Seidler and Seidler - [2010] FMCAfam 1394

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SEIDLER & SEIDLER

[2010] FMCAfam 1394

FAMILY LAW – Legal representation – application to restrain a party’s lawyer from continuing to act for that party – conflict of interest – test to be applied.

Family Law Act 1975, s.79
Legal Profession (Solicitors) Rule 2000

McMillan and McMillan (2000) FLC93-048;
Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404;
Price Jefri Bolkiah v KPMG [1998] UKHL 52 [1999] 2 AC 222;
Mills v Day Dawn Block Gold Mining Company Ltd [1082] QLJ 62;
In the marriage of Thevanaz (1986) 11 Fam LR 95, FLC 91-478;
Magro and Magro (1989) FLC 92-005;
Griffis and Griffis (1991) FLC 92-233;
Qihua Zhao v Sheng Yu Zhang and Anor [2007] NSWSC 891;
Royston & Royston [2010] FMCAfam9;
Lakey and Lakey [2008] FMCAfam 827;
Billington and Billington (No 2) [2008] FamCA 409;
Kallinicos & Anor v Hunt & Ors [2005] NSWSC 1181;
Pond and Thurga (No 2) [2007] FamCA 587

Applicant:

MR SEIDLER

Respondent:

MS SEIDLER

File Number:

TVC 1240 of 2007

Judgment of:

Willis FM

Hearing date:

14 September 2010

Date of Last Submission:

14 September 2010

Delivered at:

Cairns

Delivered on:

16 December 2010

REPRESENTATION

Counsel for the Applicant:

Mr Page SC

Solicitors for the Applicant:

Family Law Doyle Keyworth & Harris

Counsel for the Respondent:

Mr Fellows

Solicitors for the Respondent:

SR Wallace and Wallace

ORDERS

That SR Wallace and Wallace Lawyers of 60 Sydney Street, Mackay, Queensland and any partner and employee of that firm are restrained from acting further for the wife in these proceedings, and the wife is restrained from continuing to retain the firm known as SR Wallace and Wallace Lawyers, or any partner or employee of that firm as her legal representative.
This matter be listed on 22 February 2011 at 2:15pm in the Federal Magistrates Court of Australia in Cairns in relation to costs.
A written outline from each party to be filed and served no later than two days prior to the hearing, namely 22 February 2011.

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

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MACKAY

TVC 1240 of 2007

MR SEIDLER

Applicant

And

MS SEIDLER

Respondent

REASONS FOR JUDGMENT

This is an application by the husband to have the solicitors for the wife disqualified from continuing to act for her in Family Law proceedings currently on foot.
The applicant asks the Court restrain the wife from continuing to retain her lawyers SR Wallace & Wallace of Mackay as her legal representatives. Costs are also sought on an indemnity basis.
The solicitors for the wife oppose the application and ask that it be dismissed, with costs reserved.
The application arises from these circumstances: The firm Kelly Legal acted for the husband from September 2006 until 16 October 2008.
Ms Esme Elms who then worked with Kelly Legal had the conduct of the husband’s property matter throughout most of 2007 and 2008. In October 2008, Ms Elms left Kelly Legal and commenced employment as a Family Lawyer with SR Wallace and Wallace, the solicitors for the wife.
During the hearing of this application, Mr Bailey solicitor for the wife and partner of SR Wallace and Wallace filed an Affidavit stating that as from the day following the hearing, Ms Elms would no longer be working for his firm. Her departure was unrelated to this file.

