Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd

Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd - [2005] NSWSC 550 - NSWSC 2005 case summary — Zoe

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50044/05 ASIA PACIFIC TELECOMMUNICATIONS LTD V OPTUS NETWORKS PTY LTD JUDGMENT 1 This is an application by the plaintiff, Asia Pacific Telecommunications Ltd to restrain Clayton Utz, solicitors, from acting in the main proceedings (these proceedings) on behalf of the defendant, Optus Networks Pty Ltd. 2 There are in place a number of confidentiality orders in respect of the evidence that was relied upon in this application. Accordingly this judgment was published initially on a confidential basis to the legal representatives for the respective parties for a period of two days to 17 June 2005 to enable any application for suppression of any parts of it to be made. Application was made by the plaintiff and not opposed by Clayton Utz resulting in some parts of the judgment being masked for confidentiality. Those parts are marked "[edited]" in the judgment. 3 These proceedings were commenced on 31 March 2005. The plaintiff sues the defendant for damages arising out of dealings between it and the defendant in and after 1996 with respect to the provision of transit telecommunications services. The alleged services are audiotext services that utilise telephone numbers controlled by the telecommunication authorities in Vanuatu, Niue, the Solomon Islands and Tuvalu (the Pacific countries). The plaintiff facilitated telecommunications traffic permitting callers in countries such as the United States of America and Europe, to dial a telephone number that would connect to a voice recording in one of the Pacific countries. The defendant provided the transit carrier services between the calling and destination countries and was required to pay the plaintiff a nominated share of the revenue collected by it, relevantly calculated by reference to the number of minutes transmitted to the destination telephone numbers. 4 The plaintiff claims that the defendant failed to make payments to it at the correct rate and for the required minutes of traffic, and that the defendant caused or permitted "rogue" operators to utilise destination numbers to which the plaintiff was exclusively entitled. 5 In earlier proceedings commenced in this Court, 50056 of 2002, Gilsan International Limited (Gilsan) sued the defendant in respect of alleged breaches by it of similar arrangements by which Gilsan facilitated dial up telephone services also using destination numbers in the Pacific countries (the Gilsan proceedings). To assist it in its preparation for hearing Gilsan requested the plaintiff in these proceedings to provide to it answers to a set of questions (the Gilsan questions). In early 2004 Clayton Utz was retained by e-New Media Company Limited (e-New Media), a company related to the plaintiff, to assist it in respect of providing answers to the Gilsan questions (the Retainer). 6 The plaintiff claims that the Retainer prevents Clayton Utz from acting for the defendant in these proceedings. The plaintiff makes its claim on three bases. The first is a right to protect certain confidential information provided to Clayton Utz in the course of the Retainer. The second is a claim that Clayton Utz should be restrained from accepting instructions from the defendant because it would be in breach of its duty of loyalty to the plaintiff. The third is a claim that Clayton Utz should be restrained from accepting instructions from the defendant on the basis of public policy. 7 The matter was heard on 31 May 2005 when Mr P Biscoe QC leading Mr F Kunc, of counsel, appeared for the plaintiff and Mr M Einfeld QC leading Ms E Frizell, of counsel, appeared for Clayton Utz.

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The facts 8 The plaintiff relied upon the affidavit of Alex C H Yip sworn 27 April 2005. Mr Yip is the General Counsel of e-New Media and gave evidence by way of video link from Hong Kong. 9 On 10 December 2003 Mr Yip received a copy of the Gilsan questions and provided them to Dr Keith White Hunt, a consultant with the plaintiff, to obtain his views on the efficiency of the plaintiff and to answer the questions. There were eight questions and it is not in issue that the defendant would have known of the material and detail of the content of the proposed answers to four of those questions. The other four questions related to whether the plaintiff had authorised the rogue operators. The answers to those questions would not have been known to the defendant. However, the claim against the defendant in these proceedings is that the defendant had effectively permitted the activities of the rogue operators inconsistently with its obligations to the plaintiff. A necessary element of the plaintiff's claim is that it did not authorise the rogue operators. 10 Dr White Hunt wrote to Mr Yip by e-mail dated 11 December 2003. I will not set out the terms of the e-mail except to say that it contains some background to the relationship between Gilsan and the defendant and the plaintiff and the defendant. Dr White Hunt expresses a view [edited] (the View). 11 Mr Yip consulted with a colleague at e-New Media, Andrew Choi, who assisted with the drafting of the proposed answers to the Gilsan questions. On 16 February 2004 Mr Choi sent an e-mail to Mr Yip with the "answers for Gadens". 12 In February 2004 Mr Yip attempted to retain Blake Dawson Waldron to advise the plaintiff in relation to the Gilsan questions. Although Blake Dawson Waldron were initially retained they subsequently withdrew on the basis of a conflict of interest. 13 Mr Yip gave evidence that on 26 March 2004 he retained Clayton Utz to advise the plaintiff in relation to the Gilsan questions and the proposed answers. [edited]

