Walthamstow Pty Ltd v Caratti [No 2] - [2023] WASC 363

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   WALTHAMSTOW PTY LTD -v- CARATTI [No 2] [2023] WASC 363
CORAM:   LUNDBERG J
HEARD:   19 SEPTEMBER 2023
DELIVERED          :   22 SEPTEMBER 2023
FILE NO/S:   CIV 3136 of 2019
BETWEEN:   WALTHAMSTOW PTY LTD
Plaintiff
AND
ALLEN BRUCE CARATTI
First Defendant
TINA MICHELLE BAZZO
Second Defendant

FILE NO/S: CIV 2283 of 2021
BETWEEN: WALTHAMSTOW PTY LTD
Plaintiff
AND
ALLEN BRUCE CARATTI
First Defendant
TINA MICHELLE BAZZO
Second Defendant

Catchwords:

Legal Practitioners - Application to restrain law practice from acting for the plaintiff by reason of protection of confidential information, asserted conflict of interest, and ensuring due administration of justice - Law practice only recently came on the record - Prior role of the law practice as legal advisor for one defendant and history as legal adviser for related entities - Limited identification of confidential information - Consideration of Blatch v Archer - Consideration of issues associated with due administration of justice - Turns on own facts

Legislation:

Nil

Result:

Application granted

Category: B

Representation:

CIV 3136 of 2019

Counsel:

Plaintiff	:	Mr R J S French
First Defendant	:	Mr A P Rumsley
Second Defendant	:	Mr A P Rumsley

Solicitors:

Plaintiff	:	Hotchkin Hanly
First Defendant	:	Alan Rumsley
Second Defendant	:	Alan Rumsley

CIV 2283 of 2021

Counsel:

Plaintiff	:	Mr R J S French
First Defendant	:	Mr A P Rumsley
Second Defendant	:	Mr A P Rumsley

Solicitors:

Plaintiff	:	Hotchkin Hanly
First Defendant	:	Alan Rumsley
Second Defendant	:	Alan Rumsley

Case(s) referred to in decision(s):

Afkos Industries Pty Ltd v Pullinger Stewart [2001] WASCA 372
Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345
Blatch v Archer (1774) 1 Cowp 63; 98 ER 969
Caratti v Caratti [No 2] [2014] WASC 65
Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307
Clay v Karlson (1997) 17 WAR 493
Coshott v Prentice [2014] FCAFC 88; (2014) 221 FCR 450
D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118
Director of Public Prosecutions (Cth) v A Legal Practitioner [2012] WASC 459
Durban Roodeport Deep, Limited v Mark David Reilly and Glenn Robert Featherby [2004] WASC 269
Fordham v Legal Practitioners' Complaints Committee (1997) 18 WAR 467
Harvard Nominees Pty Ltd v Caratti [2022] WASC 441
Harvard Nominees Pty Ltd v Dimension Agriculture Pty Ltd (in liq) [2023] FCAFC 140
Harvard Nominees Pty Ltd v Nicoletti [2022] FCAFC 179
Harvard Nominees Pty Ltd v Tiller [2020] FCAFC 229
Hearne v Street [2008] HCA 36; (2008) 235 CLR 125
Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572
In re a firm of Solicitors [1997] Ch 1
Ismail-Zai v The State of Western Australia [2007] WASCA 150; (2007) 34 WAR 379
Law Society (NSW) v Harvey [1976] 2 NSWLR 154
Makfam Pty Ltd v CV Australia Pty Ltd [2020] VSC 296
Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357
Newman v Phillips Fox (a firm) [1999] WASC 171; (1999) 21 WAR 309
Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222
Re Van Laun; Ex parte Chatterton [1907] 2 KB 23
Rural Bank Ltd v Mammoth Investments Pty Ltd [2019] WASC 409
Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4; (2015) 48 WAR 93
Souraki Azad v Jose [No 2] [2023] WASC 218
Walthamstow Pty Ltd v Caratti [2023] WASC 76

Table of Contents

A. Introduction and summary

B. The materials relied upon

C. The competing contentions

The defendants' contentions

The plaintiff's contentions

Blatch v Archer

D. The pleadings

E. Relevant principles

F. Factual findings

Preliminary

The nature of the present proceedings

Taylor Smart

Trial listing

The Law Practice

Information barrier protocols established

Prior Bazzo Engagement

Other engagements of the Law Practice by Allen Caratti and Ms Bazzo

Engagements of the Law Practice by John Caratti and his interests

Litigation between Allen Caratti and John Caratti

G. Disposition

No issue of delay

Choice of lawyer

Consideration of the defendants' contentions

The Law Practice's interest in the proceedings

History of prior engagements

H. Orders

LUNDBERG J:

A. Introduction and summary

In October 1990, his Honour Justice Ipp delivered judgment in a seminal decision concerning conflicts of interest on the part of solicitors and impacts on the administration of justice which occur where a solicitor proposes to act against a former client.[1] His Honour said this:
Finally, in my view, public interest considerations require that a solicitor be restrained from acting for a former client when there is a real and sensible possibility that the solicitor's duty and interest might conflict. As was stressed by Bryson J in D & J Constructions Pty Ltd…it is extremely important that the courts should take 'careful measures to secure not only that justice is done but also that it is apparent that it is done, an appearance which would not survive any general impression that lawyers can readily change side'.[2]
[1] Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357.
[2] Mallesons Stephen Jaques v KPMG Peat Marwick, 362 (citation omitted).
In that same decision, Justice Ipp had earlier reiterated that the relationship between client and solicitor is one of the most important fiduciary relationships known to the law.[3]
[3] Mallesons Stephen Jaques v KPMG Peat Marwick, 361 (citing Re Van Laun; Ex parte Chatterton [1907] 2 KB 23, 29 and Law Society (NSW) v Harvey [1976] 2 NSWLR 154, 169 – 170).
Although the practice of law in private firms has changed considerably over the last 33 years, including through the greater use of information barriers to quarantine and protect confidential information held by those firms, the statements made by his Honour resonate still and remain authoritative.
The defendants to the present actions (Mr Allen Caratti[4] and Ms Tina Bazzo) place heavy reliance on these, and other, statements made by Justice Ipp in the authority to which I have referred, in support of their application to restrain the plaintiff's solicitors from continuing to act in these actions.
[4] Without intending any disrespect, I will refer to Mr Allen Caratti in these reasons as Allen Caratti to distinguish him from his brother, John Caratti.
Specifically, the defendants have applied for final injunctive relief to restrain the law firm (Hotchkin Hanly) which has only recently emerged on the record as the solicitors for the plaintiff, from continuing to act on behalf of the plaintiff. On 23 August 2023, by filing a notice of change of representation in both matters, Hotchkin Hanly replaced the former solicitors for the plaintiff, Taylor Smart, which had been acting on both matters since they were commenced.[5] In these reasons, I will refer to Hotchkin Hanly as the Law Practice for convenience.
[5] Taylor Smart had also been acting for the plaintiff in the related third action which has been stayed by consent, namely CIV 3016 of 2019.
The defendants complain that the Law Practice formerly acted for Ms Bazzo in a matter which is said to be related to the issues in these actions, and that the Law Practice has acted as legal advisors for various corporations controlled by Allen Caratti and Ms Bazzo. Less directly, the defendants complain that the Law Practice has acted for John Caratti in various court proceedings. He is the brother of Allen Caratti. This is said to give rise to real concerns given the antagonistic nature of the relationship between the brothers, and the fact there is acrimonious litigation on foot between them in this court (in respect of which the Law Practice is not acting). The Law Practice rejects the validity of the concerns which have been raised, points to the vague nature of the assertions made by the defendants in support of the application, and highlights the prudent steps it has taken to protect any confidential information being inadvertently disclosed, including the establishment of an information barrier protocol.
The defendants' application to restrain the Law Practice has been promptly brought and requires a relatively urgent resolution as the trial of the actions is scheduled to commence in approximately seven weeks, on 6 November 2023. It is of course naturally important that the question whether the Law Practice can continue to act as solicitors on the record is determined promptly given the looming trial dates.
The actions themselves have been on foot for some years. Action CIV 3136 of 2019, which concerns the Anketell Property Development, was filed in December 2019. Action CIV 2283 of 2021, which concerns the Hocking Development, was filed in November 2021.
The defendants' application was foreshadowed at the directions hearing before me on 4 September 2023, at which hearing a timetable was ordered to facilitate the prompt determination of the application.[6] A formal application for injunctive relief was subsequently filed on 11 September 2023, expressly relying on the inherent jurisdiction of the court. The application itself was heard on 19 September 2023.
[6] Orders made on 4 September 2023.
The competing arguments which were advanced on this application were finely balanced, in my view. In the result, and for the reasons set out below, I consider the application should be granted and the Law Practice should be restrained from acting. I will hear from counsel as to the appropriate orders which should be made. These reasons have been prepared in urgent circumstances given the nature of the application and are therefore briefer than would otherwise have been the case.
In the reasons which follow, I will summarise the competing contentions of the parties, summarise the primary pleaded allegations, identify the principles which I consider must be applied to resolve the defendants' application, summarise the factual findings I consider can be made on this application, and then explain my reasoning for reaching the result I have.