History of the litigation

The husband and wife in this matter have been married for 42 years. They separated in September 2006, having married in August 1964.
They each retained solicitors at separation in September 2006 to act in relation to their family law matters which included their divorce and property matters.
The wife retained SR Wallace and Wallace in Mackay in 2006 and she continues to retain that firm. The solicitor who has primarily had conduct of the matter on behalf of the wife is James MacLean Bailey a partner of SR Wallace and Wallace. The property matter apparently involves numerous corporate structures and various factual disputes. Mr Bailey in acting for the wife has prepared her court documents being a Response, Affidavit and Financial Statement filed on
21 February 2008 and three further Affidavits on 10 April 2008 (two of the wife on 10 April 2008 and one of a daughter).
The progress of this litigation has been slow. The wife has attempted to obtain other legal advice during the period she has been with SR Wallace and Wallace as she has been frustrated at times at the delay in resolving these property proceedings. Mr Bailey says that on each of the two occasions she has attempted to do so, she has been faced with a conflict of interest response from the solicitors in Mackay who she approached.[1]
[1] Paragraph 24 and 24 of the Affidavit of James Bailey filed 13/9/10
Since 2006 the wife has expended just over $184,000.00 in legal fees with SR Wallace and Wallace.
Ms Elms while at Kelly Legal commenced the husband’s property application by preparing his Initiating Application, Statement of Financial Circumstances and first Affidavit on 31 December 2007. There were four further Affidavits filed on 19 December 2007;
28 February 2008; 7 April 2008 and 11 April 2008 all prepared by
Ms Elms.
Ms Elms prepared both an Amended Application filed on 28 February 2008 and a Reply filed on 11 April 2008.
Ms Elms also assisted the husband with his divorce application from beginning to end[2] and took instructions in relation to other personal legal matters which were not directly related to family law proceedings.
[2] Husband’s affidavit filed 8/9/2010 paragraph 20.
As part of her representation of the husband, Ms Elms also prepared and sent detailed correspondence to SR Wallace and Wallace throughout the two year period. The husband says he had many discussions with Ms Elms and had conferences or discussions with her at least once a week[3].
[3] Husband’s affidavit filed 8/9/10 paragraph 22.
The husband paid approximately $170,000.00 to Kelly Legal for his legal representation for two years.
The husband also interacted socially with Ms Elms. He and his current wife Ms S each conversed socially with Ms Elms about their respective hobbies and their mutual interest in [omitted]. Ms Elms would tell the husband and his current wife about forthcoming [omitted] events being held at [omitted]. The husband, his current wife and Ms Elms would sometimes meet each other at those functions.
In October 2008 the husband changed law firms to Emerson Family Law.
In April 2010 the husband attended at the office of his former lawyers, Kelly Legal to collect some documents and on asking to speak to his former solicitor Ms Elms, the husband was shocked to find that his former solicitor now worked at SR Wallace and Wallace, the firm who had been acting for his wife for four years.
The husband went to complain to his then solicitor from Emerson Law, Mr Billimoria, but he was unavailable for a couple of weeks. On hearing of the husband’s complaint that his former solicitor was working at the same solicitor acting for his wife, Mr Billimoria said to the husband words to the effect It doesn’t change anything.[4] The husband says that Mr Billimoria told him that he had been offered employment himself at SR Wallace and Wallace and that if he took the position, he could take his own client with him. The wife’s solicitor, a partner at SR Wallace and Wallace denies that Mr Billimoria has ever been offered a position as alleged.
[4] Husband’s affidavit filed 8/9/10 paragraph 11
The husband says he continued to raise his concern at his former solicitor now being employed by the firm acting for his wife, however his complaints were dismissed by his solicitor. Accordingly on 14 May 2010 the husband left Emerson Law and engaged his current solicitors, Family Law Doyle Keyworth and Harris. Within three days his current firm had forwarded a letter to SR Wallace and Wallace on 17 May 2010 requesting that they cease acting for the wife as the husband’s former solicitor was employed by that firm.
A series of letters was then forwarded to SR Wallace and Wallace by Mr Doyle acting for the husband on 21 May 2010, 1 June 2010,
10 June 2010, 11 June 2010 (two letters), 15 June 2010, 16 June 2010 (two letters) and 30 June 2010. In this correspondence the following documents were provided to SR Wallace and Wallace:
a)a copy of the Legal Profession (Solicitors) Rule 2007 drawing attention to Rule 4;
b)an article from Proctor Magazine “Sshhh! The (Chinese) Walls have Ears...” by Neil Watt the Senior Ethics Officers at the Queensland Law Society examining the case of Asia Pacific Telecommunications Ltd v Optus Networks Pty. Ltd [2007] NSWSC 350
c)a copy of the scale of costs adopted by Family Law Doyle Keyworth and Harris attached to a letter which explained the basis of how the husband’s indemnity costs would be calculated
d)one of the letters of 16 June 2010 was directed to the Managing partner of SR Wallace and Wallace drawing attention to the possible costs implications for their firm (as opposed to their client, the wife)
SR Wallace and Wallace responded with letters of 10 June 2010,
17 June 2010 and 12 July 2010. The final letter from James Bailey at SR Wallace and Wallace concludes We advise that after carefully considering her position and speaking with our Counsel, we confirm we have instructions to continue acting on behalf of our client.
Mr Bailey says that his file comprises eleven folders of correspondence over the past four years and that during that time various topics have been canvassed. Mr Bailey also has nine folders of documents including expert reports, valuations, opinions of taxation, corporate law matters, tax returns for the four companies, two family trusts, the hybrid trust, and two self managed superannuation funds. Mr Bailey estimates that it would take about three days for any future lawyer to acquire knowledge of what has transpired to date in the file and that a cost in excess of $10,000.00 would be incurred by the wife in doing so.
I am told by the current lawyers that the asset pool is some $8 million.
On looking at the previous Orders made in these proceedings, the file shows that Orders were made by Consent on 14 April 2008 by Federal Magistrate Jarrett at which each party was represented by Counsel,
Mr Galloway for the husband and Mr Hanlon for the wife. Those Orders included interim orders for maintenance each month for each party and enabled each party to draw up to $200,000.00 from a nominated superannuation fund, pay off a tax debt, appoint accountants to finalise the parties’ accounting affairs, and organise the preparation of a valuation. Each of the parties was directed to attend a Conciliation Conference on 19 June 2008 in Mackay.
Since that time a series of court events have been conducted by a Registrar on the following dates: 28 April 2008, 16 September 2008 (at which Ms Elms acted for the husband and Mr Bailey acted for the wife), 18 February 2009, 18 April 2009, 20 May 2009, 8 July 2009,
12 August 2009, 23 September 2009, 3 December 2009, 17 March 2010 and 12 May 2010.
The matter was transferred from the Registrar’s of the Family Court list to me on 9 August 2010 in relation a proposed conflict hearing. That hearing occurred 14 September 2010 in Mackay.
Mr Fellows of Counsel appeared in person in Mackay on behalf of the wife.
Mr Page of Senior Counsel appeared by phone link to Mackay and his client and solicitor Mr Doyle appeared by video link from Brisbane to Mackay.

