Schueler & Anor v Smith & Ors
[2010] FMCA 777
•29 November 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SCHUELER & ANOR v SMITH & ORS | [2010] FMCA 777 |
| PRACTICE AND PROCEDURE – Application to restrain the applicant’s solicitor and her firm from acting – applicant’s solicitor the de facto partner of the first applicant – grounds on which a lawyer might be restrained from acting for a party. |
| Bahonko v Nurses Board of Victoria (No 3) [2007] FCA 491 Black v Taylor [1993] 3 NZLR 403 Bowen v Stott [2004] WASC 94 Canberra Residential Developments Pty Ltd v Brendas [2009] FCA 1484 DJL v Central Authority (2000) 201 CLR 226; [2000] HCA 17 Geelong School Supplies Pty Ltd v Dean (2006) 237 ALR 612; [2006] FCA 1404 Grimwade v Meagher & Ors [1995] 1 VR 446 Kallinicos v Hunt (2005) 64 NSWLR 561 Re Read (2007) 164 FCR 237; [2007] FCA 1985 Skipworth v State of Western Australia & Ors (No. 2) (2008) 218 FLR 16 Temby & Anor v Chambers Investment Planners Pty Ltd & Anor [2010] FMCA 783 VTAG v Minister for Immigration (2005) 141 FCR 291; [2005] FCAFC 91 Woolley v Ritchie [1999] ANZ ConvR 385 |
| First Applicant: | BENJAMIN SCHUELER |
| Second Applicant: | BARTON WARE |
| First Respondent: | STEVEN SMITH |
| Second Respondent: | ALEXANDER NICHOLSON |
| Third Respondent: | BLAKE SIMPSON |
| Fourth Respondent: | SCOTT HELDORF |
| File Number: | SYG1404 of 2010 |
| Judgment of: | Driver FM |
| Hearing date: | 7 October 2010 |
| Delivered at: | Sydney |
| Delivered on: | 29 November 2010 |
REPRESENTATION
| Solicitors for the Applicant: | Ms K Wulf Benetatos White |
| Counsel for the First, Second and Third Respondents: | Ms L Whalan |
| Solicitors for the First, Second and Third Respondents: | Digby Law |
| No appearance by or on behalf of the Fourth Respondent |
INTERLOCUTORY ORDERS
Ms Kirstie Wulf is restrained from acting or appearing for the applicants in these proceedings.
The firm Benetatos White is restrained from acting and appearing for the applicants in these proceedings.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG1404 of 2010
| BENJAMIN SCHUELER |
First Applicant
BARTON WARE
Second Applicant
And
| STEVEN SMITH |
First Respondent
ALEXANER NICHOLSON
Second Respondent
BLAKE SIMPSON
Third Respondent
SCOTT HELDORF
Fourth Respondent
REASONS FOR JUDGMENT
Introduction and background
I have before me an Application in a Case filed on 29 September 2010 in which the respondents to the principal proceedings seek an order restraining the solicitor for the applicants (Ms Kirstie Wulf) from acting or appearing for the applicants in these proceedings. The Application further seeks an order restraining Ms Wulf’s firm, Benetatos White, from acting or appearing for the applicants in the proceedings.
The substantive proceedings relate to an application for damages under the Copyright Act 1968 (Cth) and injunctive relief for alleged breaches of copyright in the public performance of musical works in respect of which the applicants claim to be the copyright owners. The applicants also seek interlocutory restraining orders against the respondents to prevent the further public performance by them of the works in dispute. I have decided that it would be inappropriate to consider the application for interlocutory relief to restrain breaches of copyright until I dealt with this Application in a Case.
The substantive proceedings were commenced on 28 June 2010. The applicants assert that they own copyright jointly or solely over the music and lyrics of specified musical works. The respondents contend that the two applicants and at least some of the respondents all jointly own copyright over the music and lyrics of the works.
The works in dispute were created when the applicants and the first two respondents played in a band “Beyond Terror, Beyond Grace”. The two applicants have ceased playing with the band. The first and second respondents remained and the third and fourth respondents joined the band. The band continues to play the works the subject of these proceedings.
Ms Wulf is the de facto partner of the first applicant, Benjamin Schueler and has been since 1998.
