BETWEEN : CORPORATE SYSTEMS PUBLISHING PTY LTD (ACN 009 412 622)

STANTON PARTNERS AUSTRALASIA PTY LTD (ACN 085 103 206)

STANTON ACCOUNTANTS & ADVISORS PTY LTD (ACN 085 059 909)

Legal practitioners - Inherent power of court to control legal practitioners - Conflict of interest - Duty of loyalty - Solicitor's interest in a matter - Public policy

Corporations Act 2001, s 236, s 237(2)(c), s 237(2)(d)

Trustees Act 1962, s 65(2), s 65(3), s 65(7), s 76(1)

Second Plaintiff : Mr P G Clifford & Mr A P Rumsley

First Defendant : Mr M L Bennett & Mr M A MacLennan

Second Defendant : Mr M L Bennett & Mr M A MacLennan

Third Defendant : Mr M L Bennett & Mr M A MacLennan

Fourth Defendant : Mr M L Bennett & Mr M A MacLennan

Aircent Pty Ltd v Apple Computer Australia Pty Ltd [2002] FCA 1270

Carindale Country Club Estate v Astill [1993] FCA 218; (1993) 42 FCR 307

Commonwealth of Australia v Cockatoo Dockyard Pty Ltd [2003] NSWCA 192

Coyne v Bennett, unreported; SCt of WA; Library No 920664; 9 December 1992

Emanuele v Emanuel Investments (1996) 21 ACSR 83

Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640

Grimwade v Meagher, Hegland, Morgan, Lidgett, Reid & Bellheath Pty Ltd [1995] VicRp 28; [1995] 1 VR 446

Hassall v Speedy Gantry Hire Pty Ltd [2001] QSC 327

Jovanovic v Law Society of Tasmania [2003] TASSC 11

Software Engineers Australia (NSW) Pty Ltd v Bonket Pty Ltd [2002] FCA 1168

Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583; 42 ACSR 313

Wan v McDonald [1992] FCA 4; (1992) 33 FCR 491

1 JENKINS J: This is an application by the plaintiffs to have the Court exercise its inherent power of supervision over legal practitioners as officers of the Court to order that Bennett & Co ("the solicitor"), a firm of solicitors, cease representing or advising the second and third defendants in this action, in any proceedings in relation to the demands the subject of the letters of demand on the second defendant's letterhead dated 16 December 2003 and in any proceedings or proposed proceedings in relation to the subject matter of the solicitor's letter dated 15 January 2004. Further orders are sought to restrain the second and third defendants from instructing the solicitors in relation to the same proceedings.

2 The background to this action was set out by Pullin J in his judgment on the application by the plaintiffs for summary judgment. In delivering his judgment on 12 December 2003 Pullin J said:

"The dispute concerns what was, before 1998, an accounting partnership between Messrs Christou, Lingard and Joyce, who are three of the parties to this litigation. In 1998, they restructured the practice by transferring the partnership goodwill to the second defendant, Stanton Partners, and licensing it to conduct the practice for a fee. Stanton Partners then earned the income of the practice.

Stanton Partners was the trustee of a trust, and the beneficiaries included the three former partners, each of whom held 10 of 30 capital units. These units entitled them to equal payments of the net income of the trust. Discretionary units were also issued to the family trusts of the three individuals. The third defendant provided services to Stanton Partners. The third defendant was also trustee of a trust. The beneficiaries of this trust were the family trusts of the three individuals.

In short, the second plaintiff, Mr Christou, complains that nearly $1.9 million was paid out of the Stanton Partners Trust otherwise than in accordance with the terms of the trust deed. ...

After the practice had continued for a time under the new structure, there was a falling out between the three individuals. Lingard and Joyce complained that Christou was not earning enough fees. Christou considered there were valid reasons why this was so. Nevertheless, the existence of the unhappiness between them led them to consider selling the practice as a going concern and to adjust income entitlements.

The defendants refer to two agreements which they say are relevant to the dispute. The first was in April 2001. The second was in January 2002. As to the April 2001 agreement, Mr Joyce deposes that Mr Christou agreed to a reduction in his profit share to 50 per cent of his fees collected, backdated to February 2001. Mr Joyce also says that it was agreed that if Mr Christou's maintainable collections reached $100,000 per month, then he would revert to an equal third-share of profits.

