Birkett Investments Pty v Streatfeild Investments Pty Ltd

[2016] ACTSC 323

PRACTICE AND PROCEDURE - PROFESSIONAL CONDUCT - Lawyers - Application by plaintiff to restrain defendants' solicitor for acting as the defendants' legal representative - Where plaintiffs were former client of solicitor - Whether confidential information relating to the plaintiffs had been previously communicated to solicitor - Whether restraint necessary to ensure the administration of justice - Inherent jurisdiction of the Court - Application dismissed - Departure from usual costs order that costs follow the event

Competition and Consumer Act 2010 (Cth), Sch 2, s 18

Court Procedures Rules 2006 (ACT)

Dealer Support Services Pty Ltd v Motor Trades Association of Australia Ltd [2014] FCA 1065; (2014) 228 FCR 252

Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561

Li v Wu [2012] FCA 164

McMaster v Wilkie-Snow [2009] ACTSC 76

Prince Jefri Bolkiah v KPMG [1998] UKHL 52; [1999] 2 AC 222

Spincode Pty Ltd v Look Software Pty Ltd [2001] VSC 287

Spincode Pty Ltd v Look Software Pty Ltd [2001] VSCA 248; (2001) 4 VR 501

Birkett Investments Pty Ltd (ACN 158 433 875) (First Plaintiff)

McNeilly Investments Pty Ltd (ACN 155 682 321) (Second Plaintiff)

M & M Woodburn Pty Ltd (ACN 157 679 019) (Third Plaintiff)

Streatfeild Investments Pty Ltd (ACN 125 740 365) (First Defendant)

Financial Analytics Pty Ltd (ACN 113 697 117) (Second Defendant)

Bott Enterprises Pty Ltd (ACN 163 752 501) (Third Defendant)

1. By application in proceeding filed 31 August 2016 the plaintiffs seek the following orders:

1. That Mr Stephen Gavagna and any solicitor from his firm Vertex Legal, be restrained from acting as a legal representative for the defendants in these proceedings.

2. That the defendants pay the plaintiffs' costs of and incidental to this application.

2. The grounds of the application are articulated in the affidavit of Kellie Marie Johnston dated 30 August 2016 as follows:

(a) By paragraph 3 of their defence the defendants have placed in issue the terms of the partnership agreement. The defendants have pleaded that the terms of the partnership agreement include more than the terms pleaded by the plaintiffs. Because of his involvement, when instructed by the partnership, with the drafting of a new partnership agreement which was never ultimately executed, Mr Gavagna is said to be likely to possess confidential information about the basis of the contractual arrangements between the parties giving rise to the partnership agreement that is the subject of the proceedings and may potentially become a witness in the proceedings.

(b) During the period 4 April 2016 to 8 July 2016 Mr Gavagna was a partner at Mills Oakley, the firm that had acted for the plaintiffs in relation to the dispute the subject of the proceedings until 30 March 2016. While the firm had ceased acting for the plaintiffs prior to Mr Gavagna joining the partnership, Mills Oakley retained the files and Mr Gavagna had access to those files or, alternatively if he did not access them, the proper administration of justice requires the removal of Mr Gavagna from involvement in the proceedings.

3. The plaintiffs and defendants include the former partners in a partnership known as the Analytics Group.

4. The first plaintiff, Birkett Investments Pty Ltd, was a partner in the firm.

5. The second plaintiff, McNeilly Investments Pty Ltd, was a partner in the firm.

6. The third plaintiff, M & M Woodburn Pty Ltd, was a partner in the firm.

7. The first defendant, Streatfeild Investments Pty Ltd, was a partner in the firm.

8. The second defendant, Financial Analytics Pty Ltd, was a partner in the firm.

9. The third defendant, Bott Enterprises Pty Ltd, was a partner in the firm.

10. The fourth defendant, Brett Douglas Streatfeild, was the sole director of Streatfeild Investments Pty Ltd.

11. The fifth defendant, Scott Norman Alexander, was the director of Financial Analytics.

12. Streatfeild Investments and Financial Analytics each held a 40% interest in the partnership, McNeilly Investments, M & M Woodburn, Birkett Investments and Bott Enterprises each held a 5% interest.

