ROYCE & ROYCE

[2012] FamCA 400

FAMILY COURT OF AUSTRALIA

ROYCE & ROYCE [2012] FamCA 400

FAMILY LAW – INJUNCTIONS - Injunction against solicitors acting where they had acted for both parties in a commercial matter - Bitterly contested proceedings - Orders sought by the wife against the solicitors rather than against the husband - Orders made.

Evidence Act 1995 (Cth)
Family Law Act 1975 (Cth)

DJ Constructions Pty Ltd v Head and Ors trading as Clayton Utz [1987] 9 NSWLR 119
Grieves and Tully [2011] FamCA 617
Magro [1989] FamCA 2
McMillan and McMillan (2000) FLC 93-048
Thevenaz and Thevenaz (1986) FLC 91-748

APPLICANT: Mr Royce

RESPONDENT: Ms Royce

INDEPENDENT CHILDREN’S LAWYER:

FILE NUMBER: MLC 11662 of 2011

DATE DELIVERED: 31 May 2012

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 29 May 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Spaulding

SOLICITOR FOR THE APPLICANT: De Kever Spaulding Legal Pty Ltd

COUNSEL FOR THE RESPONDENT: Mr Weerappah

SOLICITOR FOR THE RESPONDENT: Bayside Solicitors

SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: Glezer Lanteri & Associates

Orders

1. That forthwith, solicitors De Kever Spaulding Legal Pty Ltd be restrained from acting any further in proceedings number MLC11622 of 2011 on behalf of Mr Royce.

2. That the application for interim orders as set out in paragraph 8 of the amended response of interim orders filed 8 March 2012 is otherwise dismissed.

3. That the husband pay the wife’s costs by agreement in respect of this application and failing agreement as assessed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Royce & Royce has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 11662  of 2011

Mr Royce

Applicant

And

Ms Royce

Respondent

Independent Children’s Lawyer

REASONS FOR JUDGMENT

1. Ms Royce (“the wife”) seeks an injunction that De Kever Spaulding Legal Pty Ltd (“the solicitors”) be forthwith removed from acting for Mr Royce (“the husband”).  The husband and wife are embroiled in property and parenting proceedings in this Court and it would appear throughout, the solicitors have acted for the husband.

2. In discussion with the respective practitioners, it was made clear to me that the order pursued by the wife was directed to the solicitors not the husband himself.  It is therefore on that basis, I have approached the matter.

3. In final submissions on the issue of a potential costs order arising out of the wife’s application, Mr Spaulding, the principal of the solicitors, said that he had always been instructed by the husband to oppose the orders but if I was minded to make the injunction sought by the wife and consequently, a costs order thereafter, such order should be against the husband and not the solicitors themselves.  I have some difficulty with that position but I shall deal with that later.

4. As an overview, this discrete issue is simple.  The solicitors acted for the husband and the wife.  There is some dispute and confusion about that but at least, they acted for the husband in a commercial matter before separation and in which the wife was a participant as a witness or instructor.  Subsequent to separation the wife took exception to the solicitors acting for the husband.  The principal of the solicitors maintained that in the commercial proceeding referred to above no confidential information was imparted by the wife and as such the authorities relating to family law proceedings were either irrelevant or distinguishable.  That submission is limited by the facts relied upon by both parties. 

5. There can be little doubt that this discrete issue was given serious consideration by the solicitors because they drew or at least filed the affidavits of the husband.

6. Although there was a somewhat unedifying and confusing start to these proceedings about just what basis the matter was to be determined upon, each party proceeded to point to their respective client’s affidavit material and to make submissions thereon overall. 

7. The nub of this case is still the issue of whether acting for the husband and wife in a commercial matter takes it outside the usual guidelines for family lawyers.  In my view, it does not. 