This agreement was not formally documented, but the fact and substance of it was referred to in a letter from Mr Christou's solicitors, McKie and Associates. This letter read, in part:

'We are instructed that in April 2001, our client was coerced into agreeing to drawings representing 50% of his collection and, under protest, was from the period February 2001 to September 2001 (inclusive) paid 50% of such collections.'

A memorandum dated 14 December from Mr Joyce to a member of staff, with a copy to Mr Christou and a copy to Mr Lingard, also referred to the agreement. This memo read, in part:

'Upon receipt of the NFI Superannuation Fund accounts and tax returns the partnership will pay Mr. Christou's October and November 2001 income share based on his agreement to accept 50% of his cash collections. This amount is around $50,000.'

Mr Joyce has also exhibited some notes in Mr Christou's handwriting which refer to the April 2001 agreement.

A proposal to sell the practice by June 2002 was then discussed by the three individuals. Mr Christou, according to Mr Joyce, said he would consider a reduction of his unit-holder entitlement on sale of the practice when an offer to purchase the practice was made.

An offer to purchase the second defendant was made by a third party on 15 January 2002. The parties then circulated a document detailing the proposed split of the proceeds of the sale of the accountancy practice, and also a proposed split of proceeds for two projects which Mr Christou was involved in. Negotiations took place.

Then, on 21 or 22 January 2002, Mr Christou said he wished to resolve all past disputes. This led to the January 2002 agreement, which Mr Joyce said came about in this way: on 24 January 2002, a combined board meeting for the second and third defendants was convened. Mr Lingard, Mr Joyce and Mr Christou were present. According to Mr Joyce, there were discussions, following which an agreement was reached between Mr Lingard, Mr Joyce and Mr Christou regarding past and future entitlements, and Mr Lingard undertook to document the agreement and arrange for it to be executed by all directors.

The minutes of the board meeting for the second and third defendants recorded this. A short agreement was then prepared and signed by the three individuals. It attached 'an analysis of equity position' which had been discussed between the parties.

There is an issue between the parties as to whether the January 2002 agreement was an agreement conditional upon the sale of the practice, or whether it operated even if there were no sale. It is not necessary for me to set out all the terms of the agreement. Suffice it to say that it is arguable that there are some provisions which refer to what would happen if the practice were sold, and other provisions which operated even if the practice were not sold.

It is also arguable that the January 2002 agreement was an agreement between the individuals in their personal capacity and in their capacities as unit holders in Stanton Partners and also as directors of the two trustee companies. The defendants claim that the April 2001 agreement and the January 2002 agreement explain and justify the payments which the plaintiffs say were in breach of trust.

...

The plaintiffs point to the fact that a payroll tax return for the year ended 30 June 2002 revealed nothing reflecting the payments which are attacked by the plaintiffs. As a result, the plaintiffs contend that this shows that the payments were not salary. The return is pointed to as evidence of the fact that there were non-authorised payments in breach of trust.

The plaintiffs submit that there was no resolution of a meeting of the board of Stanton Partners authorising the payments, and also point to the fact that there is evidence that these payments did not go to the individuals at all but were, in fact, payments made to the family trusts of the two individuals.

...

In short, the issue between the parties is this: the plaintiffs say that the impugned payments were payments in breach of trust. The defendants, on the other hand, say that these payments were not payments in breach of trust but payments agreed to by the three individuals, who acted in their capacities as beneficiaries of the capital units, directors of the trustee companies and trustees of the family trust companies."

3 In the above excerpt from the judgment of Pullin J, the second defendant in this action is referred to as Stanton Partners. The third defendant is trustee for the NFI Trust. Pullin J found that the defendants had raised triable issues and dismissed the plaintiffs' application for summary judgment. He gave the defendants unconditional leave to defend.

4 At all times the defendants have been represented in this action by the solicitor. The solicitor receives instructions from the first and fourth defendant personally. The first and fourth defendants instruct jointly on behalf of the second and third defendants. For the time being, they wish the retainer to continue. There is no evidence before me to indicate that the solicitor has received any instructions from any other person purporting to instruct on behalf of the second and third defendants, contrary to the instructions received from the first and fourth defendants.