B. The materials relied upon

Before I set out the competing contentions of the parties, I will confirm the materials which the parties relied upon for the purposes of the application.
The defendants' contentions in support of the application are detailed in the outline of submissions dated 17 September 2023 (Defendants' Submissions). Those submissions were filed late, but I gave leave for them to be relied upon, in the absence of objection from the plaintiff. As a result of the delayed filing of those submissions, the plaintiff's submissions were received only shortly before the hearing itself, on 19 September 2023 (Plaintiff's Submissions).
The defendants relied upon the affidavit of Allen Caratti sworn 8 September 2023 (Caratti Affidavit). No affidavit from Ms Bazzo was filed in support of the application, however, during the course of the hearing, counsel for the defendants sought leave to call Mr Bazzo to give viva voce evidence to supplement the evidence filed in support of the application.
In effect, counsel proposed to call Ms Bazzo to verify certain paragraphs of her filed witness statement.[7] That statement had been filed out of time and there is an extant application for leave to enable that statement to be relied upon for the purposes of the trial, which is opposed by the plaintiff. This belated application to call Ms Bazzo, as part of the defendant's case in reply, was opposed by the plaintiffs and I declined to grant leave, for the reasons I gave during the hearing, including its lateness, proper adherence to the goals and objects in O 1 r 4A and r 4B RSC, and the evident prejudice to the plaintiff.
[7] Specifically, Ms Bazzo's witness statement filed in CIV 2283 of 2021, confined to leading evidence of paragraphs [18] – [21] which appear under the heading 'Section 159 Claims'.
I note that objection was taken at the hearing to part of the Caratti Affidavit.[8] The sole paragraph to which objection was taken is as follows:
I recall having a discussion with Phillip Dobson in relation to a claim against the plaintiff in relation to the compensation claim which was not recovered from the adjoining landowner.
[8] Plaintiff's Submissions [14], challenging [30] of the Caratti Affidavit.
I provisionally received the affidavit subject to this objection. The objection in essence was that the paragraph was conclusionary and impermissibly vague. The paragraph was said to say nothing as to when and how the alleged conversation took place and as to the content of the alleged conversation, or as to Allen Caratti's involvement. I took the objection to be that, given the asserted conclusionary and vague nature of the paragraph, the evidence was simply irrelevant. Alternatively, the plaintiff submitted that the paragraph should be given no weight for similar reasons and observed that the paragraph does not identify any specific confidential information nor how it might be relevant to the present proceedings.
In my view, the objection should be dismissed. The material within the impugned paragraph is relevant to the matters arising on the application, as it refers to a discussion between Allen Caratti and a partner at the Law Practice in respect of the claim against the plaintiff to this action which is referred to within the pleadings. The paragraph is disconcertingly vague and says nothing as to the substance of the discussion, so its evidentiary value is limited, in any event, in my view.
In opposition to the application, the plaintiffs read two affidavits sworn by a partner of the Law Practice, Mr Andrew Throssell. The affidavits were sworn on 13 and 18 September 2023 (First Throssell Affidavit and Second Throssell Affidavit). As will be seen, Mr Throssell is not actively involved in the matter but has sworn the affidavit as the firm's compliance officer under the information barriers which have been put in place as a result of this issue arising.
Following the hearing, and with leave, the defendants filed an aide memoire which cross-referenced paragraphs of the pleadings, as well as brief submissions in relation to the effect of Blatch v Archer.[9] Similarly, the plaintiff filed brief submissions addressing the Blatch v Archer point.
[9] Blatch v Archer (1774) 1 Cowp 63; 98 ER 969.

C. The competing contentions

The defendants' contentions

The defendants emphasise, in support of the restraint application, that the Law Practice has had prior roles as the legal advisor for Ms Bazzo in a matter which is expressly referred to within the pleadings in CIV 2283 of 2021. The firm provided Ms Bazzo with legal advice in relation to that matter, concerning a compensation claim under s 159 of the Planning and Development Act 2005 (WA). I will refer to this as the Prior Bazzo Engagement for convenience. The defendants also highlight the role of the Law Practice in acting for the corporate and trust interests of Allen Caratti and Ms Bazzo. The matters in respect of which the Law Practice has acted include the residential subdivision in Anketell, as well another nine corporate and trust structures as owners of residential development properties. Four of these developments are said to be pleaded in CIV 3136 of 2019 and CIV 2283 of 2021.[10]
[10] Although some are referred to in pleas which have now been abandoned and so are not relevant.
Moving a little further away from matters which directly concern the current proceedings, the defendants highlight the role of the Law Practice as lawyers for John Caratti's interests in litigation in this court against Allen Caratti and one of Ms Bazzo's companies,[11] as well as in litigation for John Caratti's interests against various third parties in the Federal Court of Australia.[12] The role of the law firm as advisor to John Caratti is said to be highly relevant to this application given the animosity between the brothers. This includes long running litigation in this court which has been ongoing since 2008.[13] That litigation relates to an alleged partnership between Allen Caratti and John Caratti, including the property held by the companies of Allen Caratti and Ms Bazzo. It is said there are seventy three defendants to the proceedings and six of the companies identified in the affidavit of Allen Caratti for which the Law Practice has acted are defendants in that proceeding. However, the Law Practice does not act for any of the parties in that action.
[11] Supreme Court of Western Australia CIV 1923 of 2016. See the decision of Kenneth Martin J in Rural Bank Ltd v Mammoth Investments Pty Ltd [2019] WASC 409 in this action.
[12] Federal Court of Australia WAD 59 of 2022, WAD 129 of 2020 and WAD 5 of 2023. See the decisions of the Full Federal Court in Harvard Nominees Pty Ltd v Nicoletti [2022] FCAFC 179, Harvard Nominees Pty Ltd v Tiller [2020] FCAFC 229, and Harvard Nominees Pty Ltd v Dimension Agriculture Pty Ltd (in liq) [2023] FCAFC 140.
[13] Supreme Court of Western Australia CIV 2006 of 2008. See for example the decision of Allanson J in Caratti v Caratti [No 2] [2014] WASC 65.
Finally, reference is made to proceedings between John Caratti and Allen Caratti in this court, concerning property held by Harvard Nominees Pty Ltd.[14] Again, the Law Practice does not act for any of the parties in that action.
[14] Supreme Court of Western Australia CIV 2172 of 2022 (and relatedly also CIV 2009 of 2022). See for example the decision of Tottle J in Harvard Nominees Pty Ltd v Caratti [2022] WASC 441 concerning the removal of a caveat.

The defendants contend that the court should restrain the Law Practice acting for the plaintiff on each of the three recognised bases, namely to ensure the protection of confidential information, to ensure the due administration of justice and to prevent a breach of the duty of loyalty to a former client.[15] Counsel for the defendant placed particular reliance on the decision of Templeman J in Clay v Karlson[16] and the decision of Ipp J in Mallesons Stephen Jaques v KPMG Peat Marwick.
[15] Defendants' Submissions [26] and [27].
[16] Clay v Karlson (1997) 17 WAR 493.
As to Clay v Karlson, the defendants submitted that the due administration of justice precludes a lawyer from continuing to act where the lawyer has an interest in the proceedings. In Clay v Karlson, the law firm had prepared the codicil to the will in question, acting for and on the instructions of the second defendant and without contact with the testator prior to execution. The second defendant was the residuary beneficiary and the person who stood to benefit from the amendments to the will introduced by the codicil. There was in allegation in the proceedings brought by the plaintiff against the executors (which included the second defendant) that the testator was not of sound mind and understanding and he received no independent legal or financial advice in relation to the codicil.
Templeman J dealt with the matter on an ex tempore basis. His Honour granted the orders sought to restrain the law practice. In essence, his Honour concluded as follows:
(a)The court had the necessary supervisory jurisdiction to support orders to restrain solicitors from continuing to act (at 495 and 497).
(b)It is generally unwise and undesirable for a practitioner who is likely to be called as a witness to continue to represent his client in the proceedings (at 494 – 495).
(c)It must follow that the case for restraint is even stronger against the solicitor acting who has a personal interest in the outcome of the action, and is more than merely a witness (at 495).
(d)The law firm had an interest in the outcome of the action because their professional conduct in the preparation and execution of the codicil is the subject of serious criticism (at 496).
The aspects of the decision of Ipp J in Mallesons Stephen Jaques v KPMG Peat Marwick to which I was drawn were focused on the importance of the fiduciary relationship between client and solicitor, as well as on the criticisms by his Honour of the use of Chinese Walls, as they were formerly known, or information barriers using the modern nomenclature. I will return to this decision below, but first let me summarise the plaintiff's response to the application.

