UTi (Aust) Pty Ltd v The Partners of Piper Alderman

[2008] NSWSC 219

CITATION:	UTi (Aust) Pty Ltd v The Partners of Piper Alderman [2008] NSWSC 219
HEARING DATE(S):	08/02/08 Written submissions: 18/02/08, 25/02/08
JUDGMENT DATE :	14 March 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Proceedings dismissed with costs
CATCHWORDS:	LEGAL PRACTITIONERS - application by current client to restrain solicitors from acting for other parties in court proceedings - various grounds on which order may be made - whether any ground made out - whether implied consent by client
CATEGORY:	Principal judgment
CASES CITED:	Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd [2005] NSWSC 550 Australian Liquor Marketers Pty Ltd v Tasman Liquor Traders Pty Ltd [2002] VSC 324 Bahonko v Nurses Board of Victoria [2007] FCA 491 Beach Petroleum NL v Kennedy [1999] NSWCA 408, (1999) 48 NSWLR 1 Belan v Casey [2002] NSWSC 58 British America Tobacco Services Ltd v Blanch [2004] NSWSC 70 Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 WLR 401 Conway v Ratiu (Note) [2006] 1 All ER 571 Fitzsimmons v R (1997) 23 ACSR 355 Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404 Grimwade v Meagher (1995) 1 VR 446 Kallinicos v Hunt [2005] NSWSC 1181, 64 NSWLR 561 Mitchell v Pattern Holdings Pty Ltd [2000] NSWSC 1015 Permanent Building Society v Wheeler (1994) 11 WAR 187 Pilmer v Duke Group Ltd [2001] HCA 31; (2001) 207 CLR 165 Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 R v Khazaal [2006] NSWSC 1353 Siemens Ltd v Schenker International (Australia) Pty Ltd [2004] HCA 11; (2004) 216 CLR 418 Spector v Ageda [1973] 1 Ch 30 Village Roadshow Ltd v Blake Dawson Waldron [2003] VSC 505
PARTIES:	UTi (Aust) Pty Ltd - Plaintiff The Partners of Piper Alderman - Defendants
FILE NUMBER(S):	SC 2552/07
COUNSEL:	Mr I G Roberts - Plaintiff Mr J C Kelly SC/Mr A Narayan - Defendants
SOLICITORS:	Deacons - Plaintiff Piper Alderman - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

FRIDAY, 14 MARCH 2008

2552/07 UTi (AUST) PTY LTD v THE PARTNERS OF PIPER ALDERMAN

JUDGMENT

Background

1 The plaintiff (which I shall call “UTi”) seeks a permanent injunction restraining the defendants, the partners of Messrs Piper Alderman, solicitors, from acting further in certain District Court proceedings on behalf of named persons and from acting on behalf of any other persons in and about claims arising from the subject matter of the several District Court proceedings.

2 UTi is an international air freight forwarding and customs brokerage company. Its warehouse at Botany was destroyed by fire in January 2006. Goods owned by numerous third parties and for the time being held on the premises by UTi were lost. Some of those owners later commenced actions in the District Court seeking damages against UTi. Seventeen separate actions are expressly referred to in UTi’s amended summons in these present proceedings.

3 Piper Alderman are the solicitors acting for the seventeen plaintiffs in the District Court. The solicitor on the record, in each action, is Mr F A Hunt, a member of the firm.

The relationship between the parties

4 UTi’s claim to have Piper Alderman restrained from continuing to act in the several District Court proceedings and from acting for any other persons making claims by reason of the fire arises from the circumstance that, since March 2004, Piper Alderman has accepted and executed a number of retainers to act as solicitors for UTi. At present, four separate retainers are extant and Piper Alderman are performing legal work for UTi accordingly. Several other assignments have been undertaken and completed since March 2004. Much of the work has been done by Mr Hunt. Some work has been done by other members of the firm and by employed solicitors. Mr Hunt is the main point of contact for UTi within Piper Alderman.

5 The first assignment undertaken by Piper Alderman for UTi involved a review and redrafting of the standard terms and conditions upon which UTi sought to do business with owners of consigned goods. UTi had become aware of the decision of the High Court in Siemens Ltd v Schenker International (Australia) Pty Ltd [2004] HCA 11; (2004) 216 CLR 418. Wishing to ensure that its terms of trade did not leave room for allegations of responsibility to cargo owners of the kind canvassed there, UTi decided to have a lawyer expert in the field examine its standard provisions. Mr Hunt was chosen for the task and accepted the assignment.