The evidence and submissions
The Application in a Case is supported by two affidavits of Alexander David Nicholson filed on 16 July 2010 and 29 September 2010 and the affidavit of Steven Smith filed on 29 September 2010.
For the purposes of the Application in a Case, the principal applicants rely upon the affidavits of Benjamin Schueler filed on 28 June 2010 and 5 October 2010 and the affidavits of Barton Ware filed on 28 June 2010 and 5 October 2010.
The respondents submit that the Court should exercise its discretion in favour of restraining the applicants’ representatives upon the following grounds:
a)Ms Wulf is said to have knowledge of matters confidential or prejudicial to the interests of the respondents;
b)Ms Wulf is a potential witness;
c)Ms Wulf has a material or financial interest in the outcome of the principal proceedings; and
d)Ms Wulf has given advice of legal matters which were matters relevant to the band.
The applicants submit that they will be prejudiced if they are denied their representation of choice (and indeed suggest that this may be the motivation for the Application in a Case) and that there is nothing in the relationship between Ms Wulf and Mr Schueler, or her involvement in any dealings between members and former members of the band, that supports a conclusion that she and her firm should be restrained from acting.
Consideration
The principles relating to restraining a practitioner from acting in a proceeding were recently considered by this Court in Temby & Anor v Chambers Investment Planners Pty Ltd & Anor[1]. At [16]-[20] Lucev FM said:
[1] [2010] FMCA 783.
The grounds on which a court might restrain a practitioner from acting have been “conveniently summarised”[2] by the Federal Court. They are as follows:
[2] Canberra Residential Developments Pty Ltd v Brendas [2009] FCA 1484 at [16] per Stone J (“Canberra Residential Developments”).
(a)the danger of misuse of confidential information;
(b)a breach of fiduciary duty of loyalty not to act against a client, or against a former client, in the same matter or a closely related matter; and
(c)the inherent jurisdiction of the Court to control the conduct of legal practitioners as officers of the Court.[3]
[3] Bahonko v Nurses Board of Victoria (No 3) [2007] FCA 491 at [4] per Middleton J (“Bahonko”), summarising principles identified in Geelong School Supplies Pty Ltd v Dean (2006) 237 ALR 612 at 617-620 per Young J; [2006] FCA 1404 at [24]-[35] per Young J (“Geelong School Supplies”), both cases cited in Canberra Residential Developments at [16] per Stone J.
In Canberra Residential Developments the Federal Court, having referred to the above grounds, went on to observe as follows:
20. Finally, the inherent jurisdiction of the Court to control its processes in aid of the administration of justice would only be evoked to restrain a legal practitioner from acting for its client if "a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice" warrants such restraint; Geelong School Supplies at [35]. It is a jurisdiction that "is to be regarded as exceptional and is to be exercised with caution"; Kallinicos v Hunt (2005) 64 NSWLR 561 at 582. In this case the emphasis must be on "reasonably informed".[4]
Accepting that this Court has no inherent jurisdiction, but rather an implied incidental power to make orders necessarily incidental to express powers,[5] and substituting the concept of implied incidental power for inherent jurisdiction in the above summary and quotation, the grounds set out in Bahonko, Geelong School Supplies and Canberra Residential Developments are the grounds on which the Court might restrain a lawyer from acting for a party. In this case the Court deals with the matter on the basis of its power to control the conduct of legal practitioners as officers of the Court.
In relation to lawyers acting for relatives there is a comparative dearth of authority. One reason for this, at least in modern times, might be that the potential conflict of interest is so obvious that modern lawyers refer matters involving their relatives to independent solicitors. Professor Dal Pont, however, puts the position as follows:
Especial care should be taken where a lawyer proposes to act in a transaction for herself or himself and a family member or associate. In addition to potentially compromising a lawyer’s independent judgment, such a situation is fraught with potential for conflict of interest. The point is well illustrated by Woolley v Ritchie,[6] where a solicitor acted on his own behalf and for his de facto spouse in real estate transactions. Upon inquiring, the de facto spouse was told by the solicitor that it was unnecessary for her to seek independent legal advice. Salmon J held that the spouse was not fully informed as to the implications of the transactions, which included the transfer of property and a mortgage in her name to a trust. His Honour held that the solicitor was under a duty to ensure that his de facto spouse was fully informed and freely consented, and the solicitor’s conflict stemming from his interest in the transactions requiring securing for the spouse independent legal advice.
