Quann v Wilson and Atkinson (A Firm)
[2015] WASC 229
•26 JUNE 2015
QUANN -v- WILSON & ATKINSON (A Firm) [2015] WASC 229
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 229 | |
| Case No: | CIV:1200/2015 | 16 JUNE 2015 | |
| Coram: | LE MIERE J | 26/06/15 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiff's case fails | ||
| B | |||
| PDF Version |
| Parties: | LINDSAY EDWARD QUANN WILSON & ATKINSON (A Firm) |
Catchwords: | Protection of confidential information Restraining lawyers from acting against former clients Risk of disclosure of confidential information Doctrine of imputed knowledge Court's jurisdiction over its officers |
Legislation: | Nil |
Case References: | Ismail-Zai v State of Western Australia [2007] WASCA 150; (2007) 34 WAR 379 Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
WILSON & ATKINSON (A Firm)
Defendant
Catchwords:
Protection of confidential information - Restraining lawyers from acting against former clients - Risk of disclosure of confidential information - Doctrine of imputed knowledge - Court's jurisdiction over its officers
Legislation:
Nil
Result:
Plaintiff's case fails
Category: B
Representation:
Counsel:
Plaintiff : Mr B G Grubb
Defendant : Mr C P K Russell
Solicitors:
Plaintiff : Metaxas & Hager
Defendant : Rowe Bristol Lawyers
Case(s) referred to in judgment(s):
Ismail-Zai v State of Western Australia [2007] WASCA 150; (2007) 34 WAR 379
Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561
1 LE MIERE J: The plaintiff, Mr Quann, and three companies of which he is a director and shareholder which I will refer to as Cadagi Holdings, Karriview Management and Adder Holdings, are the defendants in action CIV 1395 of 2013 in this court. The plaintiffs in that action are David Clark and two companies associated with him, which I will refer to as David Clark Airconditioning and DS Clark Nominees. The plaintiff's lawyers in CIV 1395 are Wilson & Atkinson. Mr Quann instructed Wilson & Atkinson on two retainers. The first retainer started in March 2004 and ended in August 2004. The second began in about November 2006 and ended sometime before 7 October 2008. Mr Quann says that he instructed Wilson & Atkinson on behalf of himself and other companies in his group, which included the corporate defendants in CIV 1395. Mr Quann has applied by originating motion for an order that Wilson & Atkinson be restrained from acting as solicitors or counsel for the plaintiffs in CIV 1395 of 2013.
2 Mr Quann puts his case on two bases. First, Mr Quann invokes the court's jurisdiction founded on the right of the former client to the protection of his confidential information. Secondly, Mr Quann invokes the court's inherent jurisdiction to control the conduct of its officers.
Protection of confidential information
3 The court may intervene to restrain a lawyer or his firm from acting for a client with an interest adverse to that of a former client when two conditions are satisfied. The first is that the lawyer is in possession of information which is confidential to the former client. The second is that such information is or might be relevant to the matter on which he is instructed by the second client. If the former client establishes these two conditions the court will restrain the solicitor from acting for the second client unless there is no real risk of disclosure of the confidential information or there are discretionary reasons for refusing relief. In order to be a real risk, the risk does not need to be substantial but it must be more than merely fanciful or theoretical.
The claimed confidential information
4 The plaintiff relies principally on an affidavit sworn by Mr Quann on 9 March 2015. Mr Quann's affidavit and the plaintiff's written submissions refer to various information given by Mr Quann to Wilson & Atkinson at different times. However, in oral submissions, counsel for the plaintiff, Mr Grubb, confined the plaintiff's case to advice given by Mr Czislowski, a lawyer then employed by Wilson & Atkinson, to Mr Quann and the companies in his group between January 2007 and October 2008. I am satisfied that the legal advice given by Mr Czislowski to Mr Quann is confidential. The primary issue is whether that advice is or may be relevant to the issues in CIV 1395. That requires an examination of the legal advice given to Mr Quann and the issues in CIV 1395.
CIV 1395 of 2013
5 The statement of claim in CIV 1395 is a 46 page document. Counsel for Mr Quann, Mr Grubb, submitted that it deals with a number of separate matters or claims. In his affidavit Mr Quann says in relation to CIV 1395 that the plaintiffs make multiple allegations against him and the defendants in relation to the repayment of monies they allege he owed to them. Specifically, Mr Quann says that the plaintiffs make allegations to the effect that in May 2008 Karriview Management and Mr Quann engaged in dealings to defraud the Australian Taxation Office. Mr Quann refers to [9(b)] of the statement of claim.