6 It is common ground that Mr Hunt prepared a revision of the standard terms and conditions for UTi and that UTi thereafter took steps to incorporate those terms and conditions into the contracts it made with customers. There is a question about whether Mr Hunt gave advice about means to be employed and steps to be taken with a view to ensuring that the revised terms and conditions came to form part of the contracts made by UTi with its customers. No doubt information about the course of dealing, the documents used and the content of the documents would be needed in order to decide whether terms and conditions printed on, for example, an invoice were effectively made part of the relevant contract: see, for example, Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 WLR 401. That is something that may be left to one side at this point, although it must be accepted that Mr Hunt was told something about proposed procedures for incorporating the terms and conditions. He could not have drafted them unless he had some understanding of the context in which they would be used.

The District Court proceedings

7 It is appropriate to look next at the several District Court actions. The statements of claim and defences are in evidence.

8 In all but four cases, the pleadings follow the same pattern. There are claims by the plaintiff for breach of contract, for negligence and for breach of bailment. The contract pleaded in each case is said to have been partly oral and partly evidenced by one or more tax invoices. The number of each relevant tax invoice is given. In answer to the paragraph of the statement of claim pleading storage of goods at UTi’s warehouse pursuant to the contract, UTi, as defendant, in each case admits the storage but otherwise does not admit the paragraph. It thus seeks to put each plaintiff to proof of the existence of the alleged contract and its terms, including, no doubt, the terms said by the plaintiff to be in the identified tax invoice or invoices.

9 In each of two other cases, the plaintiff’s claim is similar to that already outlined, but with a broker intervening between the plaintiff owner of goods and UTi. In each of those cases, the storage contract is said to have been made between the broker and UTi. The contract is again said to be partly oral and partly evidenced by a particular tax invoice; and again UTi as defendant puts the plaintiff to proof of the contract and its terms.

10 In another case, the contract claim is pursued on the basis of a specific written contract dated 17 July 2003 and UTi, as defendant, admits that the relevant goods were stored pursuant to that contract.

11 The last action is an action by a cargo owner whose goods were stored in a warehouse which adjoined UTi’s warehouse and was owned by another company. The fire in UTi’s warehouse is said to have caused a portion of the plaintiff’s goods in the adjoining warehouse to be lost. There are claims in trespass and negligence. There is no allegation of a contract between the plaintiff and UTi.

12 In all but the last two cases, therefore, the plaintiff for whom Piper Alderman act alleges a contract with UTi evidenced in part by one or more identified tax invoices and UTi, as defendant, does not admit the existence of the contract. Nor, therefore, does UTi seek, in any of these cases, to rely on any provision of any contract between the plaintiff cargo owner and itself. In particular, UTi does not seek to rely on any exclusion clause or exempting clause or any contractual provision limiting its liability.

13 In the second last case (referred to at paragraph [10] above), UTi does rely on the contract with the customer but, as I have noted, that contract was made on 17 July 2003. This was about eight months before Piper Alderman first acted for UTi. There is no suggestion that the contract has been amended or that Piper Alderman have given any advice to UTi or otherwise acted for UTi in relation to it.

The services Piper Alderman have provided

14 Having identified the subject matter of the seventeen existing proceedings in which Piper Alderman are acting for plaintiffs against UTi as defendant, I turn to the evidence about the services provided (and still being provided) by Piper Alderman to UTi.

15 The first retainer, as I have said, involved advice on the re-drafting of UTi’s standard terms and conditions. UTi’s chief financial officer, Mr Cruceanu, was introduced to Mr Hunt by the managing director of an insurance broker which represented carriers and cargo exporters. Mr Cruceanu and Mr Hunt first met together on 31 March 2004. Thereafter, Mr Hunt provided a draft of standard form documents to Mr Cruceanu and several discussions followed. Mr Hunt provided final documents to Mr Cruceanu in June 2004. Mr Hunt did not at any later stage conduct any review of UTi’s standard form documents.

16 Since June 2004, Mr Hunt has acted for UTi in relation to specially drafted agreements for individual clients. There have also been cases in which Mr Hunt has received instructions to review draft agreements provided by clients after a successful tender by UTi. He has, in those cases, assisted in negotiating and settling a form of contract. In some instances, Mr Hunt has been asked to review (and to advise UTi on) pro forma contractual documents included in requests to tender received by UTi. In some of these matters, he has had occasion to consult with UTi’s global risk management department, either directly or through Mr Cruceanu.

17 In the wake of the January 2006 fire, Piper Alderman received instructions to act for UTi in relation to certain allegations made by a competitor about conduct of UTi relevant to the fire, being allegations that were considered actionable. On instructions from UTi, Mr Phelps, a partner in Piper Alderman, wrote to the competitor demanding a retractions and apology. Mr Phelps was brought into the matter by Mr Hunt.

