OSFERATU & OSFERATU
[2015] FamCA 441
•12 June 2015
FAMILY COURT OF AUSTRALIA
| OSFERATU & OSFERATU | [2015] FamCA 441 |
| FAMILY LAW – LEGAL PRACTITIONERS – Where injunctive relief sought – Application to restrain husband from retaining solicitors – Where the solicitor was previously a member of the firm retained by the wife and is now a member of the firm retained by the husband –The appropriate test to apply is as set out in McMillan and the applicant has satisfied the test – Where there are no disentitling circumstances –The wife has established her entitlement to the relief sought. |
| Family Law Rules 2004, r 8.03 |
| Drover and Glasson and Anor [2014] FamCA 714 |
| APPLICANT: | Ms Osferatu |
| RESPONDENT: | Mr Osferatu |
| FILE NUMBER: | SYC | 2318 | of | 2011 |
| DATE DELIVERED: | 12 June 2015 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | 1 June 2015 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Gould |
| SOLICITOR FOR THE APPLICANT: | Watts McCray Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Kearney SC |
| SOLICITOR FOR THE RESPONDENT: | Barkus Doolan |
Orders
That the husband be restrained from further instructing or retaining John Barkus, Paul Doolan, Irene Morozov, Melinda Winning, Jayson McCauley, Carly Middleton and Jeff Marhinin trading as Barkus Doolan Family Lawyers.
That any application for costs be by way of Application in a Case supported by affidavit filed within 28 days from this date.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Osferatu & Osferatu 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 SYDNEY |
FILE NUMBER: SYC 2318 of 2011
| Ms Osferatu |
Applicant
And
| Mr Osferatu |
Respondent
REASONS FOR JUDGMENT
The present application arises in the conduct of further litigation between the husband and wife in circumstances where the parties consented to final parenting orders on 21 November 2013 and to final property orders on 29 January 2014.
Concurrently with the consent property orders the parties signed a deed of release under the Succession Act 2006 (NSW) with the intention of seeking approval to that deed by later application to the Supreme Court of NSW. An order approving the deed was made on 30 May 2014.
February 2015
On 3 February 2015 the husband filed an Application in a Case seeking certain parenting orders, summarised as follows:
a)That the family therapist be replaced;
b)That the child E resume time with the husband and the parties’ eldest son;
c)That the paternal grandmother spend defined time with the children S and E;
d)That the wife unblock the husband’s phone number on the child E’s phone;
e)That the wife deliver up the child E’s mobile phone to the court.
The orders sought substantially relate to implementation or enforcement of final orders. The husband described his application as “enforcement”.
The application was returnable before the Court on 4 May 2015. The husband was unrepresented.
Subsequently on 27 March 2015 the husband filed an Initiating Application that sought an order for the replacement of the family therapist and costs. The husband was unrepresented.
On 20 April 2015 the wife filed a Response to the husband’s Initiating Application seeking orders to the following effect:
a)That the husband’s application filed on 27 March 2015 be dismissed;
b)That the wife have sole parental responsibility for the child S in relation to issues of education and health;
c)That the appointment of the family therapist Ms GG be continued on certain conditions;
d)That there be a variation to final parenting orders made on 21 November 2013 in effect that the husband spend at no time with the child E;
e)That the husband be restrained from contacting or communicating with the child E;
f)That there be a variation of the child support departure order made on 29 January 2014 in relation to the husband’s child support obligation for the child S.
Otherwise, in her Response, the wife sought interim orders to the following effect:
a)That pending further order the husband’s time with the child E be suspended and the husband be restrained from contacting or communicating with the child;
b)That there be a variation of the child support departure order made on 29 January 2014 in relation to the child S.
On 1 May 2015 the husband’s solicitors filed a Notice of Address for Service confirming that they were once again acting for the husband.
