Wheller and Wheller

[2012] FamCA 356

FAMILY COURT OF AUSTRALIA

WHELLER & WHELLER [2012] FamCA 356

FAMILY LAW - LEGAL PRACTITIONERS - Conflict of interest – Order seeking to restrain solicitors from acting.

Family Law Act 1975 (Cth)

McMillan & McMillan (2000) FLC 93-048
Mills v Day Dawn Block Gold Mining Company Ltd; In re Marsland (1982) Q.L.J 62
Rakusen v Ellis, Munday and Clarke (1912) 1 Ch. 831
Songalease Aust. Pty Ltd v MacDougall and Ors (unreported)
Stewart & Stewart  (17 April 1997) (unreported)
Thevenez and& Thevenez (1986) FLC 91-748

APPLICANT: Mr D Wheller

RESPONDENT: Ms Wheller

FILE NUMBER: MLC 2615 of 2012

DATE DELIVERED: 18 May 2012

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Macmillan J

HEARING DATE: 24 April 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr O'Shannessy

SOLICITOR FOR THE APPLICANT: Glezer Lanteri & Associates

COUNSEL FOR THE RESPONDENT: Mr Dickson

SOLICITOR FOR THE RESPONDENT: Lander & Rogers

IT IS ORDERED THAT

1. Lander & Rogers be and are hereby restrained from acting on behalf of the wife in these proceedings

2. The wife, her servants and agents, be and are hereby restrained from continuing to engage Lander & Rogers to act on her behalf in these proceedings.

3. The Case Assessment Conference at 11.00am on 21 May 2012 be vacated.

4. All extant applications be adjourned for hearing in the Judicial Duty List at 10.00am on the 29 May 2012.

IT IS CERTIFIED

1. Pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Wheller & Wheller has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 2615  of 2012

Mr D Wheller

Applicant

And

Ms Wheller

Respondent

REASONS FOR JUDGMENT

Introduction

1. On 26 March 2012 the husband filed an Initiating Application seeking final orders for property settlement. A Case Assessment Conference was fixed for 21 May 2010 at 11.00am. On 2 April 2012 the wife filed a Response to the Initiating Application and an Application in a Case. In her Application in a Case she sought orders inter alia that the husband pay her the sum of $500,000 by way of part property settlement, periodic spousal maintenance, a child support departure, injunctive relief and disclosure. The wife further sought an order that all times be abridged for the hearing of her application. Time was abridged but only with respect to the wife’s application for injunctive relief and that part of her application was listed for hearing on 24 April 2012. The husband by way of his Response to the Application in a Case filed 19 April 2012 sought an order restraining the wife, her servants or agents from instructing or communicating with Lander & Rogers in respect of these proceedings or any proceedings involving the husband. It is that application that is before me.

Background

1. The husband is 42 years of age. He is a company executive officer. The wife is also 42 years of age and is engaged in home duties. The parties were married in February 1995 and separated on 10 November 2011. There are two children of their marriage T, who is 11 years of age and H, who is 6 years of age. The children live with the mother.

2. Whilst there is some dispute between the parties as to the detail of the history of the establishment of the husband’s business and the wife’s involvement in that business, it is common ground that the husband and his brothers Mr P Wheller and Mr M Wheller operate various construction industry businesses through various trading entities linked to BB Pty Ltd. Each of the husband and his brothers has his own entities which either own shares in the various trading entities or units in various associated unit trusts. The various entities are referred to as the “BB Group”.

3. The husband and his brother Mr M Wheller are the directors of BB Pty Ltd and the shares in the company are owned 28.5% by Wheller Pty Ltd as trustee of the Wheller Family Trust. The husband’s accountant Mr R is the sole director and owns the shares in Wheller Family Trust. Both the husband and the wife are beneficiaries and have received income from the Trust.

4. The wife deposes to the interest of the Wheller Family Trust in the BB Group being worth “many millions” and it is common ground that the value of the Group and of the interest of the trust is likely to be an issue in the proceedings.  

5. It is the husband’s evidence, which is not disputed by the wife, that Lander & Rogers have acted for the BB Group for approximately six years and that during that time many files have been opened in the name of the Group and/or associated entities and advice has been provided by both partners and employee solicitors of the firm throughout that period. The husband further deposed that he has, as a director of BB Pty Ltd (and other associated entities), met with representatives of Lander & Rogers at their offices and provided written instructions by way of letter, email and fax as well as verbal instructions, and that as directors of the BB Group he and his brother have had reason to discuss commercially sensitive information with their solicitors at Lander & Rogers.