18 Another matter arising out of the fire on which Mr Hunt was consulted by UTi concerned UTi’s potential liability to a lessor of forklift trucks which were held on lease by UTi and destroyed in the blaze. The information given by Mr Cruceanu to Mr Hunt about the forklifts enabled Mr Hunt to conclude that UTi was a bailee and therefore carried the onus of showing that it had not been negligent. Mr Hunt said in evidence that he had expressed the view that this could be difficult. Mr Hunt eventually assisted with the settling of a deed of release.

19 The first of the four matters now current within Piper Alderman for UTi involves the preparation of a standard form of employment contract. Ms Vass of Piper Alderman is attending to that matter. Instructions were given initially at a meeting in September 2007 attended by Mr Cruceanu, UTi’s human resources manager (Mr McGinty), UTi’s managing director (Mr Ellison), Ms Vass and Mr Hunt. Piper Alderman has produced a draft and submitted it to UTi. The main ongoing contact has been between Mr McGinty and Ms Vass.

20 The second of the current matters is in the hands of Mr Price of Piper Alderman. He was instructed by Mr Cruceanu in November 2007 to advise on a draft lease of premises in Perth intended to be taken by UTi as lessee.

21 The third matter arose on 9 January 2008, when Mr Ellison and Mr McGinty of UTi instructed Ms Vass to act in relation to the termination of the employment of two UTi employees. Ms Vass is negotiating for UTi with the solicitors for the employees.

The continuing solicitor-client relationship

22 The fourth matter is one in which Mr Cruceanu first approached Mr Hunt in late January 2008. It involves a customer which has gone into voluntary administration with cargo in the possession of UTi in circumstances where UTi wishes to exercise a lien. Mr Hunt and his colleague, Ms Roberts, have given some advice and Ms Roberts has commenced correspondence with the administrators.

23 The circumstances in which UTi seeks to have Piper Alderman restrained from acting in proceedings arising from the January 2006 fire are unusual, in that applications of that kind are most often made by former clients. As a perusal of decided cases shows, the lawyer’s retainer has generally come to an end before moves are made to prevent the lawyer acting for someone in an opposing interest. Here, by contrast, a solicitor-client relationship is ongoing, at least in relation to the four current matters. The lawyers against whom restraint is sought are subject to the duties incidental to a subsisting solicitor-client relationship, as well as those stemming from a past relationship. I say this because Piper Alderman has not been retained generally by UTi but has accepted specific retainers some of which have been fully performed while others are still in the course of being executed.

24 It is, in a commercial sense, somewhat curious that a client should, at the same time, both continue to seek services from a firm of solicitors and take the solicitors to court. But the situation is more understandable when one has regard to a particular aspect of the evidence. Mr Hunt deposes that he spoke to Mr Cruceanu in May or June 2006 before accepting instructions from the companies that later became the plaintiffs in the District Court. He mentioned to Mr Cruceanu that UTi’s insurers had appointed another firm to handle claims against UTi arising out of the fire and that he had been asked by cargo insurer clients to look into their claims. Mr Hunt then said:

“Obviously, if I turn away these instructions, other solicitors will be appointed to pursue those claims. At the end of the day, it will be a fight between the insurers. I do not have any information from my previous dealings with UTi that would hurt UTi or assist my clients. Do you have any problems with me representing those insurers?”

25 Mr Hunt’s evidence is that Mr Cruceanu replied:

“It’s OK Frazer, since our insurers have appointed Deacons, I can’t see that there would be any problem.”

26 Mr Cruceanu cannot recall having made any such response and says that it would have been beyond his authority to do so, given that, as he said in re-examination, “everything was controlled by Carter Marine in London and Deacons”.

27 The involvement of people above Mr Cruceanu is borne out by another part of Mr Hunt’s evidence, which is not challenged, to the effect that on 28 November 2006, he was telephoned by Mr Houston who introduced himself as chief financial officer of UTi Asia Pacific and said he had Mr Cruceanu with him on a speaker phone. Mr Houston said that he had had discussions with Mr Carter of Carter Marine Ltd who had been appointed by UTi’s liability insurers and with Mr Danes UTi’s UK based risk manager. Mr Houston said that UTi’s insurers “are miffed” and “would prefer that you” (which meant either Mr Hunt or Piper Alderman generally) not act for persons with claims arising out of the fire. Mr Hunt’s evidence is that the relevant part of the conversation was in these terms:

“He said:
‘I have had some discussions with Richard Carter of Carter Marine Limited, who have been appointed by UTi’s liability insurers, and Kevin Danes, our UK based risk manager (who I know to have been employed by Carter Marine) in relation to your involvement with the claims arising out of the warehouse fire in January 2006. We want to keep our relationship with you but the insurers are miffed and would prefer you not to act in these matters.’
I said:
‘I have been corresponding with Deacons who have been appointed by your insurers. I cleared the matter with UTi at the outset. This issue was only raised by Mr Carter very recently when we advised him that we did not accept his rejection of the claims.’”