6 The statement of claim pleads that Mr Quann carried on business as a tax agent, accountant and financial advisor and Mr Clark engaged Mr Quann as his tax agent and accounting, corporate, financial and business advisor. Paragraph 8 pleads that in May 2008 Mr Quann advised Mr Clark that:
• Karriview Management should invoice David Clark Airconditioning for certain amounts to be nominated by Mr Quann;
• the sum so invoiced would be identified as fees charged by Karriview Management for management services provided in the 2007 and 2008 financial years;
• David Clark Airconditioning should pay the invoices rendered;
• David Clark Airconditioning would receive an income tax deduction to the value of the sums paid excluding the GST;
• Karriview Management should invoice David Clark Airconditioning for the sum of $72,000 plus GST for management fees for the year ended 30 June 2007;
• David Clark Airconditioning should apply the sum of $72,000 at the direction of Karriview Management as payment to DCFX Nominees for Karriview Management's acquisition of 72,000 $1 income units in the DCFX Investment Trust;
• Karriview Management should invoice David Clark Airconditioning the sum of $36,000 plus GST as management fees for the 2008 financial year; and
• upon receipt of $36,000 from David Clark Airconditioning Karriview Management would apply $18,000 as payment to DCFX Nominees for Karriview Management's acquisition of 18,000 $1 income units in the DCFX Investment Trust.
- Paragraph 9(a) of the statement of claim pleads that no management or other services were provided to David Clark Airconditioning by Karriview Management. Paragraph 9(b) pleads that the dealings between Karriview Management as advised and effected by Mr Quann were a sham intended by Mr Quann and Karriview Management to defraud the Australian Taxation Office in respect of income payable by David Clark Airconditioning.
7 In [6] of their defence Mr Quann, Cadagi, Karriview Management and Adder Holdings deny [8] of the statement of claim and say that Cadagi performed management services for Mr Clark, namely allowing Mr Clark the opportunity to invest in the Karriview Lifestyle Village, putting up capital for Mr Clark's super fund to invest in and managing Mr Clark's investment portfolio. The defence further states that Cadagi invoiced Mr Clark $72,000 plus GST for the financial year ending 30 June 2007 and invoiced Mr Clark $36,000 plus GST for the financial year ending 30 June 2008. Paragraph 6 of the defence says that the current financial position between the parties is as set out in particulars subjoined to that paragraph. The particulars refer to the outstanding management and consulting fees and to amounts described as 'HPIT Unit Purchase Clark Superfund'. That appears to be a reference to the purchase by the second plaintiff, DS Clark Nominees, of units in the Harbour Pines Investment Trust which is also known as the Geraldton Retirement Village Unit Trust of which Adder Holdings, the fourth defendant, is the trustee. It appears that the units were purchased between 19 May 2008 and 30 June 2010.
Wilson & Atkinson's legal advice to Mr Quann
8 Mr Quann does not describe the legal advice given to him by Mr Czislowski or Wilson & Atkinson between 2007 and 2008 except in the most general terms. He does not say whether the advice was oral or written or whether it was given on one or more occasions.
9 The only documents relating to the advice given to Mr Quann between 2006 and 2008 which remain in the possession of Wilson & Atkinson are letters dated 21 January 2007 and 7 October 2008 from Wilson & Atkinson to Mr Quann. Each letter bears Mr Czislowski's reference and the file reference 7733. The letter of 21 January 2007 entitled 'Cobra Hill Unit Trust 589 Hay Street Jolimont', refers to a phone conference on 1 November 2006 and a subsequent email on 8 November 2006, and requests further information for the Cobra Hill Unit Trust. The letter states that as a preliminary step in the provision of taxation advice Wilson & Atkinson will require the 2005/2006 financial statements for the Cobra Hill Unit Trust. The letter of 7 October 2008 states that the file, matter 7733 (Cobra Hill Unit Trust), has been finalised and the file is to be archived.
10 Mr Quann says that Wilson & Atkinson was engaged to provide taxation advice regarding the implications and impact of Cobra Hill on his financial group and how to protect the group's interests and optimise any taxation impact. It appears from Mr Quann's affidavit that Cobra Hill Holdings Pty Ltd was the trustee of the Cobra Hill Unit Trust. Mr Quann and his wife were the directors of the company and indirectly the beneficial owners of the trust. The Cobra Hill Unit Trust owned an investment property at 589 Hay Street. Cobra Hill Holdings sold the Hay Street property on 19 July 2006. After the sale Cobra Hill Holdings was renamed Harbour Retirement Holdings Pty Ltd and was trustee for the Harbour Pines Investment Trust. Mr Quann says that he received advice in relation to weighing his options to avoid unnecessary risks and develop a tax efficient outcome, particularly 'Cobra Hill taxation implications with capital gains and the financial structuring of my group position'.