Evidence

This matter proceeded on the papers. There was no request by either party for cross examination.
I have had regard to the written submissions of each of the parties filed pursuant to the directions made by me on 9 August 2010. I have read the material and cases as identified by each party in their written submissions noting that the respondent wife also relies on a response filed on 14 September 2010.

The Law

Each counsel has helpfully referred me to what they consider to be the relevant cases as indicated in each of their written submissions.
Mr Page SC also refers to the Legal Profession (Solicitors) Rule 2007.
The leading Full Court Family Law authority, referred to by each Counsel, is McMillan and McMillan (2000) FLC 93-048.
In that matter the Full Court consisting of Justices Finn, Kay and Moore issued a lengthy judgment of fifty two pages canvassing issues relevant to issuing a restraint against a solicitor from continuing to act for a party. This included a review of the decision of Justice Wilczek’s and approval of His Honour’s identification of the two approaches on this topic being the “narrow” or “English” approach, as against the “broader” or “family law” approach and the supporting authorities (including Frederico J. in Thevenaz [5]; Rourke J. in Magro [6] ; Mullane J. in Griffis [7] ) and references in those cases including to Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831, Sogalease Austraalia Ltd. V MacDouglas and Ors (Wood J. NSW Supreme Court, 18 July 1986 unreported ) and observations of the Full Court in McGillivray v Mitchell[8]. Reference is also made to the Full Court of Queensland decision in Mills v. Day Dawn Block Gold Mining Company Ltd; In re Marsland (1882) Q.L.J at 62 at p.63 quoting Lilly CJ.
[5] (1986) FLC 91-748
[6] (1989) FLC – 92-005
[7] (1991) FLC 92-233
[8] (1998) FLC 92-
The Full Court in McMillan referred also to decisions, both single judge and Full Court, of the Supreme Courts of Australia and various English authorities.
I am also referred by Mr Fellows of Counsel to more recent decisions (though not Full Court) on the topic of conflict of interest including Pond and Thurga (No 2)[9] a decision of Justice O’Ryan in which His Honour, having thoroughly analysed an application for a restraint against a solicitor, dismissed the application noting, however, that there was a great deal yet to be done and considered and that the application could be made again as the evidence continued to unfold.
[9][9] [2007] FamCA 587
That case involved an application by the husband and wife that Minter Ellison Lawyers be restrained by injunction from acting on behalf of the second, third and fourth respondents in the proceedings. Minter Ellison were the solicitors for the 3^rd respondent known as B Pty. Ltd. In my view, the facts do not bear any resemblance to the matter I am considering. In his decision, however, Justice O’Ryan at paragraph 209 to 218 onwards considered the grounds upon which legal practitioners may be restrained from acting for a party and referred to most recent decisions including that of Justice Young in Geelong School Supplies Pty. Ltd v Dean [2006] FCA 1404.
Mr Fellows of Counsel has also provided me with the decision of Justice Coleman in Billington & Billington (No 2) [2008] FamCA 409. I have read the decision and note that Justice Coleman refers to Justice O’Ryan’s decision in Pond & Thurga and the principles considered by Justice O’Ryan at page 582-583 of that judgment which refer also to Asia Pacific Telecommunications Ltd [v Optus Networks Pty. Limited [2005] NSWSC 550]. Justice Coleman also referred to the decision in Qihua Zhao v ShengYu Zhan & Anor [2007] NSWSC 891, a decision of Justice Nicholas. Mr Fellows supplied a copy of latter case in the Supreme Court of New South Wales Equity Division which concerned an application to restrain a solicitor acting in a matter in that court.
The approach taken in this non-family law matter, was as set out in Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 235 and 236. Justice Nicholas clearly identified the different approaches stating that he had not overlooked the approach taken in the Family Court in McMillan, which was in line with the decision of Justice Frederico in Thevenaz, that a restraint is justified where only a theoretical risk of misuse of the confidential information is shown to exist. It held (paragraph 87) that an applicant need only give evidence that he has provided confidential information to the solicitor, and does not have to divulge the content of that information. The reasons for this approach were said to be related to the sensitive nature of litigation in that jurisdiction.
