Petrone and Petrone
[2019] FCCA 2622
•18 September 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PETRONE & PETRONE | [2019] FCCA 2622 |
| Catchwords: FAMILY LAW – Property settlement proceedings between husband and wife – husband applies to restrain wife’s solicitors from continuing to act for her – “breach of confidence” ground considered – “inherent jurisdiction” considered including the “getting to know you” factors – waiver and delay – application dismissed. |
| Legislation: Federal Circuit Court of Australia Act 1999, s.8(3) Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015, r.27 |
| Cases cited: Chapman v Rogers; ex parte Chapman [1984] 1 Qd R 542 Dalton & Dalton (2017) FLC 93-773 Gillam & Gillam [2017] FCCA 64 Osferatu and Osferatu (2015) FLC 93-666 Thevenaz & Thevenaz (1986) FLC 91-748 |
| Applicant: | MR PETRONE (BY HIS LITIGATION GUARDIAN MR B PETRONE) |
| Respondent: | MS PETRONE |
| File Number: | NCC 2575 of 2017 |
| Judgment of: | Judge Betts |
| Hearing date: | 12 April 2019 |
| Date of Last Submission: | 23 April 2019 |
| Delivered at: | Newcastle |
| Delivered on: | 18 September 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr Bateman |
| Solicitors for the Applicant: | Paton Hooke Lawyers |
| Counsel for the Respondent: | Ms Gillies SC with Ms Carty |
| Solicitors for the Respondent: | Merrick Spicer & Associates |
ORDERS
The court dismisses the husband’s application to restrain the wife’s solicitor and/or her law firm from continuing to represent her in the proceedings.
The proceedings are adjourned to 9.30am on 18 October 2019 for directions.
Costs are reserved.
IT IS NOTED that publication of this judgment under the pseudonym Petrone & Petrone is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 2575 of 2017
| MR PETRONE (BY HIS LITIGATION GUARDIAN MR B PETRONE) |
Applicant
And
| MS PETRONE |
Respondent
REASONS FOR JUDGMENT
Overview:
These are property settlement proceedings between husband and wife arising out of the breakdown of their twenty-three (23) year marriage in 2016.
The husband’s brother Mr B Petrone has been appointed as the husband’s Litigation Guardian in the proceedings as a result of the husband being under a legal disability. In particular the husband suffered brain damage in 1999 following a burst intra-cranial aneurysm. The husband’s brain damage has adversely impacted his memory and his personality. He suffers from major depression and anxiety and is required to take a range of medications.
What is presently before me is an interlocutory application by the husband to restrain the wife’s solicitor (Mr Spicer) and law firm (Merrick Spicer) from continuing to act for the wife in the proceedings.
The wife opposes the husband’s application.
Background facts:
In order to understand the basis for the restraining application it is helpful to set out some basic background in relation to the property settlement proceedings.
The case involves only modest assets.
A major point of contention between the parties – if not the major point of contention - relates to the ownership of the former matrimonial home. Including or excluding the home from the Balance Sheet makes a big difference to the likely property division.
The home was owned by the wife’s mother and rented out to the parties over a lengthy period up to and including the wife’s mother’s death in 2015, the year prior to the parties’ separation.
The wife was her mother’s only child. Pursuant to the wife’s mother’s will which has since been admitted to probate (“the will”), the home was bequeathed solely to the wife.
The will was drafted by the wife’s solicitor. It included a clause which was clearly intended to try to keep the home out of the potential clutches of the husband in the event of any family law proceedings subsequently arising between the husband and the wife. In particular, clause 7 of the will provided:
“I direct that my trustee not administer my estate so as to see a benefit pass to any of my named beneficiaries in circumstances where such administration would put at risk the gift to the beneficiary through a property settlement pursuant to the Family Law Act, a claim from a creditor, or other obvious wastage. In these circumstances, my trustee has absolute discretion as to when and if a gift under my Will should vest in any beneficiary, notwithstanding any age requirement of my Will or other condition ………”
Not only did the wife’s solicitor draft the will, but he is also one of the two (2) joint Trustees of the will. The other trustee is an old family friend of the wife’s mother, one Ms C.
Following the wife’s mother’s death and up until separation, the home remained an un-administered asset of the wife’s mother’s estate. Title was never transferred to the wife. Nor has title been transferred to the wife in the three (3) subsequent years since separation.
The wife’s solicitor, and Ms C, effectively continue to hold the home as trustees so as to give effect to the terms of the will, most notably clause 7.
