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[2002] FCA 1293
procedural. Orders made: (1) parties to exchange lists of proposed categories of discoverable documents by 22 November 2002; (2) if no agreement, return for further directions on 13 December 2002; (3) costs...
Red Earth sought to stop Corrs from representing the applicants because a former solicitor who had worked for Red Earth joined Corrs. The Court accepted evidence and undertakings that insulated that solicitor and found no real risk her former client's confidential information would be disclosed, so it refused to restrain Corrs. On costs, the Court held that interlocutory applications made during the main case are normally treated as costs in the cause and ordered each party's costs of the motion to follow the outcome of the substantive proceedings, refusing the applicants' request for immediate taxation and payment. The Court also gave directions for discovery.
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1,678 words · generated 30/07/2026
This judgment concerns an interlocutory dispute about whether a firm of solicitors, Corrs Chambers Westgarth, should be restrained from acting for the applicants in ongoing proceedings because a former Mallesons solicitor, Ms Ann Dufty, who had previously acted for the respondent, Red Earth (trading as Taltarni Vineyards), had become employed by Corrs. Red Earth contended Ms Dufty possessed confidential information relevant to the dispute and sought an order restraining Corrs from acting. Corrs (for the applicants) responded with detailed written undertakings and affidavits explaining the steps taken to insulate Ms Dufty from the matter and describing her limited, part-time and discrete role within Corrs' intellectual property group.
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Ryan J had earlier published reasons (9 May 2002) dismissing the motion to restrain Corrs, accepting for argument's sake that Ms Dufty might have had confidential information but concluding the applicants had discharged the onus of proving there was no real risk of disclosure because of the undertakings and evidence presented [1]. The present reasons, delivered 18 October 2002, address the applicants' application for costs of the interlocutory motion to be taxed and paid immediately rather than being costs in the cause. The Court ordered that the costs of and incidental to the motion dated 4 February 2002 (including the costs of the argument as to costs) be costs in the cause [3]. The Court also gave directions for discovery: exchange lists of proposed categories of discoverable documents by 22 November 2002 and, if no agreement, return for further directions on 13 December 2002 [9].
Two central questions informed Ryan J's reasoning: first, whether there was a real risk of disclosure of the respondent's confidential information sufficient to warrant injunctive relief; second, the appropriate costs consequence of the interlocutory motion.
On the first question, Ryan J explained that the applicants had provided uncontested affidavit evidence, together with firm undertakings, which collectively demonstrated adequate insulation of Ms Dufty and no real risk she would disclose confidential information to those prosecuting the litigation on behalf of the applicants. The Court accepted the affidavits from senior practitioners, the specific assurances given by Corrs (detailed in Darvall's letter of 12 December 2001), Ms Dufty's limited work pattern (two days a week), her discrete role and her seniority and professional awareness of duties to a former client; these factors together dispelled reasonable disquiet [1], [6].
On the costs question, Ryan J was influenced by the character of the dispute and the fact it addressed a common concern to both parties in the substantive proceedings. The Court considered precedent and discretion. It noted that challenges to a retainer in such circumstances were "hardly surprising" and that parties are entitled to seek the court's resolution of the issue rather than rely solely on firm assurances [7]. The Court referenced D & J Constructions (Bryson J's approach, where a challenge was not surprising and no costs order was made) and Photocure (Goldberg J ordered a split costs outcome) as analogous authorities informing discretionary outcomes [7], [8]. Given the absence of special or unusual circumstances justifying separate immediate taxation and payment, Ryan J exercised his discretion to make the costs of the motion costs in the cause so they would follow the ultimate event in the substantive proceedings [8].
In short, the Court found the interlocutory challenge reasonable but not meritorious; because the dispute arose in the course of the substantive action and was understandable on both sides, the costs consequences should follow the main action absent special circumstances [6], [8].
Before this decision, established principles governed injunctions against solicitors acting for a new client where a solicitor had formerly acted for an adversary: injunctive relief depends on whether there is a real risk of disclosure of confidential information, and evidence of insulation measures and professional undertakings are relevant. The Court's analysis reiterates and applies those principles rather than creating a new rule.
On costs, the Court applied established discretionary principles: interlocutory applications made in the context of substantive proceedings are ordinarily treated as costs in the cause; judicial practice varies and depends on the facts. Ryan J's decision aligns with Bryson J's reasoning in D & J Constructions, where a challenge to a retainer was not surprising and no special costs order was made, and contrasts with Goldberg J's different approach in Photocure where a partial adverse costs order was made [7], [8]. Thus the decision clarifies that, in analogous circumstances where a former solicitor's move prompts a challenge, courts may find it reasonable for either side to litigate the issue and should normally let costs follow the substantive outcome unless unusual facts justify otherwise.