The plaintiff's contentions

Counsel for the plaintiff submitted that the role formerly played by the Law Practice in relation to Allen Caratti and Ms Bazzo was somewhat more prosaic than suggested by the defendants. The plaintiffs say that the Law Practice does not presently act for Allen Caratti or Ms Bazzo, the firm has never previously acted for Allen Caratti, and only once acted for Ms Bazzo on the Prior Bazzo Engagement. The plaintiff highlights the information barrier protocol which has been implemented by the law firm upon receiving the new instructions from the plaintiff, which is said to protect the confidential information held by the firm (if any) concerning the Prior Bazzo Engagement.
The plaintiff criticises the application as failing to identify any specific confidential information which is said to be in the possession of the Law Practice, and submits further that, even if the court found the information described by the defendants to be sufficiently specific, it is not clear how it might be relevant to the present proceedings, let alone detrimental to the defendants in these proceedings.[17] The plaintiff also urged on the court the need for a close examination of the pleadings to properly assess the relevance (if any) of the Prior Bazzo Engagement.

Blatch v Archer

[17] Plaintiff's Submissions [13].

During the course of the hearing, I raised a concern as to the generality of the evidence before me concerning the Prior Bazzo Engagement, in that no clear evidence was led as to the instructions provided by Ms Bazzo or the advice given by the Law Practice (all of which could have been led under cover of a suitable confidentiality regime, subject to first ensuring that the information should properly be disclosed to me given I am the trial judge). Further, no written material, not even a letter of engagement, concerning the Prior Bazzo Engagement was adduced.
Following on from this concern, both parties made submissions in relation to the application of Lord Mansfield's dictum in Blatch v Archer. Lord Mansfield said:
[i]t is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.[18]
[18] Blatch v Archer, 970
The defendants rely on the maxim. They contend that the Law Practice, as the former solicitors for Ms Bazzo, was best placed to put before the court the necessary documents to identify the subject matter of the Prior Bazzo Engagement and failed to do so.[19]
[19] Defendants' supplementary submissions dated 20 September 2023 [6].
In response, the plaintiff submits that Ms Bazzo, like all former clients of a law firm, had the capacity and legal right to obtain from the Law Practice a copy of any client documents held by the firm and failed to exercise that right, in order to obtain and then adduce information in sought of this application.[20] The plaintiff also submits that it was prevented from disclosing any of Ms Bazzo's confidential information by reason of the applicable conduct rules, and this would also give rise to difficult questions given the information barrier which had been put in place and the erosion of legal professional privilege.[21]
[20] Plaintiff's supplementary submissions dated 20 September 2023 [3] – [4].
[21] Plaintiff's supplementary submissions dated 20 September 2023 [5].
The defendant has made plain it does not erect the Blatch v Archer point in relation to the confidential information aspects of the application, but solely on the basis that it was within the power of the Law Practice to have had Mr Dobson (a partner of the firm) refer to the documents to identify the subject matter on which he advised Ms Bazzo and put that evidence before the Court. The defendants note that Templeman J had considered it appropriate in Clay v Karlson for (at least) an affidavit to have been sworn by a principal of the subject law firm setting out his or her appreciation of the situation, and giving the reasons on which it is said the firm should continue to act.[22]
[22] Clay v Karlson, 496.

D. The pleadings

The background to these actions and a summary of the pleaded allegations can be found in my earlier reasons, published on 16 March 2023 as Walthamstow Pty Ltd v Caratti.[23] Since those reasons were published, orders have been made by consent to dismiss the defendants' set-off claims in CIV 3136 of 2019.[24] There have been some recent amendments to the pleadings, on the eve of the hearing of the present application, in both CIV 3136 of 2019[25] and CIV 2283 of 2021.[26]
[23] Walthamstow Pty Ltd v Caratti [2023] WASC 76.
[24] Orders made on 24 July 2023, dismissing [42] – [73] of the third amended defence dated 7 November 2022 in CIV 3136 of 2019.
[25] Amended Statement of Claim dated 15 September 2023; Fourth Amended Defence (described as a Substituted Defence) dated 17 September 2023; and Amended Substituted Reply dated 17 September 2013.
[26] Amended Statement of Claim dated 15 September 2023; Third Amended Defence and Counterclaim (described as a Substituted Amended Defence and Counterclaim) dated 17 September 2023, and Amended Substituted Reply dated 15 September 2013.
The claims in the actions are described (in relatively succinct terms) in the statements of claim filed in each action.[27] The plaintiff's claims arise out of the alleged non‑repayment of funds advanced under loan and mortgage instruments entered into by the plaintiff with companies associated with the defendants, which are also pleaded as being secured by various guarantee instruments entered into between the plaintiff and the defendants.[28] The loan facilities in each action were secured by residential property developments in the Perth Metropolitan region, being the 82 Treeby Road, Anketell development in the case of CIV 3136 of 2019, and the Hocking development in the case of CIV 2283 of 2021.
[27] Amended Statement of Claim dated 15 September 2023 in CIV 3136 of 2019; and Amended Statement of Claim dated 15 September 2023 in CIV 2283 of 2021.
[28] Ms Bazzo is alleged to be a party to one of the loan agreements, in her own right, alternatively as trustee for the Gucce Family Trust (in CIV 2283 of 2021).
The various instruments were entered into in 2013 and 2014. The overall quantum of the claims being pursued is in the order of many millions of dollars. All of the claims are denied. There is a substantial counterclaim in CIV 2283 of 2021.
The plaintiff's claim in CIV 3136 of 2019 is against Allen Caratti and Ms Bazzo as guarantors of the loan agreement entered into between the plaintiff and GH1 Pty Ltd. The pleadings refer to a guarantee contained within the initiating loan instrument itself, and a separate deed of guarantee subsequently entered into by the plaintiff, Ms Bazzo and several other entities. The plaintiff's claim in CIV 2283 of 2021 is against Allen Caratti as guarantor of the loan agreement entered into between the plaintiff and both Ms Bazzo and Keris Pty Ltd, and also against Ms Bazzo as a party to that loan agreement.
On 16 March 2023, comprehensive trial directions were made to facilitate the listing of the trial of the three actions for 10 days commencing on 6 November 2023. The timetable laid out a program of relatively orthodox steps to be undertaken by the parties over an 8 month period, including the preparation of a statement of agreed facts, the filing of witness outlines in respect of contentious matters, the filing of witness statements, the filing of expert evidence, and then (commencing on around 18 September 2023) the preparation of the trial bundle, papers for the judge, chronologies and trial submissions.