28 The situation can thus be seen to be one in which UTi’s insurers have carriage of its defence of claims against UTi arising out of the fire. It is the insurers who wish to see Piper Alderman prevented from acting for claimants in the current District Court proceedings and more generally. At the same time, UTi itself is apparently quite happy to continue to retain Piper Alderman to provide legal services.

Possible foundations of injunctive relief

29 The proposition that a lawyer should, at the suit of a client or former client, be restrained from acting for another person in particular legal proceedings is generally supportable on any of three bases:

1. That to act for the other person is inconsistent with the duty of loyalty owed by the lawyer to the client as an incident of the fiduciary relationship – the “loyalty ground”.
2. That the lawyer possesses information to which an obligation of confidentiality in favour of the client attaches, which confidentiality will be actually or potentially compromised if the lawyer acts for the other person – the “confidentiality ground”.
3. That restraint is necessary for the protection of the integrity of the judicial process and the due administration of justice – the “administration of justice ground”.

The loyalty ground

30 UTi contends that, apart altogether from questions of confidential information, the duty of loyalty owed by Piper Alderman to UTi as a current client and I emphasise “current”) is such as to require that Piper Alderman not also act for the present District Court claimants and any future claimants. UTi relies on the following passage in the speech of Lord Millett in Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 at 234-235:

“[A] fiduciary cannot act at the same time both for and against the same client, and his firm is in no better position. A man cannot without the consent of both clients act for one client while his partner is acting for another in the opposite interest. His disqualification has nothing to do with the confidentiality of client information. It is based on the inescapable conflict of interest which is inherent in the situation.”

31 Some later cases have expressed the relevant principle in a slightly different way – by saying that it is a breach of the duty of loyalty for a lawyer to act against a current client “in the same matter” (or, perhaps, “in the same or a related matter”). The case law to August 2002 is conveniently summarised in the judgment of Habersberger J in Australian Liquor Marketers Pty Ltd v Tasman Liquor Traders Pty Ltd [2002] VSC 324 at [14] to [19]:

“ [14] That a solicitor owes a duty of loyalty to his or her client is now well established. Mr Stirling referred me to a number of authorities in support of his submission that Deacons' conduct was a breach of the duty of loyalty which they owed as solicitors to their client, TLT. However, only one of those authorities, as I read them, goes as far as holding that it is a breach of a solicitor's duty to act at the same time both for and against the one client in unrelated matters.

[15] In Wan v McDonald Burchett J referred to a solicitor's duty to safeguard confidential information of the client and continued:
‘... But there are at least two other aspects of the problem to which attention has more recently been drawn; a solicitor's duty of loyalty, which cannot be treated as extinguished by the mere termination of the period of his retainer, and the important consideration of public policy which gives a special quality to the relationship of solicitor and client that the law will not generally permit to be stained by the appearance of disloyalty.

It is obvious that, at least in the application of these principles to particular circumstances, there is likely to be a great difference between cases such as Rakusen and D & J Constructions , on the one hand, and cases, on the other, where the one solicitor, having acted for both parties, seeks to act against one of his former clients, and in the interest of a preferred client, in litigation arising out of the very matter in which he himself acted for both . In my opinion, it could only be in a rare and very special case of this latter kind that a solicitor could properly be permitted to act against his former client, whether or not any real question of the use of confidential information could arise.’ (Emphasis added.)


[16] This decision was referred to with approval by Batt JA in McVeigh v Linen House Pty Ltd . In that case his Honour held that a firm of solicitors should not act for a company in an appeal ‘... when regard is had to the appearance created by the fact that they would be solicitors on the record ...’ for the company in an appeal by the solicitors' former clients, the company's administrators, concerning their administration. That is, the solicitors were seeking to act against their former clients in the same or a related matter.

[17] In the leading case of Spincode Pty Ltd v Look Software Pty Ltd , Brooking JA held that:
‘the equitable obligation of “loyalty” is not observed by a solicitor who acts against a former client in the same matter .’ (Emphasis added.)

His Honour stated that throughout he comprehended in ‘the same matter’ ‘a closely related matter’. This equitable obligation of ‘loyalty’, according to Brooking JA:
‘... forbids not only the concurrent holding of two inconsistent engagements by different clients in the same matter but also the holding of two successive inconsistent engagements ... By “inconsistent” I mean only that the solicitor who formerly acted for one client in the same matter now acts in that matter for a client with an interest adverse to that of the former client.’ (Emphasis added.)

