Tobias and Tobias
[2017] FCCA 654
•6 April 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| TOBIAS & TOBIAS | [2017] FCCA 654 |
| Catchwords: FAMILY LAW – Procedural – restraint on solicitor acting – whether there is a real risk of disclosure of any confidential information – inherent jurisdiction of the Court to manage its processes. |
| Legislation: Federal Circuit Court Rules 2001 (Cth), r.1.05 Family Law Rules 2004 (Cth), r.8.03 |
| Cases cited: Osferatu & Osferatu [2015] FamCAFC 177 Grieves & Tully [2011] FamCA 617 |
| Applicant: | MR TOBIAS |
| Respondent: | MS TOBIAS |
| File Number: | SYC 3773 of 2016 |
| Judgment of: | Judge Kemp |
| Hearing date: | 20 March 2017 |
| Date of Last Submission: | 24 March 2017 |
| Delivered at: | Sydney |
| Delivered on: | 6 April 2017 |
REPRESENTATION
| Solicitors for the Applicant: | Harris Freidman Lawyers |
| Counsel for the Respondent: | Mr Millar |
| Solicitors for the Respondent: | Diamond Conway |
THE COURT ORDERS THAT:
The wife be restrained from using the legal services of Mr Tom Doumanis and the firm Diamond Conway Lawyers further in these proceedings.
The matter be listed for Conciliation Conference on 30 June 2017 at 11.00am.
The directions of 11 October 2016 in relation to the Conciliation Conference stand.
The matter be listed on 28 July 2017 at 9.30am for mention.
The parties’ competing costs applications be reserved for mention on the adjourned date.
Liberty to apply on 7 days written notice.
IT IS NOTED that publication of this judgment under the pseudonym Tobias & Tobias is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYC 3773 of 2016
| MR TOBIAS |
Applicant
And
| MS TOBIAS |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application in an case brought by the applicant husband on 1 December 2016, seeking orders as follows:
(1)That the solicitor for the wife, Mr Tom Doumanis, and the firm Diamond Conway Lawyers, be and are hereby restrained from continuing to act on behalf of the wife in these proceedings;
(2)That the wife pay the husband’s costs of and incidental to this application;
(3)Such further orders as the court sees fit.
The husband was represented by Mr Leslie Stubbs, solicitor (“Mr Stubbs”).
The husband relied on his affidavit sworn and filed on 30 November 2016.
The respondent wife seeks in her response filed 2 December 2016, orders that the husband’s said application in a case be dismissed and that the husband pay her costs of and incidental to the application.
The wife was represented by Mr Millar of Counsel.
The wife relied on:
a)Her affidavit sworn and filed on 2 December 2016;
b)Her affidavit, in the substantive proceedings, sworn on 10 June 2016 and filed on 16 June 2016;
c)The affidavit of Mr Tom Anthony Doumanis (“Mr Doumanis”), sworn and filed on 13 March 2017; and
d)The affidavit of Mr I (“Mr I”), sworn 13 March 2017 and filed on 14 March 2017.
The parties tendered various documents as follows:
a)Exhibit A: consisting of two bundles of documents prepared by the Law Society of New South Wales, being Information Barrier Guidelines and Uniform Conduct Practice and CPT rules for solicitors (2015), together with conduct rule 11, being conflict of duties concerning current clients.
b)Exhibit 1: being the affidavit of the husband sworn 5 October 2016 and filed on 7 October 2016 in the substantive proceedings and the husband’s financial statement sworn 5 October 2016 and filed on 7 October 2016 in the substantive proceedings.
When the matter was before the Court on 11 October 2016, Mr Millar of Counsel appeared for the wife and Mr Levy of Counsel appeared for the husband. The Court heard, at that stage, competing applications in terms of interim distributions for property. The Court made orders on 11 October 2016 referring the parties to a Conciliation Conference with a Registrar scheduled for 2 December 2016 at 11.00am.
The Court made orders and handed down its decision on 28 October 2016 in terms of the competing interim payment applications. The proceedings were then adjourned to 20 March 2017.
It would appear that as a result of the filing of the husband’s application in a case, the Conciliation Conference did not proceed before the Registrar and at 11.00am on 2 December 2016, the Registrar vacated and adjourned that conference until 27 March 2017, being a date after the husband’s current application was to be heard by the Court.
The Court was able to hear the application on 20 March 2017, but was not then able to hand down its decision before the adjourned Conciliation Conference. Accordingly, without opposition, that Conciliation Conference was vacated to a date to be fixed in terms of this decision.
On 20 March 2017, the Court directed the parties forward to Chambers any further authorities to be relied upon by midday, Friday 24 March 2017.
