Perrell and Richter

[2010] FamCA 1193

FAMILY COURT OF AUSTRALIA

PERRELL & RICHTER [2010] FamCA 1193

FAMILY LAW – INJUNCTIONS – Restraining a lawyer from representing a party

Family Law Rules 2004 r 8.03

Kallinicos & Anor v Hunt and Ors [2005] NSWSC 1181
Garrey and Crosby [2007] FamCA 696
Selen and Selen [2009] FamCA 309
McMillan and McMillan (2000) FLC 93-048
Thevenaz and Thevenaz (1986) FLC 91-748
Stewart (17 April 1997), Lindenmayer J
D & J Constructions Pty Limited v Head (1987) 9 NSW LR 118
L and L [2003] FamCA 777 Kay J
McGillivray v Mitchell [1998] FLC 92-818

APPLICANT: Ms Perrell

RESPONDENT: Mr Richter

FILE NUMBER: SYC 3271 of 2010

DATE DELIVERED: 22 December 2010

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Johnston J

HEARING DATE: 18 August 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Livingstone

SOLICITOR FOR THE APPLICANT: Armstrong Legal

COUNSEL FOR THE RESPONDENT: Ms Christie

SOLICITOR FOR THE RESPONDENT: Z Firm

Orders

1. That Mr A and Z Firm be restrained from further acting for the husband in these proceedings.

IT IS NOTED that publication of this judgment under the pseudonym Perrell & Richter is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 3271  of 2010

MS PERRELL

Applicant

And

MR RICHTER

Respondent

REASONS FOR JUDGMENT

Introduction and Applications

1. The parties in these proceedings are Ms Perrell and Mr Richter.  For convenience I shall refer to them as “the wife” and “the husband” respectively.

2. The parties are in dispute about their property.  An interlocutory issue has arisen for determination.  This is that the wife asserts that it is inappropriate for the husband’s solicitor, Mr Z to continue to represent the husband.  The wife says that Mr Z had represented her many years ago in property settlement proceedings arising from her previous marriage.

3. In these circumstances the wife seeks orders to the following effect:

   1.That Mr [Z] and [Z Firm] be restrained from further acting for the husband.

   2.Costs.

4. The husband opposes the application and seeks an order that it be dismissed.

Background

1. The wife instructed her solicitors to forward a letter dated 6 July 2010 to the husband’s solicitors Z Firm.  In that letter the wife’s solicitors informed the husband’s solicitors as follows:

   1.Our client was involved in family law proceedings in or about 1990/1991 involving [the wife’s former husband]. 

   2.[Mr Z] acted on her behalf in these family law proceedings.

   3.Our client is personally acquainted with Ms [X] of your firm. 

   4.Over the course of our client’s family law proceedings our client provided [Mr Z] with confidential information.

   …

   … [I]n all the circumstances it appears that it would be inappropriate for your firm to continue acting in these proceedings.  We now ask that you cease to act for [the husband] in these proceedings.  …

2. On 7 July 2010 the husband’s solicitors wrote to the wife’s solicitors.  The letter was signed by Ms X.  Amongst other matters the letter included the following:

   … To the best of the writer’s knowledge Mr [Z] did not act for [the wife] in relation to her family law proceedings.  …

   Mr [Z] did not receive any information that was confidential he did not act for [the wife] in proceedings with her ex-husband.

   Mr [Z] is currently overseas, we have spoken with him this evening, he has no recollection whatsoever of ever acting for [the wife] in relation to any family law matter.  There is no family law file in this firm’s possession.  We have searched the records of this firm in 1990 and 1991 and there is no client file opened in your client’s name.

   There is no information in this firm’s possession or knowledge that is confidential or raises any possibility of conflict, there is no knowledge whatsoever.  Further, if your client believed this was the case then this should have been raised in early February, 2010 after the first letter from this firm to your firm.  To raise such at this stage is tantamount to an abuse of process.

   This firm will continue to act for [the husband]. 

   …

3. The wife has deposed in her affidavit sworn on 9 July 2010 that she initially sought advice from another solicitor then she attended Mr Z’s office in about 1990/1991 to make arrangements for her family law property settlement.  She also attended Mr Z’s office to accompany the husband in these proceedings during his dealings with Mr Z.