Justice Nicholas continued the submission must be rejected, if only for the reason that, in my opinion, the principles in McMillan have no application to the circumstances in the present case. His Honour noted that the situation in the present proceedings is different. These are not Family Law proceedings. The solicitor does not, and has not, acted for the first defendant. In these proceedings the first defendant is, and has been, without legal representation, and has filed a submitting appearance. The plaintiff is not a party to the Family Court proceedings which are between the defendants. His Honour concluded The facts and circumstances disclosed by the evidence in the proceedings in this Court bring this application squarely within the category of case to which the principles in Bolkiah apply.
Mr Fellows submitted that Justice Nicholas declined to follow McMillan even in a case which was expected to be transferred to the Family Court[10]. Having read the facts of the case and His Honour’s comments as to which approach he chose to adopt, I consider that Justice Nicholas, rather than declining to follow the Full Court decision in McMillan, very clearly distinguished between the different approach taken in the Family Court and that in other jurisdictions. His Honour noted that the application he was deciding did not arise out of a dispute between parties to a marriage, rather the litigation was between unmarried parties being the plaintiff who was the brother-in-law of the first defendant. The argument revolved around equitable principles applicable to a house the parties had jointly purchased. The plaintiff said he provided most of the funds for the purchase as a loan and sought a declaration that the defendants held the property on trust for him, a transfer of the property and monies payable. The first defendant contended that the funds were a gift as did his wife, the second defendant. She supported the position of her husband in her defence. This was not a Family Law matter and His Honour accordingly decided that it was not appropriate to apply the Family Law approach.
[10] Submissions – footnotes 12.
Mr Fellows’ written submissions on the applicable law refer to the ongoing controversy as to the application of the decision in the Full Court in McMillan and refers to Nicholas J’s decision in Qihua Zhao v Sheng Yu Zhang to which I have just referred, Pond v Thurga (No 2), Billington and Billington (No 2)[11], and Lakey and Lakey [12]a decision of Federal Magistrate Brewster.
[11] [2008] FamCA 409
[12] [2008] FMCAfam 827
Justice O’Ryan in Pond v Thurga stated at paragraph 213: The Full Court decision of McMillan v McMillan [2000] FamCA 1046; (2000) FLC 93-048 is a leading authority on the test to be applied in the family law jurisdiction. Prior to this decision it was uncertain whether a narrow test of actual prejudice or the broader test of theoretical risk of prejudice was to be applied. In this case the Full Court considered an appeal by the wife against an order restraining her solicitor from acting for her. In explaining that the case concerned a legal clerk who had previously worked on the husband’s file later moving to work for the solicitors of the wife as a secretary, his Honour continued:
The Full Court ultimately adopted the broad approach in Mills v Day Dawn Block Gold Mining Company Ltd [1882] QLJ 62 and In the Marriage of Thevanaz (1986) 11 Fam LR 95; FLC 91-748 of a theoretical risk of prejudice rather than proof of actual prejudice. The Full Court found that the narrow or English approach which requires “real mischief or prejudice” to follow in order to justify court intervention (an approach stemming from Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831) was inappropriate for the family law jurisdiction. The Full Court at para 56 cited with approval the summary of the law provided by Lindenmayer J in the unreported case of Stewart (unreported, 17 April 1997)
All that is necessary is that the wife swears that she has conveyed confidential information to the solicitors and that she believes, not unreasonably, that that information may be used against her, or at least to her disadvantage, in these current proceedings.”