By way of background facts:
a)The wife was born on (omitted) 1970 and is, currently, 46 years of age.
b)The wife describes her occupation as (occupation omitted).
c)The husband was born on (omitted) 1972 and is, currently, 44 years of age.
d)The husband describes his occupation as (occupation omitted).
e)The parties were married on 17 May 1997 and separated in August 2015. That is, their relationship was of some 18 years.
f)There are 2 children of the parties’ relationship, being [X], born (omitted) 2001, currently aged some 15 years, and [Y], born (omitted) 2003, currently aged 13 years.
g)The substantive proceedings relate to both property and parenting matters.
The husband says that, in about October 2015, he provided instructions to Mr Bruce Cameron (“Mr Cameron”), who was then employed as a partner of Cameron Gillingham Boyd, to act on his behalf.
The wife was, initially, represented by Ms Cheryl Beaumont of Family Focus Legal Pty Limited, but by 2 December 2015, she was represented by Mr Doumanis of Diamond Conway lawyers.
The husband says that in early June 2016, Mr Cameron telephoned and advised him that his firm, Cameron Gillingham and Boyd, was likely to merge with Diamond Conway in around November 2016 and that as a result of that merger, Mr Cameron would withdraw as his legal representative in this matter so as to avoid a conflict of interest. The husband says that by letter dated 16 June 2016, Mr Cameron advised him that Cameron Gillingham and Boyd were then due to merge with Diamond Conway lawyers in 2-3 months. As a result of the merger, the husband said, he believed, that Mr Doumanis should, similarly, cease acting for the wife to avoid a conflict of interest. The husband says that he instructed Mr Cameron to write to Mr Doumanis advising of his objection to Mr Doumanis continuing to act in the proceedings. That letter was sent by Mr Cameron to Mr Doumanis dated 17 November 2016. The husband says that Mr Doumanis did not respond to that letter. On 17 November 2016, the husband then instructed Harris Freidman Lawyers to appear for him in these proceedings, and a Notice of Address for Service was filed on 23 November 2016 completed by Mr Stubbs, as the lawyer for the person filing the said notice.
The husband says that he then instructed Harris Freidman to write to Mr Doumanis reiterating his objection to Mr Doumanis continuing to act for the wife and requesting that Mr Doumanis cease so acting. That letter was written on 25 November 2016 and refers to the decision in Osferatu & Osferatu [2015] FamCA 441. That citation related to the decision of Foster J, delivered on 12 June 2015. Subsequently, an appeal was lodged against Foster J’s decision which went to the Full Court of the Family Court of Australia, constituted by Finn, Ainslie-Wallace and Aldridge JJ, which allowed the appeal, cited at: Osferatu & Osferatu [2015] FamCAFC 177.
The husband says that Diamond Conway Lawyers then responded to the letter from Harris Freidman in their letter of 25 November 2016, referring to the said Full Court’s decision, and indicating that the wife did not intend to instruct someone other than Mr Doumanis.
The husband says that he is concerned that there is a danger of the misuse of confidential information. He says that he attended on Mr Cameron on several occasions where he confided confidential information, facts and details of events pertaining to his family law matter. He says Mr Cameron also advised him in writing by way of client letters, which contained legally privileged information and advice. The husband says that he has been advised that that correspondence has not been provided to Harris Freidman Lawyers, his current legal representatives, and is retained by Mr Cameron. In addition, the husband says that he also had telephone discussions with Mr Cameron regarding the strategy and best course of action in respect of his matter. The nature of the conferences, correspondence and telephone discussions, which the husband said included the confidential information were then described and set out in paragraph 16 of the husband’s affidavit of 30 November 2016, as follows:
a)the nature of the parties’ contributions at cohabitation, throughout the marriage and following separation;
b)the nature and structure of the matrimonial asset pool;
c)the nature of the parties’ liabilities;
d)the financial transactions throughout the marriage and following the breakdown of the marriage;
e)the wife’s use of matrimonial funds to purchase a block of land;
f)the wife’s use of matrimonial funds to obtain finance and fund purchases for third parties;
g)the nature of his medical condition, including private and confidential information pertaining to specifics about his treatment, medical advice and recommendations;
h)the impact of his poor health and its role and relevance to these proceedings;
i)the nature and structure of the company, including its financial operations and systems;
j)the cash and other financial transactions in respect of the company; and
k)the cash income aspects of his previous employment.
The husband says that not all of the above information were confidential, but some were. He says that he would not have confided information of a private, personal and confidential nature if he had known that:
a)Mr Cameron would be joining the firm representing the wife;
b)Mr Cameron would become a partner with the wife’s legal representative, Mr Doumanis;
c)Mr Doumanis would continue to represent the wife, despite working with his former lawyer, Mr Cameron, who was in receipt of confidential information; and
d)There was a risk that information provided to Mr Cameron could in any way, even unintentionally, be provided to or be obtained by Mr Doumanis and be possibly used against him in these or any other incidental proceedings.