E. Relevant principles

This court undoubtedly has inherent power to control and deal with members of the legal profession and to ensure that the administration of justice is not brought into disrepute. I summarised the principles applicable to such matters in Souraki Azad v Jose [No 2],[29] which I have drawn on below.
[29] Souraki Azad v Jose [No 2] [2023] WASC 218 [15] – [21].
In the exercise of that inherent power, the court may restrain practitioners from acting for clients on three well-established grounds, as explained by Steytler J (as his Honour then was), in Newman v Phillips Fox (a firm):[30]
(a) First, to ensure the protection of confidential information that has been provided by the client to the lawyer in the course of the lawyer/client relationship.
(b) Second, to prevent a breach of a supposed fiduciary duty of loyalty owed by the lawyer to the former client notwithstanding the termination of the retainer (that is, in general terms, to intervene in cases of conflicts of interest).
(c) Third, when the court considers it necessary to do so in order to ensure the due administration of justice, and to control the conduct of practitioners as its officers.
[30] Newman v Phillips Fox (a firm) [1999] WASC 171; (1999) 21 WAR 309 [18].
These principles have subsequently been reiterated in Ismail-Zai v The State of Western Australia[31] and Director of Public Prosecutions (Cth) v A Legal Practitioner,[32] among other authorities.
[31] Ismail-Zai v The State of Western Australia [2007] WASCA 150; (2007) 34 WAR 379 [19] (Steytler P) and [62] - [74] (E M Heenan J).
[32] Director of Public Prosecutions (Cth) v A Legal Practitioner [2012] WASC 459 [48] - [69] (E M Heenan J).
While there may in some cases be overlap in relation to these grounds, they must not be conflated, as each ground is separate from the other: Uon Pty Ltd v Hoascar.[33]
[33] Uon Pty Ltd v Hoascar [2017] WASC 79 [8] (Master Sanderson).
As to the protection of confidential information, the court may intervene if a practitioner is in possession of information which is confidential to a former client, and that information is or might be relevant to a matter on which the practitioner is instructed by a second client. The basis for the court's jurisdiction is not on a perception of any possible impropriety, but on the protection of relevant information: Prince Jefri Bolkiah v KPMG (a firm).[34]
[34] Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222, 234 (Lord Millett).
The confidential information which is in issue must be identified with precision and not merely in global terms: Hayes v Doran.[35] Ultimately, 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: Newman v Phillips Fox (a firm).[36] The onus is on the party who is seeking to establish that the solicitor is in possession of the confidential information: Zalfen v Gates[37] and Zani v Lawfirst Pty Ltd.[38]
[35] Hayes v Doran [2012] WASC 91 [38] (Kenneth Martin J).
[36] Newman v Phillips Fox (a firm) [32] - [33] (Steytler J).
[37] Zalfen v Gates [2006] WASC 296 [69] (Master Newnes, as his Honour then was).
[38] Zani v Lawfirst Pty Ltd [2014] WASC 75 [31] (Chaney J).
That said, the degree of particularity required will depend on the facts of the case. Master Newnes in Zalfen v Gates, after referring to Lightman J's comments on the need for particularity when alleging the existence of confidential information in In re a firm of Solicitors,[39] observed that 'in many cases identification of the nature of the matter on which the solicitor was instructed, the length of the period of original retainer and the date of the proposed fresh retainer and the nature of the subject matter, for practical purposes will be sufficient to establish the possession by the solicitor of relevant information'.[40] Master Newnes further commented that the degree of particularity with which the confidential information is required to be described must take into account that 'sometimes a lesser degree of precision may be necessary to avoid annihilating the confidence sought to be protected'.[41]
[39] In re a firm of Solicitors [1997] Ch 1.
[40] Zalfen v Gates [72].
[41] Zalfen v Gates [73].
In relation to the court's supervisory jurisdiction to exercise control over legal practitioners, a useful summary of the applicable principles is found in Brereton J's decision in Kallinicos v Hunt[42] as follows:
(a) 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 processes in aid of the administration of justice;
(b) the test to be applied is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a lawyer should be prevented from acting, in the interest of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice;
(c) the jurisdiction is exceptional and is to be exercised with caution;
(d) due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without good cause; and
(e) the timing of the application may be relevant, in that the cost, inconvenience and impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief.
[42] Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561 [76] (Brereton J).
As to this ground for intervention, being the third ground mentioned at [41] above, it has long been recognised that there is a public element in the work a solicitor performs, being officers of the court and, in performing their professional functions, solicitors play an integral part in the administration of justice: Carindale Country Club Estate Pty Ltd v Astill.[43] The juridical basis of this ground is not inter-partes fiduciary or contractual obligations as such, nor punishment for misconduct. Rather, it is the administration of justice, the public interest and the appearance of propriety of officers of the court.[44]
[43] Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307, 311 (Drummond J).
[44] Makfam Pty Ltd v CV Australia Pty Ltd [2020] VSC 296 [40] (Riordan J).
The defendants referred to the following statements of the Court of Appeal in Afkos Industries Pty Ltd v Pullinger Stewart[45] in the context of the due administration of justice ground:
…where the acts or omissions of the law firm, including situations where the actions of the client are based on advice given by the solicitors, are at the heart of the question in issue, the firm is, in a real sense, 'defending' its actions or advice. There is, in such circumstances, a danger that the client will not be represented with the objectivity and independence which the client is entitled to and which the Court demands. There is no sound reason to presume or accept that the solicitors must first have the opportunity to clarify whether their client is liable as a result of their actions or of acting on their advice before confronting the conflict.[46]
[45] Afkos Industries Pty Ltd v Pullinger Stewart [2001] WASCA 372.
[46] Afkos Industries Pty Ltd v Pullinger Stewart [29] (Murray J, Anderson and Steytler JJ agreeing).
Further, the defendants submitted that, once it becomes apparent that a practitioner's independence is affected by some personal connection, either with the client or the subject matter of the proceedings, the practitioner should cease to act in the matter generally.[47] The defendants rely upon the statements of Templeman J in Clay v Karlsen, to which I have already referred, to support the submission that the due administration of justice precludes a lawyer from continuing to act where the lawyer has an interest in the proceedings.[48] These are principles to which effect should be given and which I propose to adopt in determining this application.
[47] Defendants' Submissions [34], relying on Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4; (2015) 48 WAR 93, [22], [189] and [194].
[48] Defendants' Submissions [32].
Finally, it is appropriate to refer to the decision of the Full Court in Fordham v Legal Practitioners' Complaints Committee.[49] The underlying factual circumstances of that case concern proceedings of a criminal nature, in which a practitioner cross-examined a former client on subject matter which formed the basis of the earlier retainer. The proceeding before the Full Court was an appeal from a decision of the then solicitors' disciplinary tribunal. The practitioner had been found guilty of unprofessional conduct by continuing to act for the new client when she knew or ought to have known that there was a conflict of interest between her new client and the former client, and her duty to each of them, or there was a likelihood of conflict.[50]
[49] Fordham v Legal Practitioners' Complaints Committee (1997) 18 WAR 467.
[50] Fordham v Legal Practitioners' Complaints Committee, 469.
The issues of professional conduct considered by the Full Court do not arise on this application. The observations of Malcolm CJ (with whom Franklyn and Wheeler JJ agreed) as to the duties of solicitors are naturally instructive though. In this regard, the Chief Justice drew upon the earlier observations of Ipp J in Mallesons Stephen Jaques v KPMG Peat Marwick.[51] His Honour held as follows, in rejecting a submission that the law should not impose a duty of loyalty on solicitors as a matter of public policy:
Thus, the rule not only prevents the use of knowledge or information gained from the client during the course of a retainer, but also prevents the assumption of a position hostile to the client concerning the same matter. In my opinion, the extension to any related matter is both logical and consistent with the public policy which gives rise to the duty of professional loyalty. In the context of loyalty it is the establishment of the hostile relationship against the former client in relation to the same or a related matter which is the breach of professional duty. To put it another way, it is the existence of the former relationship which has the potential to create in the mind not only of the former client but also of the reasonable bystander a reasonable apprehension that use will be made of information provided in the course of the former relationship to the detriment of the former client, as by cross-examination for the purpose of destroying his or her credit. The submission that a practitioner is free to cross-examine a former client in the same or related matter without any inhibition, save for not actually making use of, or appearing to make use of or in circumstances giving rise to a reasonable apprehension that he or she was making use of confidential information is not a satisfactory test.[52]
[51] Fordham v Legal Practitioners' Complaints Committee, 476 – 477.
[52] Fordham v Legal Practitioners' Complaints Committee, 490.
Malcolm CJ referred to an additional consideration which added to the rationale for the general rule, namely that a cross-examiner has a very great psychological benefit in cross-examining a former client on matters previously revealed by that former client to the practitioner.[53]
[53] Fordham v Legal Practitioners' Complaints Committee, 490 (drawing upon the comments of Ipp J in Mallesons Stephen Jaques v KPMG Peat Marwick).

F. Factual findings

Preliminary

On the evidence adduced at the hearing of the application, all of which was adduced on affidavit without cross-examination, I consider the matters set out in this section of the reasons have been demonstrated.
I have earlier mentioned the late application to call Ms Bazzo to give viva voce evidence at the hearing, which I refused. I have also referred above to my ruling on the objection taken to the Caratti Affidavit.
The findings below are made solely for the purposes of the present application. In the circumstances, I make no findings (and it is not necessary to make any findings) as to the credit of any of the persons involved, adverse or otherwise, nor any comment on the professional integrity of any of the practitioners involved.

