Rizk & Mahfouz
[2023] FedCFamC2F 139
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Rizk & Mahfouz [2023] FedCFamC2F 139
| File number(s): | MLC 9999 of 2022 |
| Judgment of: | JUDGE BLAKE |
| Date of judgment: | 15 February 2023 |
| Catchwords: | FAMILY LAW – PRACTICE AND PROCEDURE – application to restrain wife’s solicitor from acting - where husband had conversation with the solicitor prior to the wife engaging her – where husband disclosed various matters including plans for his properties and issues he had refinancing – whether information imparted to solicitor was confidential information – content of information and ‘getting to know you’ factors considered - whether the Court should exercise its supervisory jurisdiction to prevent the solicitor from acting – HELD that confidential information was imparted by the husband to the solicitor – HELD that the Court should exercise its supervisory jurisdiction because a fair minded member of the public might conclude that the proper administration of justice requires the restraints - order made restraining the solicitor from acting. |
| Legislation: | Family Law Act 1975 (Cth) ss 75, 79 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 rr 6.06(3), 6.1 |
| Cases cited: | Babcock & Brown DIF III Global v Babcock & Brown International Pty Ltd [2015] VSC 453 Yunghanns v Elfic Pty Ltd [1998] VicSC 347 |
| Division: | Division 2 Family Law |
| Number of paragraphs: | 60 |
| Date of last submission/s: | 20 December 2022 |
| Date of hearing: | 21 November 2022 |
| Place: | Melbourne |
| Counsel for the Applicant: | Mr Ford |
| Solicitor for the Applicant: | C Lawyers |
| Counsel for the Respondent: | Mr Wheelahan |
| Solicitor for the Respondent: | Starnet Legal |
ORDERS
| MLC 9999 of 2022 | ||
| FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2) | ||
| BETWEEN: | MR MAHFOUZ Applicant | |
| AND: | MS RIZK Respondent | |
order made by: | JUDGE BLAKE |
DATE OF ORDER: | 15 FEBRUARY 2023 |
THE COURT ORDERS THAT:
The wife must not, in these proceedings, instruct Ms D of C Lawyers to act for her.
Ms D must not, in these proceedings, represent or act for the wife.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Rizk & Mahfouz has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BLAKE:
This is an application by the husband for an order restraining the wife’s solicitors from continuing to act for the wife in these proceedings. The wife’s solicitors are C Lawyers, and her solicitor is Ms D.
The husband contends that Ms D should be restrained from acting for the wife on the following bases. First, that a reasonable person informed of the facts might reasonably anticipate a danger of misuse of confidential information of a former client. Second, the jurisdiction of the Court to restrain a legal practitioner from acting in a particular case in order to ensure the administration of justice and to protect the integrity of the judicial process.
For the reasons that follow, I have decided the wife must not instruct Ms D to act for her and Ms D must not act for the wife.
PRINCIPLES
Misuse of Confidential Information
A Court will restrain a legal practitioner from continuing to act for a party to litigation:
(a)if a reasonable person informed of the facts might reasonably anticipate a danger of misuse of confidential information of a former client;
(b)there is a real and sensible possibility that the interest of the practitioner in advancing the case in litigation might conflict with the practitioner’s duty to keep the information confidential; and
(c)to refrain from using that information to the detriment of the former client.
See: Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357 at [362-363]; Farrow Mortgage Services Pty Ltd (in liq) v Mendall Properties Pty Ltd [1995] 1 VR 1 at [5] (Hayne J); Sent v John Fairfax Publications Pty Ltd [2002] VSC 429 at [35] (Nettle J); Dealer Support Services Pty Ltd v Motor Trades Association of Australia Ltd [2014] FCA 1065 at [34]-[35].
In determining the matters above, the Court should consider and determine the following questions:
(a)What is the relevant information?
(b)Is that information confidential?
(c)Does the legal practitioner have possession of that information?
(d)Is the legal practitioner proposing to act against the former client in the requisite sense?
(e)Is there a real risk that the confidential information will be relevant?
(f)Is there no real risk of misuse of the confidential information?
