from seeking instructions from the Executors; and
(d)Mr [Brown’s] death has effectively terminated our retained to act for him.
On the date of the expected settlement of the purchase of the home, the problem was obvious. Mr Brown was deceased and the plan for him to borrow money by mortgage could not be effected. Absent the wife having the requisite funds, not to mention Mr M’s firm indicating that they were no longer acting, the purchasers served a rescission notice. The wife turned to her father for financial assistance to overcome the problem.
In late May 2013 with all of that swirling, the executors obtained from the Supreme Court of Victoria letters of administration of a very limited nature which I have referred to in the reasons associated with the argument about the validity of the order. One of the powers given to the executors by the Supreme Court of Victoria was for the purposes of completing any sale or transfer of the property that the wife was acquiring or would have otherwise acquired with the husband.
Despite having the power pursuant to the Supreme Court order, the executors did not provide the required sum to settle the acquisition and the wife turned to her father for financial assistance. Remarkably, he provided the necessary funds very quickly. In June 2013, consent orders were made in relation to numerous boxes of chattels which had also been the subject of a contested dispute and the wife in these proceedings before me complained that there had not been compliance with that June order. At the hearing, it was unclear just what was in those boxes. The parties each have a different view and I am not in a position to make any finding. It was the wife’s submission that this was all of the property that had come from her home and therefore she had a claim to those things. The executors’ position seems to be that no-one can confirm that and their understanding was that the wife and the husband were living in two different residences and that the boxes contained property relating to Mr Brown.
One of the explanations given by the executors for the delay in carrying out the June court orders for the opening and inspection of the boxes was that they had been told of a potential Supreme Court injunctive claim by Mr Brown’s adult daughter. Counsel for the respondent executors conceded that that delay should not have happened. Bearing in mind the occupations of the executors to which I earlier referred, it is not clear to me whether advice was being sought or indeed given, about that course of action.
Mr M, through counsel for the executors, wants to continue to act only in the estate proceedings because he has “information and knowledge” that the executors need. The example just mentioned is an indication of the blurring of the boundaries or more importantly, the potential for a problem of the overlapping of the family law proceedings and the Supreme Court application for probate. The probate application will clearly require evidence to be prepared as to ownership of the chattels in the boxes and someone will have to prepare evidence for the proceedings in this Court about whether or not the wife claims ownership of them as well. Counsel for the executors used the word “information” that Mr M has that is needed by the executors.
On a strict reading of rule 8.03 of the Family Law Rules as these reasons started, Mr M is not acting for the respondent executors “in the case” if that is defined to mean the family law proceedings only. The dilemma is that I find it is artificial to simply separate the two proceedings out and what I have just mentioned is an example.
A second problem is that Mr M was understood at least by the wife to be acting in respect of the conveyancing matters for the purchase of the home for both she and the husband. He was involved in a sale of the two properties one of which she seems to have had a legal interest in and the other, a potential equitable interest. It is far too early for me to tell let alone make any finding about just what role Mr M played and whose instructions he acted upon for that purpose. In evidence, a copy of the contract clearly shows Mr M’s firm as acting for both parties.
The boundaries are further blurred by the letter dated 16 May 2013 to which I have just referred. Mr M terminated his involvement in the matter on the basis of the death of Mr Brown but he referred to the fact that the interests of the husband and the wife were not necessarily always aligned. It is not entirely clear to me what he meant by that but I have inferred that he was alluding to the potential for a conflict of interest.
The wife’s evidence was contained in her affidavits filed 20 May 2013 and 4 June 2013. She said that she found herself in a position of having to retain new conveyancing solicitors because Mr M or, more importantly, his firm, had terminated their retainer with her. She referred to the letter of 16 May 2013 and denied that at that time, from her perspective, there was a conflict with Mr M’s firm continuing to act or that she had done anything to create a delay or difficulty in providing them with instructions. Albeit that she was then saying there was no such conflict, that is not her position now. In my view however, that is not all that significant because the point she was making was that she saw Mr M’s firm as solicitors acting for her and to whom instructions would have been given. She did not say the details of what instructions had been given up until the death of Mr Brown. I do not have any evidence from the executors nor from Mr M about what role Mr M played or more particularly, what instructions were given to him in respect of the variety of transactions of a conveyancing nature or indeed the will. What became apparent from the wife’s second affidavit was her dissatisfaction with Mr M because of the trouble that was caused (as she saw it) in the conveyancing not settling as she and Mr Brown had planned.
It was the wife’s assertion that the settlement of the purchase ultimately succeeded but only on the basis that she signed an agreement involving Mr M as a solicitor for the executors, that the property then purchased would be put on the market virtually straight after the completion of the settlement of the sale. It was the wife’s assertion that in June, Mr M informed the conveyancing lawyer then acting for the wife in relation to the transaction that he did not want to involve the family lawyers but wanted to do a deal outside of the Family Court. As a result of a number of matters which are set out in the affidavit of the wife, she proposed then that Mr M be restrained from further continuing to act for the estate. Many of the matters in the affidavit conflate questions of appropriate conduct vis a vis the wife and Mr M’s role in respect of the estate. I do not and am not in a position to, make any finding about any of those matters. They are for other bodies or courts to determine where the evidence can be properly tested.
In my view, the questions that are critical are whether the wife was in a position where she had given Mr M instructions, as had Mr Brown, on the basis that Mr M was acting for them both and that his information, knowledge and understanding arising from that role gives rise to a conflict of interest in circumstances where Mr M now says that he will only act in respect of the estate.