The nature of the present proceedings

As is apparent from the earlier summary of the pleadings, the present proceedings concern residential subdivisions which were instigated by companies controlled by Allen Caratti and Ms Bazzo, in respect of which the financing was originally provided by (or later assigned to) the plaintiff in its capacity as a financier. In aggregate, the plaintiff is pursuing the defendants for an amount in the order of $6.0 million.[54]

Taylor Smart

[54] Amended Statement of Claim in CIV 3136 of 2019 [39] and Prayer for Relief 1 to 4; and Amended Statement of Claim in CIV 2283 of 2021 [30] and Prayer for Relief 1 to 3.

The plaintiff has been represented by the law firm Taylor Smart in these actions since their commencement in December 2019 and November 2021.

Trial listing

On 16 March 2023, the court listed these actions for trial commencing on 6 November 2023, for a period of 10 days.

The Law Practice

On 31 July 2023, the Law Practice undertook a conflict check in relation to Ms Bazzo, presumably following an approach by the plaintiff requesting that the Law Practice act in the matter. The conflict check conducted at that time did not reveal any matters of relevance to the present actions.[55] The check revealed that the Law Practice had acted for Ms Bazzo in 2018 on a file described as 'S. 159 Claim for Hinkley Parkway'.
[55] Second Throssell Affidavit [4.1].
The lawyers at the Law Practice who were intending to act for the plaintiff were Mr van der Zanden and Mr Fetherstonhaugh, with assistance from a junior lawyer and legal secretaries.[56]
[56] First Throssell Affidavit [4].
On 18 August 2023, it became apparent to solicitors at the Law Practice that a further conflict check may be required using additional information, once they appreciated that there was a reference in the Third Amended Defence and Counterclaim in CIV 2283 of 2021[57] to a compensation claim matter under s 159 of the Planning and Development Act 2005 (WA).
[57] Third Amended Defence and Counterclaim in CIV 2283 of 2021 [49].
In the week commencing 21 August 2023, the Law Practice established that Hinkley Parkway was the road constructed on the western boundary of one of the properties pleaded in the Third Amended Defence and Counterclaim in CIV 2283 of 2021.[58]

Information barrier protocols established

[58] Third Amended Defence and Counterclaim in CIV 2283 of 2021 [32.1(i)].

Although the Law Practice concluded that Hinkley Parkway was not the same road referred to in [49] of the Third Amended Defence and Counterclaim in CIV 2283 of 2021, out of an abundance of caution the firm created an information barrier and took steps to have an information barrier protocol prepared and signed. The information barrier protocol has been signed or approved by the persons identified therein, and is intended to operate to quarantine the lawyers and support staff acting for the plaintiff in the current actions from the lawyers who acted on the previous matter for Ms Bazzo.[59]
[59] First Throssell Affidavit [8] – [13]. A supplementary information barrier protocol has also been prepared to extend the operation of the protocol to another lawyer who had worked on the original matter for Ms Bazzo. The information barrier protocols are Attachment ATD-1 and Attachment ADT-2 to the First Throssell Affidavit.
The protocol has been consented to by the plaintiff, who has acknowledged in writing that the duty of disclosure owed by the Law Practice to the plaintiff does not extend to the provision of any confidential information which the Law Practice may have received through the former engagement for Ms Bazzo.[60]
[60] Second Throssell Affidavit [5].
There is no evidence that the lawyers who acted on the matter for Ms Bazzo have imparted information concerning that matter to the lawyers who will act for the plaintiff in these actions. There is no evidence of any leakage of information in this regard, and I find that various steps were taken by the Law Practice to restrict access to the files and information held by the firm.[61] Importantly, the firm does not possess a physical copy of the file for the matter in which the firm acted for Ms Bazzo.
[61] First Throssell Affidavit [9] and [11].
The defendants have noted that a practitioner of the Law Practice (who has acted in the matter for John Caratti against Allen Caratti, being CIV 1923 of 2016, to which I have referred below as the Rural Bank Proceedings) witnessed the affidavits of Mr Throssell which were filed in opposition to this application. It was submitted that this provides a basis to conclude there is leakage of information within the firm or that there is likely to be cross-pollination of information between lawyers. I do not accept this submission and do not consider this matter has significance for the determination of the present application. The process of witnessing the affidavit is an administrative-type function. Further, the practitioner in question is not one of the lawyers who is subject to the information barrier protocol which has been developed by the firm. As explained below, I also do not regard the role played by the Law Practice in acting for John Caratti as significant for the present application.

Prior Bazzo Engagement

I find that the Law Practice previously acted for Ms Bazzo in 2018 and 2019 (which is the Prior Bazzo Engagement) in relation to the property which is the subject of the counterclaim in CIV 2283 of 2021 (which I will refer to as the Salem Lane Property).[62] It is clear to me that two lawyers at the firm provided her with legal advice in relation to the matter, which concerned a claim for compensation under s 159 of the Planning and Development Act 2005 (WA) in respect of that property. Those lawyers, Mr Dobson and Mr Swanson, have been quarantined from the current proceedings through the information barrier protocol.
[62] Third Amended Defence and Counterclaim in CIV 2283 of 2021 [32.1(i)], being Lot 9001 on Deposited Plan 57007 being the whole of the land described in Certificate of Title Volume 2706 Folio 325.
Beyond the foregoing, I am unable to discern with any precision the nature of the legal advice which was provided by the Law Practice to Ms Bazzo on the Prior Bazzo Engagement or what information was provided by Ms Bazzo the law firm, or whether that information was confidential.
As to the role played by this issue in the present proceedings, it appears from the Third Amended Defence and Counterclaim in CIV 2283 of 2021 that the second defendant (Ms Bazzo) has a counterclaim against the plaintiff arising from the alleged delay by the plaintiff in advancing part of one tranche of the borrowed funds (referred to as the second drawdown) to Ms Bazzo.[63] This is pleaded to be a breach of the loan agreement and had the effect that Ms Bazzo was unable to complete the subdivision and the sale of the Salem Lane Property. This is pleaded to have resulted in economic loss and damage to both defendants. Further or in the alternative, the conduct is said to ground a claim under s 12GM of the Australian Securities and Investments Commission Act 2001 (Cth), for an order for loss and damage suffered by both defendants.[64]
[63] Third Amended Defence and Counterclaim in CIV 2283 of 2021 [49].
[64] Third Amended Defence and Counterclaim in CIV 2283 of 2021 [49].
There are several particulars to the foregoing plea. The defendants focus on particular (c), which is in fact the fourth particular. It is pleaded that the delays in obtaining statutory clearance for the subdivision of the Salem Lane Property had the result that Ms Bazzo was unable to create individual titles for the property until after an adjoining landowner and, without descending too much further into the detail, this resulted in the loss of Ms Bazzo's right to claim compensation under s 159. The claim for loss in this regard is quantified at $315,063.44.
In its defence to this aspect of the counterclaim, the plaintiff pleads a broad denial, pleads certain factual matters to explain the delay in the drawdown (including an entitlement to withhold the funds) and says further that the non-payment of the sum of $295,679.45 did not, in and of itself, cause the delay in the issue of titles for the Salem Lane Property (or the balance of the properties in question) and did not cause any loss as pleaded.[65]

Other engagements of the Law Practice by Allen Caratti and Ms Bazzo

[65] Amended Substituted Reply in CIV 2283 of 2021 [6] and [26].

Allen Caratti (and also Ms Bazzo, but perhaps to a lesser extent) have been involved in the business of residential subdivision for many, many years, which Allen describes as a complicated business. Allen Caratti and Ms Bazzo use corporate vehicles as part of this business. In fact, they have used numerous corporate vehicles over the years. For the purposes of managing the subdivision business, they both seek access to legal advice.
Further, since about 2008, they have caused the corporate vehicles they control to engage the Law Practice to provide those entities with legal advice in relation to matters concerning the subdivision of properties. I do not find that the Law Practice acted directly for Allen Caratti in any of these matters, but the firm acted for various companies controlled by him (and by Ms Bazzo), namely the following nine entities:
(a)Gold Class Nominees Pty Ltd;
(b)Fastbet Investments Pty Ltd;
(c)Mammoth Nominees Pty Ltd;
(d)Oakford Land Company Pty Ltd;
(e)Whitby Land Company Pty Ltd;
(f)Forrest Hope Pty Ltd;
(g)Starbrake Holdings Pty Ltd;
(h)Trevalley Investments Pty Ltd;[66] and
(i)Gucce Holdings Pty Ltd (now known as GH1 Pty Ltd).[67]
[66] Trevalley Investments Pty Ltd is referred to in several of the abandoned pleas in the Fourth Amended Defence in CIV 3136 of 2019.
[67] Gucce Holdings Pty Ltd is referred to in the Third Amended Defence and Counterclaim in CIV 2283 of 2021 [4.3.2]. It is also referred to in several of the abandoned pleas in the Fourth Amended Defence in CIV 3136 of 2019.
Allen Caratti has deposed that he personally provided instructions to the Law Practice on the matters in respect of which the above companies engaged that law firm.[68] The engagements span the period from 2008 through to May 2018. The engagements relate to a range of matters concerning subdivisions, local government relations, State government relations, easements, sewerage issues, State Administrative Tribunal proceedings, land compensation and other real estate matters.