13. Paragraph 9 of the statement of claim identifies that the rights and obligations of the partners were governed by the terms of an agreement in writing titled the Analytics Group Partnership agreement (2009 Agreement). The defendants have denied that the agreement contained all of the relevant terms and, shortly before the hearing of this application, particularised the only additional document recording the terms of the partnership agreement as a "document to which [the plaintiff's] are signatories and which bind them to the 2009 document". This was tendered and became Exhibit 1. Further, upon the hearing of the application, counsel for the defendants appeared to accept that some further documents would need to be particularised because Exhibit 1 was generated at a time prior to Bott Enterprises joining the partnership. As a result some further documentation would need to exist to take the percentage interests from those identified in the 2009 Agreement to those which the parties appear to accept were in place by the time of the departure of the plaintiffs from the partnership. Despite the pleadings, once these issues are resolved there is unlikely to be any significant dispute about the content of the partnership agreement. There is no dispute on the pleadings that the critical clauses relied upon by the plaintiffs in the claims that they make were the clauses governing the relationship between the partners.

14. The statement of claim makes four claims which may be summarised as follows.

15. The first, second and third plaintiffs gave notice of their intention to retire from the partnership with effect from 12 April 2014 on three dates in March 2014. The continuing partners gave written notice of their intention to purchase the retiring partners' interests. The partnership agreement required that the price payable by the continuing partners be "the fair value" of the interest of the retiring partners determined by a valuer. Notwithstanding that the retiring partners had bought in only two years earlier on the basis that they pay $100,000 for a 5% interest in the partnership, the valuation had the effect that each 5% interest would be worth only $26,500.

16. The claim alleges that the valuation undertaken was not in accordance with the agreement because the valuer misconceived his function under that agreement. That is on three bases. First, the valuer determined the fair market value of the business instead of the fair value of the interest of each retiring partner. Second, the valuer failed to take into account certain specific matters mentioned in cl 5.2 of the agreement, namely the amount of the credit in the capital account of each retiring partner as shown by the accounts of the partnership made up to the date of the retirement and the goodwill of the business making due allowance for all actual and contingent liabilities. Third, the assessment of fair value of the interest of each retiring partner involved different considerations and a broader approach to the valuation task than the assessment of fair market value of the business undertaken by the valuer.

17. The defence alleges that in April 2014 an offer was made to purchase the interests of the retiring partners at the same amount as was paid to acquire their interest in the partnership.

18. Claim two is that the valuation was partly induced by a contravention of s 18 of the Australian Consumer Law in the following circumstances. At the time of the request to the valuer, the fourth and fifth defendants were negotiating the sale of the partnership business to Deloitte Touche Tohmatsu Limited trading as Deloitte Australia and the negotiations were at an advanced stage. Although the valuer made a request for information which would have encompassed that information, the first, second, fourth and fifth defendants did not provide that information. That conduct is alleged to be misleading or deceptive conduct giving rise to a loss on the part of the retiring partners.

19. Claim three is that the first, second and third defendants are liable to account for the benefits derived by them from the sale of the partnership business to Deloitte in June 2014. It is alleged that in about September or October 2013 Mr Streatfeild, on behalf of the first and second defendants, commenced negotiations for the sale of the partnership business to Deloitte. The plaintiffs claim that the first and second defendants were under a duty to disclose Deloitte's interest in acquisition and that had the retiring partners been aware of those negotiations they would not have given the notice of intention to retire from the partnership. The acquisition was announced in mid-June 2014. The defendants have failed or refused to disclose to the plaintiffs any details of the benefits derived from the sale of the business.

20. The defence states that the defendants had a duty to disclose that certain matters existed, but denies that "the Deloitte interest was in regards to the purchase of the partnership business". It denies that Deloitte purchased the partnership business. The defence admits that the defendants have not disclosed the terms of the agreement, but states that is because it is subject to confidentiality and non-disclosure terms between the parties to the contract.