6. On 14 February 2012 the husband’s solicitors forwarded a letter to Lander & Rogers as follows:

   We have been instructed that for several years your firm has acted for and on behalf of the [BB] Group. This Group, as we understand it, constitutes the central entities for various companies and trusts involving [the husband].

   We understand that a Mr Champion was primarily responsible (sic) for the work involving [BB] and that our client often provided instructions to Mr Champion and your firm generally. It seems to us that in the above circumstance, your firm clearly has a conflict and cannot continue to act for [the wife].

   Could you please advise us of your attitude in relation to the above.

7. On 16 February the husband’s solicitors received a letter from Lander & Rogers advising that they did not have “a conflict as alleged in acting and continuing to act for the wife.” They asserted in that letter that the issue of the firm’s involvement with the BB Group had been referred to the firm’s Ethics Committee which, in concluding that there was no conflict, noted inter alia:

   1.    The firm took instructions from [BB] regarding past commercial matters which are unrelated to any current issues arising under the Family Law Act. Any information passed to the firm by [BB] has no bearing on the parties’ matrimonial issues.

   2.    The firm acted for [BB], a corporate entity of which your client was one of multiple members. [BB] is not your client’s alter ego. The firm at no time acted for your client.

   3.    Mr Champion, who was not a member of the Family Law department, left the firm some time ago.

8. On 20 February 2012 the husband’s solicitor responded to the letter from Lander & Rogers seeking details of the number of files in respect of which Lander & Rogers had acted and the period of time over which they had so acted and a copy of the written advice provided to and received from the firm’s Ethics Committee.

9. Thereafter Lander & Rogers forwarded a letter to the husband’s solicitor dated 29 February 2012 advising that “with regard to your request for information regarding this firms previous files involving [BB]. We are not in a position to provide information regarding other client’s matters involving (sic) for reasons of confidentiality” and maintaining that there was no conflict.

10. As a result of Lander & Rogers’ refusal to provide the information as requested, on 1 March 2012 the husband and his brother, in their capacity as directors of BB Pty Ltd, forwarded a letter to Lander & Rogers seeking information as to the number of files in respect of which Lander & Rogers had acted for BB and its subsidiary entities and the period of time over which the firm had acted.

11. In response to their letter the husband and his brother received a letter from Jonathon Quilty, a partner at Lander & Rogers, dated 16 March 2012 advising that “to the best of my knowledge all the work performed by our firm for [BB] Pty Ltd and it’s associated entities, save for a very small number, was done by a former partner of the firm, Mr Michael Champion. Michael left our firm over 12 months ago. Notwithstanding the departure of Michael, I will arrange for a review to be undertaken of files previously opened by him, while he was at Lander & Rogers, so I can respond to your queries. I will respond to you as soon as that information is provided to me.”

12. The husband deposes on 19 March 2012 his brother Mr M Wheller forwarded an email to Mr Quilty suggesting that “you need to review your information. I have a copy of quite extensive advice given to me by Daniel Progeto on 27 May 2011 and I have also had many subsequent conversations with him.” The husband further deposes that neither he nor his brother Mr M Wheller have received any further details following upon the review which was said would be undertaken of files previously opened by Mr Champion.

13. In March 2012 the husband located two accounts rendered in the BB offices for work carried out by Lander & Rogers during 2011.  As a result, upon the instructions of the husband, his solicitor again wrote to Lander & Rogers as follows:

    You will appreciate that the value of shares held in [Company E] could be a major issue in dispute in these proceedings unless your client proposes, in the above circumstances, that the value of [Company E] and any entities associated therewith, should not be considered a financial resource of the parties. Would you please advise your client’s position on this issue.

14. Lander & Rogers, by letter dated 30 March 2012, responded that in relation to their accounts rendered, the file was in relation to court proceedings involving BB Pty Ltd and F Pty Ltd, which was now concluded, that neither the husband or wife are shareholders of either of these entities and that the subject of the court proceedings was unrelated to the matrimonial matters in dispute. The wife’s solicitor, having pointed out that the husband had failed to clearly set out the particulars of the alleged conflict, said that it was his client’s position that the BB Group was relevant for the purposes of both s79(4) and s75(2) of the Family Law Act 1975.