See: Nash v Timbercorp Finance Pty Ltd (in liq), in the matter of the bankrupt estate of Nash (2019) 137 ASCR 189 (‘Timbercorp’) at [64]; Babcock & Brown DIF III Global v Babcock & Brown International Pty Ltd [2015] VSC 453 at [70].
In respect of the questions above, in this matter, the husband bears the onus of answering question (a) and also satisfying the Court in respect of the questions set out at paragraphs (b) to (e) above: see Timbercorp at [64], cited with approval in Mumbin v Northern Territory of Australia (No 1) [2020] FCA 475 at [38]-[39].
Ensuring the administration of justice
The principles to be applied in relation to restraining a practitioner under this ground have recently been set out by a Full Court of Division 1 of this Court in Charisteas v Charisteas [2022] FedCFamC1A 160 at [37] as follows:
[37]
39. The relevant principles which guide the exercise of the Court’s separate discretion are broadly as follows:
(a) The Court has an inherent jurisdiction to ensure the due administration of justice, to protect the integrity of the judicial process and to restrain legal practitioners from acting in a particular case as part of its supervisory jurisdiction (see, for example, Grimwade v Meagher [1995] 1 VR 446 at 452 per Mandie J and Dealer Support Services Pty Ltd v Motor Trades Association of Australia Ltd [2014] FCA 1065; 228 FCR 252 at [37] per Beach J).
(b) The test to be applied is whether a fair-minded, reasonably informed member of the public might conclude that the proper administration of justice requires that a solicitor be prevented from acting in the interests of the protection of the integrity of the judicial process and the appearance of justice (I prefer this formulation of the principle, as opposed to the use of the term “would”: see Timbercorp at [62] per Anderson J and the cases cited therein, as opposed to the different formulation adopted by Beach J in Dealer Support Services at [94], upon which the Jawoyn Claim applicant relied, but I would regard even that higher standard to have been met in the circumstances here).
I accept the test above is the test to be applied in this matter, however, I note that the reference to the Court’s ‘inherent’ jurisdiction is inaccurate for the reasons given in DJL v The Central Authority [2000] 201 CLR 226 at [241] and [268].
While the Court retains the discretion above, the following matters are relevant to its exercise. First, litigants should not be deprived of their choice of representation without good cause. Second, the power of the Court should be exercised very cautiously. These are important considerations to weigh in a case such as this where, among other things, the wife is able to communicate in Arabic with the solicitor, trusts the solicitor and has expressed distress at having to find another solicitor.
As to the characteristics of the hypothetical ‘fair minded legal observer’, these were summarised in Martin v Norton Rose Fulbright Australia (No 2) [2020] FCAFC 42 at [21].
THE EVIDENCE
In his affidavit, the husband deposed that he explained to a friend, Mr B, that he was having family problems. The husband says Mr B told him Ms D was a friend and that he could obtain legal advice from her. The husband also says that Mr B offered to tell Ms D the background to his situation, and that he agreed to this situation.
In his affidavit filed 26 October 2022, the husband deposes to the following interactions he had with Ms D:
4.The first time I spoke with [Ms D] was sometime in early 2021. I either called [Mr B] or he called me. I am not certain about who initiated the call however I remember the details of the conversation. [Mr B] was with [Ms D] at the time and told me that [Ms D] had a question for me. He then handed the phone to [Ms D] and we introduced each other. [Ms D] said words to the effect of "I am always here for [Mr B] and he has spoken to me about you. There is a need for Muslim [medical professionals] in our community." I respondent [sic] by saying words to the effect of "it was nice to speak with her and that I would be in contact as I have a family law matter and I will need advice."
5. [Mr B] subsequently texted me [Ms D]'s mobile telephone number on 11 April 2021. In the text message from [Mr B], he stated that I should not tell [Ms D] that [Ms E] had been my lawyer with respect to this family law matter. I don't know why he said this but assumed that [Ms D] and [Ms E] obviously knew each other.
6.I telephoned [Ms D] on 12 April 2021 and when she did not answer the call, I sent her a text message, including my full name and asking her to contact me for advice. Annexed hereto and marked "-1" is a true copy of my sms dated 12 April 2021.