[18] Similar statements are to be found in two decisions of JD Phillips J, as his Honour then was, in Macquarie Bank Ltd v Myer and Holdsworth v MR Anderson & Associates Pty Ltd . In the former case, his Honour stated:

‘Obviously the court will not readily countenance a solicitor who has acted for one client accepting a retainer from another to act against that former client in the same matter or in a related matter (although, as the cases demonstrate, there cannot be said to be any absolute rule).’ (Emphasis added.)

[19] The decision of Mandie J in Westend Entertainment Centre Pty Ltd v Equity Trustees Ltd , which Mr Stirling relied on, is the only authority of which I am aware, which holds that the solicitor's duty of loyalty is applicable to a situation not involving the same or a related subject matter. In that case, Deacons had acted for approximately six years on behalf of the previous and present accountancy firms of Mr Cerantonio in a Supreme Court proceeding. In the later proceeding, Deacons acted for the defendant against a company of which Mr Cerantonio was the managing director and for which his firm acted as its accountants. After referring to the solicitor's duty of loyalty and the need to avoid the appearance of disloyalty, Mandie J continued:

‘That principle is of particular application in cases where a solicitor seeks to act against a former client in litigation arising out of or in relation to the same subject-matter. This case does not involve that aspect. However, Mr Cerantonio is, through his accountancy companies, in substance the client (or soon to be the former client) of Deacons in a proceeding in which serious allegations were made against him. His sensitivity can be well understood in circumstances where it would seem that Deacons on behalf of the defendant is now likely to be the channel for other potentially serious allegations to be made against him and both cases thus involve questions of the propriety of his conduct in a commercial context. I have concluded that for the reason of appearance of disloyalty the injunction sought would have been granted against Deacons had they not removed themselves from the record.’
Undoubtedly, it was appropriate in that case to extend the solicitor's duty of loyalty. Similar issues of conduct and credit were likely to be raised in otherwise unrelated proceedings. That is not this case. The two proceedings are truly unrelated.”

32 Subsequently, in Village Roadshow Ltd v Blake Dawson Waldron [2003] VSC 505, Byrne J said (at [41]):

“I have been more troubled by the alternative submission based on the practitioner's duty of loyalty to its client and its former client and the need to uphold the special relationship between a solicitor and client. This principle, which has been usefully explored by Brooking JA in Spincode's case, was accepted as a correct statement of law by the parties before me. The principle does not depend upon any risk of leakage of confidential communication, it depends upon an equitable duty reposed in a practitioner, even after the client's retainer has concluded, not to act for another person in the same matter or in a closely related matter against the interests of the former client. 6 In his analysis, Brooking J likened this obligation to that of a fiduciary. As such, the solicitor might be permitted so to act, where it establishes that the former client has given an informed consent for it to do so.”

33 There is, however, good reason to think that the solicitor-client relationship may, depending on circumstances, give rise to fiduciary expectations going beyond the same or a related “matter”. That relationship was described by Auld LJ in Conway v Ratiu (Note) [2006] 1 All ER 571 at [78] as an “intensely personal context of considerations of trust, confidence and loyalty”. An aspect of the resultant expectations was referred to by Megarry J in Spector v Ageda [1973] 1 Ch 30 at 48:

“A solicitor must put at his client’s disposal not only his skill but also his knowledge, so far as it is relevant; and if he is unwilling to reveal his knowledge to his client, he should not act for him. What he cannot do is act for the client and at the same time withhold from him any relevant knowledge that he has.”

34 Thus, if a solicitor is retained to act for a client in a particular matter and has knowledge of something indicative of likely exposure of the client to resultant loss or disadvantage, the solicitor cannot, consistently with the solicitor’s duty, continue to assist the client to complete the transaction. Possession of the knowledge does not impose upon the solicitor an obligation actually to disclose it to the client. Rather, the obligation is to refrain from exposing the client to disadvantage or loss, something that may be achieved by declining to act. But to continue to act and, at the same time, to fail to communicate the danger to the client would be to act knowingly against the client’s best interests and therefore in breach of duty: compare Permanent Building Society v Wheeler (1994) 11 WAR 187; Fitzsimmons v R (1997) 23 ACSR 355.

35 The relevant principle is sometimes expressed by saying that fiduciary duties are proscriptive rather than prescriptive, that is, that they rule out particular conduct rather than requiring particular conduct so that, for example, there is a duty not to obtain an unauthorised benefit from the relationship and not to be in a position of conflict: see Breen v Williams [1995] HCA 63; (1996) 186 CLR 71 at CLR 113 per Gaudron J and

McHugh J; Pilmer v Duke Group Ltd [2001] HCA 31; (2001) 207 CLR 165 at CLR 198 and 199 per McHugh J, Gummow J, Hayne J and Gaudron J.