The husband also says that he was concerned at the conduct and ethics of Mr Doumanis in continuing to act for a client where:
a)He had objected to him acting for the wife based on the circumstances where the solicitor with the carriage of his matter had merged and was now working for the same firm as Mr Doumanis;
b)Mr Doumanis and Mr Cameron were partners;
c)It was clear to his previous solicitor, namely, Mr Cameron, that a conflict would arise following the merger and as a result, Mr Cameron suggested and he agreed, that he instruct a fresh solicitor for himself to avoid the conflict and that Mr Doumanis had not followed that practical and ethical decision (as had Mr Cameron), so as to cease to act for the wife.
The husband says that he objects to Mr Doumanis continuing to represent the wife and seeks the relief sought.
Mr Millar, Counsel for the wife, has relied on the wife’s affidavit filed 2 December 2016 where she deposes to the husband’s evidence as to his concern about the danger of the misuse of confidential information. The wife addresses each of the matters referred to in paragraph 19 above described by the husband as confidential information, which she says would be at risk of being disclosed to or accessed by Diamond Conway Lawyers. Dealing with the same headings as the husband did, the wife says in relation to those headings as follows:
a)The nature of the parties’ contributions at cohabitation throughout the marriage and following separation.
The wife says that there is nothing confidential about this information as the husband had already disclosed such material in his affidavit sworn 5 October 2016 (part of Exhibit “1”) as to what he said were his contributions during the marriage and post separation. The wife says that since separation, the husband has made no contribution, whether financially or non-financially, to the care of the children and she relied on her own affidavit sworn 10 June 2016 wherein she deposed, at length, to the parties’ respective contributions, financial, non-financial, home-making and parenting during the parties’ marriage.
b)The nature and structure of the matrimonial asset pool.
The wife says there is no confidentiality in the asset pool, as both she and the husband were, substantially, in agreement as to the items comprising those assets, although there was a disputation as to some of their values.
c)The nature of the parties’ liabilities.
The wife says that the parties’ respective liabilities were disclosed or ought to have been disclosed in the balance sheet prepared by the parties’ legal representatives.
d)The financial transactions throughout the marriage and following the breakdown of the marriage.
The wife refers to her 10 June 2016 affidavit as to what financial transactions were said to have occurred between the husband and her during the marriage and post separation and says that the husband has done, likewise in his 5 October 2016 affidavit.
e)The wife’s use of matrimonial funds to purchase a block of land.
The wife says that she has deposed (in paragraphs 43 to 46, inclusive, of her 10 June 2016 affidavit) in some detail as to how she purchased the 2 properties, being the Property A property and the Property B property.
f)The wife’s use of matrimonial funds to obtain finance and fund purchases for third parties.
The wife says she does not understand what the husband refers to in this sub-heading, nor has he raised this in his 5 October 2016 affidavit and therefore, she says she is unable to respond to that assertion.
g)The nature of the husband’s medical condition, including private and confidential information pertaining to specifics about his treatment, medical advice and recommendations.
The wife says that she is well aware of the husband’s medical condition and that she has deposed to this in paragraphs of her 10 June 2016 affidavit, as has the husband in his 5 October 2016 affidavit. Further, she says that she was served with a copy of a report from Dr H, dated 7 October 2016, in respect of the husband’s health.
h)The impact of the husband’s poor health and its role and relevance to these proceedings.
The wife says that she has deposed in her 10 June 2016 affidavit to the husband working and her view that, notwithstanding the report of Dr H, the husband can continue to work. The wife also deposes that her belief that the husband continues to work does not come from any information conveyed by the husband to his previous lawyers but from her own inquiries, which she says she will depose to upon the substantive hearing of these proceedings.
i)The nature and structure of the company, including the husband’s financial operations and systems.
The wife says, in her 10 June 2016 affidavit, that she has knowledge of the husband’s company, Company A and that she believes the husband has failed to make full and frank disclosure in relation to that company and its financial operations and systems. She says, further, that the husband is, in any event, under the rules, obligated to disclose his financial matters, including those of his company.
j)The cash and other financial transactions in respect of the company.
The wife says that, in her 10 June 2016 affidavit, she has deposed to the husband’s financial transactions, both on his own account and through the company. Further, she says that the husband has an ongoing obligation to make financial disclosure.
k)The cash income aspects of the husband’s previous employment.
The wife says that, if the husband had received cash income during the marriage, which she was not aware of, he is required to disclose such cash income. She also refers to the letters passing between her lawyers and the husband’s previous lawyer relating to the issues of financial disclosure.
The wife says that she is aware that, upon Mr Cameron joining her lawyer’s firm, all of that lawyer’s current family law matters were transferred to the Diamond Conway network. Following the transfer she says that Diamond Conway’s IT officer, Mr I, specifically removed all documentation and information in respect of Mr Cameron’s files relating to this matter, such that those files are now no longer in existence on the Diamond Conway network.