Engagements of the Law Practice by John Caratti and his interests

[68] Caratti Affidavit [11] – [30].

The Law Practice acted for John Caratti's interests in litigation against Allen Caratti and one of Ms Bazzo's companies, in the Supreme Court of Western Australia (the Rural Bank Proceedings).[69] The plaintiff in the litigation in question was the Rural Bank, which brought claims against companies controlled by John Caratti, Allen Caratti and one of Ms Bazzo's companies. The Law Practice acted on the record for Mammoth Investments Pty Ltd (as distinct from Mammoth Nominees Pty Ltd), Navarac Pty Ltd in its capacity as a trustee, and Moondancer Holdings Pty Ltd in its capacity as a trustee, all of which are entities controlled by John Caratti. These proceedings have now been concluded.
[69] Supreme Court of Western Australia CIV 1923 of 2016. See the decision of Kenneth Martin J in Rural Bank Ltd v Mammoth Investments Pty Ltd in this action.
During the course of the above proceedings, it is apparent that allegations of a serious nature as between John Caratti and Allen Caratti were made, and third party proceedings were instituted.
Separately, the Law Practice is presently acting for Harvard Nominees Pty Ltd, a company controlled by John Caratti, in several proceedings in the Federal Court of Australia about the lease of farming property (the Harvard Nominees Proceedings).[70] These proceedings apparently concern a Mr Nicoletti, who is said to 'be bonded' to Allen Caratti and it is said within those proceedings that John Caratti has a great deal of animosity towards his brother Allen Caratti. The volume and intensity of the litigation between them leaves me in little doubt about this.

Litigation between Allen Caratti and John Caratti

[70] Federal Court of Australia WAD 59 of 2022, WAD 129 of 2020 and WAD 5 of 2023. See the decisions of the Full Federal Court in Harvard Nominees Pty Ltd v Nicoletti, Harvard Nominees Pty Ltd v Tiller, and Harvard Nominees Pty Ltd v Dimension Agriculture Pty Ltd (in liq).

More broadly, litigation in this court between Allen Caratti and John Caratti, which has been ongoing since 2008, remains on foot.[71] The litigation relates to an alleged partnership between Allen Caratti and John Caratti, including the property held by the companies of Allen Caratti and Ms Bazzo. There are seventy three defendants to the proceedings. The defendants include Allen Caratti, Ms Bazzo and six of the companies identified in [74] above, in respect of which the Law Practice has previously acted. However, the Law Practice does not act on the record for any of the parties in this action.
[71] Supreme Court of Western Australia CIV 2006 of 2008. See for example the decision of Allanson J in Caratti v Caratti [No 2].
Finally, there are further proceedings in this court on foot between John Caratti and Allen Caratti, concerning property held by Harvard Nominees Pty Ltd.[72] Again, the Law Practice does not act on the record for any of the parties in this action.
[72] Supreme Court of Western Australia CIV 2172 of 2022 (and relatedly also CIV 2009 of 2022). See for example the decision of Tottle J in Harvard Nominees Pty Ltd v Caratti concerning the removal of a caveat.

G. Disposition

No issue of delay

The defendants' application to restrain the Law Practice has been brought on without delay and been heard at the first practical opportunity. The fact the proceedings are close to a looming trial is thus not a factor which is adverse to the present application in any respect, in the sense that a decision to restrain the Law Practice from acting might be said to prejudice the plaintiff so close to trial.
In any event, it has not been suggested that the former solicitors, Taylor Smart, who were solicitors on the record in CIV 3136 of 2019 for almost four years, cannot resume their previous role. Additionally, I observe that, despite the change in solicitors, lead counsel for the plaintiff has remained unchanged.

Choice of lawyer

Further, at a level of generality, I recognise that due weight should be give to the public interest in a litigant not being deprived of the lawyer of its choice without good cause. This proposition carries less weight where the litigant has been represented for many years by one law firm, and where no explanation is proffered to explain the change in representation, late in the day. In my view, this consideration should therefore be given little weight in the present circumstances.

Consideration of the defendants' contentions

Turning to the substance of the application, it is readily apparent that solicitors at the Law Practice, but not those who will have carriage of these matters for the plaintiff, have had a close association with Allen Caratti, Ms Bazzo and nine of their corporate vehicles, over an extended period of time, and have provided legal advice to the corporate interests in respect of numerous matters connected with real estate and subdivision matters. It does not seem to be seriously disputed that solicitors at the firm have acted for the companies controlled by Allen Caratti and Ms Bazzo for at least a decade from 2008, and acted directly for Ms Bazzo on one matter in 2018/2019 (being the Prior Bazzo Engagement). The firm appears to have ceased acting for these various interests in about the middle of 2018 and so the association between the firm and both Allen Caratti and Ms Bazzo has waned over the last five years or so.
During this interregnum, the Law Practice has acted as solicitors on the record for John Caratti in two large matters, being the Rural Bank Proceedings which have now concluded and the Harvard Nominees Proceedings which appear to be ongoing. The first of these matters involved the Law Practice acting adverse to the interests of Allen Caratti and Ms Bazzo, although there was no suggestion before me that the defendants applied in that matter to restrain the Law Practice from so acting.
This conveniently leads me to consider the relevance of the role played by the Law Practice in acting for John Caratti or entities with which he is associated. The defendants advance a submission that, by acting in the present proceedings, the Law Practice is placing itself in a position in which it has a conflict of interest in that it has received information in these proceedings (and will receive further information as these actions progress) which is subject to the Hearne v Street obligation,[73] yet it has an obligation not to withhold that information from its other clients, namely John Caratti and his interests for whom the firm acts.
[73] Hearne v Street [2008] HCA 36; (2008) 235 CLR 125.
The defendants also rely on the observations of Ipp J in Mallesons Stephen Jaques v KPMG Peat Marwick in this regard. In that case, Ipp J was concerned at the potential for the practitioners in the law firm, who had been seized of confidential information from their former clients, to deploy that information adversely to those former clients when acting in connection with the criminal proceedings against those clients. His Honour noted the retainer with the new client had been varied to exclude an obligation on the practitioners to disclose the previously acquired information to that new client. Nonetheless, Ipp J's concerns remained:
It is difficult to see, however, when preparing the briefs for counsel, in preparing proofs of evidence, in suggesting what witnesses should be called by the prosecution, in commenting on particular areas in which cross-examination should take place and in the many other areas in which competent solicitors are able to assist counsel in the preparation of a long and complex case, how the solicitors concerned could divorce from their minds relevant confidential information obtained from the accused himself. There is, in my view, the real prospect that, even with the best will in the world, that information would colour, at least subconsciously, the approach of the solicitors and influence them in the performance of the tasks I have mentioned: see In the Marriage of A and B (supra) (at 801).
In any event, the alteration of the terms of the retainer could not detract from the intangible advantage and detriment, of the kind to which I have referred, that would arise in a lengthy trial, in the subtle and complex atmosphere of a court room, where prosecuting counsel are briefed by the same firm of solicitors that has been the recipient of confidential disclosures by the defendant concerning several issues relevant to the charges against him.[74]
[74] Mallesons Stephen Jaques v KPMG Peat Marwick, 371.
There is, of course, force in these observations at a level of generality. However, when applied to the aspect of this application which concerns the role of the Law Practice as advisor for John Caratti, I consider it has not been adequately demonstrated by the defendants that any information received by the law firm in the present proceedings has any relevance to matters connected with John Caratti or his corporate interests. I accept there are various claims on foot in which Allen and John Caratti stand in opposite corners and 'no quarter is given' between them. But a submission that invites attention to the potential for breaches of the Hearne v Street obligation necessarily requires proper identification of the information which is of concern, confirmation that such information is indeed subject to the obligation (bearing in mind that not all information which emerges in litigation proceedings is subject to the obligation), and clarification that the recipient would then have a duty to provide that information to a third party in breach of the obligation. There is therefore no foundation to the Hearne v Street concern which the defendants have agitated in this respect.