36 The solicitor’s duty to put his knowledge at the client’s disposal is thus, in truth, a duty not to act where the knowledge is material to the client’s welfare and the solicitor is unwilling or unable to deploy the knowledge to the client’s benefit. The most usual source of unwillingness or inability will be a contrary duty owed to someone else. The case will thus be one of conflicting duties which a fiduciary must avoid.

37 The proposition that a lawyer is duty bound not to act against a current client “in the same matter” or “in the same or a related matter” may thus be seen to be a reflection of the duty to avoid conflicting duties or conflicting loyalties, with the “same” or a “related” matter as no more than a description of one particular context in which the conflict arises. It could arise in other ways as well – for example, where a lawyer acting for one client in a particular suit was called upon to attack the credit of another client who was a witness in that case.

38 A commonplace example of conflicting duties is where the duty to act in the interests of one client is inconsistent with a duty of confidentiality owed to another client or former client. It is at this point that the duty of loyalty intersects with the duty to respect confidential information.

The confidentiality ground

39 I turn therefore to the question of confidential information and whether UTi has an equity to restrain Piper Alderman from acting in the District Court proceedings because to do so would compromise confidentiality to the prejudice of UTi.

40 This ground of attack is more widely documented in the case law than what I have called the “loyalty ground”. This is because it is exceptional for a lawyer to continue to be retained and to act for the client after proceedings seeking to restrain the lawyer from doing so have commenced.

41 The relevant duty is again stated by Lord Millett in Prince Jefri Bolkiah (above). His Lordship said at 235-236:

“Whether founded on contract or equity, the duty to preserve confidentiality is unqualified. It is a duty to keep the information confidential, not merely to take all reasonable steps to do so. Moreover, it is not merely a duty not to communicate the information to a third party. It is a duty not to misuse it, that is to say, without the consent of the former client to make any use of it or to cause any use to be made of it by others otherwise than for his benefit. The former client cannot be protected completely from accidental or inadvertent disclosure. But he is entitled to prevent his former solicitor from exposing him to any avoidable risk; and this includes the increased risk of the use of the information to his prejudice arising from the acceptance of instructions to act for another client with an adverse interest in a matter to which the information is or may be relevant.”

42 Lord Millett also referred to the evidential burden at 237:

“Once the former client has established that the defendant firm is in possession of information which was imparted in confidence and that the firm is proposing to act for another party with an interest adverse to his in a matter to which the information is or may be relevant, the evidential burden shifts to the defendant firm to show that even so there is no risk that the information will come into the possession of those now acting for the other party.”

43 And later at 239:

“I am not satisfied on the evidence that KPMG have discharged the heavy burden of showing that there is no risk that information in their possession which is confidential to Prince Jefri and which they obtained in the course of a former client relationship may unwittingly or inadvertently come to the notice of those working on Project Gemma .”

44 These principles have been widely applied in Australia since 1999. In this State, it is probably sufficient to mention Beach Petroleum NL v Kennedy [1999] NSWCA 408, (1999) 48 NSWLR 1, Belan v Casey [2002] NSWSC 58, British America Tobacco Services Ltd v Blanch [2004] NSWSC 70; Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd [2005] NSWSC 550; Kallinicos v Hunt [2005] NSWSC 1181, 64 NSWLR 561.

45 In essence it is for a client or former client seeking to enjoin a lawyer to show that the lawyer possesses confidential information, that the client or former client has not consented to the use or communication of the information and that there is a real and not fanciful or theoretical risk of disclosure.

The “administration of justice” ground

46 The relevant supervisory jurisdiction of the court was described by Brereton J in Kallinicos v Hunt (above) as follows:

“[T]he 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.”

47 Brereton J later said:

“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.”

48 His Honour added that the jurisdiction “is to be regarded as exceptional and is to be exercised with caution”; and that “[d]ue 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”.

49 In a passage subsequently approved in Bahonko v Nurses Board of Victoria [2007] FCA 491, Young J said in Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404 (at [35]):

“The crucial question, therefore, is whether on the evidence before me a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that Vogrig and WVL be restrained from acting for GSS in these proceedings. In answering this question it must be borne in mind that this is an application for a permanent injunction: Yunghanns v Elfic Ltd (unreported, Supreme Court of Victoria, Gillard J, 3 July 1998). It must also be borne in mind that the Court’s jurisdiction is an exceptional one; it is to be exercised with appropriate caution and due weight must be given to the public interest in a litigant not being deprived of the solicitor of its choice without due cause.”