On 4 May 2015 the husband filed an amended Application in a Case that in summary sought the following orders:
a)That the family therapist be replaced with one of three therapists nominated by the husband;
b)That the wife file and serve such evidence as she intends to rely upon to establish a material change of circumstances that she contends warrants a reconsideration of parenting orders made on 21 November 2013;
c)That the wife file and serve such evidence as she intends to rely upon to establish a change of circumstances that she contends warrants a reconsideration of child support departure orders made on 29 January 2014.
The amended Application in a Case was filed by the husband’s present solicitors Barkers Doolan Family Lawyers. That firm had been retained by the husband previously from 9 June 2011 until the final resolution of matters by consent orders referred to above.
On the 4 May 2015 consent orders provided that :
a)The wife within 7 days file and serve any application inter alia seeking to restrain the husbands solicitors from further involvement in the proceedings together with any material to be relied on,
b)The husband file a response and any material relied on within a further 14 days.
On 7 May 2015 the wife’s solicitors informed the husband’s solicitors that they would request the Court to consider an application for injunctive orders restraining the husband from instructing them prior to determination of any other interim issues. In a triumph of hope over experience the wife’s solicitors provided to the husband’s solicitors a consent order as to the proposed injunctive relief for their consideration.
Relevantly for the present considerations, the wife filed an Application in a Case on 12 May 2015 seeking orders to the following effect:
a)That’s the husband be restrained from retaining Barkus Doolan Family Lawyers;
b)That Barkus Doolan Family Lawyers be restrained from acting on behalf of the husband.
It is common ground that the partners of the firm Barkus Doolan were not a party to the proceedings and that injunctive relief sought by the wife was directed to the husband only.
On 27 May 2015 the husband filed a Response to the wife’s Application in a Case seeking that the application be dismissed and that she pay his costs.
Ultimately the only matter for determination on an interim basis was the orders sought by the wife in her Application in a Case filed on 12 May 2015, although it is clear that the fresh proceedings have the prospect of a re-litigation of issues as to parenting and financial issues relating to child support departure.
The wife relied on her affidavit filed 12 May 2015. The husband relied on his affidavit filed 27 May 2015 and the affidavit of Ms Irene Morozov filed 27 May 2015.
On 24 June 2011 the wife instructed her present solicitors Watts McCray and signed a costs agreement on that day. Mr Jeff Marhinin (“the solicitor”), who had previously been a partner in the wife’s solicitors firm until about February 2013, commenced in the employ of the husband’s solicitors on 5 May 2014. He is now a partner of that firm.
Subsequent to final orders correspondence ensued between the parties’ solicitors as to issues arising under the final orders and aspects of implementation.
On 7 May 2014 the wife’s solicitors wrote to the husband’s solicitors acknowledging that the solicitor had not had any direct dealings with the wife but that the solicitor had held responsibilities in the firm such that he was in a position to have active knowledge of all files including this matter and that further the solicitor was part of regular discussions at meetings involving professional staff at which this matter was discussed in detail and that the solicitor thus would have been privy to and aware of:
a)Who the client was;
b)Matters relating to the parties’ respective positions;
c)The client’s instructions to the firm from time to time and, the nature of advices provided to the client with access to the client electronic and physical file.
The wife’s solicitors took the position that notwithstanding the possibility that further proceedings may be commenced that upon the giving of an undertaking in terms as provided that the wife would not object to the husband’s solicitors continuing to act but that “should there be further proceedings as between our clients (howsoever described, and beyond the implementation of the terms of settlement as between our respective clients), our client reserves the right to formally object to your firm continuing to act on behalf of [the husband] and this letter is to serve as formal notice of the same”.