The wife deposes that she recently asked the trustees to release some of her cash entitlements from the estate in order that the wife could pay for some much-needed car repairs, but that the trustees refused. Their advice to her was that such a payment “would be a breach of clause 7 of your mother’s will. You will simply have to wait.”
If the wife in fact feels aggrieved by the trustees’ determination, she has done nothing about it in any formal sense. She (and the trustees) all have standing to apply to the Supreme Court of New South Wales to seek orders or declarations in relation to the correct interpretation of the will, or in relation to the administration of the estate generally. Yet none of them have done so.
For his part, the husband has no standing to bring such an application.[1] For now at least, the home remains out of reach of the husband in these proceedings. The wife, and the parties’ two (2) children, continue to live there.
[1] In this respect I accept the further written submissions of the wife filed 23 April 2019
Short litigation history:
On 28 August 2017, the wife filed her Initiating Application seeking property settlement orders. Her proposed orders included a modest cash payment by her to the husband. The home was not specifically referred to in her proposed orders, although her general “catch-all” order means that she would retain it (and any other beneficiary entitlement of hers pursuant to the will.)
On 7 November 2017, the husband’s Litigation Guardian was appointed.
On 15 November 2017, the husband first filed a Response in which he sought, inter alia, an interim restraining order in respect of the wife’s law firm. The husband was at that time represented by Stacks Law Firm.
Then, on 20 March 2018 the husband filed an Amended Response which expressly abandoned the restraining order. (Otherwise he sought on an interim basis that clause 7 of the will be set aside pursuant to s.106B of the Act and that, consequentially, the wife be required to do all things necessary to cause her mother’s estate to be administered so that the home would vest in the wife’s name. On a final basis he sought a cash payment from the wife equal to half of the market value of the home.)
On 20 June 2018 the husband’s then law firm withdrew. The husband’s present law firm, Paton Hooke, filed a Notice of Address for Service. On 21 June 2018 Paton Hooke promptly wrote to Merrick Spicer inviting them to withdraw as the wife’s legal representatives. The letter asserted that Mr Spicer should not continue to act given that he is a trustee of the wife’s mother’s will and thus has responsibility for decisions in relation to the administration of the estate including payments to the wife of her beneficial entitlements. The letter also asserted that Mr Spicer would be a material witness at trial and that there was an “obvious” conflict of interest warranting a restraining order in the exercise of the court’s inherent jurisdiction.
The wife’s law firm did not accept the invitation to withdraw. Therefore on 17 August 2018, the husband filed a Further Amended Response. In it he formally revived his earlier application to restrain the wife’s law firm from acting. This time the wife’s solicitor, Mr Spicer, was also specifically named and a restraining order sought against him personally.
It is this Further Amended Response which was pressed before me.
The hearing:
The husband’s interim applications first came on for hearing on 9 November 2018.
Although the husband’s interim application pursuant to s.106B was also “live” that day, the parties agreed that the restraint application needed to be determined first.
At that stage the husband’s restraint application was founded upon the court’s inherent jurisdiction to restrain a solicitor. However, over the course of a lunchtime conference with his legal representatives that day, the husband was prompted to remember that the wife’s solicitor, Mr Spicer, had personally acted for him in a number of previous legal matters. The husband wished to agitate these further matters in support of his restraint application.
In the face of this new information, the husband’s legal representatives then hurriedly prepared a written proof of evidence from the husband deposing to such matters. The proof was then provided to the wife’s legal representatives at or about the time the hearing was about to commence. Understandably, they complained about the lateness of the evidence and sought an adjournment to respond.
The adjournment application was irresistible and the matter was therefore adjourned to 12 April 2019 with further directions made for the filing of material in the meantime.
The parties took the opportunity to file that further material. Ultimately, when the matter came back on for hearing on 12 April 2019 the parties relied upon the following documents:
Husband:
(a)Further Amended Response filed 17 August 2018;
(b)Consent Order for the appointment of a Litigation Guardian made on 7 November 2017;
(c)Affidavit of the husband’s solicitor, David John Fryatt, filed 15 November 2017 (relating to the Litigation Guardian application);
(d)Affidavit of the husband filed 17 August 2018;
(e)Financial Statement of the husband filed 17 August 2018;
(f)Case Outline document filed on 5 November 2018 (prepared for the hearing on 9 November 2018);
(g)Updated affidavit of the husband filed 4 December 2018 (being the additional evidence as to “confidential information”).