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14 On 29 March 2004 Mr Fairbairn wrote to Mr Yip by e-mail with a copy to Ms Still on the subject "Gilsan and Optus" attaching a copy of the "Engagement Letter". Mr Fairbairn advised Mr Yip that he had contacted Gadens, the solicitors for Gilsan, who had indicated that they would send to Mr Fairbairn a copy of the Summons in the Gilsan proceedings. The Engagement Letter set out the terms of engagement and costs agreement for the period 1 July 2003 to 30 June 2004. Those terms included the following: Confidentiality We will treat the instructions you give us as having been given only to those partners and/or staff who actually work on your matters. They will keep the instructions and any information they may receive in the course of their work confidential. However, they may disclose confidential information on an as needs basis to other partners and staff who are not and will not be working on any matter touching or in conflict with your interests. If we consider it appropriate, we will reinforce the confidentiality of information by adopting special procedures among groups of partners and staff. As a matter of general policy we will not disclose to you information which is not actually known by the partners or staff members then working on your matters (even though that information may be actually known to other partners or staff members and may be relevant to you). If a particular situation of this sort arises we shall obtain your specific consent to such non disclosure and implement appropriate procedures to further safeguard confidentiality of all parties. Only the partners and staff working from time to time on your matters will have an obligation to give advice and disclose information to you. You understand and accept that our obligation to you with respect to giving you information is restricted by these provisions. 15 On 7 April 2004, Clayton Utz were provided with a copy of the Amended Summons in the Gilsan proceedings on the basis that Clayton Utz would keep the contents of the document confidential and only provide a summary of the claims to Mr Yip. On 13 April 2004 Ms Still wrote to Mr Yip advising him of the "essence of the case" brought by Gilsan against the defendant. In that e-mail Ms Still attached a draft Deed of Release and Indemnity which had been discussed with Blake Dawson Waldron. That was a Deed that the plaintiff required Gilsan to enter into in exchange for the answers to the Gilsan questions. On 20 May 2004 Ms Still wrote to Mr Yip and advised that she had attempted to contact Gadens on a number of occasions to find out whether the pleadings could be provided to Mr Yip. Ms Still also requested Mr Yip's instructions as to whether he wished to press the matter further and to make further enquiries, and whether Mr Yip wished to have the case monitored because, as Ms Still stated, she was "conscious" that the plaintiff may want to make a similar claim if Gilsan was successful. Mr Yip instructed Ms Still by e-mail of 20 May 2004 as follows: Let's just wait for them to act first. I don't think we need to push on our end, and I don't think you need to initiate contact on your part. As for monitoring, though we might take an interest if they're successful, I don't think we need to actively monitor it for now. 16 On 25 May 2004 Mr Yip wrote again to Ms Still by e-mail advising that he had forwarded a fax to her that he had received from Gilbert & Tobin (the solicitors for the defendant, Optus, in the Gilsan proceedings) in respect of documents Optus intended to tender in the Gilsan proceedings, and requesting the plaintiff to advise whether those documents were confidential. Mr Yip's e-mail to Ms Still advised that the "business people" within the plaintiff had reviewed the information and although they had concluded that the documents were not "that confidential", a confidentiality regime to protect the plaintiff was required. Mr Yip's e-mail stated: As you're our outside counsel regarding this matter, I would like for you to co-ordinate with Gilbert to get this done so that you're in the loop on everything connected to this matter. Thanks for your help. 17 It was on 9 September 2004 that Mr Yip spoke with a solicitor at Clayton Utz, Ms Vicki Kuek, in relation to the progress of the Gilsan proceedings. Ms Kuek contacted Mr Nathan Mattock of Gadens, who advised that Gilsan had decided not to pursue the plaintiff for answers to the Gilsan questions. By e-mail dated 14 September 2004 Ms Kuek informed Mr Yip of this information and that the Deed of Indemnity and Release and Confidentiality Undertaking would therefore not be required. Ms Kuek also advised that she assumed that "will be the end of the matter". Mr Yip responded to Ms Kuek by e-mail and agreed that "with respect to this issue the matter is closed". Mr Yip then stated that depending upon how the Gilsan proceedings concluded it might effect some of the plaintiff's claims in the future. By e-mail to Ms Kuek on 14 September Mr Yip asked that he be kept "up to date shall any new information" come to Ms Kuek's attention. Ms Kuek forwarded that e-mail to Ms Still and Ms Still advised Ms Kuek by return e-mail that she needed to find out how long the Gilsan proceedings had been running and how much longer it had to go. Ms Still also advised Ms Kuek to ask that she be advised of the outcome of the Gilsan proceedings. The judgment on liability in the Gilsan proceedings was delivered on 26 November 2004. It is apparent that a copy of that judgment is on the file but it is not at all clear who placed it on the file. 18 On 5 January 2005 Mr Yip wrote by e-mail to Ms Still in relation to "a general question regarding a potential case we have in Australia that I hope I can run by you." Mr Yip advised that it was quite simple in that his company "along with an unaffiliated third party" may have a case against a common defendant. He advised that the facts were quite similar and that it had been proposed to him that "we join together in the suit to share legal cost". He advised Ms Still that it was quite attractive to share the costs and wanted to know whether an Australian court would allow the parties to join in the same law suit. That e-mail included the following: Thanks for your help in advance. Also, I'd appreciate it if you could hold off charging me with respect to this, since I don't have a budget yet and since this is so preliminary I was just hoping for some friendly advice at this stage. If you can't do so I understand, please let me know.

