Rawlings and Morris and S Law Firm

[2010] FMCAfam 938

FEDERAL MAGISTRATES COURT OF AUSTRALIA

RAWLINGS & MORRIS & S LAW FIRM [2010] FMCAfam 938

FAMILY LAW – Property – alleged conflict of interest – application to restrain wife’s solicitor from continuing to act for her.

Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307, 115 ALR 112
Farrow Mortgage Services Pty Ltd (In liq) v Mendall Properties Pty Ltd [1995] 1 VR 1
McGillivray and Mitchell (1998) 23 Fam LR 238, FLC 91,748
McMillan and McMillan (2000) 159 FLR 1; (2000) 26 Fam LR 653; FLC 93-048
In the Marriage of R A and E Thevenaz (1986) FLC 91-748; (1986) 11 Fam LR 95; (1986) 84 FLR 10

Applicant: MR RAWLINGS

First Respondent: MS MORRIS

Second Respondent: S LAW FIRM

File Number: MLC 3322 of 2010

Judgment of: Riley FM

Hearing date: 25 August 2010

Date of Last Submission: 26 August 2010

Delivered at: Melbourne

Delivered on: 1 September 2010

REPRESENTATION

Counsel for the Applicant: Ms Wheeler

Solicitors for the Applicant: Anthony Raso & Associates

Counsel for the First Respondent: [Dr I]

Solicitors for the First Respondent: [S Law Firm]

Counsel for the Second Respondent: Ms N

Solicitors for the Second Respondent: [S Law Firm]

ORDERS

1. The application filed on 10 August 2010 be dismissed.

IT IS NOTED IN that publication of this judgment under the pseudonym Rawlings & Morris & S Law Firm is approved pursuant to s.121(9)(g) of the Family law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLC 3322 of 2010

MR RAWLINGS

Applicant

And

MS MORRIS

First Respondent

S LAW FIRM

Second Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an application by the husband for an order restraining the wife’s solicitors, [S Law Firm], from continuing to act for the wife in this proceeding.  The husband alleges that the wife’s solicitor has a conflict of interest.  The case concerns property only.

The test

1. The relevant test in the general law in relation to conflicts of interest between a solicitor and a former client was stated by Hayne J, sitting in the Supreme Court of Victoria, in Farrow Mortgage Services Pty Ltd (In liq) v Mendall Properties Pty Ltd [1995] 1 VR 1 at 5. His Honour there held that an injunction should go if there is:

   a real and sensible possibility of the misuse of confidential information.

2. Similarly, Drummond J, in the Federal Court, held in Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307, 115 ALR 112 at [24] that:

   In recognition of the special position of the solicitor as a fiduciary and of the importance now placed on the need for the appearance of integrity on the part of solicitors, as repositories of confidences, in the role they play in the administration of justice, I think that the stringent approach to when a solicitor will be free to act adverse to the interests of a former client that has been taken in recent cases is preferable to the more lenient approach that was generally, but by no means invariably, adopted in past times. In my opinion, a solicitor is liable to be restrained from acting for a new client against a former client if a reasonable observer, aware of the relevant facts, would think that there was a real, as opposed to a theoretical possibility that confidential information given to the solicitor by the former client might be used by the solicitor to advance the interests of a new client to the detriment of the old client.  (emphasis added)

3. However, the test that seems to apply in family law proceedings is somewhat different, and seems to only require a theoretical risk of harm.  In In the Marriage of R A and E Thevenaz (1986) FLC 91-748; (1986) 11 Fam LR 95; (1986) 84 FLR 10 at 75,447, Frederico J decided that:

   It is my view that in this case Mr Dezarnaulds 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.

4. That view was accepted by the Full Court of the Family Court in McMillan and McMillan (2000) 159 FLR 1; (2000) 26 Fam LR 653; FLC 93-048.

Delay

1. In any application for an injunction, delay alone can be a reason to refuse the application.  The wife argues in this case that the husband’s delay in bringing the application is a sufficient reason of itself to dismiss the application.

2. [S Law Firm] has been on the record as the wife’s solicitor since 14 April 2010, when the wife’s solicitor commenced this proceeding.  However, before that, when the parties were presumably attempting to resolve the matter without recourse to litigation, the husband’s solicitors sent the wife’s solicitors a letter dated 2 March 2010 (exhibit 1).  It said, among other things:

   Finally we again bring to your attention the fact that as you have already interviewed our client in relation to the matters involving your client and her previous husband and as our client has been involved in those matters, we do not consider it appropriate that your firm continue to act in these proceedings and should you not agree to withdraw then our client will not only lodge a formal complaint but will make application for you to withdraw.

3. On 17 March 2010, the wife’s solicitors wrote to the husband’s solicitors in effect denying that they had a conflict of interest.  The husband’s solicitors wrote back on 24 March 2010, saying that the husband rejected the denial by the wife’s solicitor of her conflict of interest.