8. Despite a persistent attempt by Mr Spaulding on behalf of the solicitors to argue that there was little relevance in the authorities of this Court because they were distinguishable and that the English view should be adopted, I reject that.  I cannot see any justification for the husband’s solicitor being allowed to continue to act for him.  There being no alternative proposals by the solicitors and no suggestion that if I expressed concern, they would remove themselves from the record, I have no choice but to grant the injunction against them.  These are my reasons.

9. The husband and wife married in January 1996 and they have one child now aged twelve.

10. On 8 March 2012, the wife filed an amended response to the husband’s application and sought an interim order that the husband’s solicitor and his firm be restrained by injunction from continuing to act for the husband.  No formal response to that order was filed by the husband but it was accepted by at least the solicitors for the husband that he (and they) was implacably opposed to the order sought by the wife.

11. There is much bitterness in this case which, it would appear, has led to affidavits being drawn by lawyers which fail the relevance requirements of ss 55 and 56 of the Evidence Act 1995 (Cth). That has done nothing to assist the objective and smooth path of the litigation and it certainly limited the evidence upon which I could determine the discrete dispute.

12. Despite the requirement that in respect of any discrete application, parties could rely upon one affidavit by each deponent, each side asked me to read a variety of affidavits.  I shall refer to them in some detail below.

13. There was also a hearing before the Senior Registrar on 30 January 2012 which both practitioners referred to but as I pointed out, anything said by the Senior Registrar, apart from being irrelevant and obiter, did not (and could not) result in orders.  The issue was certainly beyond his delegated power.  I propose to ignore the attempted digression and deal with the evidence relied upon.

14. Despite a valiant attempt by Mr Spaulding to refer to a number of authorities which I shall mention below, the law which binds me is succinctly set out by the Full Court in McMillan and McMillan (2000) FLC 93-048. There, the Full Court said:

    The test propounded by Hayne J. of “a real and sensible possibility of the misuse of confidential information” does not go as far as, or is not as strict as, the test propounded by Frederico J. in Thevenaz of even a theoretical risk of the misuse of the confidential information.  To the extent that it is necessary in this case for us to express a concluded view (which it was not for the Full Court in McGillivray v Mitchell) we would support the application in this jurisdiction of the approach of Frederico J. in Thevenaz…We would do so for the reasons related to the sensitive nature of the jurisdiction which were referred to by Bryson J. in D & J Constructions…

15. In Thevenaz and Thevenaz (1986) FLC 91-748 at 75,446 Frederico J said:

    The problem, however, is that it is the practitioner’s duty to put at his client’s disposal, not only his skill but also his relevant knowledge, and if he is not prepared to make that knowledge available, she should not act…

    …

    It is my view that in this case [the solicitor] should not continue to act on behalf of [the wife].  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.

16. Thus, I intend to follow what was set out by Frederico J in Thevenaz that because of the sensitive nature of the jurisdiction, even if there is only a theoretical use of the misuse of confidential information, justice must be seen to be done.

17. This case was determined on the papers and although Mr Spaulding said he had been told that no cross-examination was available in a judicial duty list (which is incorrect) it was hard to see how the evidence could have altered the position of the parties.  In any event, Mr Spaulding proceeded.

18. In her affidavit filed 10 February 2012, the wife said that Mr Spaulding had previously represented the husband and herself in civil litigation from the end of 2005 to the end of 2008 in relation to the sale of a property that “fell over” four months after the date of settlement.  She said that during those three years, she was the main contact with Mr Spaulding and had many meetings and conversations with him.  She said Mr Spaulding had also been privy to all of her personal financial information, including copies of her bank account statements.  That evidence was not really challenged.

19. In a second affidavit filed on 8 March 2012, leaving aside opinions and argumentative material, the wife said that after a settlement in 2003, a property at Town B was ordered to be sold and there was a distribution of the balance of $100,000 to the husband and herself.  This was the settlement of the sale of the property to which the wife earlier referred.  She described why the sale fell over and that a firm of solicitors had acted for herself and the husband in relation to the fallen sale along with an estate agent.  She said she approached Mr Spaulding to represent the husband and herself in relation to the sale falling through and she sat with him on most occasions by herself and provided him with instructions to act for her in relation to this particular sale.  She pointed to the fact that the ultimate proceeds of sale resulted in the current asset pool.  That evidence too was not really challenged.

