Colonial Portfolio v Nissen

Subsequent Events After The Conflict Was Discovered 47 On 14 December 1999, Mr Shub wrote to Ms Coleman stating that AAH was acting for the insurers of Roberts Nissen due to the fact that MSJ was acting for Clifford, and:- "In your above letter you stated that, if no response to your client's letter of demand were received by 14 December 1999, then you had instructions to commence proceedings without further notice. We are now investigating the matter, and will assume that the commencement of any proceedings will not occur without the giving of 14 days' notice to us." 48 On 18 January 2000, Mr Shub wrote to Ms Pearson stating that the matter was being investigated, referring to the number of allegations raised in the draft Statement of Claim and to the documents with ASIC, and stating that in order to answer the allegations a realistic time estimate was in the range of two to three months "from now". 49 MSJ replied on 27 January 2000 stating that that period was excessive and, on 9 February 2000, AAH replied that they were continuing to analyse the allegations and would seek to reply by the end of February 2000. On 29 February 2000, AAH wrote to MSJ about progress in the matter and the fact that the defendants were "keen to attempt resolution of the dispute by a process alternative to litigation". 50 The letter continued:- "We also confirm that our clients are keen to attempt resolution of the dispute by a process alternative to litigation. It is our clients' view that if proceedings were to be commenced at this stage, the parties' resources and attention would unfortunately be diverted away from direct analysis of the allegations with a view to dispute resolution, and instead towards compliance with a preliminary court timetable and associated document management. Any increased costs incurred in the commencement of litigation may also affect both parties' interests. Accordingly, we propose to continue with our investigations, aiming to provide an early response, so as not to cause any prejudice to your clients. We will contact you again as the course of our investigations may require, or otherwise as soon as we have completed them." 51 On 8 March 2000, Ms Pearson wrote to Mr Shub asking for some more urgent activity and, on 10 March 2000, Mr Shub responded setting out the steps being taken and stating, inter alia:- "We note that your clients have foreshadowed the commencement of litigation, and we regret that this is the position. Our client has a definite desire to see whether this matter is capable of resolution by a process alternate to litigation, but can only do so once there is sufficient information to assess its position on a proper basis."

Another somewhat similar letter was sent on 19 April 2000. 52 I have referred to this correspondence at some length to show that far from there being any suggestion that MSJ should not continue to act, AAH was proceeding on the basis that they would do so.

The Challenge To MSJ's Continuing To Act 53 On 10 August 2000, Mr Martignoni wrote to Ms Coleman setting out the facts and circumstances giving rise to the conflict of interest. The letter concluded:- "Your firm is acting on behalf of parties whose interests are adverse to those of its former clients and who have a vital interest in the confidential information which is in your firm's possession. Our clients do not suggest that your firm would knowingly be a party to any disclosure of that confidential information to your present clients. However, our clients are concerned that there is a real risk that, no matter what precautions your firm adopts (whether by way of 'Chinese walls' or otherwise) there may be a disclosure to your present clients of that confidential information. In all of the circumstances, it appears that the only proper course would be for your firm forthwith to cease acting for the plaintiffs in these proceedings. Please let us know as soon as possible whether your firm will adopt this course. In the event that your firm chooses to continue acting on behalf of the plaintiffs, our clients intend to apply to the Court for appropriate orders, including an order that your firm be enjoined against continuing to act in these proceedings." 54 Prior to the writing of that letter the matter had come before the Court on 14 July 2000 when Hunter J gave directions for the further conduct of the proceedings by consent. No question was raised then about any conflict of interest. At that time, of course, MSJ were still acting and there had been no suggestion that they should not. The Motion was filed on 12 September 2000. However, prior to that there had been voluminous correspondence between AAH and MSJ, to some of which I have referred, concerning the progress of the matter. There was a request by AAH for further and better particulars, which ran into some six pages, such request being made on 24 July 2000 and answered on 30 August 2000. A number of other matters in relation to interlocutory steps had been discussed at some length. 55 In addition solicitors for other parties had requested further and better particulars of the allegations made from MSJ. The correspondence in relation to these matters is set forth, at least in part, in Exhibit B. 56 Whatever may be the ultimate rights and wrongs of the matter, from mid-December 1999 until 10 August 2000 AAH, notwithstanding the concern expressed to Mr Shub by Mr Meldrum in about December 1999 and some discussion of the question of conflict between Mr Shub and Mr Martignoni at about that time, made no complaint, and apparently took no instructions to make any such complaint, about the conflict of interest until 10 August 2000. Nor, so far as the evidence disclosed, did AAH seek information as to the extent of the confidential information MSJ had. The parties proceeded on the basis that MSJ would continue to act for the plaintiffs. 57 The letter of 10 August 2000 was passed to Mr Bates, a very senior partner in MSJ, for consideration. He responded on 17 August 2000 stating, inter alia, that Ms Chalmers received instructions from GIO on 19 August 1999, which instructions required advices in connection with the appearance of Mr Jepson before ASIC. A conflict search was conducted on 20 August 1999 and:- "The connection between the instructions received from the GIO and the instructions which Karen Coleman held from (then) Prudential Corporation Australia Limited unfortunately was not recognised."

He continued that Ms Chalmers entrusted the carriage of her instructions to Ms Dempsey, who attended a conference with Mr Jepson and others and counsel on 23 August 1999; that Ms Dempsey apparently did not attend at the examination and ceased her employment with MSJ "earlier this year" and he had not spoken to her to clarify her position; that on 1 September 1999 Ms Dempsey prepared a report to the clients, which was sent under Ms Chalmers' signature, and, in order to prepare it she listened to the audio tapes of the ASIC "interview". The letter stated that MSJ's file suggested nothing further was done between 1 September and 3 December 1999, when Ms Bain was made aware of the conflict whereupon any papers and tapes held by MSJ were returned "to your clients on 6 December, the next working day". Mr Bates advised that Ms Bain had taken custody of the file when Ms Dempsey left but had not been required to do any work in connection with it and had not read any of the materials on it. He further said there was no discussion of the issues between Ms Coleman or those assisting her and Ms Chalmers or those assisting her. 58 The letter suggested that against that factual background there had been no transfer of confidential information and there was no risk of it. Mr Bates said that what remained of the file was secured with him and that Ms Chalmers and those assisting her "have been aware since 3 December, that there can be no communication on these issues. Jacqueline Dempsey has left the firm". 59 The letter stated that Ms Coleman and those assisting her were unaware of the detail of the matters in the letter of 10 August 2000 until it was received. It said they knew there must be no enquiry or communication and undertakings to that effect could be given in appropriate terms if the defendants so required. 60 The letter made the point that the tapes and other documents related to the ASIC investigation were either discoverable by the plaintiffs or would be available from ASIC on subpoena, and that the existence of ASIC's investigation was known to Ms Coleman and those assisting her independently of instructions held by Ms Chalmers and those assisting her. Mr Bates went on to explain why there was no confidentiality attaching to those matters. 61 He concluded:- "Your clients have been aware since at least 3 December and your firm has been aware at least since your letter to Karen Coleman of 14 December, that she and those assisting her act for the plaintiffs and that they were instructed to commence proceedings. You have had the draft pleading since at least that time. Your letter of 10 August is the first time objection has been taken. If we were to withdraw at this late stage, it is likely serious prejudice would be caused to our clients' interests." 62 On 18 August 2000, Mr Martignoni replied stating, inter alia:- "Whilst they" (the defendants) "appreciate the steps taken by you to investigate and seek to control any disclosure of their confidential information, they nevertheless do not accept that there is no risk of disclosure, and they do not accept that their concerns have no realistic basis. We therefore repeat our request for your firm to cease acting in these proceedings. If you are unable to confirm to us within seven days that your firm will adopt this course our clients will proceed with an application accordingly." 63 On 23 August 2000, Mr Bates responded stating, inter alia, that it would assist MSJ in obtaining instructions "if you could articulate for us the realistic basis for the risks your clients perceive". 64 On 24 August 2000, Mr Martignoni responded:- "As stated in our fax dated 10 August 2000, our clients do not suggest that your firm would knowingly be a party to any disclosure of confidential information. However, they are concerned that the arrangements now made by your firm would not eliminate the risk of inadvertent disclosure. Please let us know whether your firm's contention is that there is no risk of disclosure, past or future; and if so, the basis for this." 65 By letter dated 25 August 2000, Mr Bates stated his understanding thus:- "(a) We have left one very small file. The only significant document on it is a letter dated September 1 Jacqueline Dempsey prepared for Robyn Chalmers, which we assume you have seen. The file also contains handwritten notes made by Jacqueline Dempsey. The writer has not devoted time to a serious attempt to decipher them, but they are not readily comprehensible. You may inspect the file if you wish. Indeed we would be perfectly happy if you were to take custody of it until the conclusion of the litigation; (b) Jacqueline Dempsey is no longer employed here; (c) Michelle Bain did not read the file; (d) The writer has probed Robyn Chalmers' memory twice. Her recollection is limited to the following: (i) Some instructions involving a Corporations Law matter came in from GIO; (ii) She asked Jacqueline Dempsey to handle the matter; (iii) She read and signed a letter Jacqueline Dempsey prepared for her; (iv) Subsequently GIO asked for the file back because there was a conflict with a matter Karen Coleman was handling; and (v) She has no other recollection at all of what the matter was about. It is the writer's conclusion, based upon his inquiries, that any confidential information of your clients that we may have possessed once is, as a matter of practical reality, within our knowledge no longer."