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19 Ms Still was on vacation in January and did not see the e-mail until 5 February 2005, when she responded by e-mail to Mr Yip apologising for the delay and giving some advice in relation to the general question in respect of an Australian Court allowing such proceedings. Ms Still concluded her e-mail by suggesting that Mr Yip let her know if he needed any further help. 20 There was no further communication between Mr Yip and Clayton Utz until these proceedings were commenced. Gadens, the solicitors for Gilsan in the Gilsan proceedings, were instructed by the plaintiff and are retained to act for the plaintiff in these proceedings. Clayton Utz have been retained to act for the defendant in these proceedings. On 20 April 2005 Gadens wrote to Clayton Utz advising that the plaintiff had retained Clayton Utz in March 2004, and that "during that time our client disclosed confidential information to your firm that is directly relevant to these proceedings and to the dealings with" the defendant. Gadens requested an undertaking from Clayton Utz to cease to act in these proceedings. By letter of the same date Gadens advised that the confidential information was: (1) the business operations in transiting audiotext traffic to Vanuatu numbers; (2) answers to questions posed by Gadens in relation to the business of the plaintiff; and (3) the possibility of commencing proceedings against the defendant in relation to the subject matter of these proceedings. 21 Clayton Utz responded advising that they did not believe that any conflict of interest arose or was likely to arise in the matter [edited]. 22 Clayton Utz's letter went on to state that even if the information were confidential, and "in an attempt resolve concern about this issue", it had put in place arrangements to ensure that no lawyer involved in these proceedings, appearing or acting for Optus, would have access to any information provided the previous year and/or in January 2005 during the Retainer. 23 The arrangements that have been put in place are the subject of evidence from solicitors and staff who provided services during the Retainer and the solicitors who are acting for the defendant in these proceedings. There is also evidence from John Eden Meggitt, General Counsel for Clayton Utz. Mr Meggitt's evidence is that on 21 April 2005 he was appointed as the Probity Manager for the conflict alleged by the plaintiff in these proceedings. The file, the subject of the Retainer, was placed in a locked cupboard on 20 April 2005, the only key to which was held by Ms Still. On 22 April 2005 the file was delivered to Mr Meggitt, as Probity Manager. Since that time Mr Meggitt has had sole physical possession of the file which is locked in a cupboard in his office. Mr Meggitt has the only key to the cupboard and his office is on a different floor to all practising solicitors within Clayton Utz. No partner or any other employee of Clayton Utz has access to that file. 24 Each of the lawyers and staff who provided services during the Retainer have signed confidentiality undertakings on 26 April 2005 in the following terms: We are the lawyers and legal secretary who made up the Clayton Utz Team ("Our Team") which handled the now-completed matter "e-New Media: Gilsan & Optus dispute", File No 800006498 ("Our Matter"). In this Undertaking "Other Matter" is used to mean work which has been performed or may in the future be performed by another team in CU ("Other Team") in relation to Supreme Court of NSW proceedings 50044 of 2005 between Asia Pacific Telecommunications Ltd as Plaintiff and Optus Networks Pty Limited as Defendant; "Probity Manager" to mean John Meggitt, the CU General Counsel, who has no connection with any of the parties involved in either Matter; "Team Leader" to mean Mary Still; and "Our Material" to mean any information or documents which any of us may have acquired during the conduct of Our Matter and which is not in the public domain. We have been informed by Probity Manager that it has been alleged that some of Our Material could be relevant, or of use, to the Other Team. Although neither he nor any of us is aware of any such relevance, each of us: 1. Confirms that he or she has not imparted any of Our Material to any member of the Other Team. 2. Undertakes that he or she will keep the Material confidential to themself; will not have any discussion concerning Our Matter with, or disclose any of Our Material to, any person (including any partner or employee of CU and including Optus Networks Pty Limited or any barrister acting on his behalf); and that he or she will not undertake in any capacity any work or other activity relating to the Other Matter. 3. Acknowledges that he or she holds no documents relating to Our Matter; declares that to the best of his or her knowledge, all such documents have been placed in the file referred to above; acknowledges that such file is held in custody by the Probity Manager; and undertakes that he or she will make no attempt to recover that file. 4. Acknowledges that we remain bound by this Undertaking until Probity Manager advises otherwise. 25 Each of the lawyers and staff who provided services during the Retainer have filed affidavits in which each has sworn that they have not, and will not, have any involvement in these proceedings and that they have not conveyed and will not convey any information to anyone else in Clayton Utz. That evidence was unchallenged. The solicitors at Clayton Utz retained for the defendant in these proceedings (the New Team) have also sworn affidavits in which they give evidence that they have not had access to the Retainer file and will not seek to have access to the Retainer file or any information in relation to the Retainer. That evidence is also unchallenged. 26 Clayton Utz has also relied upon a form of undertaking that the solicitors and staff who provided services during the Retainer, and the New Team, are willing to provide to the Court, should that be required as a condition of any order in these proceedings. That undertaking is in the following terms: SCHEDULE A - OPTUS TEAM "I, , Of , [occupation], undertake to the Supreme Court of NSW and to eNew Media Company Limited (e-New Media) and Asia Pacific Telecommunications Limited (APT) as follows: 1. not to discuss, or seek to discuss, with Mary Still, John Fairbairn, Vicky Kuek, Ravi de Foneska, Anika Zeman or Linda Durham, any matter relating to: (a) Supreme Court of New South Wales Proceedings No of 50044 of 2005 (" the Optus Proceedings ); (b) any advice previously provided by Clayton Utz to e-New Media or APT in relation to the file titled "…80006498: e-New Media Company Limited: Gilsan and Optus Dispute…" ( e-New Media matter ); or (c) any information obtained by Clayton Utz from e-New Media or APT or any person on its behalf during the course of the e-New Media matter, 2. not to seek or obtain access to any files or documents, including electronic files an documents, in the possession or custody of Clayton Utz relating to advice previously provided e-New Media or APT in relation to the e-New Media matter; 3. to restrict access to all documents created by me or at my direction including those document stored electronically so as not to permit access to Mary Still, John Fairbairn, Vicky Kuek, Ravi de Foneska, Anika Zeman or Linda Durham in relation to the Optus proceedings. SCHEDULE B - E-NEW MEDIA TEAM I, , solicitor, undertake to the Supreme Court of New South Wales and to e-New Media Company Limited ( e-New Media Team ) and Asia Pacific Telecommunications Limited ( APT ) as follows: 1. that I will not seek or obtain access to the file titled: "…80006498: e-New Media Company Limited: Gilsan and Optus dispute…" ( the e New Media matter ) or any documents, including electronic files and documents, in the possession or custody of Clayton Utz relating to the e-New Media matter. 2. that in the Supreme Court of NSW proceedings No. 50044 of 2005 ( the Optus Proceedings ), I will not act for or assist Optus Networks Pty Ltd ( Optus ) or any other party with interests in the proceeding adverse to those of APT or e-New Media, without the leave of the court. 3. that without such leave, I will not discuss, or seek to discuss, with John Collins, Michael Reede, Nicholas Tyacke, Timothy Webb or Kimberley Potts or any other person involved in the Optus Proceedings, any matter relating to: (a) the e-New Media matter; (b) any advice provided by Clayton Utz to e-New Media or APT in the e-New Media matter, (c) any information obtained by Clayton Utz from e-New Media or APT or any person on its behalf in relation to the e-New Media matter. 27 Although Clayton Utz claims that the information provided to it during the Retainer was not confidential, it is submitted that the arrangements that have been put in place are both appropriate and safe so that there is no real, as distinct from merely fanciful or theoretical, risk of that information coming into possession of members of the New Team. It is submitted by Clayton Utz that the evidence does not disclose with the required precision the information in the possession of Clayton Utz said by the plaintiff to be confidential, nor the nature of, or extent of, that confidentiality. In this regard reliance was placed upon what Bryson J, as his Honour then was, said in D & J Constructions Pty Ltd v Head & Ors (1987) 9 NSWLR 118 at 124: In this case the plaintiff is in the same position as other litigants who seek protection for their confidential information; in particular, it must be shown that the information was confidential to the plaintiff when it was communicated, involving the plaintiff in the necessity of showing facts and circumstances which show that it should then have been kept confidential or secret, and necessarily as part of that, what information was so communicated. 28 It was also submitted that the plaintiff has not demonstrated the relevance of any of the information acquired by Clayton Utz in the course of the Retainer to the issues that may arise in these proceedings. The plaintiff submitted that it has proved that the information is both confidential and relevant and that the only way to ensure that the information remains confidential is to restrain Clayton Utz from acting for the defendant in these proceedings. Should the solicitors be restrained? 29 Ms Still was cross-examined by Mr Biscoe QC, particularly in relation to the View [edited].