4. In her subsequent affidavit sworn on 15 July 2010 the wife deposed to the effect that in or about late 1991 or early 1992 she had a conversation with Mr Z at his office to the following effect.  Mr Z informed her that her former husband had approached him to ask him to represent him in the family law proceedings with her and that Mr Z informed him that he could not act for him as he was acting for the wife.

5. The wife also asserted that she and the husband have had some social interaction with Mr Z including offering him some hospitality at their home.

6. Mr Z deposed in his affidavit sworn on 9 August 2010 that he has no recollection of the above alleged conversation.  Mr Z agreed that on occasion he has dined with the husband and the wife. 

7. Mr Z said that since reading the wife’s affidavits he has become aware that while his firm has no record of acting for the wife, the firm did act for her in about 1992 in relation to her property settlement with her former husband.  He said the firm has no file in relation to the property instructions nor in relation to any divorce application.

8. Mr Z also said that he has no independent recollection of acting for the wife in her previous divorce proceedings and that the totality of his knowledge about the wife’s previous property settlement was what was contained in documents from the relevant court file which he annexed to his affidavit and documents which the wife annexed to her affidavit.

9. It is clear that Mr Z acted for the wife in her previous family law property and divorce proceedings in approximately 1992.  The wife annexed to her affidavit a copy of a Transfer by her former husband of his one-half interest in a property to the wife in April 1992.  The document bears the signature of Mr Z and he has signed as “solicitor for Transferee” and the transferee is clearly the wife.  The wife also annexed to her affidavit a copy of a statutory declaration made by Mr Z on the same day namely, 3 April 1992 in which Mr Z describes himself as the solicitor acting on behalf of the wife in effecting a property settlement with (her former husband).  The statutory declaration also included the statement that Mr Z had also received instructions to prepare an application for dissolution of marriage on behalf of the wife. 

The wife’s case

1. It is submitted that the wife asserts that confidential information was conveyed by her to Mr Z.  It is submitted that this must have included the terms of her property settlement, her assets at the time and other personal information including the circumstances in which she was prepared to settle her dispute with her former husband. 

2. It was also submitted that in circumstances where the wife had given evidence of certain dealings between the husband in these proceedings and Mr Z, Mr Z might be called as a witness in the proceedings particularly because the husband, the wife and Mr Z knew one another very well.  I must say in relation to this aspect it is unnecessary to refer to the details because I am far from satisfied that there would be any possibility that Mr Z might be a witness in the proceedings. 

3. In any event it was submitted that in accordance with the well-known principles of law in this area it would be quite unfair and inappropriate for Mr Z to continue to act for the husband against the wife in circumstances where the wife had conveyed confidential information to him when he had previously acted for her. 

The husband’s case

1. On the other hand it was submitted by learned counsel for the husband that the test to be applied is an objective one namely, 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 as was observed by Brereton J in the New South Wales Supreme Court case of Kallinicos & Anor v Hunt & Ors [2005] NSWSC 1181 at paragraph 75. It was submitted that as his Honour observed the jurisdiction is to be regarded as exceptional and is to be exercised with caution. 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.

2. It was submitted that the circumstances of the present case fall well short of what would be required for a proper exercise of the Court’s jurisdiction in this regard.  It was submitted that what the wife has asserted as confidential information is in fact not confidential at all.  The solicitor Mr Z has indicated that he does not have a file containing any material from the wife, that there is no confidentiality in the Terms of Settlement nor in whatever assets she had at the time.  In addition it was submitted that nowhere has the wife deposed to the fact that she provided confidential information.  It was submitted that the husband has a long professional association with Mr Z, Mr Z having acted for him on 22 occasions. It was also submitted that the wife did not raise her objection until well after the institution of proceedings between the parties.

3. It was submitted that the husband accepts that the test in family law proceedings is a broad one and that the wife must establish that she has imparted confidential information so that at least there is a theoretical risk that such information could be used to her prejudice. 