The wife says that she is, further, informed by her solicitor, Mr Doumanis and believes that all hard copies of documents and information in relation to this matter have been transferred by Mr Cameron to Mr Stubbs, such that there is no documentation and information in respect of this matter available in the Diamond Conway office.
The wife says that her files are available on the Diamond Conway network and can be accessed by Diamond Conway solicitors. She has confidence and trust in the integrity of those solicitors, partners and staff of Diamond Conway, that no one will access those files, without Mr Doumanis’ authority. In any event, there is nothing in the files held by Diamond Conway on her behalf of which she does not wish to be disclosed.
The wife says that she has a good rapport with Mr Doumanis who is familiar with her matter, having provided him with countless documents, including bank statements, invoices and other relevant documents, to assist in these proceedings. She says she does not want to have to change her solicitor, merely because the husband does not want Mr Doumanis to represent her for reasons, which she believes, are intended to cause her inconvenience and costs by changing solicitors.
The wife also relies on the affidavit of Mr Doumanis, who confirms the joinder of Mr Cameron’s firm with his firm, Diamond Conway and to the effect that he is now a partner of Mr Cameron’s.
Mr Doumanis refers to a conversation with Mr Cameron wherein Mr Cameron informed him that he had transferred the hard copy of the husband’s family law file in these proceedings to Harris Freidman Lawyers, but retains for his own purposes certain correspondence with the husband. Mr Doumanis said that he has not had any conversation, nor intends to have any conversations with Mr Cameron, regarding any discussions in relation to the family law matter, the subject of these proceedings and he has not accessed, or attempted to access any correspondence or documents that Mr Cameron may have retained in his dealings with the husband, nor does he have access or sought, nor intends to access the USB storage device referred to in Mr I’ affidavit sworn 13 March 2017.
Mr I deposes to his employment at Diamond Conway Lawyers as a consultant to administer the firm’s information technology systems. In that capacity, after the merger of Mr Cameron’s firm with Diamond Conway on 1 November 2016, he says he had a conversation with Mr Cameron and was informed of a potential conflict of interest in “the file of Tobias”, in which Mr Cameron had acted for the husband, and in the same file where Mr Doumanis was acting for the wife. Following that conversation, Mr I says that he removed all documents and records relating to the husband’s file from Diamond Conway’s network, and all of that information was then transferred to a USB storage device which was given to Mr Cameron. The husband’s file has, therefore, been completely removed from Diamond Conway’s network and backups, such that the husband’s file was not available to any user within the Diamond Conway firm, including Mr I and his staff. Any access to the husband’s file would have to be through Mr Cameron, who has sole access to the USB.
Mr Cameron has not filed any affidavit, nor has he indicated his position. The Court is not critical of that as it would clearly mean that Mr Cameron’s position would be somewhat compromised as being a witness for the wife.
Mr Stubbs indicated that if the Court was of the view that there was no conflict, then the husband’s position was that he would seek to re-engage Mr Cameron. The Court was of the view that if the husband did that, then there would clearly be a conflict if Mr Cameron sought to act on the husband’s request. The Court would doubt very much that Mr Cameron would, in any event, take up such a request. Further, Mr Stubbs says that his client’s application is pre-emptive in nature seeking to avoid both further applications down the track and potentially to the Law Society of New South Wales for a professional ruling.
The Court was taken to a number of authorities, including Osferatu & Osferatu [2015] FamCAFC 177, Grieves & Tully [2011] FamCA 617, Webb & Salter [2016] FCCA 1087, and Kallinicos & Hunt [2005] NSWSC 1181.
The Court was, particularly, concerned to raise with Mr Millar the issue as to what could be considered the risk of disclosing confidential matters where the husband was, otherwise, under obligations of disclosure in terms of his overall past, present and future financial circumstances. Mr Millar alluded to a similar request being made of him by Brewster FM (as he then was), in the case of Lakey & Lakey [2008] FMCAfam 827. Mr Millar recalls his response to His Honour, being that perhaps the disclosure of a relationship with a person who a party was not then in a de facto relationship, could be such a matter. His Honour was, of the view, that that was a matter that would not need to be relevantly disclosed, in any event and Mr Millar agreed with that proposition before this Court, before me.
The Court raised with Mr Millar whether the issue as to what could be determined as confidential could be properly assessed by that which was disclosed by the husband and the wife in their affidavit material. For example, if the husband had provided some information to Mr Cameron but that that information had not been disclosed in the affidavit material, but if, subsequently, challenged, the husband may be able to say: “Well, that material was, in fact, disclosed to my lawyer, and for some reason or another, did not find its way into the affidavit material.” Information which had then been so disclosed to a lawyer, which was not in the affidavit material, would have to be considered as to the basis of any confidence claim, legal professional privilege claim or any waivers thereof.