50 I quote also from the judgment of Whealy J in R v Khazaal [2006] NSWSC 1353 (at [28]):

“There is ample authority to support the proposition that the Court has an inherent jurisdiction to protect the integrity of the judicial process. The principle has often been called in aid in circumstances where a solicitor has acted for two parties on a previous occasion, and is then called upon to act for one of those parties against the other. More often than not, it will arise because of the fact that the solicitor possesses confidential information which may be used adversely to the interests of the former client. Other instances have turned, not so much on the protection of confidential information, but on the Court’s concern to ensure that justice and appearance of justice be done ( Black v Taylor (1993) 3 NZLR 403). In Kallinicos & Anor v Hunt & Ors (2005) 64 NSWLR 561, the Court ordered that a solicitor cease to act for the defendants in a civil suit. This was because the solicitor was likely to be a material witness on a controversial issue of substance; and his evidence and the propriety of his conduct would come under scrutiny, such that he would be in a position in which his interests, the interests of his former client and his obligations to the Court might well be in conflict.”

51 In each of these cases, there was reference to the decision of Mandie J in Grimwade v Meagher (1995) 1 VR 446. His Honour there restrained counsel from appearing for a plaintiff in a civil trial when he had previously appeared to prosecute the defendant in separate criminal proceedings. He concluded that there was “a real and sensible risk of a lack of objectivity” by counsel which gave rise both to a risk of unfairness to the defendant in the civil trial and concern for the integrity of the judicial process and the administration of justice. His Honour concluded (at p 445) that:

“A fair minded reasonably informed member of the public would conclude that the proper administration of justice required that the first defendant be prevented from appearing in the said action because of the real risks of lack of objectivity and of conflict of interest and duty …”

52 The jurisdiction discussed in these cases is an extraordinary and protective jurisdiction. It is separate from the jurisdiction involved in protection of confidential information and the enforcement of fiduciary duty. This is made clear, in particular, in the extract from the judgment of Whealy J just quoted. The concern is with the due and proper administration of justice in a proceeding before the court. The jurisdiction exists to ensure that the integrity of the proceeding is maintained. Identification of the means needed to maintain that integrity will, of course, depend on the nature of the proceeding and its likely course.

Consent

53 Informed consent of the client or former client will cause the client or former client to fail in any attempt to prevent the lawyer’s acting where reliance is placed on the loyalty ground or the confidentiality ground. It is also likely to preclude resort to the administration of justice ground.

54 Such consent may be express or implied. I quote from the joint judgment of Spigelman CJ, Sheller JA and Stein JA in Beach Petroleum v Kenndy (above) at [465]:

“In Maguire v Makaronis (at 466), it was stated that what constitutes a fully informed consent is a question of fact to be determined in all the circumstances of each case. The court said that there is no precise formula which will determine in all cases whether a fully informed consent has been given. Abbott Tout's submission on informed consent is straightforward. Clearly there was no express informed consent in the sense that Abbott Tout told Beach that there would be a potential conflict of interest in acting for it in the transactions while acting for other companies within the group and Beach consented to Abbott Tout so acting. However such fully informed consent is to be inferred from the undisputed facts. The three directors of Beach, Mr Fuller, Mr Cummings and Mr Main, were the directing minds and will of Beach. When they instructed Abbott Tout, on behalf of Beach, they did so with full knowledge of the circumstances that Abbott Tout were acting for the other companies in the transactions. They knew exactly what was going on and what Abbott Tout were asked to do.”

55 Their Honours later said:

“So too here. Beach, through its directors, knew that Abbott Tout were acting for other companies within the group on the various transactions. Indeed, they had quite deliberately given instructions on behalf of those other companies to Abbott Tout. If there was any conflict, it was of their own making and a decision which was made by them with knowledge of all the facts relevant to the choice of solicitor. It was a fully informed decision.”

Assessment

56 I am not persuaded that UTi is entitled to injunctive relief on the “loyalty ground”, at least when that ground is regarded as distinct from the “confidentiality ground”. By acting in the District Court proceedings, Piper Alderman will not act against UTi in the same or a related matter. But the aspect of the “loyalty ground” that compels withdrawal where a lawyer is unwilling or unable to deploy his knowledge to the client’s benefit – that is, the aspect that leads into the area of protection of confidences – requires closer attention.

57 There can be no doubt that, as a result of the work done for UTi in the past, Piper Alderman gained at least some insight into the means by which UTi sought to incorporate its terms of trade into customer contracts. Mr Hunt could not have prepared the re-draft unless he had some understanding of that. He says in his affidavit that he did not have any discussion with Mr Cruceanu or other UTi representative in relation to UTi’s documentary procedures or practices, yet that he recommended the standard terms be printed on the reverse side of UTi’s stationery, invoices, applications for credit and shippers’ letters of instructions (if still used). He must therefore have been aware that invoices and applications for credit, at the least, were used by UTi and of the purposes they were intended to serve in a contractual sense. There would have been no point in recommending endorsement on a document that came into existence after the contract had been concluded.

