UON Pty Ltd v Hoascar
[2017] WASC 79
•23 MARCH 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: UON PTY LTD -v- HOASCAR [2017] WASC 79
CORAM: MASTER SANDERSON
HEARD: 17 MARCH 2017
DELIVERED : 23 MARCH 2017
FILE NO/S: CIV 3178 of 2016
BETWEEN: UON PTY LTD
Plaintiff
AND
GABRIEL HOASCAR
Defendant
Catchwords:
Practice and procedure - Application to restrain solicitor acting for defendant - Turns on own facts
Legislation:
Patents Act 1990 (Cth)
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff: Mr N D C Dillon
Defendant: Mr D Robinson
Solicitors:
Plaintiff: AustAsia Legal Pty Ltd
Defendant: Williams & Hughes
Case(s) referred to in judgment(s):
Bowen v Stott [2004] WASC 94
Kallinicos v Hunt (2005) 64 NSWLR 561
MASTER SANDERSON: On 20 January 2017, the plaintiff in this matter issued an application for summary judgment as to part of its claim. The matter was first returned in chambers on 7 February 2017 when certain programming orders were made. On 13 March 2017, the plaintiff issued a chamber summons seeking to restrain the defendant's solicitors from acting for him. Despite the short notice of the hearing, both parties were anxious I should determine the latter application. In my view, there is no basis upon which the defendant's solicitors should be restrained from acting. These are my reasons for reaching that conclusion.
It is convenient to begin with an outline of the plaintiff's claim as disclosed in the statement of claim. The plaintiff is in the business of supplying electrical equipment including power generators, dewatering systems and the like. It is a specialist in providing equipment to remote mine sites. Between 2002 and 2015, two officers of the plaintiff developed an alternative motor starting control and power management system with specific application for remote island mine sites. In the statement of claim, this equipment is defined as the 'Invention'. On 16 August 2016, a provisional patent was granted for the Invention. The Invention has been incorporated into what is defined in the statement of claim as the 'Pro Power GMC Generator'. This equipment has been marketed to various parties engaged in the mining industry.
Between 1 July 2015 and 9 March 2016, the defendant was employed by the plaintiff. He was employed pursuant to three contracts. Each contract has its own particular terms. However, each contract has non‑disclosure obligations, non‑copying obligations and certain other obligations which are clearly designed to ensure the defendant does not misuse the intellectual property of the plaintiff. These three contracts and their terms are pleaded in detail in the statement of claim. The specific details are not presently of concern.
The plaintiff pleads the defendant left its employment around 9 March 2016 and at a date following 15 March 2016, began working with a company known as Taranis Power Pty Ltd. Taranis appears to be a competitor of the plaintiff, although they operate in slightly different fields. In any event, soon after the defendant joined Taranis, Taranis advertised it could supply a product described as 'VarioGen' which the plaintiff says achieves the same, or substantially the same, functions as the Pro Power GMC Generator. In fact, par 15.4 of the statement of claim reads as follows:
15.4The Taranis VarioGen:
15.4.1incorporates, copies or reproduces design features or elements consisting of Confidential Information the subject of the 2015 Employment Contract including features or elements of the Invention;
15.4.2copies or reproduces design features or elements of the October 2015 Design Drawing specifically for the control of submersible motor controlled pumps.
The statement of claim goes on to allege that certain clients of the plaintiff have been approached by the defendant in his capacity as an employee of Taranis. It seeks the return of confidential information, an injunction restraining the defendant from using the confidential information, and damages. The plea with respect to damages can be illustrated by quoting par 15.6 of the statement of claim. It is in the following terms:
15.6As a result of the Defendant's breaches of the 2015 Employment Contract pleaded in the preceding subparagraph the Plaintiff has suffered loss and damage.
PARTICULARS
Full particulars of the said loss and damage will be provided following discovery and inspection and/or the answering of subpoena by Taranis and other third parties.
What is remarkable about this claim is that Taranis is not a defendant to the action. The statement of claim alleges the defendant, in breach of the various contracts, has provided confidential information to Taranis and that information has led to the development of the VarioGen. It seems obvious the plaintiff would want to stop Taranis marketing the VarioGen and would want an account of profits for the VarioGen components already sold. During the course of the hearing I put this to counsel for the plaintiff. His response was to say that the plaintiff may consider taking proceedings under the Patents Act 1990 (Cth). For his part, counsel for the present defendant indicated Taranis would apply to be joined as a defendant to the proceedings. This clearly makes sense. There is a real prospect of inconsistent decisions if the defendant were to defend these proceedings on his own account and Taranis were at some later date to be sued in the Federal Court under the provisions of the Patents Act.
It is not in contest that the defendant's solicitors are also the solicitors for Taranis and Taranis is funding the defendant's defence of the claim. A notice to that effect has been given by Taranis. Further, both the defendant and Taranis have been advised by their solicitors of the potential for a conflict of interest and both have sought to have the solicitors continue to act. The plaintiff, however, maintains the prospect of a conflict of interest is so obvious the defendant's present solicitors ought be restrained from acting for him or acting for Taranis in any proceedings issued at a later date.