Mr Stubbs indicated that there may be material disclosed by the husband to Mr Cameron which could, potentially, impact on the wife’s case, for example, the names of witnesses who would be able to depose to something contrary to that which was asserted by the wife. Information/instructions as to what the husband may be prepared to settle for in monetary terms and in terms of parenting arrangements may also fall within that category. That material would not, otherwise, be disclosed in the affidavits filed to date and may be withheld for tactical reasons. There is some weight in that submission.
Further, Mr Stubbs submitted that what was of concern, similarly, was the issue where one partner may address matters, for example at a partnership budget discussion where Mr Cameron may be placed into a position of having to say something to Mr Doumanis at such a meeting (and vice versa) in relation to the financial cost outcome for the firm Diamond Conway of the conduct of this matter.
The issue of conflict could potentially starkly arise if after a final hearing the wife was dissatisfied with the outcome, based on what she considered, could amount to the negligence of her lawyers. If she commenced negligence proceedings, she would be required to join Mr Cameron as he is now a partner in the firm of Diamond Conway. Any cause of action would be based on the firm, including Mr Cameron, owing her a relevant duty of care. To an extent, that exposes the very conflict that Mr Cameron sought to avoid by ceasing to act for the husband. It also follows that Diamond Conway should not, given the partnership status of Mr Cameron, be entitled to continue to act for the wife.
The Court raised with Mr Stubbs and with Mr Millar the issue of any relevant authority as to the position of one partner in a firm being deemed to have the knowledge of another partner. Mr Millar, helpfully provided the following:
a)In partnership law the knowledge of one partner is to be imputed as the knowledge of the other: Malleson Stephen Jaques v KMPG v Peat Marwick (1990) 4 WAR 357 at 374 per Ipp J. However, Ipp J subsequently referred to his remarks concerning imputation of a partner’s knowledge as “too broadly stated”: Unioil International Pty Ltd v Deloitte Touche Tohmatsu (a firm) (1997) 17 WAR 98 at 108.
b)Subsequently, in the context of proceedings for an order of the kind sought in the current proceedings, in Prince Jefri Bolkiah v KPMG (a firm) (1999) 2 AC 222, Lord Millett said:
“Accordingly it is incumbent upon a Plaintiff which seeks to restrain his former solicitor from acting in a matter from another client to establish:
(i) that the solicitor is in possession of information that is confidential to him and to the disclosure of which he has not consented; and
(ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own.
Although the burden of proof is on the Plaintiff, it is not a heavy one, the former may readily be inferred; the latter will often be obvious. I do not think it is necessary to introduce any presumptions, rebuttable or otherwise in relation to these two matters. But given the basis on which the jurisdiction is exercise there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case…” (emphasis added)
c)That passage of Lord Millett is cited with apparent agreement by the Full Court of the Family Court in Osferatu v Osferatu [2015] FamCAFC 177 at [40].
The Court accepts Mr Stubbs’ submission that, for obvious reasons, the husband does not need to disclose the specific details of the confidential information he asserts is held by Mr Cameron as to do so would disclose that confidential material. The Full Court’s decision in Osferatu states that:
For evidence to be persuasive and cogent the applicant should have identified the nature of the information received or likely to have been received by the solicitor, which was then or could then be relevant to the current proceedings. It was not sufficient to simply say that, as family law proceedings cover a range of matters, any information at all received by such a solicitor could have been relevant.
48. “…It is clear that the wife need not, for obvious reasons, divulge in her evidence the confidential information she asserts is held by the solicitor she is trying to restrain. However, for evidence to be persuasive and cogent she should have identified the nature of the information received or likely to have been received by Mr F between 24 June 2011 and February 2012 that was now, or could now be, relevant to the current proceedings. She did not do so. It is not sufficient to say that, as family law proceedings cover a range of matters, any information at all received by Mr F could have been relevant…”
Further, the Court accepts Mr Stubbs’ submission that the Court must also consider the issue in light of the matter being both one of property and parenting. Mr Millar did not address the parenting aspects of the matter.
The Law
Rule 1.05(2) of the Federal Circuit Court Rules2001 states that where its rules are insufficient, the Court may then apply rules contained within the Family Law Rules 2004.
These proceedings necessitate such application. In particular, the consideration of Rule 8.03 of the Family Rules 2004:
A lawyer acting for a party in a case must not act in the case for any other party who has a conflicting interest.
This rule is read in conjunction with the duties required of solicitors under Rule 11 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015. A copy of this rule was helpfully provided by Mr Stubbs for the husband and is Exhibit A and is in the following terms:
11 Conflict of duties concerning current clients
11.1A solicitor and a law practice must avoid conflicts between the duties owed to two or more current clients, except where permitted by this Rule.