21. Claim four is a claim by the first plaintiff for its accrued entitlements to a profit distribution for the accounting period ended 12 April 2014. That is based on the allegation that the partnership agreement provided that if a change in the partners' percentage shares occurred during an accounting period, such as upon retirement of a partner, Analytics Group Pty Ltd, the agent company which managed the business of the partnership, was to calculate as closely as possible the net income or loss of the partnership at the date of the change in percentage shares and prepare a statement of the entitlements of each partner accordingly. It is alleged that the calculation occurred, but an amount of $54,900 shown as owing to Birkett Investments was not paid and that amount plus interest is claimed.

22. Various forms of relief are claimed which are not necessary to describe in detail. The defence alleges in answer to the whole of the plaintiffs' claim that the plaintiffs have not complied with cl 6 of the partnership agreement being the process described as "resolution of disputes".

23. Jagot J summarised the relevant principles in Li v Wu [2012] FCA 164 at [3]- [9], another case in which Mr Gavagna acted against a former client.

3. The principles applicable to the application to restrain a solicitor from acting were not in dispute. In the present case, Mr Wu relied upon two grounds in support of the proposed order. First, the protection of confidential information said to have been communicated by Mr Wu to Mr Gavagna when Mr Wu, or entities to which he was connected, were clients of Mr Gavagna, or his firm. Second, the protection of the due administration of justice.

4. In Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307; [1993] FCA 218 Drummond J identified the following propositions from the earlier authorities:

(1) "...a solicitor is liable to be restrained from acting for a new client against a former client if a reasonable observer, aware of the relevant facts, would think that there was a real, as opposed to a theoretical possibility that confidential information given to the solicitor by the former client might be used by the solicitor to advance the interests of a new client to the detriment of the old client" (at 312).

(2) "...the cases all indicate that before a solicitor will be restrained from acting for a new client at the behest of an old client, not only must there be a threat of disclosure of information given in confidence, but there must be evidence that such disclosure will be to the former client's disadvantage" (at 312).

(3) "If the solicitor receives information in confidence from the former client which remains confidential at the time application is made to restrain the solicitor from acting for the new client, the solicitor will, in general, only be able to avoid being enjoined if it is clear that the confidential information in question relates only to matters which are remote from the matters relevant to the discharge by the solicitor of his retainer for his new client" (at 313).

(4) "...it has long been recognised that a solicitor who, with the best will in the world, is determined not to make use of one client's confidential information for the benefit of another client may still subconsciously draw on that information to the disadvantage of the former" (at 313).

(5) "It is a basic requirement that before material will be recognised as having the character of confidential information, the information in question must be identified with precision and not merely in global terms" (at 314).

(6) "The more general the description of the information which a plaintiff seeks to protect, the more difficult it is for the court to satisfy itself that information so described was imparted or received or retained by a defendant in circumstances which give rise to an obligation of confidence": Independent Management Resources Pty Ltd v Brown [1987] VicRp 50; (1987) VR 605 at 609" (at 314).

5. In Yunghanns v Elfic Ltd (formerly known as Elders Finance & Investment Co Ltd) (unreported, Supreme Court of Victoria, Gillard J, 3 July 1998) (Yunghanns), Gillard J identified "three different bases for the grant of an injunction to restrain a solicitor acting against his former client" as being the protection of confidential information, the duty of loyalty (subsequently doubted as a continuing duty), and the protection of the administration of justice. Gillard J said:

In my opinion, the three bases for the jurisdiction are to be considered in the present application.

The authorities establish that there are a number of factors which must be considered and weighed on an application such as the present, namely -

(i) the right of a solicitor to act for any client and the right of all members of the community to retain a solicitor of their own choice;

(ii) the right of a client to the maintenance of all confidential information obtained by the solicitor during the course of the retainer, which right continues until the client expressly or impliedly consents to the discharge of the obligation of confidence;

(iii) that as a general rule it is necessary to identify and establish that there was some confidential information provided ...But the degree of particularity of the confidential information must depend upon all the circumstances. Often it cannot be identified for fear of disclosure. In considering this factor it must be borne in mind that a solicitor makes notes, forms views and opinions of clients and observes things that the client may have forgotten or overlooked. In some cases the circumstances of the retainer and the nature of the legal work will be sufficient to establish the nature of the confidential information. In this regard the relationship between solicitor and client may be such that the solicitor learns a great deal about his client, his strengths, his weaknesses, his honesty or lack thereof, his reaction to crisis, pressure or tension, his attitude to litigation and settling cases and his tactics. These are factors which I would call the "getting to know you" factors. The overall opinion formed by a solicitor of his client as a result of his contact may in the circumstances amount to confidential information that should not be disclosed or used against the client.