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32 In Prince Jefri Bolkiah v KPMG [1999] 2 AC 222, Lord Millett referred, at 234, to Rakusen v Ellis, Munday and Clarke [1912] 1 CH 831, as being authority for two propositions: (i) that there is no absolute rule of law in England that a solicitor may not act in litigation against a former client; and (ii) that the solicitor may be restrained from acting if such a restriction is necessary to avoid a significant risk of the disclosure or misuse of confidential information belonging to the former client. Counsel for the appellant in Prince Jefri had contended for an absolute rule that precluded a solicitor or his firm from acting for a client with an interest adverse to that of the former client in the same or a connected matter. Lord Millett said at 234: In the course of argument, however, he modified his position, accepting that there was no ground on which the Court could properly intervene unless two conditions were satisfied: (i) that the solicitor was in possession of information which was confidential to the former client and (ii) that such information was or might be relevant to the matter on which he was instructed by the second client. This makes the possession of relevant confidential information the test of what is comprehended within the expression "the same or a connected matter". On this footing the Court's intervention is founded not on the avoidance of any perception of possible impropriety but on the protection of confidential information. My Lords, I would affirm this as the basis of the court's jurisdiction to intervene on behalf of a former client. It is otherwise where the court's invention is sought by an existing client, for a fiduciary cannot act at the time both for and against the same client, and his firm is in no better position. 33 In Beach Petroleum NL v Kennedy & Ors (1999) 48 NSWLR 1 the Court said at 47-48: There is a distinction between a case in which a fiduciary acts for separate clients in the one matter and a case in which a fiduciary has, on an earlier occasion, acquired information which is relevant to another matter when he acts for a different client. This distinction has been described as one between "simultaneous" representation and "successive" representation: "Developments in the Law; Conflict of Interest in the Legal Profession "(1980-1981) 94 Harvard Law Review 1244 at 1292 and 1315. Professor Finn, as his Honour then was, has described the two situations as respectively, "same matter conflicts" and "separate matter conflicts". The former is "the very heartland of fiduciary law". The latter, "in Anglo-Australian law is not seen as involving any question of fiduciary law". Rather, Professor Finn has suggested that such a case falls to be determined under the law of negligence, breach of contract, confidential information etc: see Finn "Fiduciary Law and Modern Commercial World" in McKendric (ed) Commercial Aspects of Trust and Fiduciary Obligations (1992) Clarendon Press, Oxford at 22 and 31. The distinction has recently been affirmed by Lord Millett in Prince Jefri Bolkiah v KPMG (a Firm) [1999] 2 WLR 215 at 224-225 in a judgment with which the other members of the House of Lords agreed: " … a fiduciary cannot act at the same time both for and against the same client and his firm is in no better position. … His disqualification has nothing to do with the confidentiality of client information. It is based upon the inescapable conflict of interest which is inherent in the situation. … Where the court's intervention is sought by a former client, however, the position is entirely different. The Court's jurisdiction cannot be based on any conflict of interest, real or perceived, for there is none. The fiduciary relationship which subsists between solicitor and client comes to an end with the termination of the Retainer. Thereafter the solicitor has no obligation to defend and advance the interests of his former client. The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality of the information imparted during its subsistence."

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34 I am going to assume that by reason of the contractual relationship between the parties the information, including the View, is confidential. Lord Millett's use of the phrase "might be relevant" is of course understandable because the Court may be asked to intervene at a time when it is very difficult to be sure of the relevance. I have real doubts about the relevance of the information, however for the purposes of this application I am going to assume that it is relevant. That leaves the final question of whether there is any real (as distinct from merely fanciful or theoretical) risk that the information will come into the possession of those in Clayton Utz working for the defendant in these proceedings: Prince Jefri at 237. 35 The plaintiffs submitted that the evidence discloses that the solicitors who provided services during the Retainer and the solicitors on the New Team work on the same floor and in the same department. There was also evidence that from time to time the solicitors "bounce" matters off each other in a professional sense and attend litigation seminars together. There was also evidence that suggested that when the conflict search was done at the time Clayton Utz accepted instructions for the defendant in these proceedings, the file the subject of the Retainer did not come up on the search. It was not until Gadens wrote to Clayton Utz that Ms Still became aware of the alleged conflict. The plaintiff relies on that evidence to suggest that I could not be confident that the information will not be disclosed to the New Team, in other words, there is a real risk that this will happen. I disagree entirely. 36 The evidence of the Probity Partner, the partners, solicitors and staff of Clayton Utz satisfies me that there is no real risk of the information being disclosed to the New Team. I am satisfied that a sensible and safe system is in place to ensure that will not happen. There are also confidentiality undertakings in place and a willingness to give undertakings to the Court. Undertakings to the Court would be expected to heighten the consciousness for sensitivity and diligence in ensuring that the information remains confidential. The court will assess the need for undertakings on the particular circumstances of the case. I am not satisfied that this case calls for such undertakings. Nor am I satisfied that Clayton Utz should be restrained from acting for the defendant in these proceedings.

