Salsano v E and S Projects Pty Ltd (No.2)

[2020] FCCA 1125

FEDERAL CIRCUIT COURT OF AUSTRALIA

SALSANO v E & S PROJECTS PTY LTD (No.2) [2020] FCCA 1125

Catchwords:
INDUSTRIAL LAW – PRACTICE AND PROCEDURE – Application by respondent for injunction restraining lawyer retained by the applicant (applicant’s lawyer) from acting for the applicant because another lawyer of the practice of which the applicant’s lawyer had previously acted for the respondent in an unrelated matter – whether the respondent had previously communicated confidential information to the law practice in relation to the respondent – whether such confidential information is relevant to any issue in the proceeding in which the applicant’s lawyer has been retained to act – whether effective measures can be put in place to prevent unwitting disclosure of confidential information – application for injunction dismissed.

Legislation:

Fair Work Act 2009 (Cth)

Cases cited:

McMillan & McMillan [2000] FamCA 1046

Oram & Lambert (No.2) [2018] FamCAFC 161

Osferatu & Osferatu [2015] FamCAFC 177

PhotoCure ASA v Queen’s University at Kingston [2002] FCA 905

Applicant: BIANCO PAUL SALSANO

Respondent: E & S PROJECTS PTY LTD

File Number: SYG 1853 of 2019

Judgment of: Judge Manousaridis

Hearing date: 4 May 2020

Date of Last Submission: 4 May 2020

Delivered at: Sydney

Delivered on: 4 May 2020

REPRESENTATION

Solicitors for the Applicant: Mr C McArdle of McArdle Legal

Counsel for the Respondent: Ms A Petrie

Solicitors for the Respondent: Urania Zafiris Solicitors

ON THE UNDERTAKING given to the Court by Christopher John McArdle that he will not seek to obtain in any way, and Christopher John McArdle will actively avoid receiving, any information in relation to the claim identified in paragraph 3 of the affidavit of Stephen Fabrizio affirmed on 1 May 2020,

AND ON THE UNDERTAKING given to the Court by Deirdre Catherine McEvoy that she will not divulge to Christopher John McArdle or to any other person in McArdle Legal any confidential communication between Deirdre Catherine McEvoy and Stephen Fabrizio, or any other employee or agent of any company within the Cemento Group,

THE COURT ORDERS THAT:

1. The application in a case filed on 4 May 2020 seeking an order that McArdle Legal be restrained from acting on behalf of the applicant in this proceeding is dismissed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1853 of 2019

BIANCO PAUL SALSANO

Applicant

And

E & S PROJECTS PTY LTD

Respondent

REASONS FOR JUDGMENT
(Revised from Transcript)

Introduction

1. The matter that is listed before me today is the resumption of a part‑heard hearing of an application brought by Mr Salsano under the Fair Work Act 2009 (Cth). Two days had previously been allocated to the matter and it was part heard on those two days, but the matter was adjourned to today, largely because there was additional material that Mr Salsano indicated that he wanted to adduce.

Background

1. At the previous hearing Mr Salsano was not represented. However, early last week, or perhaps shortly before early last week, Mr Salsano consulted Mr McArdle, who is a lawyer, who practices through the firm, McArdle Legal. Mr McArdle agreed to represent Mr Salsano. In the course of taking the relevant steps to put himself in a position to act for Mr Salsano, Mr McArdle became aware that his firm had previously acted for the Cemento Group.  That became apparent in the course of his preparing a fee disclosure agreement.

2. Although Mr McArdle’s firm was previously involved in representing the Cemento Group, it was not Mr McArdle himself who performed the work. That work was performed by another lawyer employed by his practice, Ms McEvoy. Mr McArdle said that Ms McEvoy is a senior lawyer who specialises in employment matters. Mr McArdle, and I accept what he has said, said that after he had become aware that his firm had previously acted for the Cemento Group, he spoke with Ms McEvoy; she said to him words to the effect that she had done some work preparing a deed of settlement in relation to a claim that had been brought against the Cemento Group. Mr McArdle then wrote an email to the lawyer for the respondent informing the respondent of the fact that his firm had previously acted for the Cemento Group.

3. At about 1:00 pm on Friday 1 May 2020 the lawyer for the respondent sent an email to Mr McArdle demanding that he cease acting because of what was said to be his firm possessing confidential information; and that if he would not indicate that he would cease to act for Mr Salsano, an application seeking an order that he be restrained from acting would be brought. It is clear that no such undertaking was given, and the application in a case was filed.

4. That application in a case is supported by an affidavit made by Mr Fabrizio, who is a director of the respondent. In paragraph 2 of his affidavit, Mr Fabrizio sets out that the respondent has many subsidiaries, including the subsidiaries that are named in subparagraphs 1, 2, 3, and 4 of that paragraph.  He deposes that in or about March 2019 the Cemento Group retained Messrs McArdle Legal to represent its interests in respect of a claim brought against it and another party to the Fair Work Commission by a former employee. Mr Fabrizio says that the claim related to underpayment of wages, bullying, and discrimination against the person who had brought the claim.