(iv) That a solicitor must, consistent with his retainer, act in the best interest of his client which means not only exercising skill but also putting at his client's disposal all relevant knowledge and if a solicitor is in a position where he is unable to reveal all his knowledge to a client he should not act for him... This must be especially the position where the solicitor has acted for two clients in relation to one transaction and then thereafter acts for one against the other in relation to matters arising out of the same transaction.

6. In Yunghanns the injunction was granted having regard to the facts, including: - (i) the solicitors had acted for Mr Yunghanns for some 30 years, (ii) the solicitors held some 140 files on behalf of Mr Yunghanns, (iii) Mr Yunghanns gave evidence that he imparted confidential information to the solicitors about strategy, risks and returns in litigation, takeovers and other business dealings and the solicitors had obtained an intimate understanding of his approach to these matters, and (iv) the firm was involved in advising both parties about the transactions which founded Mr Yunghanns' claims in the litigation.

7. In Kallinicos v Hunt (2005) 64 NSWLR 561; [2005] NSWSC 1181 Brereton J dealt with a case in which the plaintiff sought to invoke the third ground, protection of the administration of justice. After an extensive review of the authorities Brereton J (at [76]) summarised the applicable principles in these terms (excluding case references):

• During the subsistence of a retainer, where the court's intervention to restrain a solicitor from acting for another is sought by an existing client of the solicitor, the foundation of the court's jurisdiction is the fiduciary obligation of a solicitor, and the inescapable conflict of duty which is inherent in the situation of acting for clients with competing interests.
• Once the retainer is at an end, however, the court's jurisdiction is not based on any conflict of duty or interest, but on the protection of the confidences of the former client (unless there is no real risk of disclosure).
• After termination of the retainer, there is no continuing (equitable or contractual) duty of loyalty to provide a basis for the court's intervention, such duty having come to an end with the retainer.
• However, the court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice.
• The test to be applied in this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice.

• The jurisdiction is to be regarded as exceptional and is to be exercised with caution.

• Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause.
• The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief.

8. In Geelong School Supplies Pty Ltd v Dean (2006) 237 ALR 612; [2006] FCA 1404 Young J also dealt with an application brought on the ground of the protection of the administration of justice. At [31] Young J provided a convenient summary of some of the decisions which Brereton J considered in Kallinicos v Hunt. The summary is useful because it highlights examples which have been accepted as satisfying the principle that the jurisdiction is to be regarded as "exceptional". Young J noted as follows:

[31] In the course of his examination of the authorities, Brereton J referred to the observations of Bergin J in Mitchell v Pattern Holdings Pty Ltd [2000] NSWSC 1015 ('Mitchell'), Heenan J in Holborow v MacDonald Rudder [2002] WASC 265 ('Holborow') and Hasluck J in Bowen [Bowen v Stott [2004] WASC 94]. In Mitchell, Bergin J stated that, as an incident of its inherent jurisdiction, the court may decide upon the propriety of a legal practitioner representing a party in a particular case to ensure justice and the appearance of justice: at [34]. In Holborow, Heenan J said that this power had been invoked in cases where there was a potential that the legal practitioner might be a witness; where the subject matter of the litigation was likely to involve an evaluation of the conduct of the solicitor; and where the efficacy of documents prepared by the solicitor was likely to be in issue: at [23]. In Bowen v Stott, Hasluck J said that it may be appropriate to invoke the inherent power in cases where the solicitor had some direct pecuniary interest in the outcome of the case, where the solicitor might feel impelled to justify or defend his conduct in representing a client, or where the practitioner's credibility is at stake as a potential witness: at [47], [53] and [55].