5 The letters of demand on the second defendant's letterhead dated 16 December 2003 are letters to the first and fourth defendants and their family trustee companies, signed by the second plaintiff but said to be on behalf of the second defendant, demanding repayment of the disputed payments.

6 The defendants have not complied with those letters of demand and dispute the authority of the second plaintiff to take any action on behalf of the second defendant.

7 The second plaintiff has now sought leave, pursuant to s 237 of the Corporations Act 2001, to bring proceedings in the name of the second defendant against the first and fourth defendants and their family trustee companies claiming repayment of the disputed payments ("COR 8 of 2004"). The solicitor has received instructions from the first and fourth defendants to act for the second defendant in COR 8 of 2004 and to oppose the application for leave.

8 The solicitor's letter, dated 15 January 2004, is addressed to the second plaintiff's solicitor and is written on behalf of the first and fourth defendants' family trustee companies. It states that the solicitor has received instructions to commence proceedings against the second plaintiff for failing to sell shares beneficially owned by the family trustee companies and Corporate Systems Publishing Pty Ltd. The latter company is the second plaintiff's family trustee company.

9 The letter goes on to state that as Corporate Systems Publishing Pty Ltd suffered the same loss as the other family trustee companies it must be a party to the proposed action. It asks for advice as to whether the company agrees to be joined as a plaintiff. In default of such advice, it will be made a defendant.

10 I understand that proceedings have not yet commenced.

11 It is relevant to note the remedies that the plaintiffs seek in this action. Against the third defendant, the first plaintiff seeks a declaration that the first plaintiff has been entitled to payment of one third of the net income of the NFI Trust from 12 November 1998 and directions that the third defendant pay the first plaintiff one third of the net income of the NFI Trust. The second plaintiff seeks identical orders relating to the Stanton Partners Trust against the second defendant. The plaintiffs also seek equitable compensation, alternatively damages against the second and third defendants. Against the first and fourth defendants, the plaintiffs seek damages. They further seek a declaration that the partnership between the second plaintiff, the first defendant and the fourth defendant has dissolved. Further directions are sought pursuant to the Partnership Act 1895 and to facilitate the winding up of the partnership.

12 The plaintiffs contend that, in circumstances where the first and fourth defendants have admitted they directed payments to their respective family trusts which were not authorised by the terms of the relevant trust deeds and where the second and third defendants are the corporate trustees that on the plaintiffs' case are liable to account for the funds paid out in breach of trust ("the disputed payments"), there is an actual or potential conflict of interest between the interests of the first and fourth defendants and the interests of the second and third defendants. The plaintiffs submit that the conflict of interest requires that the second and third defendants have separate representation to that of the first and fourth defendants.

13 As developed in oral submissions, the plaintiffs' case is that, on their application for summary judgment, Pullin J found that there was an arguable case. Consequently there is an arguable case that the second defendant in particular, has the right and, perhaps, the duty to recover the disputed payments. On the other hand, the first and fourth defendants have an interest in retaining those monies. In this circumstances, the plaintiffs say that there is a conflict between the interests of the defendants and one solicitor cannot act for all of them.

14 The plaintiffs submit that if the second and third defendants were separately represented from the first and fourth defendant it may be that they would take different action to the first and fourth defendants. This is particularised as action to recover the disputed payments. The plaintiffs' concern is that the solicitors for the second and third defendants are advancing, and will continue to advance, the interests of the first and fourth defendants in preference to the interests of the second and third defendants and will therefore not instruct the solicitors to seek to recover the monies.

15 The plaintiffs submit that the solicitor has a duty to acknowledge the arguable case of conflict and to act on that basis so as to decline to act for one or more of the defendants. The plaintiffs submit that as the solicitor has not taken this action the Court should require the solicitor to do so.

16 The plaintiffs' application that the solicitor be prevented from acting for the second and third defendants in specific future proceedings is based on the same arguments. The likelihood of such proceedings, in the plaintiffs' submission, strengthens their case.