This Court has the inherent jurisdiction to control its own processes. Those processes involve the administration of justice generally. I am satisfied that the rule which began these reasons does not limit the Court’s power by restricting its operation only to practitioners involved in proceedings before it. The inherent jurisdiction relates to the administration of justice and the protection of the integrity of the judicial process so long as, in some way, this Court’s process involves Mr M no matter how obliquely.
The power of the Court will be exercised where a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that the legal practitioner be prevented from acting for a client (see Spincode Pty v Look Software [2001] VSCA 248 and Grimwade v Meagher [1995] 1 VR 446).
The test involving the fictional member of the public is an objective test based on what the general public could expect of the administration of justice (op cit Grimwade v Meagher).
Whilst litigants should not be deprived of their choice of representation without good cause and the power of the Court should be exercised very cautiously, the public’s interest in the administration of justice must override that right of legal representation. It is not just the administration of justice but also the public’s confidence in the legal profession and, if that is seen to be undermined, the Court should intervene. In part, a court should exercise its jurisdiction if there is a concern about the lawyer’s capacity to exercise independent judgment and objectivity. That is because it is the lawyer’s responsibility to avoid a conflict of interest. Thus, the dilemma here involves an examination of whether on the objective test mentioned above, the public would have its confidence undermined in the justice system if Mr M continued to act for the estate. Where there is a blurring of the boundaries, this Court has in the past and should now, take a cautious approach and look at the principle of the protection of the administration of justice.
In this Court also, a number of principles have been adopted from a variety of decisions of other courts. In Pond & Thurga (No 2) [2007] FamCA 587, O’Ryan J made a number of observations from other decisions which included:
· During the subsistence of a retainer, the Court’s jurisdiction to restrain a solicitor from acting for a party arises from the fiduciary obligation of the solicitor and the inescapable conflict of duty which is inherent in the situation of acting for clients with competing interests;
· Once the retainer is at an end, the Court’s jurisdiction is not based on any conflict of duty or interest but on the protection of the confidences of the former client (unless there is no real risk of disclosure);
· After termination of the retainer, there is no continuing (equitable or contractual) duty of loyalty to provide a basis for the Court’s intervention, such duty having come to an end with the retainer;
· The Court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice;
· Due weight should be given to the public interest in the litigant not being deprived of the lawyer of his or her choice without due cause; and
· The timing of the application may be relevant because of the inconvenience or impracticality of requiring lawyers to cease to act.
Objectively, would the fictional independent observer consider that there was a risk that confidential information of a client was likely to be communicated to someone who should not have that information or for it to be misused? In this case, I accept that Mr M acted for the wife and that instructions of a confidential nature were imparted. That has come from the various matters that I have earlier mentioned. Whilst Mr M’s retainer was terminated after the death of Mr Brown because he said that he was no longer able to obtain instructions but he then chose to terminate his relationship with the wife because there was a potential for a conflict however described.
It is the executors’ submission that removing Mr M would cause them cost and difficulty. That difficulty arises because of the inconvenience of having to instruct another person. I do not understand why the “information” that Mr M has creates the difficulty. If that “information” was received by Mr M from his instructions, it would strongly suggest that he obtained confidential information from Mr Brown at a time when he was also acting for the wife. The inconvenience therefore in this case is relatively modest. Insofar as there are issues of costs, they would appear to me to be modest having regard to the fact that it seemed common ground that the estate of Mr Brown ran to a number of millions of dollars. It would seem therefore that the inconvenience to the executors who will no doubt get advice and make objective decisions to carry out their instructions under the will, are not really inconvenienced much at all.
Counsel for the wife relied upon Macmillan and Macmillan (2000) FLC 93-048 in which the Full Court reinforced the principles that arose out of Thevenaz (1986) FLC 91-748. Those decisions examined the historical context in which orders were made controlling the conduct of legal practitioners. It seems to me that the important statement comes from Fletcher Moulton LJ in the Court of Appeal in England referred to in Macmillan in which he said:
As a general rule the court will not interfere unless there be a case where mischief is rightly anticipated.
The mischief here is that there is a dispute over chattels and over issues that may arise out of the estate but which at this stage are very unclear. I think it is fair to anticipate that there is a blurring of the boundaries and that Mr M will be unable to distance himself from the family law proceedings if he is required to give advice to the estate in relation to the probate application particularly having regard to the nature of what this Court has to deal with first. I have carefully contemplated the submissions of counsel. Counsel for the executors maintained there was no conflict nor potential for one because of the role that Mr M will play. I reject that for the reasons set out above but also because even if the risk is only theoretical, justice must be seen to be done. The application for disqualification on the basis of the anticipated conflict has been made at the appropriate time, sufficient evidence has been pointed to which causes me concern and there is little or no inconvenience that I can see to the executors in not having Mr M act for them even if only in respect of the estate. In my view to allow Mr M to continue to act may put him in a position where he has to choose what information he relies upon to give advice to the executors and that would put him in a position where he would be failing in his overriding duty to the Court. Where a court doubts the solicitor’s capacity to exercise that independent judgment, the restraint order should be made (see Holborow v Rudder [2001] WASCA 91).
Accordingly, I am of the view that the Court should exercise its discretion and grant the wife’s injunction.
I certify that the preceding Forty Four (44) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 9 August 2013.
Associate:
Date: 9 August 2013
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