20. In a third affidavit filed on 2 April 2012, the wife said that there was a hearing date in the property and parenting proceedings with her husband in January 2012 and she was shocked to find that the husband had engaged the services of Mr Spaulding because he had been privy to matters personal to her and that upset her greatly.

21. The husband relied on two affidavits filed 17 April 2012 and 17 May 2012.  Neither affidavit directly responded to the wife’s allegation but I have presumed that the husband generally denied the assertions.  I propose to try and leave aside the opinions and argumentative nature of the affidavits but doing the best I can, the husband’s evidence was as follows.

22. In the affidavit filed 17 April 2012, the husband said that Mr Spaulding first acted for him and his first wife in 1989 and then ultimately for him in relation to his “matrimonial” against his first wife.  He observed there was no issue about him acting in that way.  He then said that Mr Spaulding acted for him during a claim against his conveyancing solicitors and the estate agents to which the wife had referred above concerning the Town B property.  He confirmed that that file was concluded in 2008.

23. Importantly, the husband said that during the time involved in this commercial transaction, he did not tell Mr Spaulding about his previous or then current matrimonial issues with his wife because they were simply not relevant to what the solicitor was doing for him.  He said “from what I can recall she did not discuss those issues either”.

24. The husband went on to say what happened about the money from the settlement of the commercial litigation.

25. The husband then said that he did not believe that his wife’s claim for a conflict of interest was genuine.  That was a gratuitous comment.  It had no probative value.

26. The husband then referred to the hearing on 16 January 2012 when his wife to the Court that she did not want to speak with Mr Spaulding but at the end of the day, the wife appeared and spoke to Mr Spaulding for 40 minutes.  When I asked Mr Spaulding the relevance of this particular piece of evidence, he said that it went to the fact that the wife was clearly not troubled about the objection she was raising.  However, it was clear that at the hearing on 16 January 2012, as the wife pointed out in her evidence, she was unrepresented.  Just what was discussed was not set out in the affidavit.

27. The husband then went on to say that Mr Spaulding handed his family file to a Mr Ian Robertson who has had the care and conduct of the proceeding ever since.  He pointed to the fact that the wife had contacted Mr Robertson direct by telephone and email.  This became an issue when Mr Spaulding endeavoured to argue that he had no longer any involvement in the matter because he had been associated with the commercial matter and that Mr Robertson was somehow distant from Mr Spaulding.  Mr Spaulding however conceded that Mr Robertson was his employee.  I observed that the law has long recognised that “Chinese walls” do not assist the solicitor trying to argue that someone else within the firm is handling a matter.

28. Finally, the husband asserted that the wife was a secretive person and then gratuitously said:

    Believe me a lot more has been learned about my wife by my solicitor since the start of these proceedings that any supposed “Getting To Know You Factors” from the old sale of the ([Town B]) property. 

    That is a disgraceful statement if it was drawn by the solicitor.  If anything, it confirms that there is a serious issue about what was in the file of the commercial matter that might have given the solicitors an opportunity to observe what the wife was really like.  If it is an issue now, the solicitors knowing what the wife’s real position is, presumably can compare that with what occurred when the matter was in the care of Mr Spaulding.

29. In a second affidavit filed on 17 May 2012, again apparently drawn by a solicitor, the husband’s evidence did not get much better.  This affidavit reinforced the argument to which I have just referred about the fact that someone else in the firm other than Mr Spaulding could justify the firm continuing to act.  I completely reject that argument.  The affidavit went on to say that the new solicitor and the husband had not discussed the building dispute handled by Mr Spaulding.  For reasons best known to the draftsperson, the affidavit read:

    It is just not relevant and a waste of time and money to look at that file.