The Basis On Which The Defendants Put Their Case 66 In his written submissions Mr Stevenson, under the heading "Steps Taken By Mallesons To Preserve The Confidence", said:- "20. That part of the file Mallesons have retained was, until recently, in the custody of Mr Bates. It is now in the custody of the solicitors for the Applicants. 21. Ms Dempsey ceased employment with Mallesons on 25 November 1999. 22. Mallesons state, and the Applicants unreservedly accept, that Ms Coleman (and those assisting her) and Ms Chalmers (and those assisting her) are aware that there must be no enquiry or communications between them concerning the confidential information imparted to Mallesons by the Applicants. 23. Ms Chalmers has sworn an affidavit in which she states she has no recollection of the information imparted to her by Ms Dempsey concerning the instructions received from the Applicants. 24. The Applicants accept that this is so. 25. This case is a little different from many other cases in which this issue has arisen as it is not so much concerned with whether or not Mallesons have erected 'Chinese walls' which will be effective to retain confidential information but whether or not, as Mr Bates contends in his letter of 25 August 2000 (Tab 64) that: '.. any confidential information of your clients that we may have possessed once is, as a matter of practical reality, within our knowledge no longer.' 26. The Applicants accept that Mr Bates, and Mallesons, sincerely hold that view. 27. However, it is the Applicants' submission that neither the Court, nor Mallesons can be sure that it is correct. 28. It is not known what individuals in Mallesons now possess some or all of the confidential information imparted by the Applicants to Mallesons in August 1999. It is not known with whom Ms Dempsey, or Ms Chalmers, discussed the matter and what information such parties may have obtained which, whilst insignificant to them, could, at any time, be accidentally passed on to Ms Coleman, or someone in her team. 29. The Applicants do not suggest that the risk is great. But even if the risk can be characterised as being slight the Court cannot be satisfied, in the Applicants' submission, that there is no risk - and unless the Court can be satisfied that there is no risk (and in this regard, the evidential onus is on Mallesons - Prince Jefri at 227F), Mallesons should be enjoined from continuing to act for the Plaintiffs."