His Honour continued: Importantly, the adoption of the stricter approach in the family law jurisdiction was borne out of cases concerning practitioners that had acted for both husband and wife and reasons specific to this factual situation. In these cases the reasons for adopting this test have been based on the sensitive nature of the jurisdiction and the in-depth factual inquiries that the court was often required to make into parties financial history, conduct and contributions. Indeed these factors were present in McMillan v McMillan (supra) as espousing the correct approach to be taken in cases regarding dismissal of legal practitioners. See also Magro and Magro (1989) FLC 92-005; Griffis and Griffis (1991) FLC 92-233; Kossatz and Kossatz (1993) FLC 92-386.
In my view His Honour Justice O’Ryan found little or no controversy in regard to the correct principles to apply in an application restraining a solicitor from acting in Family Law proceedings. His Honour clearly identified the pathway determined by the Full Court in McMillan as the correct one to follow.
I have also been referred to the decision of Justice Coleman in Billington & Billington (No 2)[13]. Justice Coleman stated in part in that decision although not expressly stated, inferentially counsel for the wife submitted that this Court was, or should regard itself, as bound by the decision in McMillan (supra). The Court accepts that, to the extent that “principles” established by decisions of the Supreme Court of New South Wales and those emerging from decisions of the Full Court differ, as a single judge, this Court should follow the decisions of the Full Court, notwithstanding that, on the findings of fact made by this Court, and the nature of the proceedings with which this application is concerned, McMillan (supra) is distinguishable.
[13] [2008] FamCA 409
I consider that Justice Coleman clearly articulated that the approach flowing from the principles in McMillan are binding on a single judge and I respectfully agree with his Honour.
I have also read, as requested, the decision of Federal Magistrate Roberts in Royston and Royston[14]. Federal Magistrate Roberts noted that the Full Court in McMillan recognized that there are “particular sensitivities” in family law matters. His Honour made reference to the clear acceptance of the wider approach in Australian family law matters as adopted by Frederico J in Thevenaz can be seen from the decision of the Full Court of the Family Court of Australia in McMillan and McMillan. In that case the Full Court approved a passage from a minority judgment of Cory J of the Supreme Court of Canada in MacDonald Estate v. Martin[15] .Part of that passage reads as follows:
Lawyers are an integral and vitally important part of our system of justice. It is they who prepare and put their clients’ cases before courts and tribunals. In preparing for the hearing of a contentious matter, a client will often be required to reveal to the lawyer retained highly confidential information. The client’s most secret devices and desires, the client’s most frightening fears will often, of necessity, be revealed. The client must be sure in the knowledge that the lawyer will neither disclose nor take advantage of these revelations.
Our judicial system could not operate if this were not the case. It cannot function properly if doubt or suspicion exists in the mind of the public that the confidential information disclosed by a client to a lawyer might be revealed.
[14] [2010] FMCAfam 9
[15] [1990] 3 S.C.R. 1235
It seems that FM Roberts has readily adopted the principles in McMillan as being applicable to the restraint application heard by him. The final decision Mr Fellows referred to as being an example of criticism in relation to McMillan is the decision of FM Brewster in Lakey and Lakey [2008] FMCAfam 827. Having read the decision and with respect of FM Brewster, I accept that it contains much discussion as to the application of the principles in McMillan.

The position of the husband

Mr Page of Senior Counsel for the husband submits that I will not be concerned with the delay in the father bringing this restraint application as it is well explained by the husband. The husband only found out himself on 7 April 2010, and having raised it with his solicitor and received an unsatisfactory response, the husband engaged new lawyers on 14 May 2010 and those solicitors wrote to SR Wallace and Wallace three days later on 17 May 2010.
Mr Page SC also contends that the solicitors for the wife have been unduly slow in their response to the request to cease acting and have failed completely in providing any assurances to the husband or his legal advisors that any quarantining of the file had occurred in any way or any preventative measures had been implemented in an attempt to address the husband’s concerns or to advise that Ms Elms was not associated in any way with the file or privy to information. Mr Page SC submitted that it was only in the course of these proceedings that the Affidavit material filed by Mr Bailey revealed for the first time that Ms Elms had not had access to the husband’s file and on the day of the hearing, that Ms Elms was now leaving the firm.
Mr Page SC contends that the approach that I should adopt in relation to the issue of confidential information being imparted from the husband to his former solicitor Ms Elms is referred to in the Full Court decision in McMillan. The Full Court has taken the view that a restraint is justified if there is a risk that confidential communications on relevant matters have been made by a party and all that is required is for the husband to swear to the fact that he has conveyed confidential information to his solicitors which the husband in this matter has done in his Affidavit. Mr Page SC submits that in Family Law where emotions run high, there is a far greater need for justice to be seen to be done that in other matters. Their Honours in McMillan referred to the decision of Bryson J in the Equity Division of the Supreme Court of New South Wales in D & JH Constructions Pty. V Head (1987) 9 NSWLR 118 which preferred the approach of the English Court of Appeal over the approach of the Queensland Full Court in Mills[16] which Justice Frederico had followed in Thevanez[17]. In doing so however, Justice Bryson acknowledged that the context of the circumstances in family law litigation are important to an understanding of the issues which arise in this area.
[16] Mills v Day Dawn Block Gold Mining Company Limited: In re Marsland (19982) QLJ 62.
[17] Thevanz (1986) FLC 91-748
In referring to the Family Court decision in the Marriage of Thevanaz Justice Bryson stated[18]: That court took the view that the restraint is justified if there is a risk that confidential communications on relevant matters have been made by the party for whom the solicitor has ceased to act, even if the risk may be more theoretical than practical. It seems natural that a particularly careful view would be taken in family law business, as such litigation tends to be about highly confidential facts and a very wide range of facts and circumstances can conceivably be relevant; the sensitivity which even the most reasonable people feel about such litigation when they are engaged in it calls for careful measure to secure not only that justice is done but also that it is apparent that it is done, an appearance which would not survive any general impression that lawyers can readily change sides.
[18] Paragraph 43.
Mr Page SC contends that while the husband retained the services of Ms Elms as his solicitor in his family law litigation the husband provided instructions relating to his marriage history, gave instructions and information sufficient to instigate the litigation and this involved not only matters of pragmatic facts, but other less pragmatic facts including cultural, emotional, tactical matters, the particular course to be taken in relation to the litigation, the way documents are prepared and the course to be taken in mediation and conciliation. Mr Page contends that this confidential information goes far beyond “disclosure issues” as suggested by Mr Fellows for the wife.