    Much of the rest of the paragraph relating to the settlement of the sale of the home was irrelevant.

30. The husband argued his case through his affidavit indicating that he had a right to choose his own counsel and that he had an understanding that the Court wanted to ensure that justice should not only be done but appear to be done.  At least he got that particular issue correct.

31. The affidavit then went on to say:

    Whilst initially it may be irresistible that a reasonable person may say that Mr Spaulding should not act for me against the respondent, it is not quite as simple as that when one looks at the reality of all the circumstances in this case.  In any event, Ian Robertson has been acting for me since 7 February 2012.  I am not aware of any complaints about any alleged conflict of interest by Ian Robertson in acting for me.

32. The affidavit went on to say that had Mr Spaulding and Mr Robertson not been acting for him he would have given up many times before.

33. The husband finally descended into what actually happened in the period and confirmed that Mr Spaulding had acted for him in a variety of transactions but so had other solicitors.  He said that the wife had been representing herself in this particular property proceedings and she had no (or very little) legal cost to pay whereas he had incurred tens of thousands of dollars which were unpaid.  He said his legal costs had been increased by the wife’s approach to the proceedings and his legal binders stood nearly two feet high when stacked on a table.  He said he could not afford to change solicitors.  He said that “just to bring someone up to speed” would cost thousands of dollars and he did not have that money available.  Importantly, he said he did not wish to change solicitors at this late stage of the proceedings which had been going on for five months.  From his point of view, he said that the parties should be getting close to the end of the proceedings but having regard to what I have seen, it seems extremely unlikely.

34. The husband then went on to gratuitously add that:

    The irony is the respondent has had multiple solicitors act for her at no or little cost, and watch this space, her current solicitor may well resign too, and she seeks to get rid of the firm of solicitors acting for me who I pay for.

35. It has often been said that legal practitioners particularly in family law matters have a responsibility to ensure that the evidence they put before the Court is objective and complies with the law.  This sort of material does a gross injustice to the husband. 

36. Finally, the husband said that to see that justice was done, a reasonable person needed to be appraised of the facts of the case.  He then went on to summarise the case but tended to ignore the very complaint about which the wife brought the application. 

37. Mr Weerappah the solicitor for the wife put the whole of the case on the basis of the material to which I have referred together with the authority of McMillan (supra). 

38. Mr Spaulding handed me a written submission at the conclusion of his submissions and it indicates that it is a submission on the behalf of the husband.  This tends to blur the situation that in reality, the application was for an order against the solicitors themselves rather than against the husband.

39. The submission has a number of important points.  They are:

    ·    The starting point is that there is no rule that says a solicitor cannot act against a former client from whom they have learned some information about in the past and that a former client’s retainer does not continue in all circumstances;

    ·    The wife was not genuine in her claim for conflict of interest and would stop at nothing to win any point;

    ·    There was no prior confidence or breach of an alleged confidence by Mr Spaulding to the detriment of the wife;

    ·    The appearance of justice being done was important however it is the appearance to the reasonable observer who knows and is prepared to understand the facts;

    ·    The Court should weigh the facts and assess the risks and assess the risks in the eye of reality, theoretical risk should be disregarded and when there is no confidential information available the appearance of the matter is not a basis to assume control over the retainer;

    ·    The matter is realistically close to conclusion and it is a disadvantage to the husband to change lawyers.

40. In a strange submission, Mr Spaulding said:

    The respondent has not been treated well by the justice system recently which is why he started these proceedings.   

    Just what that submission meant was never canvassed and I propose to ignore it as being inappropriate commentary from a legal practitioner.  Legal practitioners have a responsibility to engender confidence in the court system.

41. The submission then went on to discuss countervailing factors to be weighed up and I have done that.

42. Mr Spaulding referred to the breach of confidence aspect and made reference to a number of authorities.  Those authorities do not assist the husband.