Wife:
(a)Reply filed 31 July 2018;
(b)Affidavit of the wife filed 28 August 2017;
(c)Affidavit of the wife filed 8 August 2018;
(d)Affidavit of the wife filed 28 February 2019 (responding to the husband’s updated affidavit filed 4 December 2018);
(e)Affidavit of Ms A, a Law Clerk employed by the wife’s law firm, filed 28 February 2019 (responding to the husband’s updated affidavit filed 4 December 2018);
(f)Outline of Submissions of the wife filed 12 April 2019;
(g)Further written submissions of the wife filed 23 April 2019.
In arriving at its decision, the court has had regard to all of the above material as well as the oral submissions of counsel and the exhibits which were tendered.
The jurisdiction to restrain a Solicitor:
In its unanimous judgment in Osferatu and Osferatu (2015) FLC 93-666, the Full Court [2] helpfully reviewed the authorities relating to the making of restraining orders against solicitors.
[2] Finn, Ainslie-Wallace and Aldridge JJ
The Full Court confirmed that there are three (3) established categories of case in which a solicitor may be restrained from acting against a client or former client:
(i)to prevent a breach of confidence;
(ii)to prevent a breach of fiduciary duty; and
(iii)otherwise in the exercise of the court’s inherent jurisdiction over its officers and to control its process. (This category may overlap with the first two, but the basis for the exercise of the jurisdiction in each category is different.)
The “breach of confidence” ground:
The rationale for the “breach of confidence” category is that: “It is of overriding importance to the administration of justice that a client be able to have complete confidence that what he/she tells his/her lawyer will remain secret. This is a matter of perception and of substance. It is of the utmost importance to the administration of justice that a solicitor in possession of confidential information not act in any way that might appear to put that information at risk of coming into the hands of someone with an adverse interest.” [3]
[3] Taken from the judgment of Lord Millett in Prince Jefri Bolkiah v. KPMG (A Firm) [1999] 2 AC 222 at 236, cited with approval by the Full Court in Osferatu (supra) at 80,413
An applicant for a restraining order carries the evidentiary onus of adducing cogent evidence that he/she imparted “confidential information” to the solicitor and that such information is, or may be, relevant to the new matter in which the solicitor acts for a party with an adverse interest.
The applicant cannot be obliged to disclose the “confidential information” said to have been imparted, as this would defeat the purpose of the restraint. Nonetheless the applicant must provide some degree of specificity in order to enable the solicitor to respond and the court to rule on it. As Bryson J held in Mancini & Mancini [1999] NSWSC 800:
“A case about confidential information cannot be nebulous. Confidential information which existed may no longer be confidential; it may no longer be available although it was communicated in the past; it may not be material to any use which might now be proposed to be made of information. Without specificity a claim to protection cannot be defended or decided on any fair procedural basis…” [4]
[4] Quoted with approval in paragraph 27 of the joint judgment in Osferatu (supra) at 80,412 – 80,413
Some instances of “confidential information” are obvious – such as information recently provided by the client to the solicitor and going to the very matter in issue. [5] But in practice the situation will usually be less clear-cut and the court will be required to make its own assessment as to the nature of the information, the circumstances in which it was provided, and its possible relevance to a matter in issue.
[5] See paragraph 26 of the judgment in Osferatu (supra) at 80,412
If the court considers that the applicant has provided relevant “confidential information” to the solicitor, then the onus shifts to the solicitor or law firm to establish that there is no risk of disclosure. In observing that there is a continuum of risk from obvious to remote, the Full Court in Osferatu held that the relevant test is whether there is a real risk of disclosure as distinct from a risk which is merely theoretical or fanciful. [6] Note however that a real risk need not be substantial risk. [7]
[6] Paragraph 39 of the joint judgment in Osferatu (supra) at 80,414
[7] See paragraph 32 of Osferatu (supra) citing the decision in Prince Jefri (supra)
Weighing of the risk of disclosure will require consideration of any measures the law firm has put in place (or proposed to put in place) in order to prevent disclosure of the confidential information.
In the overall analysis, the court must carefully weigh the nature and relevance of the “confidential information” and the risk of its misuse in the proceedings because, as the Full Court emphasised in Osferatu, the jurisdiction to restrain a solicitor is one which needs to be exercised with caution having regard to the totality of the evidence. It is not only the interests of the applicant that must be weighed, but also the interests of the opposing party who has engaged the solicitors in question and who would be put to the cost and inconvenience of changing lawyers if the restraining application succeeds. [8]
[8] See paragraph 28 of Osferatu (supra) at 80,413
In my respectful view, the Full Court’s reference to a real as distinct from a theoretical risk of misuse of confidential information sets a clearer test for the determination of these types of applications and to some extent “raises the bar” for an applicant. It is not enough for an applicant merely to depose that he/she imparted “confidential information” to the former solicitors. The court has to consider whether there is a real risk of relevant confidential information being misused. So much is no more than an acknowledgement that there are competing interests of the parties to be weighed.