The court's jurisdiction to restrain solicitors from acting has traditionally been founded upon three bases. First, protection of confidential information; second, restraint from a breach of fiduciary duties in the context of a conflict of interest; and, thirdly, the court's control over the conduct of solicitors as its officers. These principles emerge from a number of cases including Bowen v Stott [2004] WASC 94 and Kallinicos v Hunt (2005) 64 NSWLR 561, 575. It is to be noted while there may in some cases be overlap in relation to these three areas, they cannot be conflated. Each one is separate from the other. It is the third of these principles which the plaintiff relies upon in this application.
The circumstances in which the court in its inherent jurisdiction will intervene on the third basis is conveniently set out in the judgment of Brereton J in Kallinicos:
The foregoing authorities establish the following:
•During the subsistence of a retainer, where the court's intervention to restrain a solicitor from acting for another is sought by an existing client of the solicitor, the foundation of the court's jurisdiction is the fiduciary obligation of a solicitor, and the inescapable conflict of duty which is inherent in the situation of acting for clients with competing interests [Prince Jefri].
•Once the retainer is at an end, however, the court's jurisdiction is not based on any conflict of duty or interest, but on the protection of the confidences of the former client (unless there is no real risk of disclosure) [Prince Jefri].
•After termination of the retainer, there is no continuing (equitable or contractual) duty of loyalty to provide a basis for the court's intervention, such duty having come to an end with the retainer [Prince Jefri; Belan v Casey; Photocure; British American Tobacco; Asia Pacific Telecommunications; contra Spincode; McVeigh; Sent].
•However, the court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice [Everingham v Ontario; Black v Taylor; Grimwade v Meagher; Newman v Phillips Fox; Mitchell v Pattern Holdings; Spincode; Holborow; Williamson v Nilant; Bowen v Stott; Law Society v Holt]. Prince Jefri does not address this jurisdiction at all. Belan v Casey and British American Tobacco are not to be read as supposing that Prince Jefri excludes it. Asia Pacific Telecommunications appears to acknowledge its continued existence.
•The test to be applied in this inherent jurisdiction is 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 [Everingham v Ontario; Black v Taylor; Grimwade v Meagher; Holborow; Bowen v Stott; Asia Pacific Telecommunications].
•The jurisdiction is to be regarded as exceptional and is to be exercised with caution [Black v Taylor; Grimwade v Meagher; Bowen v Stott].
•Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause [Black v Taylor; Grimwade v Meagher; Williamson v Nilant; Bowen v Stott].
•The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief [Black v Taylor; Bowen v Stott] [76].
A number of other points emerge from the decided cases. First, the jurisdiction is an exceptional one and should be exercised with circumspection and caution and only where there is a clear case. The court hearing the application needs to conclude that justice requires the making of the order.
Second, due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause.
Third, care should be taken to ensure that applications for removal of practitioners do not become a means by which opposing parties obtain forensic advantages which detract from, rather than advance, the policy for which the jurisdiction is properly exercised.
Finally, personal interests have, on occasions, provided a basis upon which lawyers for a party to court proceedings may be removed upon application by another party to the proceedings. For instance, if lawyers have a financial interest in the litigation because they may be liable if the case they are advancing for their client is not successful. Or, as a variation on that theme, where lawyers in advancing the case for their client are also defending their own actions or advice.
Against that background it is necessary to identify what precisely is the conflict of interest the defendant's solicitors have if they continue to act. The plaintiff appears to have two main grounds of complaint. First, they say that during the course of the action the defendant's solicitors will come into possession of information which is of a confidential nature but which they would, given the solicitor‑client relationship, be obliged to pass on to Taranis. The difficulty with that submission is that the plaintiff's case is presently based on an assumption that confidential information has already been passed on to Taranis. That is the foundation of the plaintiff's allegation - the VarioGen incorporates, copies or reproduces design features or elements consisting of confidential information. It is very difficult to see what further information the plaintiff may disclose to the defendant which the defendant's solicitors would then be obliged to pass on to Taranis. So far as discovery is concerned, if the plaintiff is able to convince the court that a confidentiality order is required, the defendant's solicitors would be prevented from disclosing the documents the subject of that confidentiality regime not only to the defendant, but to Taranis. That, it would seem, offers a measure of protection to the plaintiff and does not seem in any way to compromise the defendant's solicitors.
The second complaint is that if the plaintiff succeeds against the defendant and the defendant then wishes to seek indemnity from Taranis, the defendant's solicitors would be compromised. Clearly were that to happen, the defendant's present solicitors could not act either for the defendant or for Taranis. Indeed, if the present defendant, properly advised, thought it appropriate to join Taranis as a third party, then the defendant's solicitors would have to cease to act. No doubt in due course they will give that question careful consideration. But as matters stand at the moment it does not seem to me that there is any conflict of interest apparent or real.
It is also to be borne in mind that while there may be differences between the position of the defendant and Taranis, these differences are far outweighed by the similarities in the position of each. As I have indicated, Taranis is a natural party to these proceedings and should probably be joined (although as yet no application has been made and I express no concluded view). To put the parties at this point to the expense and inconvenience of obtaining separate representation is unwarranted and unnecessary.
The plaintiff's application to restrain the defendant's solicitors from continuing to act will be dismissed. I will hear the parties as to costs.
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