15. It is this impasse that has lead to the proceedings now before me.

Legal Principles

1. It is well established at least since the decision in June 1986 of Frederico J in Thevenez & Thevenez (1986) FLC 91-748, that the Court “has power to make orders restraining a firm of solicitors from continuing to act for one of the parties to proceedings in this Court, if it is of the view that it would be likely that those solicitors may have confidential information relating to the other party to the proceedings arising out of a former relationship of solicitor and client with that party which may be used to the advantage of the present client or to the disadvantage of the former client in the current proceedings.”

2. Frederico J also held in Thevenez that on the basis of agency, a solicitor is imputed to have all of the knowledge of his partners or other members of the firm even though he or she may have had no direct involvement with a particular file, and that it is a practitioner’s duty to put at his client’s disposal all of his or her knowledge including that knowledge imputed to him. In Thevenez the wife’s solicitor had been a partner in a firm that had acted for the husband and wife in several conveyancing transactions. The husband’s case was that materials in the files related to confidential information exchanged between him and the firm in that context, albeit not directly to the solicitor he sought to restrain from acting.

3. Counsel for the husband helpfully referred me to what might be described as the two lines of authority. Mr Dickson who appeared on behalf of the wife did not disagree with this summary of the legal principles although it was his case that those authorities supported a different conclusion.

4. The first line of authority which was followed by Frederico J in Thevenaz is based upon the decision of the Full Court in Mills v Day Dawn Block Gold Mining Company Ltd; In re Marsland (1982) Q.L.J 62. Lilley CJ said at p.63 as follows:

   Upon the main question, whether any confidence had in fact been imparted to Mr Marsland by Mr Mills, there was a conflict of testimony. If they (the judges) were to insist upon actual proof of the existence of such confidence, and to insist upon knowing what it was, and whether it was likely to prejudice a client’s interest, they would compel him to strip himself of the protection which the court is usually afforded, and the whole mischief he wished to avoid might arise.

5. At p. 75,447 Frederico J said as follows:

   It is my view that in this case Mr D should not continue to act on behalf of Mrs Thevenez. It may well be that the risks were he to do so are more theoretical that practical. However, if it is asserted and not contradicted that material in the files does relate to confidences exchanged in the course of the former firm previously acting on behalf of both parties and would embarrass the husband. It is of the utmost importance that justice should not only be done but should appear to be done. In the circumstances of the present case, there is a risk which may well be merely theoretical but still exists, that justice might not appear to be done.

6. In the case of Magro & Magro [1989] FLC 92 - 005 Rourke J referred to the other line of authority which he said was represented in recent times by the decisions of the Supreme Court of New South Wales in Songalease Aust. Pty Ltd v MacDougall and Ors (unreported) and D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118. Both of these cases refer to the principle in Rakusen v Ellis, Munday and Clarke (1912) 1 Ch. 831. In that case that principle was enunciated by Cozens- Hardy M.R as follows:

   I do not doubt for a moment that the circumstances may be such that a solicitor ought not be allowed to put himself in such a position that, human nature being what it is, he cannot clear his mind from the information which he has confidentially obtained from his former client; but in my view we must treat each of these cases, not as a matter of form, not on the mere proof of a former acting for a client, but as a matter of substance. Before we allow the special jurisdiction over solicitors to be invoked, we must be satisfied that real mischief and real prejudice will in all human probability result if the solicitor is allowed to act.”

7. In McMillan & McMillan (2000) FLC 93-048 the Full Court, reviewing a number of earlier decisions, which included Thevenez and Magro & Magro and the two lines of authority supported the approach adopted by Frederico J in Thevenez that because of the sensitive nature of the family law jurisdiction even if there is only a theoretical risk of the misuse of confidential information justice must be seen to be done. I am bound by that authority.

8. It is the husband’s case, as set out in paragraph 32 of his affidavit sworn 19 April 2012, that “for over a period, which I believe to be in excess of 6 years, I have continued to provide instructions to Lander & Rogers in respect of [BB] business and ancillary entities. I have confided in representatives of Lander & Rogers and they are intricately aware of the structure of my various entities and other matters pertaining to the entities in which I am involved. I am extremely concerned that the said solicitors are now possessed of confidential financial information that may be used against me.” It was submitted that in those circumstances Lander & Rogers should be restrained from acting on behalf of the wife in the family law proceedings.