Indeed, more broadly, I do not regard the role played by the Law Practice in acting for John Caratti or entities with which he is associated, either in litigation presently on foot, or in former proceedings, as being of particular significance to the resolution of the present application. True it is that Allen Caratti and his brother John are engaged in hostile litigation and there is evidently a degree of animosity between them. By virtue of the relationship between Ms Bazzo and Allen Caratti, I infer there is a similar to degree of animus between John Caratti and Ms Bazzo. However, this says nothing, in and of itself, about the propriety of the Law Practice acting for the plaintiff in the present action, as against Allen Caratti, in relation to claims and matters which do not concern John Caratti or entities with which he is associated.
Thus, while I would accept that Allen Caratti has a genuinely held concern about the 'collection and use of information' by his brother,[75] I do not regard that as providing a foundation for the present application.
[75] Caratti Affidavit [49].
The Hearne v Street obligation was raised by the defendants, in a more focused way, in relation to the confidential information acquired by the Law Practice through the Prior Bazzo Engagement. The defendants point to the conflict of interest which arises in this regard, in that the Law Practice is said to be bound not to withhold this information from its current client, the plaintiff.
A principal difficulty with this contention is, again, the defendants' failure to adduce clear evidence as to the terms of that prior engagement, the information which was disclosed by Ms Bazzo to the Law Practice, or the legal advice which the firm provided. I accept there was an engagement of the Law Practice by Ms Bazzo and I infer that some advice was given in relation to a compensation claim concerning the Salem Lane Property. Beyond that, there is simply a lacuna in the evidence. In my view, this lacuna and the difficulties of proof on this issue are not satisfactorily resolved by application of the Blatch v Archer maxim. Before explaining why this is so, I should clarify the modern treatment of the maxim itself.
Put simply, Lord Mansfield's maxim bears upon the appropriateness of deciding whether a fact has been proved when only limited evidence is available. In Ho v Powell,[76] it was observed that:
[I]n deciding facts according to the civil standard of proof, the court is dealing with two questions: not just what are the probabilities on the limited material which the court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision …
In considering the second question, it is important to have regard to the ability of parties, particularly parties bearing the onus of proof, to lead evidence on a particular matter, and the extent to which they have in fact done so …
[76] Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572 [14] – [15] (Hodgson JA, with whom Beazley JA agreed)
Further, in Coshott v Prentice,[77] the Full Court of the Federal Court referred with approval to Lord Mansfield's maxim and the observations of Hodgson JA in Ho v Powell to which I have just referred. The Full Court further stated:
Thus, where the evidence relied upon by a party bearing the onus of proof does not itself clearly discharge the onus, the failure by that party to call or give evidence that could cast light on a matter in dispute is relevant to determining whether the onus is being discharged: Hampton Court Ltd v Crooks (1957) 97 CLR 367 at 371 (Dixon CJ); Shalhoub v Buchanan [2004] NSWSC 99 at [71] (Campbell J). This principle is therefore wider than that in Jones v Dunkel (1959) 101 CLR 298 . As Austin J in Australian Securities and Investments Commission v Rich (2009) 236 FLR 1 explained at 93 [440], “[w]hereas Jones v Dunkel reinforces an inference drawn against the party who has not called evidence, to the effect that the evidence would not have assisted that party's case, Blatch v Archer leads either to the drawing of such an inference, or to some other assessment of the weight of evidence, unfavourable to the party against whom the principle is applied.”[78]
[77] Coshott v Prentice [2014] FCAFC 88; (2014) 221 FCR 450.
[78] Coshott v Prentice [81].
Finally, I wish to refer to the statements of the plurality of the High Court in Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345[79] on this issue and the need to faithfully apply the principles governing the onus and standard of proof:
[165]Disputed questions of fact must be decided by a court according to the evidence that the parties adduce, not according to some speculation about what other evidence might possibly have been led. Principles governing the onus and standard of proof must faithfully be applied. And there are cases where demonstration that other evidence could have been, but was not, called may properly be taken to account in determining whether a party has proved its case to the requisite standard. But both the circumstances in which that may be done and the way in which the absence of evidence may be taken to account are confined by known and accepted principles which do not permit the course taken by the Court of Appeal of discounting the cogency of the evidence tendered by ASIC.
[166]Lord Mansfield's dictum in Blatch v Archer that “[i]t is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted” is not to be understood as countenancing any departure from any of these rules. Indeed, in Blatch v Archer itself, Lord Mansfield concluded that the maxim was not engaged for “it would have been very improper to have called” the person whose account of events was not available to the court. (footnotes omitted)
[79] Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345 [15] – [166] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ).
The defendants bore the onus of proof on the present application to demonstrate that the Law Practice was in possession of confidential information and to identify that information with precision, not merely in global terms.[80] The defendants adduced no affidavit evidence from Ms Bazzo herself, only from Allen Caratti. The material in the Caratti Affidavit concerning the Prior Bazzo Engagement is extremely general, as I have already observed. There was no explanation for the failure to file an affidavit from Ms Bazzo, who was present in the court room during the hearing, although I recognise that a belated application was made to call her to testify on these matters. I rejected that application. That does not explain the forensic decision not to file an affidavit sworn by her, to outline the nature of the Prior Bazzo Engagement. In my view, as the application to restrain the Law Practice was foreshadowed on 4 September 2023, and given an affidavit from Allen Caratti was promptly filed on 8 September 2023, there can be no justifiable reason as to why an affidavit could not have been sworn by Ms Bazzo to explain these matters.
[80] As explained by Le Miere J in Durban Roodeport Deep, Limited v Mark David Reilly and Glenn Robert Featherby [2004] WASC 269 [69] – [80].
Allied to this, I do not accept that it was incumbent on the Law Practice to adduce the primary evidence of these matters. Rather, it was open to Ms Bazzo to call for the file from the Law Practice, and it is apparent this was not done. Perhaps, at best for Ms Bazzo, this is a situation in which both parties had equal measures of ability to adduce the evidence in question and even if that is the right assessment, it does not assist Ms Bazzo because that is not sufficient to found the Blatch v Archer inference.
I therefore do not accept the defendants' contentions that the Law Practice should be restrained because of some apprehended risk of misuse of confidential information or by reason of the Hearne v Street concerns which have been raised.
There are two further matters raised by the defendants in this application which must be addressed.
The first matter also relates to the Prior Bazzo Engagement. The issue is whether there is sufficient material for the court to conclude, notwithstanding my criticisms as to the state of the evidence concerning the confidential information disclosed to the Law Practice, that the Law Practice has an interest in the present proceedings in the sense described by Templeman J in Clay v Karlsen. Allied to this point is the further concern raised by the defendants arising from the decision in Fordham v Legal Practitioners' Complaints Committee.
The second matter is whether the long history of prior engagements of the Law Practice by companies associated with Allen Caratti and Ms Bazzo provides a sufficient basis to exercise the supervisory jurisdiction and restrain the Law Practice from further acting, either on the basis that the duty of loyalty would be breached or because of concerns as to the due administration of justice.