The position of the respondent wife

Mr Bailey the solicitor for the wife states in his affidavit that the wife speaks poor English and that taking instructions and imparting legal advice has been made more difficult because of limitations in the wife’s language and comprehension. He considers that if the wife had to change lawyers, there would be an immediate costs of around $10,000.00 for the next lawyer to familiarize themselves with the history of the matter which has involved disputes about valuations and other matters such as the parties’ former accountant who was assisting each party in their litigation, being sacked by the husband and who has now been engaged by the wife as her private accountant.
Mr Bailey raises in his Affidavit issues regarding the small pool of lawyers in Mackay and the limitations when employing solicitors which is made more problematic trying to secure a solicitor who has no conflicts.
Mr Bailey has described the practice of his firm in giving undertakings and creating what he refers to as Chinese walls in relation to known conflict situations with practitioners who have worked for other law firms in Mackay and who may seek work at SR Wallace and Wallace. Presumably these arrangements have been put in place voluntarily with no objection from parties fully appraised of the relevant case law and who made their own decisions in relation to waiving any conflict of interest issue.
Mr Fellows Counsel on behalf of the wife contends that particularly in regional areas, if conflict situations were enforced rigidly, the movement of a solicitor from one firm to another would be almost impossible. Mr Bailey refers at paragraph 17 of his affidavit to the family law legal community in Mackay being smaller than in Brisbane. I note that the argument of a smaller pool of lawyers in a particular geographical location was raised by the non-legally qualified law clerk at the centre of the dispute before Justice Wilczek at first instance in McMillan. The law clerk had previously been employed by solicitors acting for the husband, and moved to work as a secretary to the wife’s solicitor. In his own affidavit, the law clerk, Mr Pitts, stated in part that he had not discussed the McMillan file with anyone at Simon Parsons (the firm he moved to who acted for the wife) and also that I am very concerned as to the outcome of this matter as if there is found to be a conflict of interest I would be unable to obtain work in any other Solicitors firm in Morwell or for that matter in the Latrobe Valley and the surrounding areas. Secretary and Support Staff move regularly between law firms and to my knowledge this is the first occasion an issue has been made of same.
It seems to me that all around Australia there will be towns, suburban areas, regional cities that have a smaller legal community than the state capital, however, I do not consider that such a limitation provides a basis to overlook the legal principle that it is of the utmost importance that justice should not only be done, but should appear to be done as referred to in McMillan. The Full Court were clearly not persuaded that limitations in lawyer numbers or employment in any particular locality was sufficient to relax the relevant legal principles.
Mr Fellows in his submissions queries why family law is necessarily “special” litigation justifying a different approach to the law than that applied in other Courts. Mr Fellows also contends that the applicant makes a bare allegation that Ms Elms has taken “confidential information” and “privileged and confidential information” to Wallace and Wallace. Mr Fellows submits that the allegation does not describe what could have been other than broad categories such as: my life, career, health and concerns. He submits that those broad categories would not have the necessary quality of confidentiality about them as understood by the cases.
I suggest that the answer lies in the explanation of Justice Frederick in Thevenaz (supra) following the Queensland Full Court decision in Mills (supra), endorsed by Justice Bryson in the New South Wales Court of Equity in D and J Constructions Pty. Ltd v Head (1987) NSWLR 118 and adopted by the Full Court of the Family Court in McMillan when their Honours stated: To the extent that is necessary in this case for us to express a concluded view (which is was not for the Full Court in McGillivray v Mitchell) we would support the application in this jurisdiction of the approach of Fredcerico J. in Thevenaz (following Mills) which was adopted by Mullane J. in Griffis and in Kossatz (and also by Lindenmayer J. in the unreported case of Stewart to which we will shortly refer. We would do so for the reasons related to the sensitive nature of the jurisdiction which were referred to by Bryson J. in D and J Constructions and by Rourke J. in Magro, and indeed also by Wilczek J in the present case.