11.2If a solicitor or a law practice seeks to act for two or more clients in the same or related matters where the clients’ interests are adverse and there is a conflict or potential conflict of the duties to act in the best interests of each client, the solicitor or law practice must not act, except where permitted by Rule 11.3.
11.3Where a solicitor or law practice seeks to act in the circumstances specified in Rule 11.2, the solicitor or law practice may, subject always to each solicitor discharging their duty to act in the best interests of their client, only act if each client:
11.3.1is aware that the solicitor or law practice is also acting for another client, and
11.3.2has given informed consent to the solicitor or law practice so acting.
11.4 In addition to the requirements of Rule 11.3, where a solicitor or law practice is in possession of information which is confidential to a client (the first client) which might reasonably be concluded to be material to another client’s current matter and detrimental to the interests of the first client if disclosed, there is a conflict of duties and the solicitor and the solicitor’s law practice must not act for the other client, except as follows:
11.4.1a solicitor may act where there is a conflict of duties arising from the possession of confidential information, where each client has given informed consent to the solicitor acting for another client, and
11.4.2a law practice (and the solicitors concerned) may act where there is a conflict of duties arising from the possession of confidential information where an effective information barrier has been established.
11.5 If a solicitor or a law practice acts for more than one client in a matter and, during the course of the conduct of that matter, an actual conflict arises between the duties owed to two or more of those clients, the solicitor or law practice may only continue to act for one of the clients (or a group of clients between whom there is no conflict) provided the duty of confidentiality to other client(s) is not put at risk and the parties have given informed consent.
In Osferatu & Osferatu [2015] FamCAFC 177, the Full Court of the Family Court of Australia stated:
20. 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 (Kallinicos v Hunt [2005] NSWSC 1181).
21. The case before the trial judge was only concerned with the first category: the risk of the misuse of confidential information and we thus confine ourselves to it.
22. The manner in which a client’s confidential information is to be protected in family law proceedings was clearly explained by the Full Court in McMillan and McMillan (2000) FLC 93-048 where the Full Court extensively reviewed existing authorities in the Family Court and in many other courts. The following statement of Frederico J in Thevenaz v Thevenaz (1986) FLC 91-748 at 75,447 was expressly adopted by the court:
Thus “a practitioner who wishes to cease acting for one party and to continue to act for the other party will be restrained from doing so by the court if there is any evidence that confidential communications have been made to him by the party for whom he is ceasing to act. In such a case the court will not weigh conflicting evidence as to confidence. It will act upon the evidence of the client who swears that he has made the confidential communication”. (Reference omitted).
23. The following passage from Thevenaz was also expressly adopted by the Full Court in McMillan:
It is my view that in this case [the lawyer] 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.
24. In an unreported decision of Stewart & Stewart (unreported, Family Court of Australia, Lindenmayer J, 17 April 1997) Lindenmayer J said:
… 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…
25. Of that passage the Full Court in McMillan said at [87]:
In other words, the client need only give evidence that he has provided confidential information to the solicitor (or in this case, the law clerk/secretary). The client does not have to divulge the content of that information. (See Mills and also Lindenmayer J in Stewart.) In the present case, we consider it sufficient, as we said earlier, that the husband has sworn that he had given instructions to Mr Pitts as to how he wished his “matter to be conducted and the position to be put to the wife”. It is obvious that such matters would come within the description of “confidential information”.
26. It is, however, important to recognise that McMillan, as were Thevanez and Stewart, was a case where the applicant was seeking to restrain a solicitor or a clerk to whom they had recently, and directly, given instructions from acting, or the firm to which they had moved, from acting, in those proceedings. Because the applicants in those cases had given instructions to the solicitor about the very matter in issue, it follows easily that there would be a finding that the solicitor who had moved was in possession of confidential information which is or may be relevant to that matter. It is for that very reason that the passage of Lindenmayer J in Stewart commenced with the words “All that is necessary is that …”. His Honour was simply saying that, in such circumstances, the burden borne by the applicant was discharged by such evidence. Nothing that appears in Stewart, Thevanez or McMillan obviates the need for an applicant seeking such relief from discharging his/her burden of proof by adducing cogent and persuasive evidence. This is particularly so where, as here, the circumstances differ from McMillan. In this case Mr F had never taken instructions from the wife.
27. In Mancini v Mancini [1999] NSWSC 800 Bryson J said at [7]:
It is of importance to observe that information generally is not protected; the protection available relates to confidential information, and is available to the person entitled to the confidence. No circumstances were put forward in which Mrs Mancini herself is entitled to the protection of the law against the use of any particular information by Mr Mancini or by the lawyers whom he has chosen to retain. It is not possible to address in any clear way and to come to a decision on protection of any alleged confidential information without identifying what the confidential information is in a sufficiently specific way to enable it to be identified. Without doing that it is not possible to come to a conclusion on whether the information truly is confidential, to consider and appraise the circumstances in which it came into existence and was communicated, to come to any conclusion about whether protection is appropriate, or to make any enforceable order. A case about confidential information cannot be nebulous. Confidential information which once existed may no longer be confidential; it may no longer be available although it was communicated in the past; it may not be material to any use which might now be proposed to be made of information. Without specificity a claim to protection cannot be defended or decided on any fair procedural basis, and a general allegation of the kind put forward here to the effect that from the nature of the past legal business confidential information must have been communicated should not in my opinion be upheld.