9. It was submitted on behalf of the husband that the value of the shares held by Wheller Pty Ltd as trustee of the Wheller Family Trust would be a major issue in the case and that the valuation of that interest would include consideration of contracts held by the BB Group and include matters in relation to which Lander & Rogers have represented the company. He also deposed that both he and his brother had discussed commercially sensitive information with Lander & Rogers for the purposes of giving instructions and obtaining advice.

10. The wife did not take issue with the husband’s evidence save and except that in her affidavit sworn the 24 April 2012 she deposed that she was “unaware of the exact basis upon which the Husband alleges a conflict of interest to exist, and have caused my solicitors to seek clarification from his solicitors. No particulars of any confidential information allegedly held by Lander & Rogers for the Husband has been provided” and that to the best of her knowledge and understanding “..the information provided by Lander & Rogers in previously acting for companies in the “[BB] Group” with regards to commercial matters, such as leases and service agreements, is not of any relevance to any issue in the proceedings before this Honourable Court.”

11. She deposed further at paragraph 20 of that same affidavit that Lander & Rogers:

    a)Are not presently advising the BB Group or its component entities regarding the negotiation of any commercial agreement;

    b)Are not presently acting on behalf of the BB Group or its component entities regarding any extant court proceedings;

    c)Have not received further instructions from the Husband in a capacity as the sole client of the firm; and

    d)Have not in the course of previously acting, received information that is relevant to the extant proceedings before this Honourable Court.

12. The wife concluded at paragraph 21 of her affidavit that “there is no  “confidential financial information” which has been obtained by Lander & Rogers in its previous dealings with the BB Group, which could now be “used against” the husband in the extant family law proceedings. The Husband has had ample opportunity to say what confidential information allegedly is but he has not done so.”

13. Clearly unless the wife has been given access to the files held by Lander & Rogers or has been advised accordingly by her solicitors, which I accept is not likely to be the case, she cannot say what information has or has not been provided by the husband to Lander & Rogers. She cannot in those circumstances dispute the husband’s assertions and in my view it is not determinative of the matter that Lander & Rogers is no longer acting for the BB Group.

14. It was further submitted by Mr Dickson on behalf of the wife in summary as follows:

    a)that it was clear from the letter from the husband’s solicitor to the wife’s solicitor dated 26 March 2012, which is Annexure “J” to the husband’s affidavit filed 19 April 2012 that the husband’s application seeking to restrain the wife from continuing to instruct Lander & Rogers is all about obtaining some tactical advantage. I do not accept that submission. As soon as the husband obtained his own legal advice and became aware of his right to object to Lander & Rogers acting on behalf of the wife he has taken that objection and the basis of that objection is clear from the correspondence passing between his solicitors and Lander & Rogers.

    b)that this case could be distinguished on the basis that the husband was not himself a client but merely a discretionary beneficiary of the Wheller Family Trust which holds a minority interest in the BB Group. It was his submission that it was not even the husband’s case that this was property. In my view it is the husband’s direct involvement with Lander & Rogers and the nature of the information rather than the capacity in which that information has been provided which is the issue in this case.  

    c)That although the husband asserted that he had given instructions in relation to various commercial matters it is clear on the basis of his request for details of the matters in which Lander & Rogers had acted on behalf of the BB Group that he does not know what if any confidential information has been provided and it follows that he does not know what if any information might be used against him in these proceedings.

    d)That in so far as the husband asserts that he has provided information to Lander & Rogers in relation to contracts BB has entered into, given the husband’s obligation to provide full and frank disclosure these are documents and this is information that the husband will be required to disclose for the purposes of valuation; and

    e)That, in so far as the husband asserts that he and his brother have discussed commercially sensitive information, he is protected by the provisions of s121 of the Family Law Act 1975 or if further protection is deemed necessary, it could be provided by requiring the parties to enter into confidentiality agreements. Mr Dickson’s submission was that in those circumstances it was not confidential information that should preclude Lander & Rogers acting on behalf of the wife.