9. In Ismail-Zai v State of Western Australia (2007) 34 WAR 379; [2007] WASCA 150 Steytler P made this statement (at [29]) about the so-called "getting to know you" considerations in Yunghanns:

[29] These comments were made in the context of a case where the former client had had a very close relationship with a firm of solicitors spanning some 30 years. The former client had initially worked as an employee solicitor for the firm for five years and, subsequently, the firm had acted for him in many commercial transactions. The firm consequently had "many opportunities to form opinions as to [the former client's] modus operandi in business and legal work" (at 13). The case was consequently unusual. If these so-called "getting to know you" factors, to the extent that they involve knowledge of the client rather than of anything imparted in confidence by the client concerning his or her affairs, can constitute confidential information (a proposition that seems to me, with respect, to be questionable: see Black [Black v Taylor [1993] 3 NZLR 403]at 412 per Richardson J), they will only rarely do so: Mintel International Group Ltd v Mintel (Australia) Pty Ltd [2000] FCA 1410; (2000) 181 ALR 78; and see Black at 406 per Cooke P, at 408, 412 per Richardson J. However, the misuse of information of that kind might be such as to undermine the due administration of justice.

24. The plaintiffs also placed particular reliance in their written submissions upon the statements in Spincode Pty Ltd v Look Software Pty Ltd [2001] VSC 287 insofar as Warren J referred to the unreported decision of J.D. Phillips J in Holdsworth & Ors v M.R. Anderson & Associates (unreported, Supreme Court of Victoria, 26 August 1994):

1. In the category of case where the application is to restrain a solicitor formerly the subject of a common retainer for different parties in respect of the same transaction, where subsequently that legal representative continues to act for one or other of the parties who commonly retained him, in Holdsworth & Ors v M.R. Anderson & Associates, unreported judgment dated 26 August 1994 (at pp.16-17) J.D. Phillips J considered that there is no absolute rule that a solicitor may not subsequently act against one who was formerly his client, but he was strongly disposed to the view that the solicitor ought not to act, and he did not think that that depended upon the existence or not of confidences imparted on the earlier occasion that now merits protection. He considered that it depended rather upon the existence of the contract of retainer that was made in the first place:

"It is surely part of the contract of retainer that the solicitor will use his best endeavours in the interests of his client and he does not do that by placing his own particular knowledge of events in which he took part as the agent of both at the disposal of one to the exclusion of the other ...

The common interest of both sides does, I think, make it less likely that the defendants made disclosures in confidence now deserving protection, because whatever they said to the solicitors at the time was doubtless said to them as solicitors for both plaintiffs and defendants and (unless subject to restriction by some special stipulation or by virtue of some other conduct) could be expected to be used by the solicitors to the mutual advantage of both plaintiffs and defendants. After all, that was the whole point of the common retainer ...".

25. The submissions of the plaintiffs contended that there was an ongoing duty of loyalty that existed to the plaintiffs once the retainer was ended. As a consequence, the plaintiffs contended that it was not essential that they establish the risk of use of confidential information. That submission was based on a number of Victorian authorities derived from the judgment of Brooking JA on the appeal in Spincode Pty Ltd v Look Software Pty Ltd [2001] VSCA 248; (2001) 4 VR 501. There appears to be a difference of approach between those authorities and authorities in New South Wales Supreme Court and in the Federal Court as to whether or not there is a continuing duty of loyalty or whether any such issues are to be dealt within the context of a restraint arising out of the due administration of justice. The approach which denies any ongoing duty of loyalty was articulated in Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561 (Kallinicos), which in turn accepted the approach in Prince Jefri Bolkiah v KPMG [1998] UKHL 52; [1999] 2 AC 222. In McMaster v Wilkie-Snow [2009] ACTSC 76 (McMaster) Harper M adopted the analysis of the case law by Brereton J in Kallinicos as stating the relevant legal principles. It was also adopted by Jagot J, an additional judge of this Court, in Li v Wu. While the plaintiffs submitted that there were authorities to support the proposition that a duty of loyalty continued after termination of a retainer, they did not advance any reasoned basis why those authorities should be preferred to the authorities followed by Harper M in McMaster and Jagot J in Li v Wu. In those circumstances it appears to me that I should follow the same approach as Harper M in McMaster as I am not satisfied, based on the manner in which the application was argued, that the approach is clearly wrong and it appears to be consistent with recent New South Wales and Federal Court authority (see, in particular, Dealer Support Services Pty Ltd v Motor Trades Association of Australia Ltd [2014] FCA 1065; (2014) 228 FCR 252). As a consequence, I will determine this application on the basis that the plaintiffs must either establish the potential use of confidential information or alternatively that the due administration of justice requires restraint of Mr Gavagna, rather than on the basis of a free standing duty of loyalty.