As to the degree of proof of the passage of the confidential information a former client has to establish in order to have that information protected, the former client need only to prove a prima facie case as to confidential material, the disclosure or use of which by the solicitor in the course of the current proceedings for the present client would be prejudicial to the applicant[19]. The approach of having a contest about the specific nature of the confidential information or having to point to the specific confidential information as referred to in Rakusen v Ellis, Munday & Clarke [20] by Cozens-Hardy M.R. has been rejected in Family Law matters[21].
[19] Paragraph 55 – McMillan referring to Mullane J in Griffis.
[20] [1912] 1 Ch 831
[21][21] McMillan – referring to Bryson J in D & J Constructions Pty. Ltd v Head (1987) 9 NSWLR 118; Full Court of Supreme Court in Queensland in Mills v Day Dawn Block Gold Mining Company Limited: In re Marsland (19982) QLJ 62.
The factual circumstances in Magro (1989) FLC 92-005, a decision of Justice Rourke, are almost identical to those in this matter. Justice Rourke restrained the solicitor, Mr M, for the husband from continuing to act for the husband in family law property proceedings, where a solicitor who had once acted for the wife in those proceedings, had now been employed by Mr M’s firm but was in no way involved in the proceedings between the husband and wife. The issue raised in this matter by Mr Fellows of Counsel as to the broad claims about confidential information allegedly held by the husband’s former solicitor, Ms Elms, was also addressed by Justice Rourke.
Justice Rourke considered that the circumstances in his matter were stronger grounds for a restraining order than those in Thevenaz. His Honour stated:... It is abundantly clear that the nexus between Mr D in Thevenaz’s case and the husband via Mr D’s former partner was far more tenuous than the situation affecting the applicant wife in these proceedings. Mr B is the wife’s former solicitor retained by her in the presently pending, and bitterly contested, property proceedings. His professional activities on her behalf were of considerable depth and involved not only 75 pages of written instructions but also further privileged communications conveyed in conference and in the course of numerous telephone attendances. As the wife herself pointed out in a somewhat emotional outburst in the witness box: “He (ie Mr B) knows my whole life and my past history” (or words to that affect).
The same Mr B is now in the employ of the husband’s solicitor who, recognising the potential duty-interest conflict, has undertaken not to confer with his employee concerning the matter. Mr B, in an Affidavit sworn 28 November 1988, has given the Court a reciprocal undertaking. There is no evidence before me of any breach of these undertakings, and I am prepared to assume in favour of both Mr M and Mr B that each is an honourable and respected legal practitioner whose professional integrity is not in question.Even on these assumptions, if I follow the reasoning of Frederico J in Thevenaz it is the appearance of justice not being done which is the determinant, and not the probability. If this be the correct principle the injunctive relief sought in the present proceedings is prima facie irresistible”.[22]
[22] P 77,187 – 77, 188 referred to at paragraph 44 of McMillan.
Justice Rourke gave an insightful observation into the nature of family law and why it has its own sensitivities and not suitable to the Rakusen approach i.e. the need to specifically demonstrate that a breach of confidence has occurred or point to the specific confidential information conveyed. His Honour stated: The answer to this contention appears to me to lie in the peculiar quality of family law litigation to which reference was made by Bryson J in D and J. Constructions Pty. Ltd. Particularly in a proceeding involving the wealth of issues identified above, it is reasonable to infer that Mr B, by dint of his lengthy retainer, is in possession of at least some privileged material belonging to the wife which could be put to good use by the husband. This might only consist of impressions of the wife’s personality gained after many hours of confidence, which could be exploited by a skilful advocate presented with those impressions. In these circumstances the appearance of justice will, to borrow Bryson J’s words, not long “survive any general impression that lawyers can readily change sides”. On any objective view of the matter the wife’s position in these proceedings has been undermined ever since Mr B entered the employ of those representing her husband. The circumstance that Mr B has retained the photocopy document relating to the proprietary company can only serve to reinforce the wife’s perception of prejudice[23].
[23] Rourke J – 77,191 – Magro (1989) FLC 92-005