67 The defendants' position was further refined by Mr Stevenson in his final submissions. These submissions were made after Ms Dempsey had given her evidence and I had granted Mr Stevenson a short adjournment to take instructions. I am, of course, unaware what instructions he sought or received. 68 He conceded that if in fact Ms Chalmers and Ms Dempsey did not speak to anyone about the material in the file concerning the matter in relation to which Ms Chalmers was retained or about the information reported by counsel briefed to appear on the ASIC examination and by Mr Jepson and directly to Ms Dempsey in conference, the defendants accepted that there is no real risk that any such information was imparted to any other persons. 69 The significance of this concession was, firstly, that it acknowledged that the only way in which there may be a conflict of interest is if either Ms Chalmers or Ms Dempsey had passed on the information, thus removing any question about others at MSJ who may have had something to do with the file; secondly, that it was looking to a past situation, viz whether the information had been conveyed whilst the file was still with MSJ or at some past time; and, thirdly, that there was no present fear that the information would be disclosed by Ms Chalmers or Ms Dempsey. Mr Stevenson sought the various undertakings, which have been proffered. 70 Mr Stevenson submitted that I should accept the evidence of Ms Chalmers and Ms Dempsey. He continued that Ms Chalmers' evidence led to the conclusion that there was only the slightest risk that she said anything to anyone about the matter. As to Ms Dempsey he submitted that she may have said something because she could not say that she did not. The submission was that "there is at least a slight risk" that she may have spoken to someone at MSJ, including to a secretary or word process operator, but Mr Stevenson expressly acknowledged that she had not spoken to Ms Coleman or Ms Pearson. Therefore, the risks he identified were "only the slightest" and "slight". 71 Notwithstanding these concessions, Mr Stevenson submitted that that was sufficient to bring into play the relevant test to be applied, such that the defendants were entitled to the relief they sought. The Evidence On Behalf of MSJ 72 Despite the narrowness of the issues, I think it appropriate to refer to the evidence of MSJ. 73 Mr Bates swore an affidavit on 11 October 2000. He became aware on 10 August 2000, as a result of a conversation with Ms Coleman when she brought to him the letter from AAH of that date, of the problem. He said that thereafter all correspondence from MSJ to AAH relating to the conflict alleged in that letter was conducted by him. 74 He made inquiries of Mr Martignoni as to the identity of the solicitor at MSJ, who had conducted the file to which the letter of 10 August 2000 referred, and also of a number of solicitors in the section of MSJ's office, which dealt with insurance claims. As a result of what he learned, he spoke with Ms Bain. 75 He asked her whether she had a file involving Roberts Nissen where a conflict came up and she had to send the instructions back. She said she had and Mr Bates asked for the file, which Ms Bain obtained for him and gave to him on or about 11 August 2000. He said that from then on the file had been kept in his room and not "accessed" by anyone at MSJ other than himself "and has been read only by Mr Francis Douglas QC and Ms Kelly Rees, counsel retained by my firm for the purposes of this contested application". 76 He continued that his office contains a number of files relating to conflict issues, is always locked outside normal office hours and at lunch times if he is not then there, and if he is absent from it for any period in excess of a few hours. He exhibited the original file and said there was no copy of it. It has now been given to AAH. 77 In the file is a computer printout out of a conflict search dated 20 August 1999, which disclosed the existence of the proceedings being conducted for the plaintiffs. Mr Bates could find nothing in the file to indicate why Ms Dempsey did not recognise that and, as at 11 October 2000, he had not made any inquiries of her in case they might prejudice "the capacity of my firm to continue to represent the plaintiffs". He searched in the firm's word processing system and found that the letter to GIO dated 1 September 1999 was last accessed by Ms Dempsey's former secretary on 8 September 1999 and is now protected by a password known only to him and his secretary. 78 He was informed by the Human Resources Department that Ms Dempsey ceased employment with MSJ on 25 November 1999. He concluded:- "The letters written by me to Allen Allen & Hemsley dated 17 and 23 August 2000 which are annexed to the affidavit of A.D. Martignoni sworn 12 September 2000 and filed herein accurately set out the inquiries I have made and the responses I received to those inquiries as at each of those dates. Nothing has come to my attention subsequently which is contrary to the propositions there set out other than fixing more accurately the departure date of Jacqueline Dempsey." 79 Mr Bates was not required for cross-examination. 80 On 11 October 2000, Ms Bain swore an affidavit. She was admitted as a solicitor on 18 December 1998 and is employed by MSJ working under the supervision of Ms Chalmers. She made her affidavit "on the basis of my unaided recollection", noting that the file to which the affidavit refers had been taken into the possession of Mr Bates and she did not have access to it to refresh her memory. 81 Ms Bain knew Ms Dempsey and thought she left MSJ in about December 1999. A day or so before she did, Ms Dempsey spoke to Ms Bain and told her that Ms Chalmers had asked her to give the file to her, and:- "The file contains a detailed advice to the client which explains the situation." 82 Ms Bain asked Ms Dempsey whether there was anything else that needed to be done at that stage and was told that there was not and it was only necessary to wait to hear from "the insured". 83 Ms Bain said she had no recollection of doing any work on the file, beyond a vague one of reading the letter Ms Dempsey had prepared "to get a background of the matter". She said she could not recall the contents of the letter. Sometime later, on a date she could not recall, Ms Bain received a telephone call from Ms Hasapis, who advised her of the conflict of interest problem. Ms Bain told Ms Hasapis that she did not know that was the case and asked if she could do "some investigating in her firm". 84 Ms Bain reviewed the conflict searches, which indicated to her that Ms Coleman and Ms Pearson were acting for Clifford. She asked Ms Pearson whether MSJ was still acting for Clifford in a matter against Roberts Nissen. Ms Pearson said yes and asked why the inquiry was being made, and Ms Bain told her that Ms Dempsey had been acting for Roberts Nissen "and did not pick up that you were acting for Clifford Corporation". She continued that she wanted to check that Ms Pearson was still acting for Clifford "because then there is a conflict of interest and we will need to cease acting". Ms Pearson confirmed both these matters and Ms Bain said she would take steps to return the file to GIO. She denied discussing with Ms Pearson "any substantive issues about the case" and, after speaking to her, she told Ms Chalmers of the conflict and of GIO's request for the return of the file, to which Ms Chalmers replied by telling her to do so and close the file. 85 Ms Bain telephoned Ms Hasapis, told her she was correct and that MSJ did act for Clifford and, in response to a request from Ms Hasapis that the file be returned "so that we can re-allocate it to another panel solicitor", Ms Bain said she would do so immediately and apologised for the inconvenience. She returned GIO's file and closed MSJ's file and sent it to storage where it remained until Mr Bates asked her to retrieve it and give it to him. 86 Ms Bain was not required for cross-examination. In the way in which the case was finally conducted there was no submission that her association with the matter give rise to any risk that confidential information would be disclosed. 87 On 11 October 2000, Ms Chalmers swore an affidavit. She is an experienced litigation solicitor, having been admitted in 1977, and she has been a partner of MSJ since July 1984. Before making the affidavit she did not have access to the file to refresh her memory. 88 Ms Chalmers said that she received instructions from GIO, her recollection being unclear as to the nature of the matter, which she believed involved an examination of "the insured" under the Law and that it was urgent. She did not have a specific recollection of receiving papers in the matter, but said it was the usual practice of GIO to send documents over after the initial telephone conversation, and that it is her usual practice to allocate the matter to a solicitor in the group. Before doing so she usually read the papers briefly, although she did not always do so depending on how busy she was. She did not recall reading the papers in this matter. However, she remembered speaking to Ms Dempsey. She instructed her to look after the matter, to do a conflict search, and to brief counsel to appear on the examination. In paragraph 10 she said:- "I have no other recollection of the matter. I do not believe I ever spoke to the insured or met with him." 89 She continued that Mr Bates had informed her that there is a letter to GIO on the file bearing her signature, and she said that if she signed it she would have read it before returning it to the author to send "since it is my invariable practice to do so". She had no recollection of reading or signing the letter or of its contents. 90 She did not recall receiving a printed copy of an e-mail from Ms Bain informing her that MSJ had a conflict of interest, although she said that had that happened it would be her practice to tell the solicitor to inform the client of the conflict and return the documents to the client. 91 She concluded:- "I have no independent recollection of this file or the matter, beyond that set out in this affidavit. I do not remember any details of the claim. I have absolutely no recollection of the facts of the matter." 92 Mr Stevenson stated that he had no instructions to challenge Ms Chalmers' evidence as to her absence of recollection. 93 Ms Chalmers was cross-examined. She said there are eighty partners and two hundred employed solicitors in the Sydney office of MSJ, almost all of whom are at Governor Phillip Tower, in which the firm occupies about ten floors. Her practice group is Professional Indemnity and Product Liability, which is a sub-group of Commercial Disputes, the two partners in her sub-group being Mr Peter Stockdale and herself. There are approximately ten or twelve solicitors, who work in that group with Mr Stockdale and her. Ms Coleman is also a litigation partner but not in the same sub-group. 94 She said that there are thirteen partners in the Commercial Disputes section, including herself, Mr Stockdale and Ms Coleman. She agreed that Ms Pearson works with Ms Coleman and denied that she was in regular communication with Ms Pearson about matters. She also agreed that there were Commercial Disputes partners' meetings about once a month, and that so far as the Commercial Disputes section generally is concerned there are continuing educational meetings, but not administrative or other types of meetings of the group. Matters of general litigious interest are not discussed, other than in the context of continuing legal education. 95 She agreed that the Commercial Disputes section had a retreat every now and again about once each year and that there is a combination of professional and social activities at those functions. She was taken through the way in which secretaries and word process operators worked, and she said that if an e-mail was sent to her headed "Jacqueline Dempsey" it would, in the normal course, be one Ms Dempsey created and sent. 96 At Tpp.27-28 Mr Stevenson said:- "Q. You told us in your affidavit what your state of recollection or lack of it is. You understand there is no challenge being made to that by those instructing me or by me, but is this fair to say, if there is a letter that has gone out under your name, which you have signed, then you would have read it before you signed it? A. Yes."