Subsequently a form of undertaking was agreed between the parties’ respective solicitors and signed by the solicitor on 12 May 2014. The undertaking by the solicitor is in the following terms:
I undertake to the Family Court of Australia and to Watts McCray and their client, [the wife] that I will not disclose any information that I may be aware of concerning either [the wife] or the proceedings before the Family Court of Australia between the [wife] and [husband] to any other person. In that regard, I undertake not to:
- speak with [the husband] or any person at the Barkus Doolan concerning any information I may have concerning [the wife] or her proceedings,
- disclose directly or indirectly any information that I may have in my possession or control concerning [the wife] and her proceedings,
- have any involvement in the proceedings,
- view any correspondence, tax invoices, briefs or emails either sent to Barkus Doolan or received by them, nor be involved in the matter in any manner whatsoever in the future,
- convey to any person any information about the affairs of [the wife] which I may have as a result of my employment with Watts McCray.
On 13 May 2014 the wife’s solicitors wrote to the husband’s solicitors, inter alia, in the following terms:
Our client confirms her position (recorded in our letter of 7 May 2014) that such an undertaking would only be accepted by her on the basis that – should there be further proceedings as between our clients (howsoever described, and beyond the implementation of the terms of settlement as between our respective clients) – our client would then formally object to your firm continuing to act on behalf of [the husband].
The wife’s solicitors sought an acknowledgement of that position. There was no response.
On 4 August 2014, following the various issues arising from the consent orders, the wife’s solicitors again wrote to the husband’s solicitors in the following terms:
In the event that your client proposes to file a Contravention Application, which your firm provide immediate confirmation by return that [the husband] will seek alternate legal representation in such Family Court proceedings as may be instituted by him in respect of the asserted controversy to have a rose. Please note that in the event that such a Contravention Application is filed in the Family Court and in respect of which your firm is listed as the solicitors on the record, our client has instructed us to immediately file an Application seeking that your firm be restrained from acting on behalf of [the husband].
Subsequently, on 7 October 2014, the husband’s solicitors informed the wife’s solicitors that they no longer acted on behalf of the husband and that all future communication should be forwarded to the husband directly by email.
Thereafter the husband remained unrepresented and engaged in correspondence with the wife’s solicitors and the wife directly in relation to matters in issue until his former solicitors again entered the fray.
In the context of the husband’s fresh application, the wife on 19 February 2015 informed him that “I do not wish for you to be prejudiced with your legal representation and appreciate how rusty you are in an unfamiliar environment so I have no issue in your previous law firm…representing you going forward.”
The husband responded on the same day informing the wife’s solicitors that he proposed to continue to represent himself.
On 9 March 2015 the wife’s solicitors reaffirmed to the husband directly the wife’s instructions, confirming again her previous objection to the husband’s solicitors again acting for him. On 13 March 2015, the wife by email directly to the husband confirmed her solicitor’s advice to the husband of 9 March 2015.
The husband expresses doubts as to “the ability of any other legal practitioner to acquire a competent and reasonable understanding of the matters in order to deal with these issues on an urgent basis” and complains that he will be prejudiced if he is restricted from retaining the lawyer of his choice. He asserts that he has built a significant level of trust and confidence in his legal representation and would be distressed should he be forced to engage another lawyer.
The circumstances of the solicitor coming into the husband’s firm were beyond the husband’s control, as are the prospective consequences of that occurrence.
The affidavit by Ms Morozov confirms the signing of the undertaking by the solicitor referred to above. She further deposes to arrangements within her firm for the solicitor to be, as it were, isolated from the conduct of these proceedings.
There is no evidence by the solicitor himself nor was any issue taken with the wife’s contention as to the solicitor’s role while with Watts McCray.
The test
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.
A note to the Rules makes clear that it does not purport to set out all the situations in which a lawyer may not act for a party.
In Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501 at [52]-[58], Brooking JA identified three possible grounds for restraining a solicitor or counsel from acting for a particular party to litigation:
a)the danger of misuse of confidential information;
b)a breach of a fiduciary duty of loyalty not to act against a client, or against a former client in the same matter or a closely related matter; and
c)the inherent jurisdiction of the court to control the conduct of solicitors and counsel as officers of the court.