Did the husband provide the wife’s solicitor (or law firm) with “confidential information” that is or may be relevant to the current proceedings?
The wife’s solicitor and firm have acted for both parties in various transactions over the years. (The law firm also acted for the wife’s mother as noted earlier.)
Acting on the husband’s authority, the wife’s solicitors have since searched their records for all files held in relation to the husband. The files have been retrieved and forwarded to the husband’s current solicitors. The wife’s law firm no longer holds the files.
Because of the husband’s brain damage and its admitted impacts upon his memory, the overall evidential picture in relation to the husband’s attendances upon Merrick Spicer is somewhat unsatisfactory. While the husband’s affidavit filed 4 December 2018 sets out his recollection of his past dealings with Merrick Spicer, this evidence is at odds with the affidavit evidence of a legal secretary employed by Merrick Spicer, one Ms A who has searched (and returned to Paton Hooke) all of the files said to be held by Merrick Spicer in relation to the husband. Ms A’s evidence is corroborated by an affidavit from the wife.
This conflict in the evidence brings me to a point of principle.Whose evidence should I act upon?
In Thevenaz & Thevenaz (1986) FLC 91-748, Frederico J held:
Thus “a practitioner who wishes to cease acting for one party and to continue to act for the other party will be restrained from doing so by the Court if there is any evidence that confidential communications have been made to him by the party for whom he is ceasing to act. In such a case, the Court will not weigh conflicting evidence as to confidence. It will act upon the evidence of the client who swears that he has made the confidential communication.” [9]
[9] At page 75,447 – citing with approval a Victorian textbook at the time relating to legal ethics
In McMillan & McMillan (2000) FLC 93-848, the Full Court endorsed the Thevanez approach, but this was in a context where the client had only very recently provided instructions to a law clerk at to the very matters in issue.
In Osferatu the Full Court observed that this was a critical feature of the facts in McMillan. By implication the bar is easier to overcome for an applicant in such circumstances. This case is different. The husband does not suggest that he instructed Merrick Spicer as to matrimonial matters.
The husband nonetheless deposes that he provided Merrick Spicer with “confidential information” which could be misused.
If I were to act on the husband’s version of events, I would be effectively disregarding both his admitted memory difficulties and the results of Merrick Spicer’s seemingly comprehensive search of their files, which evidence is corroborated by the wife.
In the particular circumstances of this case, and noting the onus upon the husband to provide cogent evidence, I propose to proceed on the basis that, as a general statement, the evidence provided by the wife and by her law firm is more reliable than the evidence provided by the husband.
I also add that in the leadup to the hearing the husband’s solicitors had the opportunity to review the files that Merrick Spicer had returned. Despite this, no issue was taken at the hearing in relation to what those files disclosed.
Civil claim in 2000:
The wife’s law firm acted for the parties in a civil claim around the year 2000. The wife’s law firm no longer possesses a paper file but apparently did have a basic electronic copy in a now-disused Microsoft Word format.
The husband’s own affidavit makes no reference to this particular matter; indeed it is the wife and her law firm who have brought it to the court’s attention. The wife’s evidence is that there is no relevant “confidentiality” in any event as both she and the husband attended all appointments together.
For my part, I cannot logically see how any information said to have been imparted by the husband so long ago, whether confidential or not, could be relevant to the present dispute. In the circumstances I do not see how there could be a real risk of misuse of confidential information arising out of this matter.
It follows that the husband has not satisfied the requisite evidential onus.
Powers of Attorney & Wills:
In 2004 the wife’s law firm drew Powers of Attorney and wills for the husband and wife. The wills were further updated in 2012.
The husband deposes that in the 2004 meetings with Mr Spicer, the parties discussed their asset and liability situation with him. The husband deposes that he is “sure” that he and the wife discussed with Mr Spicer that the wife’s mother held the home on for them.
The wife deposes that she was present for these appointments and she has no recollection of such discussions. Merrick Spicer does not appear to hold any relevant documents.