The applicable law

1. As I observed in both Garrey and Crosby [2007] FamCA 696 at par 32 and Selen and Selen [2009] FamCA 309 at par 36 it is clear from the decision of the Full Court of this Court in the case of McMillan and McMillan (2000) FLC 93-048 that two approaches have developed in this area concerning restraints on legal practitioners. These were described by the trial judge in that case, Wilcek J, as the “narrow” or “English” approach and the “broader” or “family law” approach. They were described as follows at pages 87,718 and 87,719:

   The first approach was described as being either the ‘narrow’ or ‘English approach’ with numerous authorities referred to, with a suggestion that a court would only intervene when it is convinced both that a confidence has been reposed in a lawyer by a former client, and that it is probable that this confidence will be used in the subsequent proceedings to the disadvantage of the former client.  On that approach the court would ignore theoretical risks.

   The second approach was referred to as being a ‘broader’ or ‘Family Law’ approach where it was said that the court will intervene if there is ‘a reasonable apprehension that confidential information has been given to a lawyer by a former client and that there is at least a theoretical possibility that this information might be used to the disadvantage of that client’.  To that end earlier decisions were referred to such as that of Justice Frederico in Thevenaz (1986) FLC 91-748, Rourke J in Magro (1989) FLC 92-005; Smithers J in A and B (1990) FLC 92-126; Mullane J in both Griffiths (sic) (1999) (sic) FLC 92-233 and Kozatz (sic) (1993) FLC 92-386.

2. In McMillan (above) the Full Court endorsed the “broader approach”.  It said at page 87,733 as follows:

   To the extent that it is necessary in this case for us to express a concluded view … we would support the application in this jurisdiction of the approach of Frederico J in Thevenaz (following Mills) which was adopted by Mullane J in Griffis and in Kossatz (and also by Lindenmayer J in the unreported case of Stewart to which we will shortly refer).  We would do so for the reasons related to the sensitive nature of the jurisdiction which were referred to by Bryson J in D & J Constructions and by Rourke J in Magro, and indeed also by Wilczek J in the present case.

3. In Thevenaz (above) Frederico J was prepared to restrain a solicitor from acting on behalf of the wife in property settlement proceedings against the husband where that solicitor had previously been in partnership with another solicitor, who had handled conveyancing matters for the husband and the wife.  Frederico J said at page 75,446:

   The problem, however, is that it is the practitioner's duty to put at his client's disposal, not only his skill but also his relevant knowledge, and if he is not prepared to make that knowledge available, he should not act.  (See Spector v Ageda (1973) 1 Ch 30.) [The solicitor] is thus under a duty to make available to his client such information as may appear from the files of the parties formerly kept by Mr Halliday which are in [the solicitor’s] possession or power.

4. Frederico J went on to say at page 75,447 as follows:

   It is my view that in this case (the solicitor) should not continue to act on behalf of Mrs Thevenaz.  It may well be that the risks were he to do so are more theoretical than practical.  However, it is asserted and not contradicted that material in the files does relate to confidences exchanged in the course of the former firm previously acting on behalf of both parties and would embarrass the husband.  It is of the utmost importance that justice should not only be done but should appear to be done.  In the circumstances of the present case, there is a risk which may well be merely theoretical but still exists, that justice might not appear to be done.

5. In the unreported decision of Stewart (17 April 1997), Lindenmayer J accepted Mullane J’s exposition of the law as his Honour set out in Griffis and Kossatz  and said as follows:

   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 … 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.  … [I]t 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.

6. In the New South Wales Supreme Court case of D & J Constructions Pty Limited v Head (1987) 9 NSW LR 118, referred to by the Full Court in McMillan (above), Bryson J said as follows at page 123: 

   … 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.

7. In L and L [2003] FamCA 777 Kay J was considering an application to restrain a firm of solicitors from acting for a party to a marriage in circumstances where the solicitors had previously acted for the opposing party some 15 years previously. The objection consisted of two parts. Firstly, the husband deposed that he had been previously represented by the solicitors in property settlement proceedings with his former wife and that as a result the solicitors would have knowledge of him and his financial position. Secondly, there was a letter from the husband’s lawyers to the solicitors informing them of the husband’s objection to them acting for the wife.

8. His Honour granted the injunction saying at page 3 as follows:

   My conclusion from McMillan is that the test is indeed a very stringent test, stringent in the sense of not narrow but broad.  If a solicitor theoretically is imparted with information that could embarrass the other side, then if the other side is not unreasonably of the view that that information might be used against them, the solicitor ought to be restrained from acting.