In Pond and Thurga (No 2) [2007] FamCA 587 O’Ryan J said:
213. There are number of cases (sic) where the Family Court has dealt with what I will refer to as the first and or second grounds. The Full Court decision of McMillan v McMillan (2000) FLC 93-048 is a leading authority on the test to be applied in the family law jurisdiction. Prior to this decision it was uncertain whether a narrow test of actual prejudice or the broader test of theoretical risk of prejudice was to be applied. In this case the Full Court considered an appeal by the wife against an order restraining her solicitor from acting for her. This case involved a legal clerk that had previously been working at the firm the husband had retained in an administrative capacity. The legal clerk had worked on the husband’s file and taken his telephone calls and later moved across to working for the solicitors of the wife in the capacity of a secretary. The Full Court ultimately adopted the broad approach in Mills v Day Dawn Block Gold Mining Company Ltd [1082] QLJ 62 and In the Marriage of Thevanaz (1986) 11 Fam LR 95; FLC 91- 748 of a theoretical risk of prejudice rather than proof of actual prejudice. The Full Court found that the narrow or English approach which requires ‘real mischief or prejudice’ to follow in order to justify court intervention (an approach stemming from Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831) was inappropriate for the family law jurisdiction. The Full Court at par 56 cited with approval the summary of the law provided by Lindenmayer J in the unreported case of Stewart (unreported, 17 April 1997):
“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”.
214. Importantly, the adoption of the stricter approach in the family law jurisdiction was borne out of cases concerning practitioners that had acted for both husband and wife and reasons specific to this factual situation. In these cases the reasons for adopting this test have been based on the sensitive nature of the jurisdiction and the in-depth factual inquiries that the court was often required to make into parties financial history, conduct and contributions. Indeed these factors were present in McMillan v McMillan (supra). They were also present in Thevanez and Thevanez (1986) FLC 91-748, a decision which the Full Court referred to in McMillan v McMillan (supra) as espousing the correct approach to be taken in cases regarding dismissal of legal practitioners. See also Magro and Magro (1989) FLC 92-005; Griffis and Griffis (1991) FLC 92-233; Kossatz and Kossatz (1993) FLC 92-386.
Subsequently the issue was considered again by the Full Court in Volker and Anor [2013] FamCAFC 169.
In Drover and Glasson and Anor [2014] FamCA 714 Watts J overviewed the development of the applicable principles prior to and subsequent to Volker:
7. In relation to the first ground (the danger of misuse of confidential information) the leading authority as it applies in proceedings under the Family Law Act 1975 (Cth), before Volker and Anor [2013] FamCAFC 169 was McMillan v McMillan (2000) FLC 93-048. That decision had, in applications in the family law jurisdiction, resolved two different lines of authority in relation to the approach to the danger of misuse of confidential information. Previous cases had differently adopted a narrow test of actual prejudice or a broader test of theoretical risk of prejudice. In McMillan, the Full Court set the lower bar, requiring an applicant to only establish a theoretical risk of prejudice rather than the proof of actual prejudice.
8. The rationale for departing from the stricter test set in other jurisdictions included the extensive scope of matters that might be relevant both in a parenting case and in a property case and the level of emotions that litigants in this jurisdiction often experience.
9. That rationale was articulated in D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118 where Bryson J said:
.... 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.
10. Senior counsel for the applicant relied upon the Full Court’s 2000 decision in McMillan. Counsel for the respondent relied upon the Full Court’s 2013 decision in Volker. There are questions as to whether the Full Court in Volker intended to change the law as expressed in McMillan; whether or not there is any inconsistency between those two judgments and if there is, which decision should guide me.
11. In McMillan the Full Court said at paragraph 87:
87. 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”.
12. The discussion by Mullane J in Griffis and Griffis (1991) FLC 92-233 about what was said in Mills v. Day Dawn Block Gold Mining Company Limited; In re Marsland (1882) QLJ 62, and the extract from Stewart (Lindenmayer J., 17 April 1997 unreported), to which the Full Court refer with approval are contained at paragraphs 55 and 56 of the Full Court’s reasons in McMillan:
55. 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 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.”
56. 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.”