7.I eventually spoke with [Ms D], on 16 April 2021 when I telephoned her again. She told me that she had already spoken with [Mr B] and knew of my family and financial situation. For example, she told me that she was aware that I was trying to refinance my properties, because that is what [Mr B] had told her. Annexed hereto and marked "-2" is a true copy of my telephone record for 16 April 2021.
8.I had been trying to refinance my properties throughout 2021 through either Commonwealth Bank, Westpac or National Australia Bank. [Mr B] was assisting me with this process through a broker at [Company L] in [Suburb M].
9.During the conversation on 16 April 2021, I told [Ms D] words to the effect of "I have a family dispute with my wife as she requested separation after an argument and wanted to move to Melbourne. We reconciled and I rented a house for her and the kids in [Suburb F] very close to where [Mr B] lives and where the Islamic school she wants the kids enrolled in is located."
10.I then I gave [Ms D], [Ms Rizk's] name and contact details in response to her request for this information, before proceeding to tell her that "there is a lawyer who prepared an agreement for the family dispute matter but my wife was difficult and she never went to meet the lawyer despite offering her to have an independent legal advice".
11.I told [Ms D] about my concerns and that the reason for contacting her was to protect my assets. I told her that "[Mr B] told me that he already briefed you about my house in [Suburb F] where he also lives and as well about the two investments properties I have in [Suburb G] and my current work is in [Town H] where I have also a house in my SMSF". [Ms D] took details of all the addresses. I also spoke to [Ms D] about the mortgages secured over the properties and the fact that the mortgages were through private banks with high interest rates.
12.I told [Ms D] about my plans and that I intended to keep the [Suburb F] house but at some time wanted to sell the other properties. I told [Ms D] that I was in the process of refinancing.
13.I said to [Ms D] words to the effect of "Is there anything that I can do from now immediately to protect all my assets. [Ms Rizk] requested from me to pay her $200,000 on basis she will then no more seek division of property and will not ever proceed with any family law matters even if I marry again."
14. [Ms D] told me that the matter can be resolved on the basis I suggested and further told me that she would send me an email and cost disclosure and advice on steps that I can take soon to protect my properties in case the matter proceeds further.
15. I asked [Ms D] specifically whether "Can I pay more in the default account I have for a business interest loan as long I can withdraw it at any time. I have other loans to pay off as well and may need money from what I have saved."
16. [Ms D] replied: "Yes, you [I] can pay more in the business interest loan and it will not be subject to the family law dispute even if the matter goes to court as long as the loan evidence is valid."
17.I further explained to [Ms D] that I was planning to have my brother and mum come from the [Country J] towards the end of the year to visit me and the family. I said "Do you think I can transfer the [Suburb F] property to my brother name at that time. I should by then have refinanced and paid off the mortgage on the [Suburb F] property."
18. [Ms D] responded by saying that "You [I] can certainly transfer the property in [Suburb F] to your [my] brother's or wife's name when they come from overseas."
19.I continued by asking whether such a transfer would put me in a safe position, meaning [Ms Rizk] if she proceeds with the separation and family law proceedings would not be able to claim the [Suburb F] property. [Ms D] assured me that "there will be no risk on your properties as long as your [my] wife does not issue family law proceedings before and as long as you have legal documents supporting the transfer and the basis for it."
20. I then asked [Ms D] to please get this done through her as I want to really make sure that all is secured legally. [Ms D] told me words to the effect of "there are strong binding legal documents, which she can prepare to secure my position."
21.I told [Ms D] that it has been a bit of a struggle to refinance and that I had to go to different lenders, but hopefully I will be able to refinance shortly. [Ms D] invited me to visit her office and then took down my email address so that she could send her costs disclosure. I replied by saying that I would have to come visit her but was unable to due to the Covid-19 lockdowns. She said she understands that and welcomed me as her client.
The husband next deposes that he became aware that Ms D was acting for the wife in January 2022. He says that after various attempts to contact her, they spoke by phone. He deposes as follows:
27.When I spoke with [Ms D] by telephone on her return from leave, I first asked her: "How come you are acting for [Ms Rizk] when I already have been in contact with you and you accepted me as a client but I did not have a chance yet to come and meet you?"
28.She responded by saying: "I do not recall we ever talked." I told her: "Look up your messages. How come you do not recall our contact."