4. However, the husband’s solicitors did not make any complaint to the Law Institute.  The matter came on for interim hearing in this court on 25 May 2010.  The husband’s solicitors, at that point, made no complaint to the court about the wife’s solicitors having a conflict of interest.  The court set the matter down for a conciliation conference on 23 August 2010 and a final hearing on 29 September 2010.

5. The present application seeking the injunction against the wife’s solicitors was filed on 10 August 2010.  The husband’s solicitor was cross-examined about why he had not acted sooner.  He said that he had hoped that the matter would settle. 

6. The Full Court of the Family Court in McGillivray and Mitchell (1998) 23 Fam LR 238, FLC 91,748 explained that hoping that a matter will settle is not a sound reason for delaying an application based on a conflict of interest. The court said, at [35]:

   …It is difficult to see why the husband would not feel equally at risk (if his fears and apprehensions are genuine) whether Mr Dowding was acting for the wife in settlement negotiations or in court proceedings - indeed it could well be argued that the husband should have been more uncomfortable having his former solicitor acting against him in settlement negotiations.

7. In McGillivray, the court then said, at [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 misuse of such confidential information.

8. The Full Court of the Family Court went on to determine that the solicitor in that case should not be restrained from continuing to act for his current client.  The Full Court said at [38] that it did so

   …purely on the basis of the husband’s delay in prosecuting his complaint ….

9. The delay in McGillivray was seven months.  In the present case, it was about five months.  In McGillivray, the solicitor had appeared at numerous interlocutory hearings.  In the present case, the solicitor had appeared at only one.   However, these distinctions do not appear to me to be material.  It is a matter of common knowledge that cases generally proceed to trial more quickly and with fewer interlocutory hearings in this court than in the Family Court.  Consequently, in this court, time frames are compressed and appearances are scarce.

10. A more important distinction may be that, in McGillivray, there seems to have been no mention, even in a letter, that there was a potential conflict of interest until many months had passed.  The Full Court particularly noted in McGillivray at [36] that it was incumbent on a litigant who was aware of a potential conflict of interest to “take the point at least in correspondence”. 

11. In the present case, the husband’s solicitors wrote a letter dated 2 March 2010 alleging a conflict.  When the conflict was denied, the husband’s solicitors wrote a further letter dated 24 March 2010 saying that the husband rejected the denial.  Notwithstanding that, the husband’s solicitor did not raise the issue with the court when the matter came on for interim hearing on 25 May 2010. 

12. In my view, raising the issue of the potential conflict in a letter is not sufficient to overcome the problem presented by a delay in bringing an application to the court.  At best, a letter sent early in the piece tends to suggest that there is a genuine belief that there may be a conflict.  However, failing to follow the letter with an appropriate application means that the litigant is still:

    …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.[1]

    [1] McGillivray [36]

13. I also consider that, in the circumstances of this case, the failure by the husband to raise the issue at the interim hearing on 25 May 2010 arguably constituted a waiver of the husband’s rights.  The husband knew the necessary facts to bring the application, and had brought them to his solicitor’s attention, well before 25 May 2010.  

14. In these circumstances, the wife argues that the court should exercise its discretion against granting the injunction on the basis of delay alone.  Although there is considerable force in that submission, I take the view that it is proper to consider the other facts of the case before exercising the discretion either way.

The wills

1. The husband said that he and the wife had both been clients of [S Law Firm] for the purpose of drawing mutual wills in April 2006.  A copy of the husband’s will is exhibit BR-1 to the husband’s “affidavit” sworn on 9 August 2010.  That “affidavit” does not bear the court heading and is stapled to the application in a case filed on 10 August 2010.

2. The husband’s will is five paragraphs in length and is very basic in nature.  It does not provide for any life interests or elaborate trusts or bequests of any description.  It could have been prepared without any significant detail being conveyed to the lawyer about the husband’s financial circumstances. 

3. The wife’s solicitor, Ms R, did not dispute that her firm, [S Law Firm], had drafted the husband’s will in 2006.  However, she said in her affidavit sworn on 22 August 2010 that she had bought the practice on 1 September 2008.  She said that she was not involved in drafting the husband’s will and does not have the file.  She said that her predecessor, Ms M, had retained all the files that had been in storage on her departure. 

4. In her oral evidence, it became clear that Mr R meant that Ms M had taken with her all of the files that had been completed, including the husband’s will file.  Mr R said that she was a sole practitioner, who employed a conveyancing clerk, one other part-time clerk and a part-time solicitor.  Mr R said that the solicitor working for her now was different to the solicitor working for her in 2008.

5. I accept Mr R’s evidence as stated above.  It was not subject to any real challenge.

6. On the test that applies in the general law, it is clear that there is not a real and sensible possibility of the misuse of confidential information.  There is no reason to suppose that Mr R has any confidential information received from the husband because:

   a)she was not involved with [S Law Firm] when the firm acted for the husband; and

   b)the previous owner of the firm has taken the husband’s file.

7. However, as noted in Thevenaz, a theoretical risk that justice will not be seen to be done will suffice to warrant that a solicitor be restrained from acting against a former client.  In that case, which was a property proceeding, the husband actually gave evidence that the instructions that he had given in the earlier matter differed from those that he was giving in the present proceeding, and that he could be embarrassed by the disclosure of his earlier position. 