She said she gave that answer because that was her practice. 97 Ms Chalmers denied emphatically that if there were discussions between her and Ms Dempsey about the substance of what happened it is possible she discussed those matters with other people in the firm and with Mr Stockdale "for example". When it was put to her whether it was "impossible" that she had any such discussions, she said that it was not impossible "because nothing is impossible", but that there would be no reason for her to discuss "a run of the mill insurance case with" Mr Stockdale or any other partner. She agreed she could say nothing about whether Ms Dempsey had discussions with people about anything she learnt in the course of her retainer and that she did not instruct Ms Dempsey not to talk to anyone in the Department about the matter. She said that in the normal course she would not give those instructions. 98 She did not recall seeing the papers from GIO, and whether she looked at them before assigning the work would have depended on how busy she was. She said she did not think that GIO included the policy or a document setting out the level of indemnity. 99 I have set out Mr Stevenson's final submission in relation to Ms Chalmers and, in considering whether there is "only the slightest risk" of an inadvertent comment having been made by her disclosing information confidential to the defendants, which is the factual issue propounded in relation to her, I have come to the firm conclusion that she has satisfied me that there was not. My reasons for so deciding are:- (a) Ms Chalmers' firm denial of having made any such comment. Her evidence was not sought to be impugned, rather I was asked to accept it. Even without that invitation I would have had no hesitation in doing so, for she impressed me as a totally reliable witness. (b) No comment was made on the failure to call Mr Stockdale to say whether Ms Chalmers discussed the matter with him. (c) There is no suggestion, nor on the evidence could there be, that she discussed the matter with Ms Coleman or Ms Pearson. Ms Coleman and Ms Pearson denied discussing the matter with Ms Chalmers and they were not challenged on their evidence. Ms Bain gave her version of her limited conversations with Ms Chalmers, on which she was not cross-examined. Further, none of them became aware of the confidential information, which heightens the probability that Ms Chalmers did not tell anyone. (d) As a matter of probability, it is inconceivable, to the point of being "fanciful" or "theoretical" that Ms Chalmers would have discussed the matter with anyone. I say that for these reasons:- (i) This, on any view, was a relatively minor matter to which Ms Chalmers gave barely any consideration before passing it on to a junior solicitor in her sub-group. (ii) Ms Chalmers was unaware of any conflict, which would not cause her interest in the matter to be stimulated. (iii) Whilst Ms Chalmers received the e-mail under Tab 13, the letter of 1 September 1999 made no reference to the particularly pertinent confidential information, such as to reinforce it in her mind. (iv) The present proceedings must have jogged any relevant recollection of what she had done, bearing in mind her awareness of the conflict in December 1999. It seems to me inconceivable that she would not have recalled passing on information about the matter having learnt of the conflict then and, subsequently, having been interviewed by Mr Bates and having become aware of these proceedings. All these matters make her evidence that she told no-one the more powerful. (e) She regarded the instructions as "a run of the mill insurance case". No valid reason was advanced as to why she, a busy practitioner, would impart information to other busy practitioners. 100 Whilst she conceded that "nothing is impossible", this did not derogate from her evidence and the probabilities that she told no-one, nor did it cause Mr Stevenson to put any higher weight on it than that there was "only the slightest risk". Ms Chalmers has satisfied me completely that she did not communicate any confidential information concerning the defendants to anyone. 101 At Tp.31 I noted the agreement of the parties that counsel briefed by MSJ to appear on behalf of Mr Jepson at the ASIC investigation was not briefed to appear on behalf of the plaintiffs in the principal proceedings. 102 On 12 October 2000, Ms Coleman swore an affidavit. She was not required for cross-examination. She detailed the way in which she came to act for the plaintiffs and, after referring to various steps taken in the litigation, she referred to the letter of 14 December 1999 from AAH and said she was aware from something Ms Pearson told her "around the time of the letter of 14 December 1999" that some instructions had been returned by the insurance section of MSJ relating to Roberts Nissen. 103 She detailed the steps taken in the proceedings prior to 10 August 2000, when she received the letter of that date from AAH, and she said it was not until she read it that she had any knowledge of the instructions to MSJ from GIO or that MSJ had acted on the examination of Mr Jepson. However, she became aware, as a result of a newspaper report in 1999, that ASIC was being called upon to conduct an investigation into the affairs of Clifford and, on 15 July 1999, MSJ made application to ASIC for a copy of the record of any examinations and related books. She referred to portion of the letter from AAH in which it was asserted that the plaintiffs' draft Statement of Claim raised numerous specific allegations, and that some of the documents required for investigation of them included those in the possession of ASIC "which we understand to comprise nineteen boxes". She expressed the view, in paragraph 15, that any records of an examination by ASIC of Mr Jepson relating to the 1997 Clifford audit were relevant in these proceedings and discoverable. 104 She denied ever having spoken to Ms Chalmers, Ms Bain or Ms Dempsey about the matter and, in relation to the latter, she said:- "I do not now recall who she was or whether I have ever spoken to her." 105 In paragraph 17 she set out the various matters pleaded in the Statement of Claim in summary form and, in paragraph 18, she explained that since instructions were first received she and lawyers under her supervision had recorded to date 654 hours approximately in preparation and conduct of this claim of which 282 hours were worked after 14 December 1999. 106 On 17 October 2000, Ms Pearson made an affidavit. Since the end of December 1998, she has worked with Ms Coleman on behalf of the plaintiffs. 107 She recalled speaking to Ms Bain about the potential conflict of interest. The conversation was short, Ms Bain having said to her that she had noted an involvement in a matter acting against Roberts Nissen; that "we" have instructions to act for the insurers of Roberts Nissen; and could she tell her something about the matter. Ms Pearson said that she told Ms Bain that MSJ was considering proceedings against, amongst others, Roberts Nissen, and it appeared that they may have been negligent or may have made misleading statements in relation to their audit of the Clifford accounts in the relevant years, to which Ms Bain replied that there may be a conflict. She concluded:- "I have not discussed the matter with Michelle Bain since the conversation above. Nor have I spoken about it at any time with Robyn Chalmers or with Jacqueline Dempsey while she was employed at Mallesons Stephen Jaques or subsequently."