29. [Ms D] then said: "You were my client but now she is my client".
The husband goes on to depose that in February 2022 he met Ms D in her office for the purpose of resolving matters between himself and the wife. Self-evidently the matter did not resolve. Subsequently, the husband deposes that on 24 August 2022, he instructed his lawyer to write to Ms D to seek that she stop acting for the wife.
The husband tendered into evidence translated text messages between him and the wife dated 10 January 2022. In one of these messages, the husband asks the wife ‘did this lawyer tell you that she knows me? And that Mr B spoke to me from her place’. The wife texts that ‘she doesn’t know you at all. This is the first time she hears about you’. The husband responds ‘for sure she is a liar. I got her number and will show you a message. We spoke more than once’.
In cross examination, the husband stood by his account of what occurred. He denied that he contacted Ms D in April 2021 for the purpose only of ascertaining whether a loan owed to him by Mr B could be repaid. The husband conceded, however, that two previous sets of lawyers he had engaged in connection with the breakdown of his marriage did not object to Ms D acting for the wife. He also agreed that he did not object to Ms D acting for the wife when he attended her office to attempt to resolve matters in February 2022.
Mr B gave evidence to the Court. He deposed that around 9 July 2019, he borrowed the sum of $10,000 from the husband to help him pay an outstanding debt. He says the husband began to constantly question him as to when he would repay the borrowed amount, and that the husband sought to have Mr B’s solicitor explain Mr B’s financial circumstances to him. Mr B deposes that he informed Ms D of this and also provided the husband with Ms D’s telephone number. Mr B says on around 14 April 2021, the husband called him and said he had been unsuccessful in contacting Ms D. Mr B deposes that he told the husband he would contact Ms D and remind her to expect a call. Mr B says that he repaid the loan to the husband on 23 August 2022. Mr B denies that he put the husband in contact with Ms D for the purpose of obtaining legal advice with regards to any family law matter.
Questioned about these matters, Mr B stood by his account of events. He also stated that when he became aware that the husband was having problems in the marriage, he directed him to another firm, K Lawyers, which was close to the husband’s office. He also denied briefing Ms D about the husband’s affairs.
Ms D gave evidence to the Court. In her affidavit, Ms D deposed that Mr B called her office in a panicked state and told her that the husband was seeking repayment of the loan he had made to Mr B. She says Mr B asked her to speak to the husband to inform him that an outstanding settlement on a property development he was involved in was preventing repayment of the loan.
Ms D confirms that she spoke to the husband on around 16 April 2021. Her evidence as to what occurred on 16 April 2021 is set out in her affidavit as follows:
4.As requested by my client, I spoke to the Respondent on or around 16 April 2021 to inform him about the circumstance of the settlement preventing [Mr B] from repaying the Loan until after settlement. That was the extent of my conversation with the Respondent. I was aware that he was having issues with the Applicant, as [Mr B] had informed me that that was the basis on which he was requesting repayment of the Loan. At no point prior to receiving instructions from the Applicant was I privy to information regarding the Respondent's financials as he alleges in his Affidavits.
Ms D goes on to depose that she was first contacted by the wife on 15 December 2021 and that she commenced acting for the wife on around 28 December 2021. She says that on 23 January 2022, she received correspondence from the husband’s then solicitor, Ms E, and there followed an exchange of correspondence. Ms D says that on 28 January 2022, the husband messaged her to advise her that he had instructed his lawyer to cease acting for him and asked to meet with her and the wife in person to attempt a resolution. Ms D deposes that the husband ultimately attended her office on 11 February 2022 to discuss a settlement. She also says that following that meeting, on 14 February 2022, the husband sent her a list of assets and liabilities. Ms D goes on to depose that at no point prior to 24 August 2022 did the husband raise any concerns regarding her capacity to act for the wife.
Ms D was subject to cross examination. Among other things, she was asked whether she had kept a file note of the conversations between her and Mr B. Somewhat surprisingly, Ms D said she had not checked the files to see whether she had kept a file note. She was also asked whether she kept a file note of her conversation with the husband on 16 April 2022. She said she had not done so.