Assuming that the parties discussed their beneficial ownership of the home with Mr Spicer as the husband deposes, it is my view that such discussions would constitute information directly relevant to the current proceedings. Such information is not “confidential” however in that the wife was present and participated in them. Moreover, any relevant legal professional privilege in relation to any such discussions has been waived by the husband (and in turn by the wife) - with the practical effect that Mr Spicer could now potentially be called as a witness as to such discussions.
It follows that the husband has not satisfied the requisite evidential onus; the information was not “confidential”. However, Mr Spicer is potentially rendered a material witness which is relevant to any exercise of the court’s inherent jurisdiction to which I will turn later.
Business lease:
The husband does not specifically refer to this matter in his affidavit.
The wife’s law firm gives evidence (corroborated by the wife) that they drew a business lease for the husband and wife in 2009. According to the firm’s records, the wife was present with the husband for each appointment and the husband was only present for one such appointment.
I cannot logically see how any information said to have been imparted by the husband at that conference could be relevant to the present dispute. I do not see how there could be a real risk of misuse of confidential information arising out of this matter. The wife was once again present so that any information he imparted was not “confidential”.
It follows that the husband has not satisfied the requisite evidential onus.
Employment matter concerning an alleged thieving employee of the husband’s business:
The husband deposes that around 2010 he consulted Mr Spicer to seek his advice concerning his rights as an employer in relation to an employee whom the husband suspected was thieving from his business. In the course of those discussions he says he spoke with Mr Spicer concerning the running of his business and its operations. He says this is relevant as the wife’s case is that at that particular point in time the husband was unable or unwilling to operate the business properly.
The wife has no recollection of such matter; the wife’s law firm has not found any file and by implication holds no relevant documents if any such consultation/s occurred.
With all due respect to the husband, I am unable for present purposes to proceed on the basis that these consultation/s in fact occurred.
But even if they did, and taking the husband’s evidence at its highest, I do not see how any confidential information said to have been imparted by him to Mr Spicer has any real relevance to a generic allegation by the wife that the husband was unable to operate the business properly at the time.
In the circumstances I do not see how there could be a real risk of misuse of confidential information arising out of this matter. It follows that the husband has not satisfied the requisite evidential onus.
Sale of husband’s business:
The wife’s law firm acted on the sale of the husband’s business in 2012. The husband’s evidence is that he spoke to Mr Spicer about the business operations, plant and equipment and financial matters, as well as describing his participation in the business over the years.
The wife was the business bookkeeper. She says the business did not do particularly well. It is common ground that the sale price for the business was modest.
The evidence of the wife and of Merrick Spicer is that the wife was the main point of contact and that there is no record of the husband attending their office except with the wife.
The wife submits that the attendances were not “confidential” given that she was present - and that any relevant financial records of the business would in any event be required to be disclosed. I accept those submissions.
In the circumstances I do not see how there could be a real risk of misuse of confidential information arising out of this matter. The husband has not satisfied the requisite evidential onus.
Husband’s personal injuries claim:
In 2012 and 2013 the husband and wife consulted the wife’s law firm in relation to a possible personal injuries claim to be brought by the husband arising out of a motorcycle accident. The husband’s evidence is that he spoke to Mr Spicer about his injuries and treatment and about his prognosis and capacity for further work.
The evidence of the wife and of Merrick Spicer is that the wife was again the main point of contact and that there is no record of any attendances upon the husband alone; the wife was in fact present on the one (1) occasion that the husband attended for an appointment.
In mid-2013 the file was taken over by an employed solicitor. The claim did not ultimately proceed, the file being closed in August 2014.
In relation to this matter, the wife’s presence once again removes the element of “confidentiality” the husband asserts. In any event, in the grand scheme of things - this being a long marriage - it is difficult to see how any information that may have been imparted by the husband to the law firm could be relevant in any meaningful way to the property settlement dispute.
Overall, in relation to the personal injuries claim it follows that the husband has not satisfied the requisite evidential onus.
Conclusion as to the “breach of confidence” ground:
The husband has failed to adduce cogent evidence that he has imparted relevant confidential information.
However, the extent of the dealings the husband has had with Mr Spicer and/or with the wife’s law firm over the years remain relevant to the exercise of the court’s inherent jurisdiction to which I now turn.
The husband’s application on the basis of the court’s inherent jurisdiction:
The Federal Circuit Court is a court of record, and a court of law and equity.[10]
[10] Section 8(3) of the Federal Circuit Court of Australia Act 1999
As such, the Federal Circuit Court has an inherent power to restrain a solicitor from acting for a party in proceedings before it where the interests of justice so require.[11]
[11] While I will refer to it as the “inherent” power, it may more appropriately be referred to as an “implied” or “incidental” power – see the discussion of Johnston J in Luthra & Betterley [2015] Fam CA 1080, unreported, 30 June 2015 which cites the High Court decision in DJL v The Central Authority (2000) 201 CLR 226.