Advice is not relevant to CIV 1395 of 2013
11 The evidence of and concerning the advice given by Mr Czislowski to Mr Quann is sparse. Mr Romano and the present employees of Wilson & Atkinson know nothing about it beyond what is disclosed by Wilson & Atkinson's letters of 21 January 2007 and 7 October 2008. Mr Quann has little recollection of the advice or its subject matter. Wilson & Atkinson commenced acting for the plaintiffs in CIV 1395 on 11 March 2014. Mr Quann cannot recall when he was informed of that fact and did not take much notice of it when he was. In about mid-December 2014 while searching his archives and those of the defendants in CIV 1395 to comply with their discovery obligations in that action Mr Quann located the letter of 7 October 2008 from Wilson & Atkinson. Prior to discovering the letter Mr Quann did not previously recall that Wilson & Atkinson had acted for him. That Mr Quann did not recall that Wilson & Atkinson had acted for him at a time when his 'focus … was on defending the action brought against [him] by Mr Clark' gives rise to the inference that the advice had little or no relevance to the issues in CIV 1395.
12 I find that the subject matter of the advice given by Mr Czislowski or Wilson & Atkinson to Mr Quann between January 2007 and October 2008 concerned the taxation implications, and in particular capital gains tax implications, of the sale of the Hay Street property by the Cobra Hill Unit Trust on 19 July 2006. Wilson & Atkinson's request in its letter of 21 January 2007 for the 2005/2006 financial statements for the Cobra Hill Unit Trust is consistent with that. The lawyers may have requested those financial statements on the basis that the contract for the sale of the Hay Street property may have been entered into during the 2005/2006 financial year. Mr Quann obscurely refers to the advice being in relation to 'Cobra Hill taxation implications with capital gains and the financial structuring of my group position'.
13 The plaintiff has not established that the advice given by Wilson & Atkinson extended beyond the taxation implications of the sale of the Hay Street property by Cobra Hill Unit Trust on 19 July 2006. To the extent that the advice may have related to the financial structuring of the Quann group the plaintiff has not established that the advice went beyond the taxation implications of the sale of the Hay Street property for the financial structuring of the Quann group.
14 Mr Quann has not established that the advice given by Wilson & Atkinson to him and any companies or trusts related to him between January 2007 and 7 October 2008 is or might be relevant to the matters in issue in CIV 1395. The matters in CIV 1395 to which Mr Quann has made reference concern advice given by Mr Quann to the plaintiffs in CIV 1395 about management fees to be charged to the plaintiffs in CIV 1395 by Karriview Management, investment by those plaintiffs in the DCFX Investment Trust and the acquisition by those plaintiffs of units in the Harbour Pines Investment Trust between 19 May 2008 and 30 June 2010. The evidence does not establish any connection between advice by Mr Quann to the plaintiffs about management fees and the advice given by Wilson & Atkinson to Mr Quann in 2007 or 2008. The only connection between the sale by Cobra Hill Holdings as trustee for the Cobra Hill Unit Trust of the Hay Street property and the Harbour Pines Investment Trust is that Cobra Hill Holdings was renamed Harbour Retirement Holdings Pty Ltd and became trustee for the Harbour Pines Investment Trust. Advice concerning the capital gains or other taxation implications of the sale by Cobra Hill Holdings of the Hay Street property or even taxation implications of that transaction for the Quann group of companies has no bearing on the claims made by the plaintiffs in CIV 1395 or the defence of the plaintiffs in CIV 1395 to those claims. The plaintiff has not established that the legal advice given by Wilson & Atkinson is relevant to any issue in CIV 1395.
No real risk of disclosure
15 The plaintiff's case based on the protection of his confidential information must fail because he has failed to establish that the legal advice given by Wilson & Atkinson is relevant to any issue in CIV 1395 of 2013. However, I will briefly set out my findings on the issue of whether there is a real risk of disclosure of the legal advice.