Finally, the wife gave evidence. She deposed that she first sought advice from Ms D on around 16 December 2021. The wife says that after meeting Ms D, she felt immediately at ease, and that she has trust and confidence in Ms D, who is able to communicate with her in Arabic. The wife says that the husband is making false allegations to deprive her of her choice of solicitor. In the witness box, the wife produced a message exchange between her and the husband on which she sought to rely, in support of her case.
FINDINGS
As can be seen from the above, Ms D and the husband have given vastly different accounts of what occurred.
The husband contended that his account should be preferred because, among other things, he sent a text message to Ms D on 12 April 2021 stating that he ‘had advise from brother Mr B to call you for advise’. The husband contended that if he had wanted advice about the loan to Mr B in the text, he would have said so. The difficulty with that position is that the same applies to asking for advice about his separation – he could have said so. The message does not advance the argument one way or the other. I do not place any weight on it.
The husband then contended that the evidence of Ms D and Mr B to the effect that he called Ms D about the loan he had given to Mr B because he was concerned about being repaid, should not be believed. The husband contended that he earned significant income of around $15,000 per week and had no need to be repaid at that time. It may be that the husband had no need to be repaid at that time, but that does not mean he was not concerned to ensure that Mr B could meet the debt he owed, or that he wanted to better understand Mr B’s financial position. He was, after all, going through a marriage breakup, and his own evidence was that he was struggling to obtain refinance at this time. I therefore place no weight on this submission of the husband.
The husband next contended that Ms D was not a credible witness and her version of events should not be accepted. That submission was based on an argument that Ms D had misled a Registrar of this Court, and on her performance in the witness box before me.
I have looked carefully at the transcript of what occurred before the Registrar. It is clear Ms D initially told the Registrar that she had never had any dealings with the husband. It is equally clear, however, that she attempted to correct the record but was cut off by the Registrar because the issue was to be programmed for a separate hearing later. In that circumstance, I do not regard Ms D as having misled the Registrar or as having now attested to evidence before me that is inconsistent with what she told the Registrar.
While Ms D may not have misled the Registrar, her performance before me in the witness box was at times, less than convincing. At times, she failed to answer direct questions. Questions had to be repeated, and she appeared either evasive or reluctant to answer questions put to her. As I have said, it is surprising that a solicitor appearing to give evidence about conversations that she has had in a professional capacity has not checked the file to see whether she has recorded a file note.
It was contended by the wife that the husband’s evidence as to what occurred on 16 April 2021 should not be believed because it is improbable that he could recall that conversation with such accuracy, given the effluxion of time, and in the absence of him keeping any record of the conversation. I agree that it is surprising that the husband can recall the detail of the conversation to the extent that he has, however, I regard it as inherently more likely that the husband would recall the detail of the conversation. I regard it as inherently more likely that a person who does not usually engage with lawyers, but then speaks to a lawyer about the breakdown of his marriage and the consequences for his finances, is more likely to recall the detail of that conversation than a solicitor who (by her own admission) takes ‘100’s of calls a week’ but keeps no record of the conversation.
The other issue of relevance in assessing the content of the 16 April 2021 phone call is the length of the call. The call lasted for 13 minutes. That is a considerable period of time. If the phone call was made simply to check the status of Mr B’s finances or was limited to the content described in Ms D’s affidavit, it is unlikely the phone call would have lasted 13 minutes. In that regard, I would add that Ms D’s answers under cross examination as to why the phone call took 13 minutes were most unconvincing, and given most unconvincingly.
The wife contended that the husband’s account of the 16 April 2021 conversation should not be accepted because he already had engaged lawyers. It was put that he would not seek advice from Ms D in circumstances where he already had a lawyer. I do not accept that submission and give it no weight. It is clear that the husband had engaged a lawyer at the time he made the call on 16 April 2021. Even if he had engaged a lawyer to assist him with family law matters, however, it is open to him (as it is to anyone) to get a second opinion.
The wife then contended that the husband’s account of the conversation should not be accepted because he did not raise a concern about Ms D acting until much later. It is clear the husband did not object to Ms D acting for some time. I am, however, prepared to accept his evidence that he did not object because he was seeking to have the matter resolved, and thought it might resolve. It is also the case that the husband acted quickly in objecting to Ms D’s involvement once proceedings were commenced.