(Emphasis added)
28. The need for this proof is obvious. In Billington & Billington (No 2) [2008] FamCA 409 Coleman J said at [43]:
As the authorities make clear, the jurisdiction to grant relief of this kind "is to be exercised with caution". The court understands caution to be exercisable in relation to the totality of the evidence, and the matters relevant to the exercise of the jurisdiction, and not to be referrable only to the interests of the party seeking the relief. Relevant in that context is the need to give appropriate weight to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause. Also relevant in this context is the cost and inconvenience of requiring the wife to retain new lawyers. Quite apart from the work required to be undertaken by solicitors familiar with the case to adequately represent the wife's interests before the Full Court, realistically, were new solicitors now to be instructed, a far greater level of reading and preparation would be required, and at greatly increased expense to the wife.
29. These are serious and weighty considerations which must, of course, be balanced against the competing interests of the client which were described by Lord Millett in Prince Jefri Bolkiah v KPMG (A Firm) [1999] 2 AC 222 at 236 as follows:
…It is of overriding importance for the proper administration of justice that a client should be able to have complete confidence that what he tells his lawyer will remain secret. This is a matter of perception as well as substance. It is of the highest importance to the administration of justice that a solicitor or other person in possession of confidential and privileged information should not act in any way that might appear to put that information at risk of coming into the hands of someone with an adverse interest.
30. We see no conflict between what was said by the court in McMillan and in Volker and Anor & Dunwell and Anor (2013) FLC 93-558 as it was suggested that there might be in Drover & Glasson and Anor [2014] FamCA 714 (which was a decision referred to by the trial judge). Accordingly, we reject any such suggestion. It is to be recalled that McMillan and Volker were cases dealing with very different circumstances. Merely because a principle is expressed in different words by different courts, often to highlight the exigencies of that particular case, does not mean that the principle itself has been altered.
31. This conveniently leads to the next point. Once the client has discharged the onus of proving that the solicitor is in possession of confidential information which is, or may be relevant to the new matter, that is not the end of the case.
32. The next step involves a consideration of the risk that the relevant confidential information will be disclosed. The risk of disclosure “must be a real one, and not merely fanciful or theoretical. But it need not be substantial”: Prince Jefri at 237.
33. How is this to be determined? It is by the consideration of the risk and of any protective measures taken or proposed by the solicitor or his or her new firm. The evidentiary burden on this issue falls squarely on the lawyer or the firm to which he or she has moved. As Lord Millett said in Prince Jefri at 237-238:
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 D.L.R. (4th) 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.
34. We agree with Goldberg J in PhotoCure ASA v Queen’s University at Kingston [2002] FCA 905 where he said at [50] and [51]:
50. 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.
51. 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…
35. A balancing of the nature of the information against a consideration of the person to whom the information was given, when the information was given, the relevance of that information to the current proceedings, the risk of disclosure and any proposed protective measures is required before any determination can be made as to whether any relief is required and, if so, what is the appropriate relief.
36. As an example of the application of such considerations we refer to Asia Pacific Telecommunications Ltd v Optus Networks Pty Limited [2007] NSWSC 350.
37. None of this conflicts with what was said in McMillan. At [93] their Honours said:
…We accept that the mere fact of access to confidential information is not the test. Rather the issue is whether the former client actually imparted confidential information to a solicitor (or clerk) who is now employed by the solicitors acting on the other side of the litigation.
38. The risk, and management of the risk, were not issues in McMillan, although the authorities quoted there deal with that aspect of the law in the manner we have described.
39. Before leaving this discussion we wish to refer to the statement in McMillan that even “a theoretical risk of the misuse of the confidential information” is sufficient to found relief. The phase “a theoretical risk” was echoed in Prince Jeffri in the passage quoted earlier. For our part, we find the word “theoretical” unhelpful. There is indeed a continuum of risk from obvious to remote. In Asia Pacific, Bergin J described the risk of disclosure or misuse as “probably real and not fanciful” (at [41]). In Billington Coleman J referred to “any real risk” (at [37]). That phrase was also used by Goldberg J in PhotoCure (at [78]). This is a more meaningful phrase. The consideration should be whether there is a real risk of misuse as opposed to one which is merely fanciful. To the extent that what we have said may be seen to represent a departure from McMillan (which we do not necessarily accept), it is to accord with more recent authority and provides a clearer test.