17 The plaintiffs submit that the solicitor is required to cease to act for the second and third defendants on at least one of the following bases:

(1) an actual or potential conflict of interest between the solicitor's clients;

(2) a breach of the duty of loyalty owed by the solicitor to a current client;

(3) the solicitor having an interest in the matter; and

18 The defendants deny that the disputed payments were unauthorised. To the contrary, they submit that the payments were authorised by the 24 January 2002 agreement and that such payments were accordingly not in breach of the relevant trust deed. They point to the fact that, in dismissing the plaintiff's application for summary judgment, Pullin J found that the defendants had raised a triable issue in this regard.

19 The defendants submit that the plaintiffs' application relating to the third defendant is weaker than that relating to the second defendant.

20 The defendants' position is that cl 18(a) of the second defendant's constitution provides that questions arising at a meeting of directors shall be decided by a majority of votes of directors who are present and that such decisions shall be deemed a decision of the directors. As the solicitor is instructed by a majority of the directors, being the first and fourth defendants, it is obvious that all defendants have consented to the solicitor acting and, further, all information imparted by the first and fourth defendants in their personal capacities is automatically disclosed to the second and third defendants. Being so informed, the second and third defendants, through the first and fourth defendants as directors, take the position that it is in the second and third defendants' best interests to defend the proceedings brought by the plaintiffs, and not to commence an action against the first and fourth defendants to recover the disputed payments. In those circumstances, the defendants submit that there is no conflict and no reason why the solicitor should not act for all defendants in the present proceedings.

21 The defendants further submit that it is for the defendants, not the plaintiffs, to seek relief of this kind and as there is no evidence of conflict it is not appropriate for the Court to enquire into the solicitor/client relationship.

22 In relation to the second plaintiff's application pursuant to s 237 of the Corporations Act 2001, the defendants submit that it is premature to consider whether any conflict arises until and unless leave to bring such proceedings is granted. Such leave, they submit, should not be granted because the proposed application does not meet the criteria in subsections 237(2)(c) or (d) of the Corporations Act 2001.

23 The defendants say that the second plaintiff should not be able to deprive the defendants of their solicitor and counsel of choice merely by making such an application, which may well be unsuccessful.

24 In his oral submissions, counsel for the defendants submitted that the second plaintiff was attempting to orchestrate a conflict of interest by seeking leave to bring proceedings on behalf of the second defendant to recover the disputed payments. It was submitted that those proceedings are an abuse of process. The basis for this submission is that s 76(1) of the Trustees Act 1962 provides that where a trustee, in this case allegedly the second defendant, commits a breach of trust at the instigation or request or with the consent in writing of a beneficiary, in this case allegedly the first and fourth defendants, the court may if it thinks fit, make an order impounding all or any part of the interest of the beneficiary in the trust estate by way of indemnity to the trustee or persons claiming through him. The defendants further rely upon s 65 of the Trustees Act 1962. Sub-section 65(2) and (3) state that the court may make an order on a claim by a person beneficially interested under a trust that any person to whom trust assets were distributed shall pay to the beneficiary or to the trustee a sum not exceeding the value of those assets. Sub-section 65(7) states that where a trustee has made a distribution of any trust assets a person may exercise the remedies given by s 65(3) and all other rights and remedies available to him without first exercising the rights and remedies (if any) available to him against the trustee in consequence of the making of the distribution. It further states that a person shall not exercise any remedy that may be available to him against the trustee until he has exhausted all other remedies available to him, including those in s 65(3).

25 The defendants' position is that the relief sought in the proposed action for which leave is being sought, would be available in the present proceedings pursuant to the above sections. The proposed action is an abuse of process because it seeks to litigate the very issues raised in this action.

26 The defendants submit that the solicitor does not have an interest in this matter. In response to the allegation that the solicitor has acted "negligently" or "in breach of its professional duty" in advising the second and third defendants not to advance claims for contribution in the present proceedings, nor to pursue the first and fourth defendants for repayment, the second and third defendants say that this is a point for them to take and not for the second plaintiff. Further, they say that as the second plaintiff is not privy to what has passed between the solicitor and the defendants the allegation, even if relevant, has not been proved.

27 Generally, the defendants submit that the plaintiffs mistakenly equate a conflict between the three directors with a conflict between the second and third defendants on the one hand and the first and fourth defendants on the other. They submit that it is appropriate that the solicitors proceed on the basis that the first and fourth defendants, as a majority of directors, have the authority to act and speak on behalf of the second and third defendants. The solicitor is not in a position to look behind the instructions of the majority directors and form an independent view as to where the interests of the second and third defendants lies.