Finally, I note that the Husband tendered into evidence a text message exchange between the parties dated 10 January 2022. In that text message, the husband tells the wife he knows Ms D and has spoken to her more than once. The wife responded to that message by stating, among other things, that Ms D does not know the husband at all and that this is the first time Ms D had heard about him. The message from the husband sent in January 2022 tends to support his version of events that he sought advice from Ms D in April 2021.
The inference to be drawn from the wife’s responses contained in the text message referred to above is that she had spoken to Ms D about the husband’s claims to have met Ms D. Ms D, however, told the Court during cross examination that she could not say for certain that such a conversation with the wife took place. It is somewhat surprising that Ms D cannot recall a conversation with the wife in around January 2022 on this issue, but is able to say with certainty that the she had no discussion at all with the husband eight months earlier in April 2021 about his financial affairs and the breakdown of his marriage.
When these matters are considered, I find the husband did speak to Ms D about the breakdown of his marriage and his finances on 16 April 2021. In particular, I am satisfied that:
(a)A discussion took place between Ms D and the husband regarding the state of Mr B’s finances. That discussion was quick and I have little doubt Ms D assured the husband that Mr B would be in a position to repay the loan. Given the date on which Mr B ultimately repaid the loan, it seems the husband accepted the assurances given by Ms D; and
(b)The husband then used the opportunity while speaking to Ms D to ask her some questions about the financial consequences of the breakdown of his marriage.
I find that during the conversation between the husband and Ms D, Ms D became aware of the following:
(a)the husband’s financial and family situation and his wish to refinance his properties;
(b)the financial institutions that the husband was seeking or had sought finance from;
(c)that the husband had separated from his wife and the wife was living in rented accommodation;
(d)that the wife refused to sign an agreement prepared for the family dispute matter;
(e)the location of properties in the marriage and the fact that one property was in a self-managed super fund;
(f)the mortgages over the properties and the fact the mortgages were obtained through private banks with high interest rates;
(g)the husband’s wish to keep the house in Suburb F and to sell the other properties;
(h)that the husband wished to ‘protect’ all of his assets;
(i)that the wife proposed that she be paid $200,000 in exchange for not seeking any further division of property;
(j)that the husband had a default account for a business interest loan and that he had a question about whether he could pay more into that default account;
(k)that the husband wished to transfer the property in Suburb F to his brother;
(l)that the husband had a ‘bit of a struggle’ to obtain refinance and had to go to different lenders.
SHOULD MS D BE RESTRAINED FROM ACTING BECAUSE SHE HAS CONFIDENTIAL INFORMATION OF THE HUSBAND?
It is important to note at the outset that this is a case in which a solicitor has spoken to the husband about a matter (the breakdown of his marriage and his financial concerns and position), and now proposes to act for the opposing party (wife) in the same matter. This is not a case in which the solicitor has dealt with the husband in one matter, but now proposes to act for the opposing party in a different matter.
In a written outline of submissions filed before the hearing, the husband identified items set out in paragraphs 37 (e), (g), (h), (j) and (k) above as constituting the confidential information. In closing submissions, he also argued that Ms D would have formed a view about him and his attitudes, and that such amounts also to confidential information. By this submission, the Applicant was seeking to point to and rely on the ‘getting to know you’ factors identified by Gillard J in Yunghanns v Elfic Ltd (Unreported, 3 July 1998 at pages 10 and 11) (‘Yunghanns’). The wife submitted that none of the information provided by the husband to Ms D was confidential information.
Much of the argument between the parties focused on the husband’s desire to protect his assets, his plans to transfer properties and whether or not Ms D could have formed a view about the husband and his attitudes.
A desire expressed in general terms by a party engaged in family law litigation to protect his or her assets is unexceptional. The expression of such a general statement could never possess the necessary quality of confidence.