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Duty of Loyalty 37 The plaintiff submitted that Clayton Utz should be restrained from acting further for the defendant in these proceedings because to continue to act would be in breach of its duty of loyalty to it. In support of this claim, the plaintiff relied upon Spincode Pty Ltd v Look Software Pty Ltd and Ors (2001) 4 VR 501. 38 Spincode was a very different case from the present case. Warren J, as her Honour then was, had granted an injunction against the solicitors then acting for Spincode and its director from further acting for them. It is clear that the company, Look Software Pty Ltd, of which Spincode was a shareholder, had instructed the solicitors to act for it since the date of incorporation and during the initial stages of disputation between the directors and shareholders. In the principal proceedings, an oppression suit, Spincode was the plaintiff and the defendants were the company and the other shareholders. 39 Unfortunately one of the solicitors gave evidence suggesting that the company had not retained his firm. Brooking JA regarded this evidence as "remarkable", and the firm's correspondence at the time suggesting that it had not been retained by the company as ""remarkable and reprehensible" (par [17] & [18]). Brooking JA observed that Warren J had found that "confidential information, relevant to matters in dispute in the litigation, had been obtained by the solicitors from the company", and that her Honour "was right to do so" (par [22]). Brooking JA then said: 24. There is no reason to doubt the correctness of her Honour's view that the appellant had failed to show that there was no real risk of the misuse of the confidential information [ Prince Jefri Bolkiah v KPMG [1999] 2 AC 222] and that the respondents had shown a real and sensible possibility of that misuse [ Farrow Mortgage Services Pty Ltd v Mendall Properties Pty Ltd [1995] 1 VR 1 per Hayne J]. 40 In the present case Clayton Utz has established that there is no real risk of misuse, and the plaintiff has failed to establish a real and sensible possibility of misuse. After finding that there was no reason to doubt the correctness of Warren J's view Brooking JA continued: 25. But the judge did not found herself on this alone and so her judgment raises a much wider question. Strictly, we need not consider that question. It would be enough to say that the decision below can be supported, on the most narrow view of the law, as resting on confidential information and its possible misuse. But I take the opportunity of considering the wider question. 41 Having regard to these remarks, it seems to me that Brooking JA's observations in relation to the duty of loyalty referred to earlier are obiter. The review of the law conducted by his Honour commenced with the three cases in which a solicitor had discharged himself from the retainer and then acted for "the other side": Cholmondeley v Lord Clinton (1815) 19 Ves 261; 34 ER 515; Beer v Ward (1821) Jac 77 at 82; 37 ER 779 at 781; and Bricheno v Thorp (1821) Jac 300 at 301; 37 ER 864 at 865. Brooking JA noted that in each of these cases there was no mention of confidential information, albeit that it was apparent that a later Irish case treated the first of the cases as depending on confidential communications; Hutchins v Hutchins (1825) 1 Hog 315 (par [26]-[27]). His Honour then reviewed a number of cases in which the question of who terminated the retainer was of some significance: Johnson v Marriott (1833) 2 C & M 183; 149 ER 725; Griffiths v Griffiths (1843) 2 Hare 587; 67 ER 242; Parratt v Parratt (1848) 2 De G & Sm 258; 64 ER 116; and re Holmes; re Electric Power Co Ltd (1877) 25 WR 603. After an analysis of Rakusen v Ellis, Munday & Clarke his Honour concludes: 31. One cannot say with confidence what Lord Eldon and the judges whose opinion he took were intending to lay down in Cholmondeley v Clinton . In particular, it is not possible to say with confidence what the significance was thought to be of the solicitors' having discharged themselves or whether Cholmondeley v Clinton , at all events as subsequently explained by Lord Eldon, is to be regarded as based on the danger of the misuse of confidential information. 42 However at the end of this paragraph, footnote 16 refers to Finn, Fiduciary Obligations deriving from Cholmondeley v Clinton a rule that "the courts will restrain a solicitor if he discharges himself for the purpose of acting for the opponent", irrespective of whether the solicitor possesses information confidential to the former client. Brooking JA said at [38]: "There is a good deal of authority for the view that a solicitor, as an officer of the Court, may be prevented from acting against a former client even though a likelihood of danger of misuse of confidential information is not shown". His Honour reviewed a number of cases in which the jurisdiction of the court over its officers was discussed as a basis for restraining solicitors from acting against their former clients: Black v Taylor [1993] 3 NZLR 403; Kooky Garments Ltd v Charlton [1994] 1 NZLR 587; and Grimwade v Meagher and Ors [1995] 1 VR 446. His Honour then referred to what Lord Millett said in Price Jefri in the extracts earlier in this judgment, and observed that the House of Lords had "disposed of the question whether a basis could be found for restraining a solicitor from acting against a former client other than the protection of confidential information without discussing it at any length" (par [37]). 43 Brooking JA analysed the writings of Justice Paul Finn, prior to his Honour's appointment to the Federal Court, and observed: 42. "Duty of Loyalty" is a phrase used in recent years by Judges and others in discussing whether a solicitor who acts or has acted for one client may be prevented from acting for another. The currency of the expression in this connection is undoubtedly the result, at least in part, of the writings, before his appointment to the Bench, of Professor Finn. I have not noticed any reference to a duty of loyalty in his work Fiduciary Obligations (1977), although ch 22, headed "Conflict of Duty and Duty" begins with the words "To ensure a loyalty which is undivided … ". Writing in 1988, Professor Finn said that the "fiduciary" standard enjoined one party to act in the interest of the other - to act selflessly and with undivided loyalty. 44 His Honour later observed that Justice Finn's reference to the problem of "successive adverse representation" was "tantalisingly brief" (par [46]) and notes that his discussion of the duty of loyalty was "in general not concerned with what are nowadays called 'perceptions'" and that "he founds himself on the entitlement in equity of a client to the undivided loyalty of the fiduciary who has been retained" (par [47]).