58 Mr Hunt says, however, that such knowledge as he had about these matters was nothing more than his general knowledge as a solicitor practising in the field of marine and transport law; and that he obtained no information confidential to UTi. That is a quite plausible explanation. The mechanics of the business cannot be complex and a solicitor experienced in the field will know, in a generic sense, the documents used and the purposes they serve. That generic information cannot be confidential.

59 With the evidence as it is, I accept Mr Hunt’s assessment. In any event and as I have said, UTI does not seek in the District Court proceedings to rely on any provision of the contract in those cases brought by cargo owners whose goods were stored in its own warehouse, not being the case involving a specific written contract.

60 There is then the matter of advice given to UTi about its position in relation to the leased forklift trucks. One would think that Mr Cruceanu must have given Mr Hunt some information about the circumstances of the fire in the connection; and that Mr Hunt could not have advised adequately without that information. But the evidence is to the contrary. Mr Hunt said in cross-examination:

“He told me that these had been destroyed. We didn’t discuss the circumstances of the fire.”

61 UTi has not sought to adduce any evidence to the contrary. As Bergin J observed in Mitchell v Pattern Holdings Pty Ltd [2000] NSWSC 1015, the real and sensible possibility of misuse of confidential information cannot be addressed unless the party claiming the benefit of the obligation of confidence adduces some evidence of the content of the information. UTi has not done this.

62 There is accordingly no clear evidentiary basis for an apprehension of misuse of confidential information obtained in the context of the forklifts matter.

63 The third area in which it is alleged by UTi that confidential information has been imparted and may be misused concerns the instances in which Piper Alderman were retained to act and advise in relation to specifically negotiated customer contracts. It was submitted on behalf of UTi that, as a result of these activities engaged in over a significant period, Piper Alderman have obtained intimate knowledge of UTi’s operations and a close understanding of its attitude towards risk and its negotiating strategy.

64 The submission made on behalf of Piper Alderman is that attitudes and “appetite for risk” in relation to negotiation of storage contracts are quite different from attitudes concerning settlement of claims. It is further submitted that it is, in any event, the attitude of UTi’s insurers that is material to any question of settlement of the District Court litigation, not the attitude of UTi itself.

65 I accept these submissions. The somewhat incongruous situation in which UTi continues to retain Piper Alderman and expresses satisfaction with the services provided, yet seeks to restrain it from acting for the District Court plaintiffs, emphasises that there are, in reality, two decision-making mechanisms at work in relation to UTi. As a defendant in the District Court litigation, UTi will be actuated by its insurers. It is their “appetite for risk” and their attitudes to compromise that will be at work. It is not shown that Piper Alderman has obtained any confidential information about those matters – which are, in any event, quite divorced from attitudes of UTi in relation to the negotiation of contracts.

66 In none of the areas identified, therefore, can it be said that UTi has positively identified confidential information possessed by Piper Alderman in respect of which there exists a real and not fanciful or theoretical risk of disclosure if Piper Alderman continue to act in the District Court proceedings.

67 As far as the “administration of justice” ground is concerned, it is necessary to refer not only to the matters already mentioned in this present assessment but also the circumstances referred to at paragraphs [24] to [27] above. Whether or not Mr Cruceanu said to Mr Hunt that there would not be any problem in Piper Alderman’s acting for the District Court plaintiffs, it is clear that UTi was put squarely on notice by Piper Alderman in that respect in May or June 2006, that in the absence of objection by UTi Piper Alderman went ahead in the way they had foreshadowed in that it was only in late November 2006 that UTi demurred, saying that its insurers were “miffed” and “would prefer” that Piper Alderman (or Mr Hunt) not act for the District Court plaintiffs. That circumstance, plus the fact that UTi has happily continued its relationship with Piper Alderman since November 2006, would, in my view, be very influential in forming the opinion of a fair-minded, reasonably informed member of the public as to what is required for the proper administration of justice. In short, I do not think that, in the particular circumstances, the due administration of justice requires the exercise of the extraordinary jurisdiction to prevent a lawyer acting for a client.

68 Finally, there is the question of consent. Despite the factual uncertainty (referred to at paragraphs [24] to [27] above), it seems quite clear that UTi was told in advance that Piper Alderman intended to act for the District Court Plaintiffs and did not express any objection or disquiet. It was only five or six months later that a preference of UTi’s insurers that Piper Alderman not act was expressed. By that time they had accepted instructions from the District Court plaintiffs. The consent of UTi for them to do so, if not express, was clearly implied.

Disposition

69 The proceedings are dismissed with costs.

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