The Law Practice's interest in the proceedings

As to the Clay v Karlsen point, the submissions advanced by the defendants have substance, in my opinion. The gravamen of the defendants' attack is that the Law Practice had a prior engagement acting for Ms Bazzo on a subject matter which forms part of the present proceedings. The subject matter, on the face of the pleading as presented, is the prospect that Ms Bazzo had a claim for compensation under s 159 of some value, which she lost by reason of the conduct of the plaintiff. The existence of that claim for compensation and its quantification is an issue in CIV 2283 of 2021. Although counsel for the plaintiff identified the fresh amendments to his client's pleading in response to this issue, which were made in the week before this application was heard, those amendments include a general denial of the plea.[81] The battleground in this respect, at least on the pleadings as I read them, is thus not confined to matters of causation. The entirety of the defendants' plea remains in issue.[82]
[81] Amended Substituted Reply in CIV 2283 of 2021 [26].
[82] Third Amended Defence and Counterclaim in CIV 2283 of 2021 [49]
Of course, on this interlocutory application, it is not incumbent on the court to undertake a mini-trial of the merits of this particular issue to assess how it would play out at trial. It is appropriate that I evaluate the issue by reference to the pleadings as they stand.[83]
[83] Afkos Industries Pty Ltd v Pullinger Stewart [23] (Murray J).
The court is therefore faced with a situation in which there will be an issue at trial as to both the existence of a claim for compensation and the quantification of that claim, in respect of which evidence is intended to be led by Ms Bazzo.[84] Ms Bazzo may be cross-examined on these matters by counsel for the plaintiff, instructed by the Law Practice. The Law Practice provided Ms Bazzo with advice on this issue and I can at least infer that the firm has possession of some relevant information on this issue, despite the generality of the evidence led by the defendants.[85] In this sense, the Law Practice has an interest in the proceedings.
[84] Whether Ms Bazzo should be permitted to file her late witness statement is a matter which is subject to an extant application. I will assume, without deciding, that the statement forms part of the evidence to be presented at trial.
[85] Applying the inferential approach identified in Zalfen v Gates to which I have earlier referred.
This is the type of situation in respect of which Malcolm CJ in Fordham v Legal Practitioners' Complaints Committee was especially concerned, so too Templeman J in Clay v Karlsen. As I have already noted, the Chief Justice in Fordham v Legal Practitioners' Complaints Committee did not wish to confine his concerns to cross-examination in that circumstance on the use by the practitioner of confidential information or the existence of a reasonable apprehension that the practitioner is making use of such information. The concern is more fundamental. Weighing into this analysis is the psychological advantage of a cross-examiner over a former client.
In my view, these matters are, in and of themselves, sufficient reason to restrain the Law Practice from continuing to act. I do not think it is an answer to the concerns I have just identified that the compensation claim forms only a small part of the defendants' counterclaim in a much broader case. The concerns to which I have referred, and the importance of the duties of the practitioners, are of sufficient significance that the matter should not be analysed by reference to whether the plea in question represents most, or some, or only a part of the case at hand. The defendants, and particularly Ms Bazzo, should not be required to face a trial at which her former solicitors are permitted to adopt a hostile position to her given the overlap of matters between the Prior Bazzo Engagement and the counterclaim in CIV 2283 of 2021. Whether on the basis of the duty of loyalty, or the broader ground of the due administration of justice, this circumstance should not be countenanced by the court.
The conclusion I have reached is not disturbed by the information barrier protocol which the Law Practice has implemented. I say this for two reasons. First, the information barrier protocol does not create any geographical separation between the solicitors involved. The two solicitors at the Law Practice who acted on the Prior Bazzo Engagement will remain the same office as the practitioners who will represent the plaintiff in these actions. The lack of such a separation gives rise to the risk of inadvertent disclosure through the type of 'wordless communication' mentioned by Bryson J in D & J Constructions Pty Ltd v Head,[86] and highlighted by Ipp J in Mallesons Stephen Jaques v KPMG Peat Marwick.[87] To be clear, I am not suggesting there is a risk of deliberate disclosure in any respect and have no doubt as to the honesty and integrity of those practitioners involved. The point to be made is that the risk of inadvertent disclosure is not removed where the practitioners remain in close proximity, with daily contact, over long hours.
[86] D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118.
[87] Mallesons Stephen Jaques v KPMG Peat Marwick, 373.
Second, I consider the information barrier protocol lacks some features which I would expect in order to be effective. The protocol is ad hoc in nature. It is not accompanied by any educational programme or similar procedures and there are no elements concerning monitoring and record keeping. Nor is there any aspect which is concerned with disciplinary sanctions, other than general references to the functions of the compliance officer who 'will, if a breach or suspected breach is reported to him, investigate and take the appropriate steps in the circumstance'.[88] Similar criticisms which made of the information barrier proposed in Newman v Phillips Fox (a firm) by Steytler J[89] and by Master Newnes in Zalfen v Gates.[90] I note that, in Prince Jefri Bolkiah v KPMG (a firm),[91] Lord Millett endorsed the following organisational arrangements as common features of an effective barrier:
(i)The physical separation of the various departments in order to insulate them from each other - this often extends to such matters of detail as dining arrangements;
(ii)an educational programme, normally recurring, to emphasise the importance of not improperly or inadvertently divulging confidential information;
(iii)strict and carefully defined procedures for dealing with a situation where it is felt that the walls should be crossed and the maintaining of proper records where this occurs;
(iv)monitoring by compliance officers of the effectiveness of the wall;
(v)disciplinary sanctions where there has been a breach of the wall.
[88] First Throssell Affidavit Attachment ADT-1 pg 9.
[89] Newman v Phillips Fox (a firm) [77].
[90] Zalfen v Gates [100] – [103].
[91] Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222, 228.
Information barriers are now ubiquitous in law firms, certainly relative to the position which existed when several of the authorities to which I have referred were decided.[92] Undoubtedly, over the past two to three decades, the mobility of lawyers in law firms, the internationalisation of law practices, and the growing complexity of commercial transactions have all contributed to the pervasiveness of these devices. The starting point remains, though, that unless special measure are taken, information moves within firms.[93]
[92] Specifically, Mallesons Stephen Jaques v KPMG Peat Marwick, Prince Jefri Bolkiah v KPMG (a firm) and Newman v Phillips Fox (a firm).
[93] Newman v Phillips Fox (a firm) [72].
Given these concerns with the information barrier protocols, I consider the defendants might remain fairly concerned, as might a fair minded, reasonably well informed and disinterested observer, that there could have been some inadvertent disclosure or that some inadvertent disclosure may occur in the future. In these circumstances, it is appropriate the court should proceed cautiously.

History of prior engagements

The second matter to which I will return is the long history of prior engagements of the Law Practice by companies associated with Allen Caratti and Ms Bazzo. This circumstance provides a further basis, in my view, to exercise the supervisory jurisdiction and restrain the Law Practice from further acting, on the basis it is necessary to do so to ensure the due administration of justice. The long-standing nature of the prior engagements of the Law Practice by the entities controlled by Allen Caratti and Ms Bazzo, and the subject matter of those engagements which largely concerned real estate and subdivision matters, would give rise to a concern for a fair-minded, reasonably informed member of the public when informed that the Law Practice is to act against those persons in litigation which also concerns their real estate and subdivision business.
It matters not, in my opinion, that the engagements were for the entities controlled by Allen Caratti and Ms Bazzo rather than direct engagements. That distinction misses the point. The critical aspect is that Allen Caratti personally instructed the Law Practice and sought its advice in respect of a range of issues as concerns the process of subdivision and related matters. It is safe to infer (and I so infer) that the Law Practice, over the decade long period of being engaged by the interests of Allen Caratti and Ms Bazzo, acquired a solid understanding of their business practices.
The position might be otherwise if the subject matter of the present proceedings bore no similarities to the real estate and subdivision matters in respect of which the Law Practice was formerly engaged.
Apprised of these matters, as the defendants submit, the fair-minded member of the public would likely conclude that the Law Practice should be prevented from acting in the interests of the protection of the integrity of the judicial process and the due administration of justice.[94] The length of the engagement, the number of corporate vehicles involved, the range of instructions given to the Law Practice, and the similarity of the subject matter to the present proceedings all combine to provide the foundation for this conclusion. I recognise that the relationship between the Law Practice and the defendants appears to have dissolved some five years ago. There have been no further recent instructions given to the Law Practice. Does that alter matters? I do not think so. The deep relationship which emerges from the Caratti Affidavit, spread across some 10 years, is not to be lightly swept aside by that lapse of time.
[94] Defendants' Submissions [46].

Once this point is reached, the conclusion is not altered by the information barrier protocol which has been implemented by the Law Practice. This is because the protocol does not control or prevent disclosure of information acquired by the Law Practice on any of these former engagements. The protocol is confined to the Prior Bazzo Engagement.
I therefore conclude that the Law Practice should be restrained from acting either to prevent a breach of loyalty owed by the Law Practice to the defendants (which survived termination of the retainer) by reason of a possible conflict of interest, or because it is necessary to restrain the firm to ensure the due administration of justice. In either case, I do not consider the information barrier protocol which has been implemented by the firm alters the position.

H. Orders

For the foregoing reasons, I consider the Law Practice engaged by the plaintiff should be restrained from acting. The defendant's application filed on 11 September 2023 is granted. I will hear from counsel on the issue of costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
IHN
Associate to the Honourable Justice Lundberg
22 SEPTEMBER 2023