After this decision, practitioners should expect that:
Passage: "… by the undertakings given to the court, the uncontested affidavit evidence of Ms Dufty and Mr Stern, the fact that Ms Dufty only works two days a week in a discrete area of the intellectual property group and is a senior practitioner with a strong appreciation of her duty to Red Earth as her former client" [1]. Plain English: The Court relied on the firm's promises to the court, the sworn statements from experienced lawyers including Ms Dufty, and the fact she worked part-time in a separate role and knew her duties to her old client. Together, these showed there was no realistic chance she would disclose confidential information.
Passage: "We must therefore maintain our client's strong objection ... unless your firm voluntarily withdraws ... our client will have no option but to move the court to order you to do so." [3]. Plain English: This records Red Earth's formal warning: their lawyers demanded Corrs stop representing the applicants or they would ask the court to make them stop.
Passage: "However it was hardly surprising that there was a challenge to the defendant's retainer. No less so because the challenge has not been upheld. I propose to make no order as to costs." (quotation from D & J Constructions) [7]. Plain English: The Court quoted earlier authority saying it was understandable someone would challenge a solicitors' retainer, and losing such a challenge does not automatically mean the challenger should pay costs.
Passage: "Because it has been made in the course of the substantive proceeding, I consider that the costs generated by the challenge should follow the event in that proceeding." [8]. Plain English: Because this dispute arose during the main lawsuit, the costs of the dispute should be dealt with as part of the costs of the main case, not paid right away.
This decision is engaged where:
In such scenarios, courts will examine whether there is a real risk of disclosure and whether the challenger acted reasonably in seeking judicial resolution. If the challenger is reasonable and there are no special factors, costs will usually be costs in the cause.
This judgment explicitly referenced and aligned with aspects of D & J Constructions (Bryson J) and noted divergent practice in Photocure (Goldberg J) [7], [8]. Ryan J's approach is consistent with the conservative, fact-sensitive exercise of discretion: evidence and undertakings that plausibly remove risk may defeat injunctive relief; costs ordinarily follow the substantive litigation. Subsequent courts assessing analogous conflicts of retainer disputes will have this decision as persuasive authority on costs and the sufficiency of undertakings and uncontested affidavits where the issue is interlocutory and tied to substantive proceedings. Practitioners should expect that later courts will apply the same real risk test and exercise costs discretion based on reasonableness of the party bringing the motion and any special circumstances.
This judgment therefore provides a measured application of established principles about former-client confidentiality and costs, reiterating that the court's discretion will be exercised on factual assessment of risk, reasonableness of the challenger, and the context of the substantive proceedings [1], [6], [8].
REASONS FOR JUDGMENT 1 On 9 May 2002 I published reasons for dismissing a motion on notice by the respondent ("Red Earth"), seeking an order that Corrs Chambers Westgarth ("Corrs"), be restrained from continuing to act as solicitors for the applicants in this proceeding. The basis of that motion was the fact that Ms Ann Dufty, a solicitor, currently engaged as general counsel at Corrs, had, whilst a partner and special counsel at Mallesons Stephen Jaques ("Mallesons"), acted for Red Earth at an early stage of the dispute between the parties to this action and when the present proceedings were in contemplation. It was contended that Ms Dufty possessed confidential information belonging to Red Earth and relevant to matters in issue between the parties. For the purposes of the argument, I assumed that Ms Dufty had acquired confidential information of the kind for which Red Earth contended. However, I concluded that the applicants had discharged the burden of proving that there was no real risk of disclosure to them of whatever confidential information Ms Dufty may have possessed. In my view, the applicants had been aided in the discharge of the relevant burden of proof: "… by the undertakings given to the court, the uncontested affidavit evidence of Ms Dufty and Mr Stern, the fact that Ms Dufty only works two days a week in a discrete area of the intellectual property group and is a senior practitioner with a strong appreciation of her duty to Red Earth as her former client"; see reasons for judgment of 9 May 2002 [51]. 2 The applicants now seek orders that Red Earth pay their costs of the motion on notice dated 4 February 2002 and that such costs be taxed and paid forthwith, that is before the resolution of the substantive issues in this proceeding. In written submissions in support of that application, counsel for the applicants pointed, first, to the fact that the issue of Corrs' acting for the applicants in this proceeding was first raised by Red Earth's solicitors in a letter dated 5 December 2001. 