Prudent lawyers will not, therefore, act in transactions in which they are personally interested and that involve their spouses, other family members or business partners, unless the other party is separately represented or advised. The need for independent representation or advice in these cases is heightened by the likelihood that the relative or associate places greater trust in the lawyer than a client lacking that association, and that the lawyer may be less scrupulous in matters of full disclosure. The lawyer may be less inclined to advise the relative or associate of the risks of the deal, and the latter may simply assume without inquiring that the lawyer acts in her or his best interests.[7] [8]
The Court accepts the above as an accurate summation of the law with respect to lawyers acting for immediate family members.
[4] Canberra Residential Developments at [20] per Stone J.
[5] Skipworth v State of Western Australia & Ors (No 2) (2008) 218 FLR 16 at 27 per Lucev FM; [2008] FMCA 544 at [34] per Lucev FM (“Skipworth (No 2)), where it is also pointed out that the Federal Court and Family Court have no inherent jurisdiction, but an implied incidental power to make orders necessarily incidental to express power, for the reasons set out in detail in Skipworth (No 2) FLR at 24-27 per Lucev FM; FMCA at [29]-[34] per Lucev FM, citing DJL v Central Authority (2000) 201 CLR 226; [2000] HCA 17, VTAG v Minister for Immigration (2005) 141 FCR 291; [2005] FCAFC 91, and Re Read (2007) 164 FCR 237; [2007] FCA 1985. See also J Tarrant, Amending Final Judgments And Orders (Sydney: Federation Press 2010) pages 6-7.
[6] [1999] ANZ ConvR 385.
[7] G E Dal Pont, Lawyers’ Professional Responsibility (4th Edn) (Sydney: Thomson Reuters (Professional) Australia Limited, 2010) pages 147-148 (“Lawyers’ Professional Responsibility”). The two preceding footnotes reproduce the footnotes to the quoted text. See also page 377 which provides as follows: “Lawyers should also be wary of the dangers of representing friends or relatives. In addition to the issues of independence and objectivity, lawyers who do so may be tempted to cut corners, accept work beyond their competence, or be less exact with issues of professional responsibility (for instance, the duty of confidentiality)”.
[8] Woolley v Ritchie [1999] ANZ ConvR 385 at 388.
With respect, I agree with Lucev FM.
I proceed also on the basis of the respondents’ submissions that the Court has an incidental and necessary power[9] to restrain legal representatives from acting for a party when the interests of justice require that order. In Geelong School, Young J ordered that the solicitors, Wakefield and Vogrig Lawyers, be restrained from acting. The successful application in Geelong School was founded upon one ground only:
The power of the Court to control the conduct of its own officers so as to ensure the proper administration of justice and the integrity of the judicial process.[10]
[9] More accurate than the words “inherent jurisdiction” which the majority in DJL v Central Authority (2000) 1 CLR 226 at 241 said: “should be avoided to as an identification of the incidental and necessary power of a statutory court”.
[10] at paragraph 1.
The prior existence of a retainer is not critical to the determination of an application to restrain a party. The party sought to be restrained need not have acted for the party seeking the restraint.
This principle is illustrated by the decision in Grimwade v Meagher & Ors[11]. The application was for an order restraining particular counsel from acting in civil proceedings. That counsel had appeared in the committal proceedings, at the abortive first trial, at a second trial and in the court of criminal appeal. The Court ordered that counsel be restrained upon two grounds:
a)the application of the objective test, whether a fair minded, reasonably informed member of the public would conclude that the proper administration of justice required that counsel be prevented from acting, favoured restraining counsel in that instance; and
b)the Court accepted that there was a real and sensible risk of lack of objectivity on the part of the first defendant, which gave rise to a risk of unfairness or disadvantage to the opposing party[12].
[11] [1995] 1 VR 446.
[12] at 454.
In that decision, Mandie J held:
… it cannot be doubted that this Court likewise has an inherent jurisdiction to ensure the dual administration of justice and to protect the integrity of the judicial process and as part of that jurisdiction, in an appropriate case, to prevent a member of Counsel appearing for a particular party in order that justice should not only be done but manifestly and undoubtedly be seen to be done[13]
[13] at 452.