5. Mr Fabrizio says at that time he became acquainted with a senior associate of the firm who was introduced to him as Ms Deirdre McEvoy.  He met with Ms McEvoy in conference and thereafter had several telephone conversations with her regarding the claim. Mr Fabrizio says: “During such discussions I divulged to her the structure of the Cemento Group and particulars as to its financial position”, and that “I divulged this privileged information to Ms McEvoy on the basis that it would remain confidential.” Finally, Mr Fabrizio deposes that ultimately that claim was resolved by way of terms of settlement that were drafted and filed by McArdle Legal; and he says that that firm represented the Cemento Group during settlement negotiations and when the terms of settlement were made and the matter resolved.

6. Mr Fabrizio was briefly cross‑examined by Mr McArdle. In evidence given under cross‑examination, Mr Fabrizio said he had not met Mr McArdle, he had not received any letter from Mr McArdle, he had not written to Mr McArdle, he has not told anything to Mr McArdle, and Mr McArdle has not told anything to him.  The effect of that evidence is that Mr McArdle and Mr Fabrizio are unknown to each other.

7. In support of the application in a case, which seeks an order that McArdle Legal be restrained from acting on behalf of Mr Salsano in these proceedings, it is submitted that McArdle Legal is in possession of confidential information, being the confidential information identified by Mr Fabrizio in his affidavit. It is submitted that whether or not Mr McArdle himself had previously acted for the company, there is a risk, even a theoretical risk which it is submitted is sufficient, where he may make unwitting use of that confidential information.  It was submitted that that risk is real because Mr McArdle is a principal of that firm who would have supervised the work of Ms McEvoy.  It was also submitted that, at the very least, there would be an appearance of conflict, and it is intolerable that a client, represented by a particular law firm in one matter, would find itself being sued by a person who retains the same law firm. In support of those submissions, counsel for the respondent relied on, particularly, the judgment of the Full Family Court of McMillan & McMillan [2000] FamCA 1046.

8. In answer to those submissions, Mr McArdle submitted that he knew nothing about this matter, and that he did not supervise Ms McEvoy.  She was a senior lawyer who did not need supervision.  He accepted that from time to time, as colleagues, they would discuss matters together, but he was adamant that no such discussion took place in relation to the matter in which Ms McEvoy acted for the respondent. In the course of making those submissions, Mr McArdle referred to the structure of his firm, McArdle Legal, and said that it is owned by a company.  He and his wife are employees, as is Ms McEvoy, who incidentally has had the title of “Special Counsel”. The shareholders of that company are Mr McArdle and his wife, and he and his wife are the directors. So even though the practice is pursued in corporate form, it is clear that Mr McArdle is a principal of the practice and would be responsible for the matters he, his wife and other employees of the company conducting the practice would perform.

Principles to Apply

1. I then turn to the principles that I must apply. As I said, counsel for the respondent relied on the case of McMillan.  That is no doubt a helpful authority, but in the small opportunity I had to consider the matter, I came across a more recent authority, and the authority that seems to be most helpful is a Full Family Court judgment in Oram & Lambert(No 2) [2018] FamCAFC 161, and the Full Court consisted of their Honours Ryan, Aldridge and Watts. Although delivered ex tempore, the relevance of that decision is that it refers to earlier authority, although authority that is later than McMillan. At paragraph 10 of those reasons for judgment, the Full Court referred to the case of Osferatu & Osferatu (2015) FamCAFC 177, and set out a passage in which the Full Court in Osferatu identified the bases for seeking orders.  The quote is as follows:

   There are three established categories on the basis of which solicitors may be restrained from acting against their client or former client.  They are:  breach of confidence, breach of fiduciary duty and the inherent jurisdiction of a court over its officers and to control its process.  Each category has its own principles which guide its operation.  The third category may be involved in conjunction with either of the first two so there is clearly an overlap; nonetheless, the basis for the exercise of the jurisdiction in each is different.

2. It appears to me that the principal basis on which the respondent in this case seeks to restrain McArdle Legal from acting is the risk of that firm using, to the disadvantage of the respondent, the confidential information which Mr Fabrizio, in his affidavit, says was disclosed to Ms McEvoy.

3. The Full Court in Oram & Lambert also referred to Osferatu referring to a judgment of Goldberg J in PhotoCure ASA v Queen’s University at Kingston [2002] FCA 905. The reference to that authority is at paragraph 13 of the judgment in Oram. The Full Court in Oram referred to paragraph 50 of the judgment of Goldberg J in PhotoCure, which is as follows:

   It is apparent from Lord Millett’s judgment that there are three stages which need to be considered:

   ·whether the firm is in possession of information which is confidential to the former client;

   ·whether that information is, or may be, relevant to a matter in which the firm is proposing to act for another party with an interest adverse to the former client;

   ·whether there is any risk that the information will come into the possession of those persons in the firm working for the other party.