The evidence forming the basis of the application

26. In support of the application the plaintiffs relied upon the affidavit of Kelly Marie Johnston of 30 August 2016, the affidavit of Melissa Sue Woodburn of 8 September 2016 and the affidavit of Mark Duncan Flint dated 24 October 2016. The defendants relied upon the affidavit of Stephen John Gavagna dated 12 October 2016.

27. Those affidavits disclose the following facts.

28. Each of the plaintiffs was admitted into the partnership trading as the Analytics Group on 1 July 2012. In mid-2012 Goodman Law, the law practice of which Mr Gavagna was the principal, opened a file relating to the partnership agreement. On 16 November 2012 Melissa Woodburn and Scott Alexander met with Mr Gavagna to give instructions and receive advice in relation to the drafting of a new partnership agreement. The partners had agreed on a list of principles that should be incorporated into the new partnership agreement. That was a substantial document which was Annexure A to the affidavit of Ms Woodburn. The evidence of Ms Woodburn about that meeting was:

At that meeting Scott, Stephen and I discussed the personal circumstances of each of the people controlling the entities in the partnership, the nature and structure of the partnership's business and the matters that needed to be addressed in a new partnership agreement, including the list of principles that have been agreed by the partners and sent to Stephen before the meeting.

29. Mr Gavagna wrote to Mr Alexander and Ms Woodburn concerning the scope of his instructions on 23 November 2012. He sent a further letter dated 27 November 2012 in relation to the costs agreement with his legal practice. The costs agreement was signed by Mr Streatfeild and Ms Woodburn on 5 December and emailed to him on 11 December 2012.

30. There was a further meeting between Ms Woodburn, Mr Alexander, Mr Gavagna and a solicitor whom he employed, Nithya Sambasivam, on 12 December 2012. Ms Woodburn's evidence was "at that meeting we discussed in more detail some terms of the proposed new partnership agreement and in particular, the terms relating to entry and exit from the partnership agreement and how the partnership would make decisions on various matters". In mid-2013 a draft partnership agreement was prepared by a solicitor employed by Mr Gavagna under his supervision. The partnership agreement as drafted did not incorporate the principles identified in the principles document earlier referred to. The partnership agreement was not finalised and hence did not become the binding agreement between the partners. Most of the work on the file was done by Paul Smith and Ms Sambasivam. Mr Gavagna closed the file in July 2013.

31. Mr Gavagna denied he received any instructions that were not available on the public record or instructions which were or could have been provided by Mr Alexander. He said he could not recall any discussion of the personal circumstances of each of the people involved in the partnership. I accept that evidence.

32. No party alleges in the present proceedings that the principles document formed part of the agreement that was operative between the partners in 2014. As a consequence, at least by the time of the hearing of this application, it was clear that the documents arising from this process would not be asserted by the defendants to form part of the operative partnership agreement between the partners as at 2014.

33. In March 2014 Goodman Law opened a file in relation to the separation of the partnership. The clients appear to have been the current defendants. That appears to have been the result of each of the three plaintiffs giving notice during that month of their retirement from the partnership. Those retirements became effective on 12 April 2014. Mr Gavagna charged the defendants some $34,000 for the fees of solicitor and counsel during the period when the file was open. On 9 April 2014 Goodman Law wrote to the plaintiffs in these proceedings proposing a settlement deed. Goodman Law engaged in correspondence with the plaintiffs and Meyer Vandenberg, the then solicitors for the plaintiffs.