The basis of the jurisdiction and the relevant authorities were helpfully discussed by Brereton J in Kallinicos v. Hunt [2005] 64 NSWLR 561 – a decision which has subsequently been cited with approval and applied in both the Family Court and Federal Circuit Court.
At paragraph 76 of Kallinicos, Brereton J distilled the following principles:
(a)the court retains an inherent jurisdiction to restrain a solicitor 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;
(b)the test to be applied is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner [12] should be prevented from acting, in the interests of the protection of the integrity of the judicial process and due administration of justice, including the appearance of justice;
(c)the jurisdiction is to be regarded as exceptional and is to be exercised with caution;
(d)due weight should be given to the public interest in a litigant not being deprived of the lawyer of his/her choice without due cause;
(e)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.[13]
[12] Or by extension, a law firm
[13] Pages 582 – 583 of the reported judgment.
Lack of Independence?
In this case, the husband’s primary argument is that the wife’s solicitor cannot be seen to possess the necessary degree of independence required by the court of a legal practitioner who represents a party to these types of proceedings. On that basis the wife’s solicitor (and firm) should not be acting for the wife.
Before proceeding further, I should note that at the hearing the husband’s counsel was at pains to emphasise that the restraining application carried with it no adverse imputation against Mr Spicer’s professional or personal integrity. I accept that position and nothing I say in these reasons for judgment should be taken as carrying any adverse imputation against Mr Spicer or his law firm. To the extent that the husband’s application is brought pursuant to the inherent jurisdiction, his application succeeds or fails by application of the objective test identified by Brereton J in Kallinicos. It is, and remains throughout, a question of perception.
The husband raises a number of concerns that are conveniently grouped together.
The husband points out that Mr Spicer, in his capacity as a trustee of the will, has a duty to uphold the will. Clause 7 of the will, which he or his firm drafted, confers upon Mr Spicer a discretion to delay payment to the wife of any portion of her inheritance under the will, including but not limited to her inheritance of the home.
A decision by Mr Spicer (and the other trustee Ms C) to go ahead and administer the gifts in the will would place those estate assets within the husband’s immediate reach. It seems an obvious inference that the wife does not want that to happen. So the wife finds herself in the advantageous position that her family law solicitor, charged with representing her interests in the property proceedings, also holds trusteeship of the will and thus has a discretion as to what, if any, estate property is administered in his client’s favour in the course of the proceedings.
It must not be forgotten that the husband’s complaint is that Mr Spicer, as his former solicitor, was personally aware of the true position concerning the ownership of the wife’s mother’s home. In the circumstances, the husband is aggrieved by the drafting of the will and deposes that Mr Spicer “must have known of the difficulties” clause 7 would cause him.
In response, the wife’s counsel submits that this does not give rise to any issue of concern; that the position of the estate and the wife are in alignment. She submits that clause 7 of the will precludes the vesting of the wife’s gifts until the property settlement proceedings have been concluded.
But on my reading of it, clause 7 of the will potentially confers a discretion on the trustees to administer some (and perhaps all) of the estate notwithstanding the present proceedings. The trustee’s present interpretation of clause 7 – that it absolutely prohibits any distribution to the wife - may be correct. But there is no realistic way for that interpretation to be challenged in the Supreme Court of NSW, as neither the wife nor the trustees have any intention to seek that court’s interpretation. The husband, who is impacted by this interpretation cannot challenge it in the Supreme Court as he has no standing to do so.
It is also true that Mr Spicer and the wife have a common interest in upholding the will, but as the husband’s counsel points out, Mr Spicer’s firm also has an interest in sustaining any advice that may have been given to the wife’s mother in relation to the efficacy of clause 7 of the will in the context of any property settlement application brought by the husband.
In this respect, the husband relies upon the decision of Thomas J in Kooky Garments Ltd v. Charlton [1994] 1 NZLR 587 which held that solicitors should not act "where the acts or omissions of the solicitors are an integral part of the other party's complaint or the client has been sued in circumstances where he or she was acting on the advice of their solicitors, and it is effectively that advice which is in issue". [14]
[14] A case which has been applied in Australia; see for instance Grieves & Tully [2011] FamCA 617, unreported, Young J, 24 August 2011
Clause 7 seems to have been drafted so as to attempt to defeat the very type of claim that the husband now brings. In that sense Mr Spicer’s advice is under direct challenge by the husband’s section 106B application.