Conclusion

On the facts of this case, I note that despite four years of gathering information and appointing experts, the issues have not resolved and trial directions have not yet been made. This seems to be because the solicitors with conduct of the matter have continually been asking the Registrar for the Family Court for adjournments to attend to some aspect of the forensic exercise. Mr Bailey referred to an alleged incident in the history where the husband asserts that the wife removed $1.6 million in cash in a shopping bag on or around separation. The husband has, it seems, sacked the parties’ former company accountant who was assisting each of the parties in the litigation. That accountant is now the personal accountant for the wife which is likely causing the husband some angst. This matter involves disputes at all levels in relation to what appears to be a large property pool of some $8 million which includes a complicated corporate structure of family trusts, unit trusts, companies, taxation and financial issues. I note that the husband has re-married.
The depth and intensity of the litigation is seen both in the volume of material involved to date and the significant outlays on legal fees by each of the parties, a combined total of around $350,000.00. This is at a time when all that appears to have occurred so far is that the parties have filed their initial Applications and agreed to Interim Orders. Numerous procedural mentions have occurred and each time an issue is raised as requiring more attention and time. The matter has not yet been given trial directions.
Mr Bailey refers to there being eleven folders of correspondence and nine folders of documents being compiled over the four years since separation of the parties in September 2006. I consider that there has been ample opportunity for the husband to have imparted significant information including confidential information to Ms Elms whilst she appeared for him in 2007 and 2008. Paying Ms Elms’ firm around $170,000.00 for representation during that time signifies to me seriously entrenched litigation that has been labour intensive with what must be hours and hours of conferences.

Undoubtedly Ms Elms developed a close professional relationship with the husband over time and had ample time to observe the husband’s demeanour, attitudes, strengths and weaknesses and to discuss all aspects of his long marriage of 42 years, both personal and in relation to the relevant aspects of s.79.
In reviewing the facts of the matter in question and considering the facts in the leading case of McMillan it seems that whilst McMillan involved a senior law clerk and the matter in question involves a solicitor, the circumstances are otherwise similar. Ms Elms has in my view had a significant involvement with the matter and her involvement in obtaining instructions and giving advice to the husband was at a much deeper and more professional level than the senior law clerk in McMillan.
No doubt in representing the husband, Ms Elms’ professional responsibilities incorporated not only the kinds of matters with which the senior law clerk in McMillan was involved, but extended to an involvement in and understanding of the husband’s case procedurally, legally and strategically.
Ms Elms also met the husband and his new wife occasionally when they attended musical concerts held in Mackay through a shared interest in music, an occasional topic of conversation between the husband and Ms Elms.
I note the advice of Mr Bailey that Ms Elms was to leave the firm of SR Wallace & Wallace on the day of the hearing. I do not consider that this alters the possible conflict of interest situation given the period of time, from October 2008 to September 2010, which Ms Elms has worked with SR Wallace & Wallace.
I am aware of and have regard to the evidence of the inconvenience that may be caused to the respondent wife and the estimated cost of a new lawyer reading the file in the event the restraint against the wife’s solicitors is issued.
I am also mindful that public interest requires that generally a litigant ought not to be deprived of the lawyer of his or her choice.
In this case however, the husband has sworn that he has conveyed confidential information to Ms Elms who acted for him for two years and he believes that the information may be used against him, or at least to his disadvantage in his Family Law proceedings. In all of the circumstances I am satisfied that the husband’s belief is reasonable.
I am satisfied that the husband has acted reasonably and in a timely fashion in doing all he could to bring this application as soon as he became aware of the conflict and as soon as he could get a lawyer to pursue the matter on his behalf.
I adopt Justice Bryson’s view that a careful approach should be taken in relation to Family Law proceedings because the “sensitivity which even the most reasonable people feel about such litigation when they are engaged in it calls for careful measure to secure that not only that justice is done but also that it is apparent that it is done, an appearance which would not survive any general impression that lawyers can readily change sides”[24].
[24] Justice Bryson D & JH Constructions Pty. V Head (1987) 9 NSWLR 118 - referred to McMillan para 43
Having regard to all of the circumstances of this matter and the relevant legal principles I am satisfied that it is appropriate in this matter to accede to the applicants request to issue a restraint on the wife’s solicitors from continuing to act for and on behalf of the wife, and I intend to make Orders as set out in the application.

I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of Willis FM

Date: 16 December 2010