A discussion, without more, about whether a property or properties within a marriage should or may be transferred to third parties may be capable of having the necessary quality of confidence. In the circumstances of this case, however, it is not possible for the husband’s statements to Ms D about his wish to transfer property to his brother to constitute confidential information. That is because, as the wife rightly points out, parties to family law litigation have an overarching duty of disclosure. Those obligations are set out in Part 6.1 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (‘Rules’). Rule 6.06 (3) in particular requires a party to make full and frank disclosure of the party’s financial circumstances. Among other things, a party must disclose any vested or contingent interest in property, any vested or contingent interest in property owned by a legal entity that is fully or partially owned or controlled by a party, and any disposal of property whether by sale, transfer, assignment or gift made by the party in the 12 months immediately before the separation of the parties, or since the final separation of the parties. Indeed, when the content of the Rules is properly considered, none of what is set out in paragraph 37 (e), (g), (h), (j) and (k) above could constitute confidential information.
Comparatively little (if any) attention was given by the parties in submissions to these items set out in paragraph 37 (b), (f) and (l) above. This information provided by the husband to Ms D relates to the identity and number of financial institutions the husband was seeking refinance from, the nature of the interest rates he was being charged (high), and his struggles to obtain finance. It may be the case that if any refinancing had ultimately taken place, the identity of the new financier would have to be disclosed. This information cumulatively, however, discloses something more. It is information that shows that the husband was captive to what he regarded as being high interest rates charged by private banks. It is information that shows the husband had, on one view, approached a number of financial institutions to refinance without success. It is information that shows the husband was struggling to refinance. Taken together, this information is significant. It is not simply information about what is in the parties list of assets and liabilities or balance sheet, i.e. information that would have to be disclosed. It is information that could be used by an opposing party to its benefit, for example, in making an assessment as to whether the husband needed to resolve litigation quickly or whether he may be more amenable to settlement given the state of his financial position.
It was contended by the wife that the information disclosed by the husband to Ms D was not relevant. It was submitted that the information could not rationally affect the probability of a fact in issue in light of the considerations under sections 75 and 79 of the Family Law Act 1975 (Cth) (‘Act’). It was further contended that the information had no relevance to the exercise of the discretion under section 79 of the Act to make a just and equitable adjustment of property interests. These submissions take an unduly narrow view of litigation in this Court. It may be, for example, that whether the husband has difficulty obtaining refinance of his properties or is subject to high interest rates is not relevant to determining a just and equitable division of property. Such information is, however, highly relevant to the litigation strategy in this Court, particularly where parties are required to attempt to resolve their differences prior to a final hearing: see for example, clause 4.1 of the Central Practice Direction. That a party is subject to high interest rates, needs to refinance, has approached various lenders, has difficulty refinancing or is struggling to obtain refinance is information that could well inform the mediation and litigation strategy of a party. In this Court, parties are encouraged to resolve their differences through exploring settlement prior to trial, often with the assistance of the mediator. Information of the type I have identified above is important in developing a position for mediation.
There is then the husband’s reliance on the ‘getting to know you factors’ identified by Gillard J. Many litigants come before this Court seeking to rely on these factors. Litigants before this Court should note that the comments by Gillard J were made in a very specific factual context, where the firm of solicitors who were ultimately restrained had a long-standing relationship with a former client spanning 30 years. In that sense it was an unusual case. The wife pointed to various authorities including Ismail-Zai v The State of Western Australia [2007] WASCA 150 (‘Ismail-Zai’), Li v Wu [2012] FCA 164 (‘Li v Wu’) and Karapataki & Karapataki [2011] FMCAfam 6 (‘Karapataki’) to emphasise her submission, which was to the effect that the getting to know you factors will only rarely constitute confidential information.
I accept the import of that submission and have noted that Yunghanns was an unusual case. The following should be noted, however, about the cases cited by the wife.
The wife contended in written submissions that the facts in the present case ‘can be distinguished from Ismail Zai, which involves a relationship for some 30 years’. That submission is incorrect and appears to be a typographical error. Ismail Zai concerned very limited contact between a prosecutor and defendant for whom he had previously acted in two very brief, prior and unrelated criminal matters. The facts and circumstances in Ismail Zai are very different from the present matter.
Li v Wu is a case that also turns on its facts. The applicant for the restraint, Mr Wu, did not give direct evidence of his dealings with his solicitor and none of the assertions of confidential information could therefore be tested. The Court therefore preferred other evidence. In this case of course, the husband has given direct evidence about his interactions with Ms D and Ms D is proposing to act in the same matter in relation to which the husband had provided Ms D with the information.