13. The decision in McMillan did not come as a surprise. A number of cases of a similar nature had proceeded it, including Thevanez and Thevanez (1986) FLC 91-748; Magro and Magro (1989) FLC 92-005; In The Marriage Of R P and A A Gagliano (1989) 12 Fam LR 843, Griffis and Griffis (1991) FLC 92-233; Kassatz and Kazzatz (1993) FLC 92-386 and Stewart.
14. As Coleman J observed in Billington & Billington (No. 2) [2008] FamCA 409 at [49] and [50]:
49. The passage most potentially helpful to the husband’s application before this Court arises from the Full Court’s acceptance in McMillan (supra) of the judgment of Lindenmayer J in the case of S & S (17 April 1997, unreported) in which his Honour said:-
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.
50. Clearly, the test, which the Full Court accepted in McMillan (supra) can more readily be satisfied than the test adopted by the New South Wales decisions to which reference has earlier been made.
15. The New South Wales decisions to which Coleman J referred set a narrower test of actual prejudice.
16. During submissions, reference was made to a statement of this narrower test applied in other civil jurisdictions which is succinctly stated in Durban Roodepoort Deep Limited v Mark David Reilly and Ors [2004] WASC 269 at [80]:
Before a court will grant an injunction to protect a client’s confidential information by restraining his former solicitor from acting against him, the former client must establish that the solicitor possesses confidential information and must identify the confidential information with precision and not merely in global terms. The client must identify the confidential information with some particularity. The degree of particularity required must depend upon the facts of the particular case. The confidential information must be identified with sufficient particularity to enable the court to determine whether the information is truly confidential, whether the confidential information which once existed, if it did, continues to be confidential and whether the confidential information is relevant to any issue in the current proceedings and might be used in those proceedings.
17. Counsel for the respondent relied upon the Full Court’s more recent decision of Volker. In that case, the Full Court said that the principles to be considered in determining an application to restrain a solicitor from acting are “uncontroversial”. At [45] and [46] the Full Court adopted with approval a statement of those principles by Brereton J in Kallinicos v Hunt [2005] NSWSC 1181:
45. The principles to be considered in determining an application to restrain a solicitor from acting are uncontroversial and were set out in the appellant’s written submissions at paragraph 22. They bear repeating here:
The principles involved in the application to restrain the solicitor from acting for the opposing party were discussed at length by Brereton J in Kallinicos v Hunt [2005] NSWSC 1181; 64 NSWLR 561 at [31]-[76]; and ultimately summarised by him at [76] as follows:
• During the subsistence of a retainer, where the court’s intervention to restrain a solicitor from acting for another is sought by an existing client of the solicitor, the foundation of the court’s jurisdiction is the fiduciary obligation of a solicitor, and the inescapable conflict of duty which is inherent in the situation of acting for clients with competing interests [Prince Jefri].
• Once the retainer is at an end, however, 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) [Prince Jefri].
• 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 [Prince Jefri; Belan v Casey; Photocure; British American Tobacco; Asia Pacific Telecommunications; contra Spincode; McVeigh; Sent].
• However, 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 [Everingham v Ontario; Black v Taylor; Grimwade v Meagher; Newman v Phillips Fox; Mitchell v Pattern Holdings; Spincode; Holborow; Williamson v Nilant; Bowen v Stott; Law Society v Holt]. Prince Jefri does not address this jurisdiction at all. Belan v Casey and British American Tobacco are not to be read as supposing that Prince Jefri excludes it. Asia Pacific Telecommunications appears to acknowledge its continued existence.
• The test to be applied in 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 [Everingham v Ontario, Black v Taylor; Grimwade v Meagher; Holborow; Bowen v Stott; Asia Pacific Telecommunications].
• The jurisdiction is to be regarded as exceptional and is to be exercised with caution [Black v Taylor; Grimwade v Meagher; Bowen v Stott].
• Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause [Black v Taylor; Grimwade v Meagher; Williamson v Nilant; Bowen v Stott].