16 Wilson & Atkinson do not have a copy of the legal advice in hard copy or electronic form. No present employee of Wilson & Atkinson has any recollection of the legal advice. A lawyer's lack of any particular recollection of a matter is not determinative. Where a lawyer has had a matter disclosed to him or her, or knew of some matter, and has no present recollection of the matter there remains the possibility that his or her recollection might be refreshed during the course of the latter matter. However, that is irrelevant if the information has never been disclosed to or known by the lawyer. In this case, the evidence of the employees that they have no recollection of the advice is, in the circumstances, evidence that the advice was never disclosed to or known by them.
17 The evidence establishes that the only person who knew the content of the advice and that it was given to Mr Quann is Mr Czislowski. Wilson & Atkinson is an incorporated legal practice. Mr Romano is the only legal practitioner director of Wilson & Atkinson. Mr Czislowski is a director of the company. He is not an employee. He does not hold a legal practice certificate. He has not been an employee or held a legal practising certificate since 2012.
18 Mr Grubb submits that the knowledge of Mr Czislowski is to be imputed to Wilson & Atkinson. The doctrine of imputed knowledge which provides that the knowledge of one partner, including possession of a client's confidential information, is imputed to the other partners within the firm is a matter of some controversy. It does not apply to a non-legal practitioner director of an incorporated legal practice.
19 Mr Grubb also submitted that Mr Czislowski is entitled to access the records and documents of Wilson & Atkinson. I find it unnecessary to consider that argument further. The question is not whether Mr Czislowski can access the records of Wilson & Atkinson but whether there is a real risk that Mr Czislowski will disclose to the legal practitioner director or employees of Wilson & Atkinson the advice he gave to Mr Quann.
20 Whether there is a real risk of disclosure is a question of fact which depends on all the circumstances of the case. In the circumstances of this case there is no real risk that Mr Czislowski will disclose to the legal practitioner director or employees of Wilson & Atkinson the legal advice he gave to Mr Quann.
Court's jurisdiction over its officers
21 The court has power to restrain a lawyer from acting against a former client when, acting under its inherent supervisory jurisdiction, the court considers that it is necessary to do so in order to ensure the due administration of justice. 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 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: Ismail-Zai v State of Western Australia [2007] WASCA 150; (2007) 34 WAR 379 [30] (Steytler P quoting Brereton J in Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561 [76]).
22 The relevant circumstances include the following. First, Mr Quann and his companies instructed Wilson & Atkinson on two retainers, one retainer was started in March 2004 and ended in August 2004 and the second began in late 2006 and ended sometime before 7 October 2008. The plaintiff only claims that the second retainer is relevant to the matters in issue in CIV 1395 of 2013. I have found that it is not. Secondly, the relevant information is legal advice given by Wilson & Atkinson to Mr Quann and his companies in 2007 or 2008. The advice was given by a lawyer, Mr Czislowski, who ceased to be an employee of the firm in 2012. Thirdly, Wilson & Atkinson has no hard or electronic copy of the advice given to Mr Quann or the information provided by Mr Quann to the firm for the purpose of giving the advice. Fourthly, none of the current staff had heard of Mr Quann or his entities prior to February 2014 when the firm received instructions from the plaintiffs in CIV 1395 of 2013. Fifthly, in the middle of 2012 Mr Czislowski ceased to be employed by Wilson & Atkinson and his practising certificate expired and has not been renewed. Sixthly, Mr Czislowski is a director of the incorporated legal practice Wilson & Atkinson and a discretionary trust that he is a beneficiary of is a shareholder in the company but he has performed no legal work for the firm since January 2011, his only ongoing role is to review and sign financial documents in relation to the corporate governance of Wilson & Atkinson and he no longer attends the firm's office. Seventhly, Mr Romano, who is the sole legal practitioner director of Wilson & Atkinson and effectively its managing director, is aware of the need not to discuss Mr Quann, his entities or CIV 1395 of 2013 with Mr Czislowski or indeed Mr Wilson in his dealings with them in relation to the corporate governance of Wilson & Atkinson. He has not had any discussions with them about those matters and has given an undertaking not to do so. He has also given an undertaking to inform Mr Quann's solicitors if Mr Czislowski should at any time in the future become an employee of the firm. Eighthly, the current staff of the firm have undertaken not to speak to Mr Czislowski and Mr Wilson about Mr Quann, his entities or CIV 1395 of 2013.
23 In those circumstances a fair minded, reasonably informed member of the public would not conclude that the proper administration of justice requires that Wilson & Atkinson should be prevented from acting for the plaintiffs in CIV 1395 of 2013 in the interests of the protection of the integrity of the judicial process and the administration of justice including the appearance of justice.
Conclusion
24 The plaintiff's application will be dismissed.
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