8. The husband in the present case has not pointed to any similar basis for a potential embarrassment.  In any event, it is difficult to see how this issue could arise in a practical sense, given that the parties to property proceedings have a duty of full and frank disclosure.  Obviously, the court should not readily give a discretionary remedy to a party who wishes to conceal facts from the court that he is duty bound to disclose. 

9. Be that as it may.  On the authorities, in a family law proceeding, the court need not concern itself with practical risks, but should consider the theoretical risks.  I take it that a theoretical risk is somewhat more than a fanciful risk.

10. In relation to the potential conflict arising from the drawing of the husband’s will, I consider that the risk of justice not being seen to be done falls in the range between zero and fanciful.  It seems to me that any reasonable person with a knowledge of the relevant facts would not think for a moment that [S Law Firm] now has any confidential information arising from the drawing of the husband’s will in 2006.

Morris and Mr C

1. The husband also said that Mr R had a conflict because she acted for the wife in her family law proceedings with her former husband, Mr C, and the husband had participated in one or possibly two interviews between the wife and Mr R in 2008.  The husband did not claim to be a party to that proceeding. He did not claim to be Ms R’s client in relation to that proceeding.  However, through his counsel, he said he was a member of the family unit that had been Mr R’s client.  He claimed that he had contributed to wife’s costs of the legal proceeding. 

2. The husband claimed that he had divulged confidential information about his “employment, salary and related issues” to Mr R. The husband maintained that he had been interviewed jointly with the wife in Mr R’s personal office, rather than in the boardroom, where Mr R said all of her interviews were conducted.

3. Mr R and the wife categorically denied that the husband had participated in any of the interviews concerning the wife’s family law proceeding with her former husband.  They both said that the husband had attended Mr R’s office on one occasion, but had remained in the reception area while Mr R interviewed the wife alone.  Mr R said that she conducted all of her interviews in the boardroom because her personal office did not have a visitor’s chair and had files everywhere.

4. I do not accept the husband’s claim that he was interviewed by Mr R.  I prefer the evidence given by Mr R and the wife.  The image created by Mr R of her office layout and the limitations of her workspace was very convincing.  The husband was adamant that the interview took place in Mr R’s personal office rather than the boardroom.  Mr R convincingly explained that the husband’s recollection could not have been accurate.  The wife and Mr R consistently said that the husband had only been to Mr R’s office on one occasion, whereas the husband’s evidence wavered on that issue.  At one stage, he said that he had been there once for an interview but on another occasion he said that he had been there twice for interviews.

5. Moreover, it seems to me to be appropriate to give considerable weight to the sworn evidence of a solicitor.  The penalty facing a solicitor for lying to the court includes the possibility of losing his or her livelihood.  It would be an unusual solicitor in unusual circumstances who would take that risk.  I see no reason to consider that Mr R would have done so in the circumstances of this case.

6. The husband’s counsel emphasised that Mr R had not deigned to check her notes of her interviews with the wife to refresh her memory about whether the husband had attended.  However, I am satisfied that Mr R’s confidence that she would have remembered such an attendance was well placed.  It seems to me that it is the sort of thing that a solicitor in Mr R’s position would remember, without needing to consult her notes.

7. I suspect that the husband may have confused his interview with Ms M, for his will, with an interview with Mr R, for the wife’s parenting proceeding. 

8. In any event, for these reasons, I do not accept the husband’s basic claim that he attended one or more interviews between Mr R and the wife.  Consequently, I do not consider that he gave any confidential information to Mr R that would lead to her having a conflict of interest.  Even if the husband did assist the wife with her legal costs in relation to her proceedings with her former husband, it would not alter the situation.

9. The husband also said that he took part in interviews with a family consultant, Ms J, in relation to the wife’s parenting proceedings with her former husband.  The husband said that he had divulged confidential information to Ms J.  The husband argued that, as Mr R had access to that family report and he did not, Mr R had a conflict.

10. This argument appears to me to be misconceived.  The husband does not have access to the family report in the previous proceeding because he was not a party to it.  He was not Mr R’s client in that proceeding.  Ultimately, the husband was not even a witness in the proceeding between the wife and her former husband.  It is most unlikely that anyone would be permitted to use the family report in the current proceeding, as it was created for the earlier proceeding. 

Conclusion

1. In view of all of the circumstances of this case, I do not consider that it would be appropriate to exercise my discretion in favour of the husband.  The principal reason for that is his delay in bringing this application.  Additionally, I do not consider that there is even a theoretical risk of the sort mentioned in Thevenaz on the facts of this case.  However, even if I am wrong about that, I consider that the husband’s delay, and his apparent waiver of his rights by not pursuing the conflict point at the interim hearing on 25 May 2010, militates against the court exercising its discretion in the husband’s favour. 

2. Consequently, the husband’s application in a case filed on 10 August 2010 will be dismissed.

I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Riley FM

Date:  1 September 2010