   It is the application of the test in this case that is of concern to me.  The first leg, as I say, is clear.  The solicitor has previously acted for the husband 15 years ago.  It is extremely doubtful to me that there is likely to be any information that could possibly be in conflict, but that is not the test. 

   I do not have the expressed belief that the information may be used to a disadvantage other than by necessary implication from the very fact that these proceedings were occurring and that the letter came fairly rapidly from the husband's solicitors.

   Given the strict nature of the test that has arisen in McMillan's case, I think that it is better to err on the side of caution in these proceedings and, as regrettable as it may seem to the wife in the proceedings, I think the injunction must flow. I propose to grant the application and restrain the wife's solicitors from further acting in these proceedings.

Conclusion

1. I must say that I propose to adopt the approach taken by Kay J in L and L (above).  As was submitted by learned counsel for the husband, the wife has not deposed to having imparted confidential information to Mr Z.  But the wife instructed her solicitors to write to the husband’s solicitors and inform them that over the course of her family law proceedings with her former husband she provided Mr Z with confidential information.  In any event, it is difficult to contemplate that the circumstances in which the wife relied on Mr Z acting for her in the proceedings would not have involved some communication to him of confidential material.  In my view this supports the wife’s assertions. 

2. In my view, given the nature of what is involved in a resolution of a matrimonial property dispute, the wife should be afforded the benefit of any doubt in the circumstances of this case. 

3. It is true that the husband will suffer the prejudice of not being able to be assisted by the solicitor who has acted for him over many years.  But in my view this Court should err on the side of caution in the interest of its high duty to ensure that justice be seen to be done.

4. The remaining matter for consideration is whether the wife has left it too late to raise her objection.

5. The wife said that she had always regarded Mr Z as the husband’s solicitor and had not focussed on the fact that Mr Z had represented her in her previous family law proceedings many years ago.  The wife said that she was unaware that she could challenge the husband’s choice of solicitor until she had a conference with her counsel on 1 July 2010.  As indicated above, shortly thereafter her solicitors wrote to the husband’s solicitors raising the wife’s objection.

1. The relevance of delay in a similar context was the subject of consideration by the Full Court of this Court in the case of McGillivray v Mitchell (1998) FLC 92-818.

2. In that case the husband had sought an order restraining the wife and her solicitor from instructing a certain practitioner from representing the wife in circumstances where the practitioner had previously acted for the husband.  The Full Court upheld the trial judge’s refusal to make the order.  But this was clearly on the basis that in the exercise of the Court’s discretion, the Court decided that the husband had delayed in taking steps to have the practitioner restrained.

3. At page 85,304 the Full Court said as follows:

   34.  In the present case we consider that the husband’s failure to make any protest to the other side regarding Mr Dowding’s involvement, or to take steps to have Mr Dowding restrained from acting for the wife, at or very close to the point in time when he became aware of Mr Dowding’s involvement, is a most relevant consideration which would have to be taken into account adversely to the husband on whichever approach was adopted.

   …

   36.  It is our opinion that 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 mis-use of such confidential information.

4. In my view the facts of the present case are quite different from those in McGillivray (above).  Firstly, there is nothing to suggest that the wife has waited to raise her objection as a delaying tactic.  Secondly, in McGillivray, a prominent matter in persuading the Court not to exercise its discretion in favour of restraining the legal practitioner was the fact that a strategic decision had been made by the husband upon legal advice not to object to the practitioner’s involvement whilst there remained an opportunity for early settlement of the case.  This was regarded by the Court as being acquiescence by the husband in the practitioner’s involvement and this was relevant to the exercise of the discretion. 

5. In the present case, I do not interpret the somewhat loose language used by the wife to explain her delay as demonstrating either a lack of bona fides or acquiescence on her part in Mr Z’s involvement. I accept that she has a genuine concern about Mr Z’s involvement but only became aware that she could endeavour to do something about this upon receiving advice from her counsel on 1 July 2010.

6. Accordingly, I do not regard the fact that the wife did not raise her objection until the letter from her solicitors to the husband’s solicitor dated 6 July 2010 as a matter which would in any manner support an exercise of the discretion against the relief sought by her.

7. In my view, the order sought at paragraph 1 of the wife’s application should be made.

I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johnston delivered on 22 December 2010.

Associate:     

Date:              22 December 2010