4. Goldberg J, in the following paragraph, continued as follows:

   The burden of establishing the first two propositions is upon the former client, but the burden of establishing the third proposition moves to the firm proposing to act once the first two propositions are satisfied. Lord Millett identified the evidentiary process at 237:

   Once the former client has established that the defendant firm is in possession of information which was imparted in confidence and that the firm is proposing to act for another party with an interest adverse to his in a matter to which the information is or may be relevant, the evidential burden shifts to the defendant firm to show that even so there is no risk that the information will come into the possession of those now acting for the other party. There is no rule of law that Chinese walls or other arrangements of a similar kind are insufficient to eliminate the risk. But the starting point must be that, unless special measures are taken, information moves within a firm. In MacDonald Estate v Martin 77 DLR (4^th) 249, 269 Sopinka J said that the court should restrain the firm from acting for the second client ‘unless satisfied on the basis of clear and convincing evidence that all reasonable measures have been taken to ensure that no disclosure will occur.’ With the substitution of the word ‘effective’ for the words ‘all reasonable’ I would respectfully adopt that formulation.

Questions Arising

1. The questions, therefore, that I need to consider are those set out at paragraph 50 of Goldberg J’s judgment in PhotoCure. The first question is whether McArdle Legal is in possession of information which is confidential to the former client. That requires me to identify the evidence of the confidential information which is said to be in the possession of McArdle Legal, and the only evidence of that is what was described by Mr Fabrizio. It is described in the most general terms, understandably, largely because that information is privileged information, and no adverse inferences or no criticisms can be made about the generality with which that information has been described.  Therefore I am prepared to accept and find that confidential information was disclosed by Mr Fabrizio to Ms McEvoy, that confidential information being “the structure of the Cemento Group and particulars as to its financial position”.

2. The next question is whether that confidential information is, or may be, relevant to the matter which McArdle Legal is proposing to act for Mr Salsano.  In other words, the question is whether that confidential information is, or may be, relevant to any matter in the proceeding that Mr Salsano has brought against the respondent. Counsel for the respondent submitted that it is relevant because, although the respondent denies that Mr Salsano was employed by it, or indeed by anyone within the Cemento Group, nevertheless the question arises that even if he were so employed, it would not have been that company.  In other words, the respondent submitted that the issue was relevant to the identity of the correct respondent.

3. It is difficult to see how information about the corporate structure of the Cemento Group, some of which is disclosed in Mr Fabrizio’s affidavit, could have a bearing on that question.  The evidence is in, in terms of the work Mr Salsano claims he performed.  Mr McArdle has informed me that no evidence is specifically directed to the identity of the employer, other than such as may be disclosed by the evidence Mr Salsano has tendered and proposes to tender which describes the nature of his work. I am not, therefore, satisfied that the confidential information described by Mr Fabrizio is information which may be relevant.  However, I am going to assume, for the purposes of considering the third question, that the confidential information may be relevant to the issue counsel for the respondent says it may be relevant. 

4. So the next question is whether there is any risk that the information will come into the possession of Mr McArdle. Mr McArdle, on oath, has said that he does not know anything about the matter.  There is no reason for me to not believe what he has said.  The current position, therefore, is that Mr McArdle does not know the confidential information that was disclosed by Mr Fabrizio to Ms McEvoy.

5. Then there is the submission made by counsel for the respondent that, being a small firm, there is a risk that the confidential information will unwittingly come into Mr McArdle’s knowledge.  In my opinion, the fact that McArdle Legal is a small firm makes it easier to put in place effective measures to ensure that unwitting disclosure does not occur.  It is not a case, like a large law firm involved in mega litigation where you may have teams, sometimes scores of lawyers, who are involved in a matter, which increases the risk of unwitting leakage or disclosure.  This is a case of a small law firm and effective measures can be put in place. One of those effective measures would be – although it hardly needs to be insisted upon, but in order to minimise what apprehension the respondent might have in my not restraining Mr McArdle from acting in the matter – that Mr McArdle himself give a particular undertaking to the Court to the effect that he will not seek to obtain any information in relation to the other matter in relation to which Ms McEvoy acted, and to shut his ears to any communication about such matter. I also have in mind, although this obviously cannot be done immediately, for the procurement of an undertaking – again, hardly necessary from an officer of the Court, but nevertheless one that I will require –from Ms McEvoy that she will not divulge to Mr McArdle or to anyone else in McArdle Legal any information in relation to the other matter.

6. What I propose to do is to dismiss the application in a case, provided that Mr McArdle is prepared to give an undertaking to the Court and to procure, by close of business today, a written undertaking from Ms McEvoy, the terms of which I will set out in my orders, once I explain what I have in mind to Mr McArdle and once he can tell me whether he will be in a position himself to give the undertaking and whether he believes he will be able to procure that undertaking from Ms McEvoy.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis

Associate:

Date: 11 May 2020