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45 After reviewing three further authorities (Macquarie Bank Ltd v Myer [1994] 1 VR 350; Holdsworth v MR Anderson & Associates Pty Ltd [1994] VSC (Unreported, Phillips J, 26 August 1994); and McVeigh v Linen House Pty Ltd [1999] 3 VR 394) the first two of which were decided some years prior to Prince Jefri and the last of which made no reference to it, Brooking JA then posed the question "How, then do matters stand?" and said: 52. … I think it must be accepted that Australian law has diverged from that of England and that the danger of misuse of confidential information is not the sole touchstone for intervention where a solicitor acts against a former client. That danger can and usually will warrant intervention, but it is not the only ground. There are two other possible bases for an interdict. In the first place, it may be said to be a breach of duty for a solicitor to take up the cudgels against a former client in the same or a closely related matter. What is the origin of the duty? What is the content, and, in particular, what is the significance, if any, of the fact - if it be the fact - that the solicitor, in Lord Eldon's words, "discharged himself" before he "went over to the other side"? It is of course difficult to consider the origin of a possible duty without at the same time considering its content. 53. Three possible sources of a relevant duty suggest themselves. The first is that there is an equitable obligation of "loyalty", which forbids not only the concurrent holding of two inconsistent engagements by different clients in the same matter but also the holding of two successive inconsistent engagements. To speak of two successive inconsistent engagements might be thought to beg the question whether equity imposes a bar; in the view of the House of Lords there is in this sense no inconsistency. By "inconsistent" I mean only that the solicitor who formerly acted for one client in the same matter now acts in that matter for a client with an interest adverse to that of the former client. In their Lordships' view, the duty of loyalty largely perishes along with the retainer from which it sprang, the only survivor being that aspect of the duty which protects confidential information. Once the retainer has gone "the solicitor has no obligation to defend or advance the interests of his former client". But what can be drawn from this last proposition? Once the contract of retainer comes to an end the solicitor does, it is true, cease to have active duties to perform for the former client. But why should we not say that "loyalty" imposes an abiding negative obligation not to act against the former client in the same matter? The wider view, and the one which commends itself to me as fair and just, is that the equitable obligation of "loyalty" is not observed by a solicitor who acts against a former client in the same matter. 54. But if this result cannot be achieved as a matter of equitable obligation why should not the law impose, and the court enforce, an obligation arising otherwise than in equity? In the passage earlier cited from Holdsworth v MR Anderson Pty Ltd Phillips J referred to the contract of retainer, and to what might be said to form part of that contract. A possible approach would be to say that it was an implied term of the contract of retainer between the solicitors and the company in the present case that the solicitors would not act against the company in the dispute in relation to which they had been retained by it. But I need not pursue this, since in my view a negative equitable obligation arose… … 58. If I thought that the solicitors in this case were subject neither to a negative equitable nor to a negative contractual obligation, I would say that what has been done by them - and I would have regard to the whole of their conduct here - is so offensive to common notions of fairness and justice that they should, as officers of the court, be brought to heel notwithstanding that they have not (on this hypothesis) infringed any legal or equitable right. … I am not deterred by the suggestion that, once infringement of legal or equitable rights ceases to mark off what may be proscribed, solicitors and their would-be clients will be subject to a great and unfair uncertainty, being unable to say in advance what view the court will take. No experienced solicitor of sound judgement would have done what has been done in this case. And in my view the nature and objectives of the jurisdiction which the court exercises over its officers, and the breadth of the discretion, permit regard to be had, not only to the nature of the dispute before litigation ensued, and the former retainer, and the new one, but also to the conduct of the solicitors at all stages. This includes the partisan approach of (the solicitor) when he acted for the company and his undisclosed attempts to serve (the director's) interests, the peremptory and unseemly way in which the solicitors changed sides, their denials that it was the company which had been their client and the uncandid affidavit of (the solicitor) in which he tried to give the impression that the company had not been the client. It would, as they used to say, the pessimi exempli if (the firm of solicitors) were not called to account. 59. I return to the equitable duty of loyalty. (The firm of solicitors) was still acting for the company in the dispute at the time they began acting for (the director and Spincode) in that dispute. But I should be sorry to think, and reluctant to hold, that whether a solicitor's fiduciary duty of loyalty stood in the way of acting against a former client in the same matter depended on whether the solicitor had, in Lord Eldon's words, "discharged himself". If there is such a requirement, it is met in this case. But I would deny the existence of the requirement. 60. So far I have not said much about her Honour's reasons for decision. But that is only because Warren J's reasoning seems to me, in its essentials, to accord with the approach which I would adopt of resting the injunction against this firm of solicitors on three independent bases: first, the danger of misuse of confidential information; secondly, breach of the fiduciary's duty of loyalty; thirdly, the desirability of restraining the solicitors as officers of the court. …

[19]

[ 98 ] In Spincode Pty Ltd v Look Software Pty Ltd, Brooking JA observed that the law in Australia had diverged from that in England to the extent that the danger of misuse of confidential information is no longer the sole touchstone for curial intervention where a solicitor acts against a former client. His Honour held that there is also an independent equitable obligation of loyalty which forbids a solicitor acting against a former client in the same matter or in a closely related matter. [ 99 ] The plaintiffs have invoked those observations as support for their contention that the defendant should be enjoined from continuing to retain Mr Sher. The plaintiffs contend that this proceeding should be regarded as closely related to the matter on which Sent took advice from Mr Sher. [ 100 ] The defendants have responded that Brooking JA's observations were obiter, and were not supported by other members of the court, and should not be followed because they are inconsistent with decisions of the highest authority in England and decisions in New South Wales. [ 101 ] It must be accepted that Brooking JA's observations appear to take the law further than it has thus far been held to go in England or New South Wales. [ 102 ] But that does not mean that Brooking JA was wrong. Nor is it altogether correct to say that Brooking JA was unsupported by other members of the court. Certainly Ormiston JA expressed no view on the point but Chernov JA, although noting that it was unnecessary to decide, considered that Brooking JA had made a compelling case for the view which he expressed. [ 103 ] In my respectful view too, Brooking JA's analysis makes a compelling case for the view which he expressed. It accords with the weight of authority in Canada and New Zealand, and it accords with equitable principle, and none of the judges' that have refused to follow Brooking JA's observations have directed themselves to an analysis of principle of the kind which his Honour undertook. [ 104 ] If it were necessary to make a choice about the matter, I would respectfully choose to follow Brooking JA's analysis in Spincode.