1. In conclusion it was submitted by Mr Dickson that at its highest the husband’s case is based upon an assertion that Lander& Rogers are in possession of confidential information but that the husband has not identified the category or nature of the information or established that that information is confidential, and that I can infer that he cannot do so because he doesn’t even know the details of the matters in which Lander & Rogers has acted for the BB Group. It was Mr Dickson’s submission that it was incumbent on the husband to identify the category of confidential information he asserts might be held by Lander & Rogers and how such information might be used against him and that the fact that he has not done so, and he would submit, cannot do so speaks for itself. 

2. I agree with Mr Dickson’s submission that I cannot infer based upon the refusal by Lander & Rogers to provide information in relation to previous files involving the BB Group that those files therefore contain confidential information. However I also do not conclude that because the husband requested that information it can be said that he does not know what information is being held by Lander & Rogers and therefore cannot assert that that information is confidential.

3. The difficulty I have with the submissions made on behalf of the wife in relation to the husband’s obligation to provide full and frank disclosure and the ability to maintain the confidentiality of commercially sensitive information is that in my view it does not take into account the peculiar qualities of family law litigation and the fact that the information that might be available to Lander & Rogers having dealt with the husband in his capacity as a director of entities within the BB Group is not necessarily limited to information provided by the husband which might be relevant to the valuation of the entities or issues which the parties perceive to be in dispute at this point of time in the litigation.  Rourke J in Magro observed for example that such information “...might only consist of impressions of the wife’s personality gained after many hours of confidence, which could be exploited by a skilful advocate presented with those impressions.”

4. Whilst both parties agree that the value of the BB Group is likely to be a significant issue in the case, it is also possible that other issues may arise in the conduct of the proceedings and that information either imparted by the husband or other officers of the company might be available to the wife by virtue of Lander & Rogers having acted for the BB Group. As Bryson J observed in D & J Constructions Pty Ltd v Head:

   There was recent consideration of the circumstances in which a solicitor would be restrained from acting for a former client by the Family Court of Australia Frederico J.) in Thevenez and Thevenez. That Court took the view that restraint is justified if there is a risk that confidential communications on relevant matters have been made by the party for whom the solicitor has ceased to act, even if the risk may be more theoretical than practical. It seems natural that a particularly careful view would be taken in family law business, as such litigation tends to be about highly confidential facts and a very wide range of facts and circumstances can conceivably be relevant; the sensitivity which even the most reasonable people feel about such litigation when they are engaged in it calls for careful measure to secure not only that justice is done but also that it is apparent that it is done, an appearance which would not survive any general impression that lawyers can readily change sides.

5. It was submitted on behalf of the wife that the husband must establish that the information he has provided is confidential and that he has not done so. The Full Court in McMillan in the process of reviewing cases dealing with this issue referred to the unreported decision of Lindenmayer J in Stewart & Stewart  (17 April 1997) in which he said as follows:

   All that is necessary is that the wife swears that she has conveyed confidential information to the solicitors and that she believes, not unreasonably, that that information may be used against her, or at least to her disadvantage, in these current proceedings.

6. To determine whether or not the information held by Lander & Rogers is confidential and that there is a possibility that it might be used to the disadvantage of the husband in these proceedings I would, as pointed out by Lilley C. J in Mills, be likely to compel the husband to strip himself of the very protection he seeks and “...the whole mischief he wished to avoid might arise.”

7. Lander & Rogers have acted for the BB Group for in excess of six years and the husband has deposed that during that period he has given instructions to and confided in Lander & Rogers. The husband asserts that he has provided confidential information to Lander & Rogers that might be used against him in these proceedings and I am satisfied that he should not be required to provide proof as to either the information he has provided or how it is likely to prejudice his interests.

8. Even if the risk in this case turns out to be only theoretical, justice must be seen to be done. In all of the circumstances, I propose to make the orders sought by the husband restraining Lander & Rogers acting on behalf of the wife in the proceedings in this Court.

9. The wife wishes to proceed with her interim applications and both parties agree that I should vacate the Case Assessment Conference at 11.00 am on 21 May 2012 and adjourn the matter for hearing in the Judicial Duty List on 29 May 2012. I will make orders to that effect. I also note the husband’s undertakings, with a denial of the need for same, pending the further hearing of the wife’s interim application.  

I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 18 May 2012.

Associate: 

Date:  18 May 2012