34. On 18 September 2015 Mills Oakley, the firm then acting for the plaintiffs, sent a notice of dispute to Goodman Law in relation to the claims which are now the subject of these proceedings. Between that date and 15 December 2015 there was correspondence between Goodman Law and Mills Oakley in relation to the claims made by the plaintiffs. In October, November and December there was further correspondence between the solicitors.

35. In late February 2016 an agreement was reached by Mr Gavagna with the Mills Oakley partnership that he would be admitted to that partnership. In anticipation of Mr Gavagna joining the partnership, Mills Oakley, taking a prudent approach to the avoidance of conflicts, ceased to act for the plaintiffs and transferred the file to the plaintiffs' present solicitor.

36. Mr Gavagna became a partner in Mills Oakley on 4 April 2016. Some time after Mr Gavagna became a partner at Mills Oakley he had a conversation with Mr Flint who was also a partner in the firm and who had acted for the plaintiffs up until 30 March 2016. Mr Gavagna said that some days after joining Mills Oakley he asked Mr Flint what had happened to the Analytics Group file and was told that it had been sent back to the clients. Mr Flint's recollection was that he told Mr Gavagna that file had been transferred to Kellie Johnston (the plaintiffs' current solicitor) because Mills Oakley thought it would have a conflict if Mr Gavagna joined the firm. Mr Gavagna asked whether, if the dispute got underway again and Mr Streatfeild wanted to use Mills Oakley, that would be okay. Mr Flint said that it would not be. I was invited by counsel for the defendants to accept Mr Flint's version of this conversation and I do so. It appeared to me to be a more detailed recollection of what occurred and no evidence was put on by Mr Gavagna subsequent to the filing of the affidavit of Mr Flint to contradict or qualify what was in his affidavit.

37. Mr Gavagna denied on oath that he ever looked at the Mills Oakley file relating to the plaintiffs. There is no basis for not accepting that evidence and I do accept it.

38. Proceedings were commenced on 27 June 2016. Mr Gavagna resigned from the Mills Oakley partnership on 8 July 2016. On 1 August 2016 Wayne Wharton of Vertex Legal filed the notice of intention to respond on behalf of the defendants. On 8 August 2016 a defence signed by Mr Gavagna, who then practised either as an employee or partner at Vertex Legal, was filed.

39. As pointed out above I have approached this matter on the basis that there is no ongoing duty of loyalty. There is clearly a gap between those circumstances in which a solicitor may choose, in order to protect his or her professional reputation, not to act in a case against former clients and the circumstances where, either by reason of the potential for misuse of confidential information or because of the need to preserve the integrity of the administration of justice, the Court will restrain a solicitor from acting.

40. So far as confidential information is concerned, the plaintiffs must establish that a reasonable observer would think that there was a real as opposed to a theoretical possibility that the confidential information given to the solicitor by the plaintiffs might be used by the solicitor to advance the interests of the defendants to the detriment of the plaintiffs. So far as the retainer by the partnership in 2012 is concerned I am not satisfied that any information that was confidential as between plaintiffs and defendants was disclosed to Mr Gavagna. Further, I am satisfied that the extent of contact between Mr Gavagna and Ms Woodburn was not such that Mr Gavagna would have the benefit of what is referred to in the authorities as "getting to know you" information which might be deployed against his former clients. Additionally, having regard to the manner in which the defence has now been particularised, or foreshadowed that it will be particularised, any confidential information relating to the proposed new partnership agreement, although generally related to the relationship of partnership, is likely to be remote from the matters relevant to the discharge by Mr Gavagna of his retainer for the defendants.