40. We return finally to Lord Millett in Prince Jefri:
Accordingly, it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious. I do not think that it is necessary to introduce any presumptions, rebuttable or otherwise, in relation to these two matters. But given the basis on which the jurisdiction is exercised, there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case…
(Emphasis added)
41. It follows from the above discussion that the law requires that an applicant seeking to restrain a solicitor from acting must adduce evidence that establishes the confidential information and the risk of the misuse of that information in the circumstances. The weight and persuasiveness of any evidence adduced depends, of course, on the precision of the evidence called, the nature of the confidential information and the nature of the risk of disclosure.
In terms of the third category, being the inherent jurisdiction of the Court to control its officers and process, identified by the Full Court, this Court has had regard to the decision of Naczek & Dowler [2011] FamCAFC 179 which stated that the test to be applied is:
61.“…whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice.”
In relation to the issue of the risk of a breach of confidence, the Court is satisfied that the husband has discharged his onus of showing that Mr Cameron was in the possession of confidential information which may be relevant to the current matter, both property and parenting.
As the Full Court of the Family Court of Australia stated, that however, is not the end of the matter and this Court must examine the risk that any such confidential information, so held, would be disclosed or indeed has already been disclosed under duties and obligations to disclosure where such confidence has been lost. The Court accepts, in that regard, that there would be a minimal risk of the communication of any documents containing confidential information, given the steps taken by Mr Doumanis and Diamond Conway to insulate such documents in the possession of Mr Cameron. The Court, of course, accepts the integrity of both Mr Cameron and Mr Doumanis. However, there is as Mr Stubbs submits, always the risk that something may be said (not in documentary form) between partners which may disclose information of a confidential nature. To a large extent, the steps taken by a firm to isolate silos of knowledge and information through the construction of what are generally known as “Chinese Walls” can be quite effective where the recipients of that knowledge do not necessarily have day to day contact or engagement with other members of the firm. The larger the firm size, the more likely that such Chinese Walls will be effective. Further, the fact that the recipient of the confidential information in this case is a partner, tends to the view that there is more likely an ongoing engagement of that partner and his other partners, including Mr Doumanis, which would increase the risk of any disclosure (inadvertent, as it may be).
Conclusion
The Court also accepts, following its findings in paragraphs 47 and 48 above, that:
a)The husband’s application in a case was filed 30 November 2016, relatively quickly after the asserted conflict issue was made apparent to the husband. There was no substantial delay in the bringing of the husband’s application. There has been no waiver by the husband of his position.
b)Both parties would have incurred costs and expenses in retaining their lawyers and both lawyers had been involved with the parties, in the case of the wife, from about December 2015, and in the case of the husband, from about October 2015. The husband’s application if successful now would prevent the wife being exposed to even greater costs if his application was made at a later point in time and determined at that time in his favour. That is, it avoids the husband’s approach to the Law Society for a potential ruling noting that any such ruling might impact on any further application to be made to this Court at a later date. Indeed, as Mr Stubbs submits a further application could be made as late as on the hearing itself, with even greater risks to legal costs and expenses incurred.
c)The Sydney registry is not short of skilled family lawyers. This fact must be considered on any consideration of the potential difficulties for the wife in seeking new legal representation.
d)The position of Mr Cameron as a partner is, substantially, different from the lawyer sought to be excluded in Osferatu where it was conceded that he had had no discussions or engagement with the subject client prior to his move to the firm sought to be excluded. Mr Cameron was the partner with direct involvement with the husband and the recipient of his instructions and confidential information. The Court notes its concerns as expressed above about the mechanisms to protect against the risk of the disclosure of such information and Mr Cameron’s position of Mr Doumanis and his ongoing liability and obligations to the wife in that capacity.
e)These are parenting proceedings as well as property and to that extent the Court considers it prudent to adopt an approach to avoid conflict between the parents and which may have a greater potential opportunity for them to reach resolution of parenting matters. The Court considers the parenting aspect of this particular matter as an example of the mentioned “sensitive nature” of the jurisdiction and weight is also attached to that in favour of the husband’s application.
The Court proposes to provide an injunction as against the wife (not Mr Doumanis and his firm) to the effect that the wife be restrained from continuing to use Mr Doumanis and the firm Diamond Conway, in these proceedings.
The Court will allocate a Conciliation Conference, sufficiently, in advance to enable the wife to obtain fresh legal representation and provide a fresh mention date after that conference.
If there is any issue about the timings for such listings, the parties will be given liberty to apply on 7 days written notice.
The parties’ competing costs applications will be reserved for mention on the adjourned mention date.
I certify that the preceding fifty-three (53) paragraphs are a true copy of the reasons for judgment of Judge Kemp
Associate:
Date: 6 April 2017
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