The Position Of Ms Dempsey 108 At what appeared to be the conclusion of the evidence, Mr Stevenson having commenced his address, I raised the question whether, Ms Dempsey not having been called, he proposed to comment on that and, if he did, what submission he would make. Mr Stevenson, after considering the matter over the luncheon adjournment, said that he would be commenting on the failure to call Ms Dempsey by submitting that she was not able to say anything, which would assist the case for MSJ. In the light of this Mr Douglas took instructions and requested an adjournment to obtain evidence from Ms Dempsey. 109 Ms Dempsey, who is readily available, provided a statement, which was forwarded to my Associate by Ms Rees without any objection from Mr Stevenson. The statement was, it was agreed, taken by Ms Rees from Ms Dempsey without the intervention of any person from MSJ. The parties consented to Ms Rees showing Ms Dempsey the original of the confidential and other documents in Exhibit A to assist her recollection. 110 Ms Dempsey, after leaving MSJ, became a solicitor in the Professional Indemnity section of HIH Insurance Group. From paragraph 9 she dealt with her "Unassisted Recollection". She recalled working for Ms Chalmers "on a matter where two partners of an accounting firm had received a summons from ASIC to answer questions in relation to an audit". She did not recall the names of the parties nor the insurer, but that indemnity had not been granted. The best of her recollection was that Ms Chalmers gave her some papers, the only one of which she recalled being the summons, told her to brief counsel and that it would be "cheaper than you going to the examination as well". She obtained some recommendations about counsel and arranged for a conference with him "and the partners of the accounting firm". She met "the partners" for the first time at the conference, but does not recall their names. She remembered there was an older and a younger partner. She remembered the "older partner" saying that he was concerned about the ramifications of the ASIC examination and:- "I have no doubts that we have nothing to hide." 111 She remembered the partners asked lots of questions about the nature of ASIC examinations, the older one saying that they had not been before such an investigation previously. 112 She said that at no stage was she aware why ASIC wanted to examine the partners, but she did remember receiving a telephone call from counsel after the examination and being told it was long and tedious; that nothing substantive occurred; and that he had tapes given to him by the ASIC investigators. Ms Dempsey requested the tapes and his fee note and asked whether it was likely that ASIC would need them again, to which counsel replied that he did not know but that he would be happy to appear for them again if needed. 113 Ms Dempsey said she listened to the tapes, which was tedious, and then prepared a report "to whoever was instructing us and told them that we would do nothing further until we heard of any developments from ASIC or the partners". She left the report, which was obviously the letter of 1 September 1999, in Ms Chalmers in-tray to sign and did not recall speaking to her about it. She did not recall any other conversations with Ms Chalmers about the file before she left the firm, nor to whom she transferred it. She had no recollection of discussing the file with Ms Bain, nor Ms Bain's taking over that particular file. She said:- "25. I don't recall speaking to anyone else in the Professional Indemnity & Product Liability Group about the matter. I don't believe that I did speak to anyone about the matter as it was uneventful. 26. I did not speak to my secretary or the Word Process operator about the matter. I did not usually discuss matters with my secretary or the Word Process operator. 27. I did not speak to anyone else at Mallesons Stephen Jaques about the matter. I only knew one person at Mallesons Stephen Jaques outside our Professional Indemnity & Product Liability Group - a female solicitor in the Intellectual Property Group who I had studied with. I had telephone conversations with her from time to time but did not discuss this matter (or any other matters). 28. I did not attend any corporate retreats while I was employed at Mallesons Stephen Jaques. 29. I do not know who Karen Coleman is, and do not recognise her name. I don't know where her office was in the firm. I did not discuss this matter with her. I cannot categorically say that I was never introduced to Karen Coleman when I joined Mallesons Stephen Jaques, but I have no memory of having been introduced to her. 30. I have not met Susan Pearson. I do not know who she is, and do not recognise her name. I don't know where her office was in the firm. I did not discuss this matter with her. 31. After having given my unassisted recollection, I have now examined the complete conflict search from the Matter Management File. I cannot with my unassisted recollection identify any file which would have been in conflict with the matter I conducted for Robyn Chalmers." 114 Earlier Ms Dempsey had said she had been employed by MSJ from June to November 1999. 115 Ms Dempsey under the heading "Assisted Recollection" referred to the various documents at Tabs 1 to 5, 7 to 21 and 23 of Exhibit A. By reference to Tab 1 she recalled the name of the "younger partner" as Carl Jepson. She did not recall having seen the documents under Tab 2. She recognised the document under Tab 3 as her file note, although she had no independent recollection of the matters referred to in it. She drafted the letter under Tab 4, but had no independent recollection of the matters referred to in it. She noted it referred to Mr Meldrum and Mr Nissen, but did not recall whether the other partner that she met at the conference with counsel was Mr Meldrum or Mr Nissen. 116 She drafted the letter under Tab 5, but had no independent recollection of the matters referred to in it. The document under Tab 7 is her file note although her lack of recollection was the same. 117 By reference to the documents under Tabs 8 and 10 she recalled that her secretary was Ms Wolff and she thought that the reference to "Clifford" was a reference to the solicitors, Clifford Chance. 118 She recognised her file notes under Tabs 9, 11 and 12, although she had no independent recollection of them. She recognised the document under Tab 13 as an e-mail she sent to Ms Chalmers. She continued that having read it she recalled that counsel had informed her that an issue, which had not come up in conference, had been a topic of the ASIC examination. She continued:- "I wanted to listen to the tapes to see whether this was a matter of concern that I should report to the client. In the e-mail to Robyn Chalmers, I essentially summarised the issue and sought approval to listen to the tapes. I was concerned that this would take several hours and I did not want to run up legal costs without Robyn Chalmer's (sic) approval. From other documents I have been shown, I now recall that there was some question as to whether the legal costs would be covered by the policy, and I did not want to incur legal costs, which the insurer may have to pay, without approval from Robyn Chalmers." 119 She said that her handwritten note on the e-mail, which she initialled, confirmed that Ms Chalmers approved of her listening to the tapes and that to the best of her recollection she did not discuss that issue with Ms Chalmers, but received an e-mail from her approving of her request. In cross-examination she said she did not keep a copy of that e-mail, but endorsed her own. 120 She recalled reading the second complete paragraph on page 2 of counsel's report and she identified the documents under Tabs 15 and 16 as notes she made on listening to the ASIC tapes of which she said she had absolutely no independent recollection. She said, having reviewed those notes, that she could see no reference to the transaction which counsel raised with her and which was referred to in her e-mail to Ms Chalmers under Tab 13. She continued that these were the only notes made at MSJ of the ASIC examination. 121 She referred to a number of other documents and repeated that she did not recall discussing the file with Ms Bain, nor handing a number of files to her and saying to her that if she had any queries to ask her "but there's nothing happening on these". 122 She said that after giving her assisted recollection, she has now examined the complete conflict search in the Matter Management File again and could readily identify the matter which Ms Coleman was conducting. She does not know why she did not identify it at the time and she was unaware "at all times" that Ms Coleman was acting for any other party in relation to the matter in which "the partners" were being examined by ASIC. 123 She concluded by saying that having given her assisted recollection she repeated what she had said in paragraphs 25 to 30; that she had not spoken to anyone from MSJ about the matter since leaving the firm; that she is prepared, if necessary, to give an undertaking not to discuss the matter; and that she will be leaving Australia in late November 2000 to return permanently to Ireland. 124 In cross-examination, which was taken in closed Court, Ms Dempsey was asked about the material in the e-mail at Tab 13. She was also asked about her recollection of any conversations she may have had in respect of confidential information. In relation to discussions with Ms Chalmers about the letters she drafted for Ms Chalmers' signature, she said that it was possible, but highly unlikely, that she had such conversations. She could not say categorically that there were not. 125 She agreed she spoke to persons at MSJ, including at drinks on Friday evenings, but her evidence was that she did not recall ever mentioning this matter. In relation to the e-mail under Tab 13 she said:- "Q. Is it your position that you may have spoken to your people, but you just can't recall that you did? A. I can't say categorically that I didn't speak to other people, but it would be highly unlikely. Q. It is possible, isn't it? A. Yes. Q. You can't give his Honour an assurance that you didn't? A. I can't give his Honour an assurance I didn't, no. Q. Because you simply don't know? A. I have no memory about speaking to anyone about the matter": Tp.43. 126 Ms Dempsey satisfied me that she did not discuss the matter with anyone, save to the extent that she received instructions from Ms Chalmers. Ms Bain set out her conversations, which did not refer to any confidential information, with Ms Dempsey on which she was not cross-examined. Ms Coleman and Ms Pearson has each denied speaking to Ms Dempsey on which evidence they were not challenged. 127 Ms Dempsey, as with Ms Chalmers, could not say that it was impossible that she spoke to anyone about the confidential information. But that does not detract from her evidence, which I found inherently credible. She was a junior solicitor at MSJ, at least in the sense of time of service. She left that employment in November 1999. Whilst she attended "drinks" on Friday nights she said that the conversation, generally, was about social rather than work matters. However, apart from my general acceptance of her evidence, I found it most convincing, when testing it to have regard to the probabilities. In her letter of 1 September 1999 she made no mention of the critical information in the e-mail under Tab 13. This indicates to me that it could have made little impact on her, because the nature of the information was such that I would have expected it to be communicated to GIO, if Ms Dempsey had attached any significance to it. The fact that she did not, in my opinion, only reinforces the conclusion that she would not have bothered to speak to anyone about it. Finally, and I say this in no disrespectful way, the information was not "scuttlebut", which may cause one to reveal it for its inherent gossipworthiness. 128 Ms Dempsey has satisfied me that she did not communicate this information to anyone, including a word process operator or her secretary. 129 On 27 October 2000, Mr Bates swore a further affidavit to which he annexed a letter to AAH of 20 October 2000 stating:- "We have been informed by junior counsel Ms Kelly Rees that the applicants' submissions and a bundle of documents were delivered directly to her yesterday afternoon. We have made a decision that no one from this firm (including the writer who is instructing Mr Douglas SC (sic) and Ms Rees) will read those documents." 130 He deposed to the fact that Exhibit A was not delivered to the offices of MSJ and he has not looked at it, and that the affidavit of Mr Meldrum was, but he has not read it. He said he has read the written submissions of the parties, after being assured by counsel briefed by him that the submissions did not contain confidential information, but he had not read the chronology because he understands it may contain such information. He continued that during the hearing on 24 October 2000, he and a solicitor assisting him left the Court during the evidence of the applicants' witnesses, and that he also left the Court during submissions when he became concerned that they may make him aware of confidential information. He concluded that he has not spoken to Ms Dempsey since she left MSJ in November 1999. 131 The evidence was concluded by an affidavit of Ms Patricia Anne Sinclair, a solicitor employed by Colonial Services Pty Limited, a company within the Colonial Group. She has responsibility for the management of this matter on behalf of the plaintiffs. 132 She deposed to the complexity of the matter and her concern that the plaintiffs would suffer considerable prejudice if MSJ were unable to continue to act. She referred to the amount of work done by MSJ and the fees thus far incurred. She concluded that if MSJ were prohibited from acting further it would take considerable time for a new firm with their expertise to build up their knowledge and understanding of the case. She opined that that would cause great delay and affect the progress of the claims against the auditors, RMB Australia Limited and the directors. She was not required for cross-examination.