[22]

(1) breach of a duty to hold information confidential; (2) breach of a duty of loyalty; and (3) the Court's inherent jurisdiction over solicitors. In Prince Jefri, Lord Millett, with whom four other Law Lords agreed, said at 234-5 that the jurisdiction in a case where the retainer was no longer active was solely founded on confidential information and was not, nor could it be, connected with some principle of conflict of interest. [ 16 ] In Spincode Pty Ltd v Look Software Pty Ltd [2001] VSCA 248, Brooking JA made it quite clear that he considered that the House of Lords in Prince Jefri had not conducted a thorough enough consideration of the authorities and that the principle espoused was too narrow. However, on any view, the Spincode case could be decided the same way if the Court had followed Prince Jefri: indeed that is how the other two judges, Ormiston and Chernov JJA did decide it. [ 17 ] Prince Jefri decided two basic points: (a) the basis of the claim is the fiduciary duty to maintain information as confidential; and (b) that it is sufficient if the plaintiff demonstrates that there is a real and not fanciful risk of disclosure of confidential information, though it is not necessary to show that the risk is substantial. [ 18 ] Prince Jefri has been followed on almost every occasion when the present situation has arisen, except in Victoria. It is true that it is proposition (b) that has met with approval, though it is hard to see how this can be truly divorced from proposition (a). The Court of Appeal followed it in Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1, 48 as did the Full Court of South Australia in Pradhan v Eastside Day Surgery Pty Ltd [1999] SASC 256 (Bleby J with whom Doyle CJ and Prior J agreed). It was followed in New Zealand in Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd [2001] 3 NZLR 343, and (though he slightly modified proposition (a)) by Steytler J in Newman v Phillips Fox (1999) 21 WAR 309, 315, by Conti J in Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2000) 178 ALR 322, by Rolfe J in Colonial Portfolio Services Ltd v Nissen (2000) 35 ACSR 673 and by Gillard J in World Medical Manufacturing Corp v Phillips Ormonde & Fitzpatrick Lawyers [2000] VSC 196. [ 19 ] In Victoria, a Court of Appeal seemed to decide contrary to Prince Jefri in McVeigh v Linen House Pty Ltd [1999] VSCA 138, but that decision must be regarded as being per incuriam as Prince Jefri was neither cited to the Court nor referred to by it. [ 20 ] Some of the authorities to which Ms Dulhunty referred were decided before Prince Jefri and so are of little assistance. Others pay lip service to Prince Jefri yet continue to flirt with the ideas of conflict mentioned in some of the pre 1999 authorities. [ 21 ] In my view, the overwhelming weight of authority is to the effect that where the applicant to restrain a solicitor is a former client, the sole consideration is whether there is a real risk of disclosure of confidential information and one does not delve into matters of conflict of interest or conflict of duty. In other situations this delving may well be material. 50 The second decision is British American Tobacco Australia Services Ltd v Blanch [2004] NSWSC 70 in which the Chief Judge said:

[23]

[34] Mr Gleeson SC made it plain that the plaintiff was putting the case on three bases. First he put it squarely under the principle (as "properly understood") enunciated in Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 (Prince Jefri). He said that properly understood, the basis of Prince Jefri is vindication of the fiduciary obligations owed by solicitors. Secondly on the basis of the contractual duty of loyalty which survives the end of the provision of legal services. Thirdly he put the case on the basis of the Court's supervisory jurisdiction over solicitors. [ 35 ] Mr Gleeson invited me to reconsider my reasoning in Belan v Casey [2002] NSWSC 58 insofar as I held that only the first of these is available. … [ 77 ] Mr Gleeson took me to a learned article by professor Paul Finn, as his Honour then was, entitled "Fiduciary Law and the Modern Commercial World in Commercial Aspects of Trusts and Fiduciary Obligations" (Clarendon Press, Oxford, 1992). This article pays particular attention to what is called "former client conflict" and "separate matter conflict". [ 78 ] Of course, this article was written before Prince Jefri and that must be taken into account when considering the weight of the thinking, but I have found the general analysis extremely useful. [ 79 ] "Former client conflict" is where a law firm acts for A in a matter and later acts against A in the same or a related matter. Here, the public interest in maintaining an environment in which uninhibited and secure communication can take place between lawyer and client and other factors mean that the right of the second client to the lawyer of his or her choice will take low priority. [ 80 ] "Separate matter conflict" occurs where a lawyer obtains information in the course of acting for client A which is relevant to another matter arising later in which the lawyer acts for client B. [ 81 ] Separate matter conflict may involve information received directly from the client, but may also cover information received from third parties while acting for the client. [ 82 ] The question was discussed by the English Court of Appeal in Tournier v National Provincial and Union Bank of England [1924] 1 KB 461 and the conclusion reached that the duty of confidentiality extended to material ascertained from sources other than the customer whilst the relation of banker and customer was current. [ 83 ] Finn J says at p 33 that "Confidential information obtained in and for the purpose of rendering a particular client service can lawfully be used only for the purposes of that service unless the client consents to the contrary." [ 84 ] However, as Finn J also notes at p 33 the core difficulty is working out what information is covered by confidentiality. [ 85 ] To take some examples, the fact that the client is accustomed to catch the 5:15 train to Newcastle does not of itself indicate confidential information. However, if the solicitor is told that there are many process servers seeking out the client, the information will attain a confidential character. [ 86 ] A distinction needs to be drawn between information that comes to a solicitor by way of know how when retained by a client and information that belongs to the client. Thus, if a lawyer in the course of work for a client ascertains the most efficient system for locating people by working through the electoral roll, that knowledge ordinarily becomes part of the lawyer's know how and may be used by the lawyer on any subsequent occasion. [ 87 ] The law has for many years been that a lawyer is not prevented from taking as a subsequent client a person who is a competitor of a previous client; see eg Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831. In order to obtain an injunction something much more must be shown. [ 88 ] At this point it is appropriate to analyse Prince Jefri. [ 89 ] The basal facts were that in 1996 the plaintiff retained accountants KPMG to provide forensic accounting advice and litigation support in major litigation relating to his financial affairs. For that purpose, KPMG were given access to confidential information. [ 90 ] After that litigation was settled, the Government of Brunei retained KPMG to investigate the affairs of an agency of which the plaintiff had been chairman. The plaintiff sought an injunction against KPMG from so acting and was successful in his case in the House of Lords. [ 91 ] The leading judgment was delivered by Lord Millett with whom Lords Browne-Wilkinson, Hope, Clyde and Hutton agreed. [ 92 ] At p 234, Lord Millett affirmed the proposition that where the plaintiff is a former client, the court's intervention is founded not on the perception of any possible impropriety, but on the protection of confidential information. [ 93 ] Where the court's protection is sought by a former client, the plaintiff must show that "(i) the solicitor is in possession of information which is confidential to him and the disclosure of which he has not consented to and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own." (p235). [ 94 ] "Whether founded on contract or equity, the duty to preserve confidentiality is unqualified. It is a duty to keep the information confidential, not merely to take all reasonable steps to do so. Moreover, it is not merely a duty not to communicate the information to a third party. It is a duty not to misuse it, that is to say, without the consent of the former client to make any use of it or to cause any use to be made of it by others otherwise than for his benefit. The former client cannot be protected completely from accidental or inadvertent disclosure. But he is entitled to prevent his former solicitor from exposing him to any avoidable risk; and this includes the increased risk of the use of the information to his prejudice arising from the acceptance of instructions to act for another client with an adverse interest in a matter to which the information is or may be relevant." (pp 235-6). [ 95 ] "… the court should intervene unless it is satisfied that there is no risk of disclosure. It goes without saying that the risk must be a real one, and not merely fanciful or theoretical. But it need not be substantial." (p 237). [ 96 ] Mr Gleeson also relied on the short judgement of Lord Hope on p 227 which underlines what Lord Millett said. [ 97 ] The basic propositions enunciated in Prince Jefri have been adopted in Australia; see eg Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1, 48. See also Colonial Portfolio Services Pty Ltd v Nissen (2000) 35 ACSR 673 and Pradhan v Eastside Day Surgery Pty Ltd [1999] SASC 256 [51] a decision of the South Australian Full Court (Bleby J with whom Doyle CJ and Prior J agreed). [ 98 ] However, in one respect, there has been some substantial disagreement with Prince Jefri. In Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501, Brooking JA thoroughly examined the authorities and reached the conclusion at pp 521-2 that: "…it must be accepted that Australian law has diverged from that of England and that the danger of misuse of confidential information is not the sole touchstone for intervention where a solicitor acts against a former client." [ 99 ] Brooking JA was a member of the Victorian Court of Appeal with Ormiston and Chernov JJA. The former said that he thought that Brooking JA was correct in his analysis, but had not had time to consider the question deeply and noted that there had been little argument on the point. Chernov JA seemed to agree on the confidential information part of the case and remarked that Brooking JA appeared to make a compelling case for his view. [ 100 ] Brooking JA's view has been adopted by later cases in Victoria; see eg Sent v Fairfax Publication J Pty Ltd [2002] VSC 429 per Nettle J. [ 101 ] I briefly examined the position in Belan v Casey (supra). I there said that, except in Victoria, it seemed to me that there had been full acceptance of Prince Jefri in Australia and that Brooking JA's view was obiter. [ 102 ] Mr Gleeson submitted that I should re-examine that view. He suggests that cases such as Parry-Jones v Law Society [1969] 1 Ch 1 and Westgold Resources NL v St Barbara Mines Ltd [2002] WASC 264 show that much more emphasis must be placed on the former solicitor's contractual duty of loyalty, a contractual duty which survives the termination of the retainer, than was done in Prince Jefri . [ 103 ] Mr Gleeson further suggests that the cases on corrupt retirement by fiduciaries or corrupt termination of retainers by solicitors clearly show that the propositions put by Lord Millett in Prince Jefri were not intended to be exhaustive. [ 104 ] I have done as Mr Gleeson requested. However, I remain of the view I took in Belan v Casey.