In Chapman v. Rogers; ex parte Chapman [1984] 1 Qd R 542, Campbell CJ held where a solicitor’s personal or reputational interest is challenged then this is:
“a strong indication that the interests of justice – which in this field involve clients being represented by independent and objective lawyers unfettered by concerns about their own interests – require the lawyer to be restrained from continuing to act.”
In my view, the reliability of Mr Spicer’s advice in relation to Clause 7, and thus his reputational interests, are under attack in this case.
Added to this is the fact Mr Spicer may also become a material witness at trial as to a range of relevant matters, including the factors (if any) that may bear upon any exercise of his trustee’s discretion pursuant to clause 7 of the will. Separately, he may be a material witness in relation to any discussions held with the husband and wife about the ownership of the home, at the time when he was drafting their wills.[15]
[15] There are other matters about which Mr Spicer could potentially be called as a witness, including the value of the estate assets and matters relating to the administration of the estate to date. But I accept the wife’s submissions that these matters would not be expected to be controversial and that the other trustee (or valuers as appropriate) could be called as witnesses if necessary. There is no substance to this particular aspect of the husband’s complaint
The relevant solicitor’s conduct rule [16] provides a solicitor who is a material witness in a case is prohibited from appearing as the client’s advocate at the hearing. Another solicitor or associate within the solicitor’s firm may however continue to act for the client “unless doing so would prejudice the administration of justice.” This latter caveat itself recognises the court’s inherent jurisdiction and no doubt casts a positive onus upon a solicitor to consider his/her position carefully in the event he/she is potentially going to be a material witness.
[16] Rule 27 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015
Overall, I am of the opinion that the fair-minded, reasonably informed observer described by Brereton J would feel considerable disquiet at the wife’s solicitor continuing to act for the wife. I do not think that it matters much that Mr Spicer is one of two trustees under the will. Mr Spicer is a solicitor; he drafted the will which includes Clause 7. He is intricately involved.
The husband has made out a proper basis for the court to exercise its inherent jurisdiction. But that is not the end of the matter. In this particular case the court is still obliged to consider serious questions of delay and waiver.
Restraint on the basis of the “getting to know you” factors?
The husband submits that, having been a client of Merrick Spicer over the years, the wife’s solicitor has acquired a personal knowledge of the husband’s personality characteristics, strengths and weaknesses, sometimes described as the “getting to know you” factors.
In this respect, a number of relevant authorities have cited with approval the unreported decision of Gillard J of the Supreme Court of Victoria in Yunghanns v Elfic, wherein it was held that: [17]
“… the relationship between solicitor and client may be such that the solicitor learns a great deal about his client, his strengths, his weaknesses, his honesty or lack thereof, his reaction to crisis, pressure or tension, his attitude to litigation and settling cases and his tactics. These are factors which I would call the “getting to know you” factors. The overall opinion formed by a solicitor of his client as a result of his contact may in the circumstances amount to confidential information that should not be disclosed or used against the client.” [18]
[17] Yunghanns v Elfic (1998) 3 July 1998, SCV at p10 and referred to on the Law Institute of Victoria website under “Ethics”.
[18] Paragraph 42 of the Gillard J’s reasons for judgment
In Karapataki & Karapataki [19] Walters J of the Family Court of Western Australia held that in a case where a former client’s credibility becomes a matter of significance, their former lawyer’s knowledge of the “getting to know you” factors can be – or at least be perceived to be – a powerful weapon in the hands of a cross-examiner armed with those impressions.
[19] Taken from paragraph 37 of the judgment. Case citation appears at footnote 11 of these reasons
In this particular case the husband has been a client of Mr Spicer (and of Merrick Spicer generally) since the year 2000. His evidence is that he has confided in Mr Spicer about private domestic and business matters over that period, including the drafting of wills and powers of attorney. The husband’s evidence is that Mr Spicer was his family solicitor and that he trusted him.
As to this particular matter, the fact that the wife was present at the appointments is beside the point. It is a question of what Mr Spicer has learned about the husband’s character in the course of having acted for him as a client.
In Gillam & Gillam [2017] FCCA 64, Judge Coker, unreported, 19 January 2017, his Honour in the exercise of the court’s inherent jurisdiction restrained a solicitor from acting against a former client. In that case, the solicitor had acted for the client over many years in a range of transactions. The solicitor had prepared a will for the client and had been nominated as his alternate executor. The solicitor had also been nominated as an attorney for the client pursuant to a power of attorney.