41. In relation to the administration of justice ground, I have accepted the evidence that Mr Gavagna did not gain access to the plaintiffs' file during the brief period when he was a partner at Mills Oakley. Further, it is not a case where the administration of justice requires the exercise of the Court's inherent jurisdiction to restrain solicitors from acting in a particular case. The general principle is that there is a public interest in a litigant not being deprived of the lawyer of his or her choice without due cause. As Brereton J pointed out in Kallinicos, the jurisdiction is to be regarded as exceptional and to be exercised with caution. As the case is currently pleaded, it is not one where Mr Gavagna might be a witness, where the proceedings are likely to involve an evaluation of his conduct or where the efficacy of documents he prepared is likely to be an issue. While the categories of cases which might require the restraint of a legal practitioner in the exercise of the Court's inherent jurisdiction are not closed, the circumstances of this case do not warrant the Court's intervention.

42. In those circumstances the plaintiffs' application will be dismissed.

43. In relation to costs the approach in matters such as this would generally be that the costs follow the event. That would involve the plaintiffs paying the defendants' costs. That would be consistent with the fact that prior to the filing of the application Mr Gavagna outlined to the solicitors for the plaintiffs the fact that he had not, in fact, accessed the Mills Oakley file and pointed to the decision of Jagot J in a Li v Wu.

44. However, in my view, some modification of that approach is warranted. One of the two grounds upon which the plaintiffs sought to have Mr Gavagna restrained from acting arose from the terms of paragraph 3 the defence. That related to the terms of the partnership agreement between the partners in the Analytics Group. The defendants pleaded that the 2009 Agreement was included amongst the documents forming a partnership agreement, but indicated that further documents would subsequently be particularised. The particulars provided on 26 October 2016 purported to provide particulars of the documents. That particularisation had the effect of substantially eliminating the prospect that Mr Gavagna would be required to give evidence in relation to the transactions that occurred in 2012 and reduced the prospect that he may hold confidential information that was not remote from the issues in these proceedings. The issue of the particularisation had been earlier addressed, to some extent, in the affidavit of Mr Gavagna which in response to the articulation of the grounds for the application in Ms Johnston's affidavit said: "No request for particulars are [sic] made in regards to the documents. The documents referred to relate to emails transpiring between the parties in the resignation of the partners. Those documents will be provided in the ordinary course of proceedings." While this statement appears, in the light of subsequent events, to be inaccurate, it did provide some indication that the other documents alleged to form part of the partnership agreement did not relate to events occurring during the 2012 retainer. Although it is correct to say that the plaintiffs had not requested particulars of paragraph 3, the obligation on the defendants was to provide particulars in their pleading. As indicated above, during the course of the hearing on 27 October 2016 counsel for the defendants accepted that some further documents would need to be provided by way of particulars. The provision of those documents, while being inconsistent with the statement on 26 October 2016 that the provision of particulars was complete, will not change the position that Mr Gavagna is unlikely to have to give evidence in relation to those dealings and his unlikely to hold confidential information relevant to the terms of the partnership.

45. While the relevantly operative terms of the 2009 Agreement were admitted as part of the defence, the failure to fully plead in the defence the documents said to comprise the operative terms of the partnership agreement as at 2014 left open the real prospect that the transactions in 2012 might have had to have been traversed for the purposes of the hearing. In my view, the failure by the defendants to properly particularise in accordance with the Court Procedures Rules 2006 (ACT) the documents which they said constituted the partnership agreement, the limited disclosure of their content in the affidavit of Mr Gavagna and the partial particularisation of the documents on 26 October 2012 provides a basis upon which it is appropriate to modify the costs order in this case.

46. In those circumstances I consider that the appropriate order is that the plaintiffs pay the defendants' costs of the application in proceedings from 14 October 2016, the day after the filing of Mr Gavagna's affidavit, but that otherwise the costs of the application are the defendants' costs in the cause.

1. The application in proceeding filed 31 August 2016 is dismissed.

2. The plaintiffs are to pay the defendants' costs of the application in proceedings filed 31 August 2016 from 14 October 2016, but otherwise the costs of that application are the defendants' cost in the cause.

3. The costs ordered to be paid pursuant to order 2 may not be assessed until the proceedings end.

I certify that the preceding forty-seven [47] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Associate Justice Mossop.