Counsel’s previous involvement was sufficient to:
…cause a fair minded observer to apprehend a real risk that the first defendant (Counsel) would be unable to appear in the said action and act with that objectivity and detachment which the Court expect of Counsel appearing before it and a real risk the first defendant would be unable to properly distinguish or avoid a conflict between his personal interest and his duty to his clients in the said action.[14]
[14] at 454.
Here, Ms Wulf’s personal attachment to the first applicant, her de facto partner, adds an additional layer to “personal interest and duty” giving rise to the particular concerns identified by Professor Dal Pont.
I accept that the application to restrain a party’s legal representatives is a serious measure. The cost, inconvenience or impracticality of requiring Ms Wulf and Benetatos White to cease to act is relevant to exercise of discretion.[15] The initial application was filed on 28 June 2010. Mr Nicholson’s response, filed on 16 July 2010 sought an order for an injunction on grounds other than, “in the interests of justice”. It was not pressed at the first directions hearing on 29 July 2010.
[15] Black v Taylor [1993] 3 NZLR 403; Grimwade v Meagher.
The present application, filed on 17 September 2010, has been filed within a reasonable time after the application for final orders filed on 28 June 2010. The matter has not yet reached mediation. The matter has not yet been given directions for the filing of pleadings or points of claim.[16] In my view, there is no delay sufficient to constitute a reason for refusing the grant of relief sought by the respondents.
[16] In Kallinicos v Hunt (2005) 64 NSWLR 561 at 587, Brereton J found that the proceedings were not so advanced that obtaining alternative representation would be “unduly disruptive”.
A party has the general right to retain representatives of his or her choice.[17] In the present case Ms Wulf was chosen by the applicants at least partly for reasons of cost and convenience[18]. The applicants contend that they may choose to proceed unrepresented if Ms Wulf and her firm are restrained from acting. However, I do not regard that as an exceptional circumstance behind the retainer of Ms Wulf or Benetatos White, such that the Court could or would be persuaded to override the principle of the proper administration of justice.
[17] Black v Taylor; Grimwade v Meagher; Bowen v Stott [2004] WASC 94
[18] Ms Wulf conceded that her retainer was only “partly commercial”.
In my view, the proper administration of justice calls for the restraint sought in the Application in a Case. First, the relationship between Ms Wulf and Mr Schueler of itself presents potential difficulties and a risk that proper professional impartiality may be lost. Ms Wulf has acted in these proceedings in a proper and professional manner but there is nevertheless a risk that her relationship with the first applicant will overwhelm the professional distance which is necessary for a legal representative. Neither is Ms Wulf a stranger to the first and second respondents. The band members met and rehearsed in the home of Mr Schueler and Ms Wulf. The first and second respondents were minors when they joined the band[19] and Mr Schueler had counselled one of them in a professional capacity for behavioural problems. The first and second respondents were pupils at the school where Mr Schueler worked. At least some of the songs in dispute were composed between 2005 and 2008 when the band met and rehearsed at Ms Wulf’s home. These close links between Mr Schueler, Ms Wulf and the first and second respondents is a concern.
[19] About 16 years of age.
Secondly, Ms Wulf is a potential witness in the substantive proceedings. There is a factual dispute between the parties as to the extent to which (if at all) Ms Wulf participated in band activities but there seems little doubt that she assisted in the provision of worksheets for band performances. The applicants do not intend to call her as a witness but there is no property in a witness. She may be subpoenaed by the respondents. If Ms Wulf were required to give evidence, there is little doubt that she would have to cease acting[20]. That would be disruptive to the proper administration of justice.
[20] NSW Law Society Rules, rule 19 – Practitioner a material witness.
Having regard to the relevant legal principles and the particular circumstances of this case, I am satisfied that a fair minded, reasonably informed member of the public would conclude that the proper administration of justice required that Ms Wulf be restrained from acting. Her firm is a small one and the introduction of “Chinese Walls” or other similar arrangements are unlikely to be effective. In any event, it is doubtful whether other members of the firm would be willing or able to act on the partly non commercial basis that Ms Wulf is acting. The restraint required extends to the firm. I conclude that I should exercise my discretion to require Ms Wulf and Benetatos White to be restrained from further acting for the applicants in these proceedings.
I will so order.
I will hear the parties as to what other orders or directions should be made in consequence of those orders.
I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 29 November 2010
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