3 In response to that letter, Mr Darvall, a partner in Corrs, in a letter dated 12 December 2001, described in considerable detail the steps which had been, and would be, taken to insulate Ms Dufty from the subject proceeding and from those members and employees of Corrs who were prosecuting this litigation on behalf of the applicants. Those assurances did not alleviate the concerns of Red Earth's solicitors who said at the end of a letter dated 19 December 2001; "We must therefore maintain our client's strong objection to your firm continuing to act and have to advise that unless your firm voluntarily withdraws from representation of the applicants in this matter, our client will have no option but to move the court to order you to do so." 4 At the time of publishing the reasons for refusing the injunction against Corrs, I was inclined to the view that the costs of each party of the application for that injunction should be costs in the cause. At the end of those reasons I said: "Partly because the applicants had been minded to pursue a similar motion, I was inclined to order that the costs of each party of the motion on notice dated 4 February 2002 should be costs in the cause. However, in case there are factors which have not been revealed or debated which may bear on the court's exercise of discretion as to those costs, I shall order that they be reserved." 5 Mr Shavin QC, who now appears with Mr Settle for the applicants, has sought to dissuade me from that tentative view by pointing out that the applicants had only contemplated applying to the Court for a resolution of the same issue because the solicitors for Red Earth, despite having received Mr Darvall's letter, had not conceded Corrs' entitlement to act. Resort to the Court, it was said, had not been contemplated: "… because there was any independent doubt in their own mind, but only to have the issue determined so the principal proceedings could continue." 6 However my earlier reference to the applicants' having considered pursuing a similar motion was not intended to suggest that they had any doubt about the propriety of Corrs' continuing to act. It was made rather by way of indicating that the issue was of common concern to both sides and that its resolution was a necessary interlocutory step in the determination of the substantive proceeding. It is true that Red Earth did not seek to challenge, by cross-examination on the hearing of the motion, the evidence filed on behalf of the applicants. However, that evidence, it is to be borne in mind, comprised affidavits by senior practitioners experienced in the field and it was entirely proper for Red Earth's counsel and those instructing him to accept it at face value. 7 In the circumstances, deposing to those affidavits was necessary to dispel the disquiet reasonably felt by Red Earth after learning that its former solicitor had become employed in the intellectual property department of the applicants' solicitors. Similar considerations have induced me to the view that it was reasonable for Red Earth to have taken out the motion when it did and to have persisted in it to the end of the hearing on 5 April 2002. It appears that discretionary factors of the same kind weighed with Bryson J in D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118 to which I referred in the earlier reasons for judgment. In that case the plaintiffs sought an injunction in separate proceedings against a firm of solicitors to restrain them from acting for or advising Wycob Pty Ltd, which was the plaintiff in other proceedings against D & J Constructions Pty Ltd. 8 Although he refused the injunction, his Honour said at 125: "However it was hardly surprising that there was a challenge to the defendant's retainer. No less so because the challenge has not been upheld. I propose to make no order as to costs." I was referred in the same context by Mr Bailey to Photocure ASA v Queen's University at Kingston (unreported) [2002] FCA 905, where, Mr Bailey points out, Goldberg J in a similar case to the present in relation to confidential information ordered that the unsuccessful applicant pay fifty per cent of the costs of the respondent with no order that the costs be taxed and payable forthwith. I regard the challenge in the present case as unsurprising in the same way that Bryson J regarded it in D & J Constructions. Because it has been made in the course of the substantive proceeding, I consider that the costs generated by the challenge should follow the event in that proceeding. I shall therefore order that the costs of each party of and incidental to the motion on notice dated 4 February 2002 including the costs of today's argument as to costs be costs in the cause. Even if that be a wrong exercise of the court's discretion as to costs, I have not been persuaded of the existence of special or unusual circumstances which would have warranted the separate taxation and payment of the applicants' costs forthwith. 9 Accordingly I propose to make the orders as to costs which I have just indicated and I shall make in addition by way of directions for the further conduct of the action orders that: 1. The parties exchange lists of proposed categories of discoverable documents on or before 22 November 2002. 2. In the absence of agreement as to the proposed categories of discoverable documents the matter be returned for further directions on 13 December 2002. I shall reserve the costs of both parties of today's directions as distinct from the costs of the argument as to costs which are to be dealt with by par 3 of the order already indicated. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan.
Counsel for the Applicant: Mr D Shavin QC with Mr M T Settle
Solicitors for the Applicant: Corrs Chambers Westgarth
Solicitors for the Respondent: Davies Collison Cave
Bureau Interprofessionnel Des Vins De Bourgogne
Red Earth Nominees Pty Ltd
(1987) 9 NSWLR 118
Orders made: (1) parties to exchange lists of proposed categories of discoverable documents by 22 November 2002; (2) if no agreement, return for further directions on 13 December 2002; (3) costs of each party of and incidental to the Notice of Motion dated 4 February 2002 (including costs of argument as to costs) to be costs in the cause; (4) costs of this directions hearing otherwise reserved [Orders].