[26]

54 In Belan v Casey, the Chief Judge referred to the confusion that existed prior to the decision in Prince Jefri. I apprehend that some of that confusion stemmed from the blurring of the line between the courts' supervision of its officers and the entitlement to have the courts intervene to protect an equitable right - the right to protection of confidential information. It seems to me that in respect of solicitors acting against former clients, the line between disciplinary supervision and consideration of the entitlement to injunctive relief for the protection of confidential information and/or for breach of duty is best accommodated by the approach taken in Prince Jefri and adopted in Beach Petroleum NL v Kennedy and by the Chief Judge in Equity in Belan v Casey and British American Tobacco Australia Services Ltd v Blanch, and in the cases referred to therein. 55 Applying this approach to the facts in Spincode would result in the evidence of the solicitor's conduct supporting findings that there could be no confidence that the confidential information provided to him by the company would not be misused or quarantined from access by the other solicitor within the firm who accepted instructions from Spincode and the director. The delivery of legal services in this modern environment permits a firm of solicitors to act against a former client so long as confidential information that "might be relevant" to a subsequent client in proceedings against the former client can be quarantined from access by solicitors who act against the former client, and there is no real risk of access to it or misuse of it. If that is not possible then there are good grounds to restrain the solicitors from acting against the former client. There are no such good grounds in this case. Public Policy 56 In Grimwade v Meagher [1995] 1 VR 446, Mandie J held that the court has inherent jurisdiction to ensure that due administration of justice and the protection of the integrity of the judicial process as part of that jurisdiction enabled the court to prevent a legal practitioner appearing for a party in order that the jurisdiction should not only be done but be seen to be done. 57 In Sent v John Fairfax Nettle J referred to the objective test applied by Mandie J of whether a fair minded, reasonably informed member of the public would conclude that the proper administration of justice required that a legal practitioner be prevented from so acting, and that in this process, due weight is given to the public interest that litigants should not be deprived of their choice of legal practitioner without good cause. 58 In my view a fair minded reasonably informed member of the public would conclude that the administration of justice is not adversely affected by the processes that have been put in place to protect the confidential information given to Clayton Utz during the Retainer. By reason of the proof that there is no real risk that the information, said to be confidential, will be available to the solicitors for the defendant, I do not accept that the perception that justice must be done and appear to be done is at risk. Orders 59 I am not satisfied that the plaintiff has established a proper basis upon which the firm, Clayton Utz, should be restrained from further acting for the defendant in these proceedings. The plaintiff's Motion is dismissed. If the parties are unable to agree on a costs order I will hear argument on a date to be fixed by arrangement with my Associate but no later than 24 June 2005.

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