• The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief [Black v Taylor; Bowen v Stott].
46. It is said that his Honour’s focus ought to have been whether “the proper administration of justice” required the appellant be restrained from acting for the wife. However, that cannot be determined in a vacuum and what was said by Pembroke J in Westpac Banking Corporation v Newey [2013] NSWSC 533 at [22] is particularly resonant in this case:
The law and lawyers would be held in disrepute if judges acceded too readily and too often to such applications. Before doing so, there must be some realistic sense of impropriety about the circumstances; something that sensibly justifies the conclusion that unless an injunction were granted, the integrity of the judicial process would be impaired. The basis for the second defendant's application existed only in the clouds, at an abstract theoretical level. The facts on which it relied were thin and the speculation on which it depended was unconvincing. On the other hand, the grant of an injunction must be grounded in pragmatism, reflecting the practical commercial reality, paying due regard to established legal principle and acknowledging norms of acceptable behaviour…
18. The facts of this case fall for determination within the second dot point of the principles set out by Brereton J at [76] in Kallinicos, that is, in this case it is asserted that a solicitor should not act because the solicitor is said to have received confidences in circumstances where the applicant believes there is a real risk of disclosure given that that solicitor now acts for the other party in the proceedings.
19. It is arguable that by the Full Court in Volker endorsing the second bullet point of Brereton J’s summary in Kallinicos, the Full Court was returning to the House of Lords’ decision in Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 and various Australian authorities which have followed that decision.
20. In Prince Jeffri Bolkhiah v KPMG (a firm) [1999] 1 All ER 517, the test relating to evidentiary burden of proving confidential information had been provided was expressed in the following way at [527]:
Accordingly, it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious. I do not think that it is necessary to introduce any presumptions, rebuttable or otherwise, in relation to these two matters. But given the basis on which the jurisdiction is exercised, there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case. In this respect also we ought not in my opinion to follow the jurisprudence of the United States. [emphasis added]
21. Prince Jeffri provides that the applicant incurs the burden of proving the solicitor has been given confidential information and is a statement of the narrower test applied in other jurisdictions.
22. Given the Full Court’s apparent endorsement in Volker of Brereton J’s citation of Prince Jeffri, in Kallinicos, as the uncontroversial basis of the protection of confidences (seemingly in this jurisdiction), the question arises as to whether or not the Full Court in Volker intended to raise the bar to require the applicant to prove that confidential information was given rather than simply asserting in an affidavit that it was, in circumstances where that assertion is contested.
23. The facts in Volker are significantly different from the facts in the current case. In Volker the Full Court held that the trial judge had incorrectly found that the solicitor acting for the wife, who had received confidential information from the husband, had disclosed that information to a third party. There was no issue in that case about whether the solicitor had received confidential information; it was agreed that he had. The issue was whether or not he had passed it on when he was duty bound not to. The Full Court concluded that the trial judge’s finding that he had, was erroneous.
24. Prince Jeffri, Kallinicos and some other cases discussed in Kallinicos, relate to the broader exercise of an inherent jurisdiction aimed at controlling situations where there is the need to preserve the proper administration of justice. Examples include situations where a lawyer becomes a witness in the proceedings; where the efficacy of documents prepared by a legal practitioner is questioned; where the lawyer has some direct pecuniary or other interest in the outcome of the proceedings, or where there is some need for the lawyer to justify and defend the lawyer’s behaviour which may involve an evaluation of the conduct of that lawyer (see Young J in Geelong School Supplies Pty Ltd v Dean at [31]). In Prince Jeffri, there was again no issue as to whether confidential information had been received but a focus on a volume of evidence about whether effective Chinese walls had been created within a large accounting firm to ensure the confidentiality was protected.
25. In the current case, the question is what approach is to be taken in the hearing of a matter when an assertion is made that confidential information has been provided to a solicitor and the respondent seeks to refute that assertion.