The Relevant Principles 133 The basis on which an injunction will be granted, in a case such as the present, is to prevent information given confidentially to solicitors and other persons receiving it in confidence from being misused, relevantly for present purposes, inadvertently. There are, obviously and correctly enough, very strong public policy reasons to protect such information and to prevent possible abuse of the basis on which it was given. There is no issue in this case that the information provided for the purposes of the ASIC investigation could be relevant to the claim now made by the plaintiffs. Once the position was appreciated, there was no argument but that a conflict of interest existed. 134 The evidence is that MSJ received very little information when it acted on the ASIC examination. However, that does not end the matter and had Ms Dempsey properly read the conflict report MSJ would not have accepted instructions to act. 135 MSJ seeks to meet this position in two ways. First, it submits that, as a matter of fact, there is no reasonable likelihood of any of the information obtained by Ms Chalmers and/or Ms Dempsey ever being used against the defendants in the litigation, because they did not communicate it. 136 Second, there is no issue but that MSJ has taken all possible steps to remove any danger, which would come about by reason of the conflict having arisen. Mr Bates has dealt with the matter with considerable care and tact. MSJ is now confronted with the very limited case to which I have referred. 137 Third, in essence MSJ has submitted that there is barely any information, which would touch upon this matter, but in so far as there is it has all been sent to AAH, and that, in any event, there is nobody at MSJ, who can recall or knows what instructions were given by the defendants. 138 Fourth, MSJ submitted that the defendants' and AAH's delay in bringing this issue forward, and their continued acquiescence in MSJ's acting for the plaintiff, notwithstanding that the question of conflict was well understood by them in December 1999, amounted to delay, election and waiver, which operated either as defences or as discretionary considerations of significance justifying refusal of the discretionary relief sought. 139 These proceedings do not involve considerations of the effectiveness of an information barrier or a "Chinese wall". Mr Stevenson concedes that there is no possibility that the confidential information will be made available to the plaintiffs in the future, although, for understandable reasons, his clients require the undertakings Mr Bates and Ms Dempsey have proffered. His concession is well founded when regard is had to the following facts:- (a) Ms Chalmers has no recollection of the matter and thus cannot, even if she was otherwise inclined to do so, give any information. (b) Ms Bain has no knowledge of the matter at all. (c) Ms Dempsey has no independent recall of the matter. (d) MSJ has handed over all documents it holds. (e) There is no suggestion that any other solicitor employed by MSJ has been made aware of the contents other, perhaps, than Mr Bates. It was not submitted that Mr Bates would disclose the information.

Thus the case was put on the very limited basis to which I have referred, viz that there were the stated risks that in the past either Ms Chalmers or Ms Dempsey told someone the information. MSJ has satisfied me, for the reasons I have given, that this is not so. 140 The relevant principles have been considered in many cases, although usually in the context of it being necessary to provide an information barrier or "Chinese wall". They include Rakusen v Ellis, Monday and Clark [1912] 1 Ch 831; D & J Constructions Pty Limited v Head & Ors trading as Clayton Utz (1987) 9 NSWLR 118; Mallesons Stephen Jaques v KPMG Peat Marwick & Ors (1991) 4 WAR 357; Farrow Mortgage Services Pty Limited (In Liquidation) v Mendall Properties Pty Limited & Ors [1995] 1 VR 1; Prince Jefri Bolkiah v KPMG (A Firm) [1999] 2 AC 222; Newman v Phillips Fox (1999) 21 WAR 309; Pradhan v Eastside Day Surgery Pty Limited (Supreme Court of South Australia - Full Court - 18 June 1999); and World Manufacturing Corporation v Phillips Ormond & Fitzpatrick Lawyers (A Firm) & Anor (Supreme Court of Victoria - Gillard J - 18 May 2000). There has been a very full discussion of the principles in most of those decisions, which makes it unnecessary for me to go back through them. I shall refer to the tests propounded in Farrow and Prince Jefri. The weight of authorities since Prince Jefri supports the test therein stated, the onus being on the recipient to prove the absence of the defined risk. I propose to follow that test, which seems to me to differ from that stated in Farrow in relation to the issue of onus. 141 In Farrow, Hayne J considered the various decisions and said, at p.5:- "In my opinion the weight of authority, especially more recent authority such as the Malleson's case and Re A Firm of Solicitors , clearly supports the view that the test to be applied in resolving an application of the present kind is not that put forward by Cozens-Hardy MR in Rakusen 's case but is a less stringent test. Although it is necessary to be acutely conscious of the fact that the Court is asked to interfere with the right of a litigant to be represented by the solicitor of the litigant's choice, it is not necessary to conclude that harm is inevitable (or well nigh inevitable) before acting to restrain a possible breach of the duty that a solicitor owes to clients and former clients to keep confidential information given to the solicitor in confidence and not use that information against the interests of the client who gave it to the solicitor. For present purposes I do not need to consider whether anything turns on the differences in expression of the test as given by Parker LJ and Ipp J. It is enough to say that I consider that injunctions should go if there is a real and sensible possibility of the misuse of confidential information ." (My emphasis.) 142 The matter was considered in some length by the House of Lords in Prince Jefri. The principal speech was delivered by Lord Millett, with whom Lord Browne-Wilkinson, Lord Clyde and Lord Hutton agreed without elaboration. Lord Hope also agreed but added certain reasons of his own. 143 Lord Millett stated the test the House of Lords favoured thus, at p.237:- "I prefer simply to say that 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 ." (My emphasis.) 144 It seems to me, with respect, that this is very close to, if not totally congruent with, the test propounded by Hayne J in Farrow. The test is not that there is no risk of disclosure, but rather that there is a real, albeit insubstantial, risk of disclosure, i.e. one going beyond the merely fanciful or theoretical. 145 Subsequently, at p.237, his Lordship referred to the onus of proof. He said that once the former client had established that the respondents were in possession of information imparted in confidence and that they were proposing to act for another party with an adverse interest in a matter in which the information is or may be relevant:- ".. the evidential burden shifts to the defendant firm to show that even so there is no risk that the information will come into the possession of those now acting for the other party."