43. In respect of the decision of Thevenaz (supra), the submission was put that it was distinguishable because it was not asserted and not contradicted, that material in the files related to confidences exchanged in the course of the former solicitor acting on behalf of both parties which would embarrass one of the parties.  That is not a correct summation of what Frederico J said and it ignores the evidence put by the wife which was not denied by the husband.

1. The submission then referred to Magro [1989] FamCA 2 a decision of Rourke J. The submission said that the case was about the wife alleging that the solicitor knew her whole life and past history and that no such allegation was made here. On the contrary, a very significant allegation was made by the wife of the solicitor knowing exactly what her personality and financial position was. That position was reinforced by the point I made earlier about the views that the husband has that his current solicitor seems to enjoy about the wife.

2. The submission then went on to refer to Grieves and Tully [2011] FamCA 617 which is a judgment of Young J. That was a case where the husband’s solicitor had a longstanding friendship with the husband and the wife complained about his knowledge of her. In a very clear synopsis of the law, Young J said:

   69.In the decision of McGillivray v Mitchell (1998) FLC 92-818 (a Full Court constituted by Ellis, Baker and Finn JJ) the husband appealed against the decision at first instance refusing an application to restrain a practitioner who acted for the husband in his divorce from his first wife from representing his second wife in their subsequent divorce proceedings. The husband argued that the Family Court’s approach to the law of conflict was broader than that of other superior courts (see Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357 applying Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831 at 835) and that the primary judge should have applied the law in accordance with the reasoning of the decisions of Thevenaz v Thevenaz (1986) FLC 91-748, Magro v Magro (1989) FLC 92-005, A v B (1990) FLC 92-126; Griffis v Griffis (1991) FLC 92-233 and Kossatz v Kossatz (1993) FLC 92-386.

   70.The Full Court held that it was unnecessary for the court to determine the correctness or otherwise of the approach taken in various decisions at first instance in regard to the question of when it is appropriate to restrain a practitioner from acting as, on either approach, the court has a discretion to determine whether the practitioner should be restrained in all the circumstances of the particular case.

   71.The Full Court specifically highlighted that it was relevant that the husband did not immediately make any protest or take any steps on becoming aware of the practitioner’s involvement, and that this must occur where a restrain is sought, at least in correspondence, at the earliest possible opportunity. The practitioner in question appeared for the wife in ex parte proceedings in November 1996, and in interlocutory proceedings on six occasions between February and August 1997, prior to the husband raising his concern in relation to the practitioner’s conflict before a Registrar in July 1997, followed by the filing of an application by the husband seeking an order restraining the practitioner in August 1997. The Full Court stated at 85,304 that:

   It is our opinion that if a family law litigant has a genuine concern about a former legal adviser acting against him or her in later family law litigation, the litigant must take the point at least in correspondence with the other side at the earliest possible opportunity. If he or she does not do so, then he or she is possessed of a weapon which can later be used as a delaying tactic at some point in the proceedings convenient to his or her position. Furthermore a failure to take the point initially must also cast doubt on the bona fides of any later complaint concerning the existence of confidential information in the practitioner in question, and on the bona fides of any alleged apprehension regarding the possible mis-use of such confidential information.

   72.Although as stated in McGillivray the decision to restrain a practitioner from acting is a discretionary decision, there are three grounds upon which the injunction may be sought, as set out by Brereton J in the decision of Kallinicos v Hunt (2005) 64 NSWLR 561. The first basis relates to a breach of confidence arising from the law of contract and equity, the second as derived from a solicitor’s fiduciary duties in accordance with equitable principles, and the third due to a superior court’s inherent supervisory jurisdiction over its officers (see also Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501).

3. Accordingly, I fail to see how the judgment in Grieves and Tully does anything to assist the solicitors in this particular case.

4. The submission then referred to DJ Constructions Pty Ltd v Head and Ors trading as Clayton Utz [1987] 9 NSWLR 119 but that was a case where Bryson J noted that family law proceedings were somewhat unusual and caution had to be exercised. That judgment too was referred to in the authorities which I have earlier referred to and which I find are binding.