His Honour Judge Coker took the view that the solicitor (and firm) should be restrained. This was because:
(a)there had been a business relationship between the client and the law firm for almost a decade; and
(b)even more significantly, there was a personal relationship of trust and familiarity between the husband and the solicitor (or attorney) had owed a fiduciary duty to the client at the time the proceedings commenced.
Each case is different. In the present case there is no fiduciary duty but there was clearly a relationship of trust built up over many years.
Having carefully weighed this matter however, I have come to the view that the “getting to know you” factors do not justify a restraint in the present case.
I say this because the husband’s characteristics as a client have been well and truly laid bare by his former solicitor’s affidavit in support of the application for a Litigation Guardian. This affidavit makes clear that the husband has failed to attend several conferences; that the husband struggles to sit in a conference with him for any length of time or to answer questions; that the husband usually becomes confused and distressed within 10 or 15 minutes of each conference and needs to take a break. The husband is unable to supply documents as needed.
Incidentally, this affidavit puts into context why the wife would have been present during the various conferences with Mr Spicer over the years and why it seems she was the main point of contact. The husband is, and was at all material times, under a disability as a consequence of his brain damage.
In saying these things I do not intend to be in any way critical of the husband or of his former solicitor’s affidavit. But it seems to me that it is somewhat artificial for the husband to rely upon the “getting to know you” factors in the circumstances. Any solicitor who acts for the wife would have a reasonable insight into the husband’s personality and character simply by reading the affidavit material as to the husband’s incapacity.
Moreover the husband has a Litigation Guardian. It is the Litigation Guardian who now provides the instructions to the legal representatives. In that sense a strong argument can be made that the Litigation Guardian’s character strengths and weaknesses matter at least as much, if not more, than the husband’s.
Certainly in an appropriate case the “getting to know you” factors could warrant the invocation of the court’s inherent jurisdiction. But in this case the evidence falls short.
Delay and Waiver:
To recap, I am of the view that the court does have a proper basis for restraining Mr Spicer and his firm from continuing to act for the wife in the exercise of the court’s inherent jurisdiction. This is on the basis that he (and his firm) cannot be seen as being appropriately independent.
But as a discretion is being exercised, the timing of the application is always relevant and delay can militate against the granting of relief.
In this case the husband sought a restraint at the very outset of proceedings on 15 November 2017. There was no delay.
However, on 20 March 2018 the husband then filed and served an Amended Response, which specifically struck out the previous application for a restraint. The restraint application was then “revived” by letter of 21 June 2018, and later formalised in the Further Amended Response filed 17 August 2018.
Where a party acts inconsistently with the maintenance of that party’s right, then waiver can be imputed by operation of law regardless of the party’s intention.[20] Delay in applying for a restraint, particularly while substantive steps in the proceeding are otherwise taking place, can constitute a waiver: see Dalton & Dalton (2017) FLC 93-773.
[20] Mann v. Carnell (1999) 201 CLR 1
But here in my view the waiver was express. The Response of 20 March 2018 positively struck out the proposed restraint. There is no need to analyse the legal niceties relating to imputed waiver.
Though under a disability, the husband had a Litigation Guardian at the time he expressly waived his application for a restraining order. Moreover, he was legally represented.
In my view, the husband has expressly waived his rights to seek the restraining order he now presses.
For what it is worth, the waiver contributed to some delay in bringing the restraining application, which delay also militates against the making of the restraining order.
Conclusion:
The issue the husband has raised relating to the inherent jurisdiction goes to the heart of justice being seen to be done in the proceedings. This is inevitably a matter of fundamental concern to the court. The inherent jurisdiction exists to preserve public confidence in the courts and in the justice system generally.
However, these are adversarial proceedings. The husband has expressly waived his right to seek the restraint pursuant to the inherent jurisdiction. The only logical inference is that, at the time he filed and served his Amended Response on 20 March 2018, he did not consider that the restraint was in fact necessary in the interests of the administration of justice.
In adversarial litigation such as this, the husband’s waiver means that, although there was otherwise some merit in the husband’s application, it must now be dismissed.
I propose to dismiss the husband’s application, reserve costs at this stage and otherwise adjourn the proceedings for directions to 9.30am on 18 October 2019.
I certify that the preceding one hundred and twenty nine (129) paragraphs are a true copy of the reasons for judgment of Judge Betts
Date: 17 September 2019
0
6
3