In using the words "no risk", he must have been doing so in the context in which they appear earlier on that page, i.e. no real risk. If that were not so the only inquiry would be whether confidential information was received. 146 He then said:- "There is no rule of law that Chinese walls or other arrangements of a similar kind are insufficient to eliminate the risk. But the starting point must be that, unless special measures are taken, information moves within a firm. In MacDonald Estate v Martin , 77 DLR(4th) 249, 269 Sopinka J said that the Court should restrain the firm from acting for the second client 'unless satisfied on the basis of clear and convincing evidence that all reasonable measures have been taken to ensure that no disclosure will occur'. With the substitution of the word 'effective' for the words 'all reasonable' I would respectfully adopt that formulation."

147 In that case his Lordship was not satisfied that the respondents had discharged the heavy burden of showing that there was no risk, using those words in the sense to which he had referred, that information in their possession, which was confidential to Prince Jefri and which they obtained in the course of a former client relationship with him, may unwittingly or inadvertently come to the notice of those working on another project. 148 In World Medical Manufacturing Corporation Gillard J was faced with the situation of a potential conflict concerning solicitors and patent attorneys. 149 In paragraph 93, his Honour noted that he had previously adopted the test stated by Hayne J in Farrow. He considered that test in the light of the decision of the House of Lords in Prince Jefri and, in paragraphs 110 and 111, said:- "110. His Lordship went on to consider the extent of a solicitor's duty and observed that although the former client cannot be protected completely '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 ' (emphases added). 111. As his Lordship pointed out it does then become a question of degree. He stated that if there was no risk of disclosure or misuse of confidential information then there was no basis for granting relief." 150 His Honour set forth the test propounded by Lord Millett. He considered that his Lordship's statement concerning the risk went further than that of Hayne J in Farrow, and he noted that the onus was placed upon the recipient of the information, such that an injunction will be granted unless the Court is satisfied there is no real risk of disclosure. His Honour considered that Hayne J placed the onus on the plaintiff to show there was a real and sensible possibility of the misuse of confidential information. 151 After a further consideration of Prince Jefri, Pradham and Newman, his Honour expressed the view that the principles laid down by Lord Millett in Prince Jefri should be followed in Victoria.

A Resolution Of The Present Situation 152 For the reasons I have given I am satisfied, MSJ bearing the onus, that neither Ms Chalmers nor Ms Dempsey passed on the confidential information. The risk Mr Stevenson identified was not, in my opinion, a real one. On the evidence it was either fanciful or theoretical to suggest that either Ms Chalmers or Ms Dempsey had passed on any confidential information. 153 I have kept constantly in mind, in considering Mr Stevenson's submissions, his statement that one will never know if this occurred. The tests propounded by Hayne J and the House of Lords necessarily accept this. The Court's duty is to decide, on the facts before it, whether MSJ has satisfied it that the information was not passed on. I am so satisfied. 154 In the result I have come to the conclusion that the defendants' Notice of Motion must be dismissed with costs, subject only to the giving of the undertakings proffered by Mr Bates and Ms Dempsey.

Acquiescence, Delay, Waiver And Election 155 MSJ and the plaintiffs submitted that if I was not otherwise in their favour I should conclude that the defendants had waived their rights to have MSJ not act for the plaintiffs or, alternatively, had elected not to object to that course. Further, they submitted that the granting of injunctive relief was discretionary, such that I should take into account delay and acquiescence. 156 I have pointed out that from December 1999 until 10 August 2000, notwithstanding the steps being taken in relation to the proposals to resolve the litigation in other ways and, after the issue of the Summons, the furthering of the litigation, the defendants took no steps to challenge the right of MSJ to continue to appear on the plaintiffs' behalf. The defendants are bound, in my opinion, by the conduct of their solicitors in so far as they were not aware of their rights. 157 In Craine v The Colonial Mutual Fire Insurance Company Limited & Anor (1920) 28 CLR 305, at p.326, Isaacs J acknowledged that "waiver" is a doctrine of some arbitrariness:- ".. introduced by the law to prevent a man in certain circumstances from taking two inconsistent positions."