5. The bottom line in this case is that the submission was put that the fact that there was a commercial transaction which did not involve the solicitor being aware of anything associated with the family law proceedings somehow or other distinguishes it.  That misses the point.

6. At paragraph 7 of the written submission, under the heading of “Getting to Know You Factors” the solicitor set out a number of matters relating to the respondent wife which could only be said to have been critical of her conduct.  I find this submission unprofessional because the reality was that it was not based upon any of the evidence to which my attention was drawn nor was it relied upon.  It was unfortunate the submission was put at the point in time that it was because I would have otherwise refused to have allowed it to be canvassed.

7. Finally, the submission said that the matters were close to conclusion and that Mr Spaulding and if not him, Ian Robertson should be able to continue to act for the husband.

8. Nothing that I have heard convinces me that the evidence to which I have earlier referred does not support the conclusion that the injunctions ought not be made.

9. In this case, I am satisfied that the solicitors acted for the wife and obtained confidential information from her.  I make that finding on the basis that she asserts she had numerous conversations with them.  As the Full Court in McMillan (supra) said, even if there is a theoretical risk of the misuse of that confidential information, the wife is entitled to be protected from the prospect that it could be so used.  It is quite clear in this case from the submissions to which I have referred that the solicitors identify very carefully with the husband.  They have articulated his position both orally and in written form and no doubt have settled the affidavits and filed them on his behalf.  Justice must be seen to be done and in this case, it is not appropriate for the firm to continue to act and I propose to make the injunction accordingly.

10. I have also referred to the fact that the issue of costs was raised. 

11. Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that in proceedings in this Court, each party shall bear their own costs unless there are circumstances justifying a departure from that principle in which case such matters as those set out in s 117(2A) should be taken into account.

12. The first question is whether there are justifying circumstances for making an order.  Having regard to the findings I have made, I am perplexed as to why the solicitors continue to act having regard to the position clearly articulated in McMillan (supra). It does not seem to me that they had any justifiable cause to advise their client that they could continue to act. Mr Spaulding submitted that his client had been quite clear in wanting the firm to continue to act and he was simply acting on instructions. That was certainly not apparent from the fact that the application for the injunctive orders was against the solicitors. I am prepared however to accept that the husband strongly wished the position to be put and that the submissions were made on his instructions. Accordingly, I turn to the matters in s 117(2A).

13. I do not know the financial circumstances of the parties in any detail but it is clear that there is a significant financial dispute between the parties here.  Mr Spaulding told me that the property in dispute related to vacant land and there was an estimated value of about $800,000.  I can therefore conclude that the parties are not impecunious.

14. Another matter to be taken into account is the conduct of the proceedings.  It is quite clear that the affidavit material in this case should not have been filed in the format that it was and many of the matters were not objective and distracted the attention of both parties from the substantive issue.  The wife’s position had always been from January that she objected to the solicitors acting but they pressed on no doubt on the instructions of the husband.

15. The Court is also obliged to take into account in a costs application whether a party has been wholly unsuccessful and in this case, the solicitors have been.  To the extent that the solicitors have been acting on the instructions of the husband, the husband too has been wholly unsuccessful.

16. This is a case where a level of objectivity could have avoided these proceedings.  The wife has had to argue her position and has therefore been dragged into proceedings unnecessarily.  Orders for costs are not intended as a punishment but rather as a compensation for the person who has to participate in proceedings where there is no alternative.  That is exactly what has happened here.

17. Having regard to the findings I have made, there is a justification for a departure from the principles set out in s 117(1) of the Act and order for costs should be made.

18. On the basis of the submission of Mr Spaulding about who should bear those costs, I propose to make an order against the husband.  As there was no specific order sought for costs, I propose to make an order that in default of agreement as to the amount of costs, the costs can be assessed.

I certify that the preceding Sixty One (61) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 31 May 2012.

Associate: 

Date:  31 May 2012