The wife also pointed to the decision of Walters FM in Karapataki and drew the Court’s attention in particular to the passage by Heery J from Mintel International Group Ltd v Mintel Australia Pty Ltd [2000] FCA 1410 at [44] (‘Mintel’) which Walters FM referred to at [39]. I understand the import of Heery J’s comments but note the following. First, the facts in Mintel are very different to the case presently before me, including what information was ultimately shared between the barrister and the former client. In particular, Heery J was satisfied that no confidential information disclosed by the former client in the earlier proceeding had any relevance to the present proceeding (at [45]). That is not the case here. Second, Heery J in the passage referred to places particular emphasis on work undertaken by counsel. This case concerns work undertaken by a solicitor. Third, Heery J was concerned with significant commercial litigation whereas the present litigation is highly personal family law litigation.
Quite apart from the factual background to each of the cases cited by the wife being different, there is significant distinction between the present case and those cited. In the present case, I have found the husband has conferred with Ms D in relation to the same matter in which Ms D now proposes to act for the wife. This was not what occurred in Ismail-Zai, Li v Wu or Mintel.
This case is closer to what occurred in Karapataki. That was a case where the solicitor was restrained from acting in a family law proceeding. That occurred following the husband and wife previously attending on the solicitor to discuss wills, estate planning and other financial matters. It is plain that the matters discussed with the solicitor are matters that would have been examined in the family law proceeding.
The husband told Ms D he had ‘a bit of a struggle’ to obtain refinance. That statement by the husband is his characterisation or view of his efforts to refinance i.e. it had been difficult or not easy. Whether it was in fact difficult to obtain refinance is not the issue. The issue is that whatever happened, the husband had found it hard. The husband had therefore given Ms D an insight into his reaction to the problem he perceived he had faced. It had been a ‘struggle’. Of itself, I have my doubts that this alone would be sufficient to engage the ‘getting to know you factors’ identified by Gillard J. When it is taken together with the other matters I have identified and the matters at paragraph 37 (b), (f) and (l), however, it reinforces the conclusion that Ms D was privy to confidential information obtained from the husband.
For the reasons given above, I conclude that Ms D was provided with confidential information of the husband. She has possession of that information. The confidential information is relevant. She is proposing to now act for the wife against the husband in the same matter.
Finally, as to the whether there is a real risk of misuse of confidential information, I refer to what I have said earlier. The information obtained and impression formed by Ms D are able to be deployed as part of the wife’s litigation strategy, including any approach to formal mediation or other settlement discussions. In my view, there is a real risk of misuse of confidential information.
SHOULD MS D BE RESTRAINED AS AN INCIDENT OF THE COURT’S SUPERVISORY JURISDICTION?
In my view, this is also a case in which a fair-minded, reasonably informed member of the public might conclude that the proper administration of justice requires that Ms D be prevented from acting in the interests of the protection of the integrity of the judicial process and the appearance of justice. There are three reasons for this.
First, Ms D is in possession of confidential information from the husband for the reasons set out above.
Second, Ms D has obtained that information from the husband in the same matter that she now proposes to act for the wife in.
Third, Ms D understood following her conversation with the husband that he wished to protect his assets. That is unremarkable of itself. Also unremarkable of itself is Ms D lodging caveats over properties in the marriage following her engagement by the wife. What is worthy of comment, however, is the combination of these two facts. Can it be said that Ms D placed the caveats on the properties on behalf of the wife because that is what she might ordinarily do as a competent lawyer? Or is it the case that she promptly placed the caveats over the properties because of the discussions she had had with the husband? I do not make any finding of fact as to the answers to these questions, but have considered what a fair minded, reasonably informed member of the public might conclude of this sequence of events.
In my view, a fair minded, reasonably informed member of the public might conclude (in respect of each of the three matters set out above) that the proper administration of justice requires Ms D to be prevented from acting in the interests of the protection of the integrity of the judicial process and the appearance of justice. There is also a material risk of the public having less faith in the outcome if a restraint is not imposed in this case.
For all of the reasons above, Ms D should be restrained from acting for the wife in these proceedings.
| I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Blake. |
Associate:
Dated: 15 February 2023
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