His Honour said it is a conclusion of law when the necessary facts are established, looking to see whether a person has "approbated" so as to prevent him from "reprobating", namely:- ".. in English terms, whether he has elected to get some advantage to which he would not otherwise have been entitled, so as to deny to him a later election to the contrary … His knowledge is necessary, or he cannot be said to have approbated or elected." 158 In The Commonwealth of Australia v Verwayen (1990) 170 CLR 394, Mason CJ considered the concepts of waiver, election and estoppel, as did other members of the Court. At p.407 his Honour said:- "Another category of waiver is one in which a person is prevented from asserting, in response to a claim against him, a particular defence or objection which would otherwise have been available. Here waiver is said to arise when the person agrees not to raise the particular defence or so conduct himself as to be estopped from raising it: see Kammins ." 159 His Honour then quoted from the passage of Stephen J in Sargent v ASL Developments Limited (1974) 131 CLR 634, at p.641, in relation to election:- "The doctrine only applies if the rights are inconsistent the one with the other and it is this concurrent existence of inconsistent sets of rights which explains the doctrine; because they are inconsistent neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other, a benefit denied to him so long as both remained in existence." 160 Subsequently his Honour gave consideration to estoppel by conduct or representation preventing the party estopped from unjustly departing from an assumption of fact which his conduct had caused another party to adopt or accept for the purpose of their legal relations. The representation must be one of an existing fact. 161 In Orr v Ford & Anor (1989) 167 CLR 316, at p.340, Deane J noted the submission that acquiescence was relied on in the sense of calculated, i.e. deliberate and informed inaction or standing by which encouraged another reasonably to believe that his assertion of rights and consequent actions were accepted and not opposed. 162 The defendants' conduct, as evidenced by that of their solicitors, between December 1999 and August 2000 gave the clearest indication, in my opinion, that they did not propose to take any point about the conflict of interest in consequence of which the plaintiffs continued to instruct MSJ and MSJ continued to act on their behalf. A considerable amount of work was done, which was very necessary for the proper preparation of the plaintiffs' case. The prejudice, both actual and potential, identified by Ms Sinclair was not challenged. In my opinion, it would be inequitable in the circumstances which have existed, to grant equitable relief to the defendants even if I were otherwise of the view that they were entitled to it. 163 MSJ and the plaintiffs relied upon the decision in The Uncle Toby's Co Pty Limited v Trevor Jones Steel Fabrications Pty Limited (In Liquidation) & Ors (Supreme Court of Victoria - Batt J - 12 October 1995 - unreported). His Honour was considering an application for an injunction restraining insurers from continuing to retain a firm of solicitors. Although that was not a case in which counsel opposing the application relied on delay or acquiescence as constituting a discretionary equitable bar to the grant of relief, his Honour took into account the delay as evidence "that the apprehension on the part of Austcom of misuse of confidential information was not a strong one or at any rate that the possibility is not 'real and sensible'". Not only is that a matter to which I can have regard, but so also is the failure of AAH to ascertain the extent of the confidential information MSJ had for a long time. 164 The discretionary defences were considered at greater length in South Blackwater Coal Limited v McCullough Robertson (A Firm) (Supreme Court of Queensland - Muir J - 8 May 1997 - unreported). His Honour noted that:- "In brief, it is alleged that a solicitor, Mr McCosker, who participated in the giving of advice to South Blackwater whilst an employee of South Blackwater's solicitors cannot now, as a partner in the defendant firm, act against South Blackwater in the dispute the subject of action 9730 of 1996." 165 As in all these cases it is necessary to consider the particular facts with which the Court was confronted. After considering those facts his Honour said:- "In commencing to act for Thiess in the dispute Mr McCosker placed himself in a position in which there was a significant possibility that his duty to South Blackwater may conflict with his interest in advancing the interests of the new client, Thiess. As Mr McCosker was a partner in the defendant firm it was placed in a similar position: Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357 at 374." 166 His Honour then considered a number of cases arising out of that situation and, under the heading "Acquiescence" he noted the defendant's argument that whatever may have been the rights of the plaintiff to restrain the defendant from acting in the dispute they had been lost through the plaintiff's acquiescence, and he quoted from the judgment of Deane J in Orr v Ford at pp.337-338. 167 His Honour set forth a passage from the judgment of Sir Samuel Griffith in Cashman v Seven North Golden Gate Gold Mining Co (1897) 7 QLF 152, where his Honour said:- "The term acquiescence is not a term of art. It was used in courts of equity as a term to characterise a defence which may be set up by a person against whom another makes a claim for equitable relief. It is a well-known doctrine of equity that when a person claiming equitable relief has lain by for a long time and so conducted himself that it would be inequitable to permit him to complain of the defendant's actions, the court will refuse to grant the relief. The term also bears another meaning. It may be fairly applied to a man who, seeing an act about to be done to his prejudice, stands by and does not object to it. He may be very properly said to be acquiescent in that act being done. But the difference in point of law and the legal consequences of the two kinds of acquiescence is quite clear. A man who stands by and sees an act about to be done which will be injurious to himself, and makes no objection, cannot complain of that act as a wrong at all. He never has any right of action, because he stands by and allows the act to be done. Acquiescence in the other sense is a defence to an action for specific relief, on the ground that the plaintiff cannot be reinstated in his original position without doing injustice to the defendant, but it is not an answer to a cause of action already accrued." 168 The evidence is that AAH took no objection during a period when there was a possibility that the parties may be able to resolve the problems other than by resort to litigation. 169 Muir J concluded that the plaintiff knew in March 1996, at the latest, that the solicitor was a member of the defendant firm and that he was acting in relation to the dispute. By that time the plaintiff, through its solicitors, was aware of the extent of the information possessed by the solicitor as an employee of his former firm. He continued:- "Acting upon legal advice the plaintiff decided that it would not oppose Mr McCosker's or the defendant's continuing to act in the dispute in whatever manner and to whatever extent Thiess and the defendant considered appropriate. The plaintiff was then aware and continued to be aware that: the dispute was a very substantial one; extensive legal advice was likely to be obtained by Thiess on a continuing basis; and that such advice would or would be likely to touch upon the matters in respect of which Mr McCosker had previously advised or had been involved on behalf of the plaintiff. The plaintiff communicated its decision to Thiess not to take objection to McCosker's continuing to act in the understanding that Thiess would act on that intimation. It had the expectation, which in the event was fulfilled, that both McCosker and the defendant would continue to act in the dispute. The plaintiff must have appreciated also that there was some risk that in acting on behalf of Thiess, McCosker would retain some residual memory of advices given or information obtained whilst an employee of BDW. The plaintiff took a commercial decision to accept such risks." 170 His Honour concluded that it did not seem to him that the plaintiff ever held or expressed to the defendant or Thiess the concern that should the dispute go to litigation the risk of a misuse by Mr McCosker of confidential information would be greater than such risk whilst the parties were attempting to solve their differences without recourse to litigation. 171 He considered that even if the plaintiff's conduct did not disentitle it to equitable relief on the grounds of acquiescence he would nevertheless, in the exercise of his discretion decline to grant an injunction for the reasons he then gave. These included the counterbalancing prejudice to Thiess, which had paid a great deal of money for legal advice to further its claims against the plaintiff. His Honour agreed that much of the money so spent would not be thrown away if Thiess had to engage new solicitors, but he said that it was inevitable that a substantial amount would be. His Honour also had regard to the fact that if the defendant was prevented from acting there would be delay in the prosecution of the action and loss of management time taken up in re-acquainting new solicitors with matters within the knowledge of the defendant, such that Thiess would be deprived of the use of legal advisers in which it had reposed confidence. 172 Mr Stevenson expressly stated in the present case the defendants would take no objection to counsel briefed by MSJ in the principal proceedings continuing to be retained. 173 Mr Stevenson responded to these submissions by saying, firstly, that Mr Martignoni had not turned his mind to the question of conflict until July 2000. I do not consider the evidence supports this submission. Clearly he and Mr Shub considered the matter in late 1999 or early January 2000 and, as I have pointed out, the matter was drawn to Mr Shub's attention by the client. In any event, Mr Martignoni's evidence was clear that the point was not taken whilst the parties were seeking to reach a commercial resolution of the matter. Once again, as I have said, it is unclear to me why the conflict of interest had any greater effect in those circumstances than if litigation was commenced. 174 In the result, had I otherwise considered that the defendants were entitled to the relief claimed, I would, in the exercise of my discretion, have declined to grant it on the basis of their delay, with all that entailed in the circumstances of this case, in bringing forward their application.

Conclusions 175 In my opinion, the Notice of Motion must be dismissed. It may be that the defendants wish to argue some aspect of costs based upon the initial failure by MSJ to call Ms Dempsey. If they do I shall entertain any such application. 176 The parties should bring in Short Minutes of Order to give effect to the dismissal of the Notice of Motion upon the giving of the undertakings referred to by Mr Bates and Ms Dempsey. The Short Minutes of Order should also provide for the return of the exhibits and, in particular, the way in which the confidential exhibits are to be returned. 177 In giving these reasons I do not consider that I have set out any material in the confidential documents or transcript, which has the effect of breaching their confidentiality. However, lest it be thought that I have, I propose in the first instance to publish the reasons only to counsel for the parties. When the Short Minutes are brought the parties can, if it is considered that I have set out any matter, which breaches the confidentiality order, raise that then. 178 I stand the matter over to Friday, 10 November 2000 for the making of final orders.

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