26. Given the facts in Volker, that case did not raise any issue as to whether or not confidential information had been provided. Consequently any reference to the proof required when a litigant asserts that confidential information has been provided, is obiter. Given that the Full Court in Volker did not mention McMillan, nor specifically refer to any of the cases mentioned in McMillan, in my view the Full Court in Volker could not be said to have intended to overrule McMillan and I remain bound by that authority in determining this application and not by the more stringent standards set from decisions emerging from other civil jurisdictions.
27. To reiterate the Full Court’s endorsement in McMillian of what Lindenmayer J said in Stewart:
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.
Discussion
The application is founded on the first ground identified above and in the Court’s inherent jurisdiction 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.
The wife retained the firm of Watts McCray to act for her by reason of her costs agreement with that firm. She retained the services and resources of the firm, not any particular solicitor in that firm. The solicitor was a member of that firm. The wife’s retainer of Watts McCray continues. It is not of her doing that the solicitor left that firm and subsequently became a partner of the husband’s present solicitors.
The solictor’s retainer by the wife ended with him leaving Watts McCray.
Once the retainer is at an end, however, 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).
The solicitor’s role and responsibilities in Watts McCray as asserted by the wife are not in issue, particularly where the solicitor himself gives no evidence.
Notwithstanding the contention by counsel for the husband that there is no distinction between the state authorities and family law authorities the discussion above clearly demonstrates that the test formulated in McMillan is to be applied in this jurisdiction.
All that is necessary is that the wife contends 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. That is the nub of the wife’s case.
Otherwise 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 (Kallinicos v Hunt [2005] NSWSC 1181 ).
The test to be applied in the 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 (Kallinicos (supra)).
In the circumstances of the solicitor’s role as “Work Director” when a partner in Watts McCray, and his engagement in detailed discussions as to the wife’s case and the wife’s evidence of her concerns that the nature of her instructions to Watts McCray and the advices given to her by that firm may be communicated to the husband’s solicitors through the solicitor, it is readily apparent that the proper administration of justice is clearly indicative of the relief sought by the wife.
Are there any disentitling circumstances? Notwithstanding that due weight should be given to the husband’s right to instruct whoever he chooses, the present circumstances are not of his doing. The intake of a new partner into a firm must prospectively put that firm on notice of circumstances such as these.
It is contended by the husband that the court should weight the wife’s delay in bringing the application. The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief (Kallinicos (supra)). No such submission was made on behalf of the husband. Irrespective of the ground relied upon to restrain a legal practitioner from acting for a party to litigation, delay, and especially unreasonable or unexplained delay, is a relevant factor. In McGillivray v Mitchell (1998) FamCA 96 the Full Court said:
… if a family law litigant has a genuine concern about a former legal adviser acting against him or her in later family law litigation, the litigant must take the point at least in correspondence with the other side at the earliest possible opportunity. If he or she does not do so, then he or she is possessed of a weapon which can later be used as a delaying tactic at some point in the proceedings convenient to his or her position. Furthermore a failure to take the point initially must also cast doubt on the bona fides of any later complaint concerning the existence of confidential information in the practitioner in question, and on the bona fides of any alleged apprehension regarding the possible misuse of such confidential information.
There has been no delay. The wife’s solicitors have steadfastly maintained the wife’s position and brought the present application in a timely manner.
The husband asserts a “waiver” by the wife occasioned by her personal email to the husband. The course of the matter leading to the present application is set out above. The wife’s asserted “waiver” was made in the context of the husband’s first application in a case as to “enforcement”. It was quickly asserted by her solicitors that she continued to maintain her qualified consent to the circumstances where the husband may retain his former solicitors.
Whilst such injunctive relief is to be regarded as exceptional and is to be exercised with caution, the circumstances of this matter are clearly indicative of the relief sought by the wife being granted. The wife has established her entitlement to the relief sought.
Orders will be made accordingly.
I certify that the preceding fifty-seven (57) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered 12 June 2015.
Legal Associate:
Date: 12 June 2015
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