28 In their oral submissions the defendants also submitted that the plaintiffs were guilty of delay and they thereby raised the defence of laches.

29 Further, the defendants submit that the orders sought in this application, in the nature of an injunction, are lacking in utility. They submit that the reality is that either the second plaintiff gives instructions on behalf of the second and third defendants, or the first and fourth defendants give those instructions. They submit that preventing the solicitor from acting for all the defendants is not going to resolve the real issue, which is who is authorised to give the instructions on behalf of the second and third defendants.

30 In reply, the plaintiffs submit that the delay in bringing this application has occurred because the conflict emerged in the affidavits filed in support of the summary judgment application. The plaintiffs submit that the application was made at the first reasonable opportunity after Pullin J delivered his reasons for decision on 12 December 2003.

31 They submit that there is no evidence that the application, pursuant to s 236 of the Corporations Act 2001, for leave to commence proceedings is made for collateral purposes.

32 The plaintiffs' oral submissions were to the point that the plaintiffs do not seek to have the second and third defendants take a position contrary to the first and fourth defendants. Rather the plaintiffs wish the second and third defendants to be separately represented so that the legal advice they receive is not tainted by the instructions that their solicitor has received from the first and fourth defendants personally.

33 The parties are not in dispute with respect to the applicable legal principles.

34 The court has jurisdiction to oversee solicitors, as its officers: Newman v Phillips Fox (1999) 21 WAR 309 [18], [21]-[25]. This jurisdiction includes the power to restrain a solicitor from continuing to act in proceedings: Clay v Karlson (1997) 17 WAR 493 at 498; Murcia & Associates v Grey & Ors [2001] WASCA 240 at [15].

35 As a matter of public policy the law imposes a duty of loyalty on a solicitor in relation to his or her client. The duty prevents the use of knowledge or information gained from a client during the course of a retainer being used to the detriment of the client in the same or any related matter. It also prevents the assumption of a position hostile to the client concerning the same matter: Fordham v Legal Practitioners Complaints Committee (1997) 18 WAR 467 at 489. I have not found, in the cases, a basis for restraining a solicitor to act for a party founded in public policy alone.

36 The court will also intervene to prevent a solicitor from acting for a party in proceedings in which the solicitor has an interest. Such an interest exists where a solicitor is aware that he or she may be called as a material witness in the proceedings: Clay v Karlson (supra). An interest also exists where, because of allegations made in the pleadings, the solicitor would be required to defend his or her professional conduct. Thus the solicitor's independence from the interests of their client is compromised: Afkos Industries Pty Ltd v Pullinger Stewart [2001] WASCA 372 at [31]- [32]. In such a situation the client's view that the legal practitioner should continue to act will not generally persuade a court not to restrain the solicitor by injunction where otherwise it thinks it is necessary to do so: Ibid at [34].

37 The court will further intervene to restrain a solicitor who has acted for one party from acting for an adverse party in certain circumstances. Thus, where a solicitor has received information from a client which is subject to legal professional privilege and there is a real and sensible possibility that the solicitor's interest in advancing the case of a new client might conflict with his or her duty to keep information given to him or her by the former client confidential, or to refrain from using that information to the detriment of the former client, then an injunction will lie to restrain the solicitor from acting for the new client: Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357 at 362-363.

38 It is plain to me that apart from the acknowledged jurisdiction to make the orders sought in this application, the legal principles stated above are not directly applicable to the facts of this action.

39 This is not a situation where the solicitor is in possession of information, subject to legal professional privilege, which was received for the benefit of one client in circumstances where there is a real and sensible possibility that the solicitor's interests in advancing the case of another client might conflict with the solicitor's duty to keep information given to him by the first client confidential and to refrain from using that information. I accept the defendants' submissions that, as currently instructed, no such issues of confidentiality between the defendants arises.

40 The plaintiffs contend that the solicitor has a potential conflict of interest between the duty to advance the first and fourth defendants' interests and the possibly conflicting duty to advance the second and third defendants' interests. None of the decided cases, that I have been referred to, have similar facts to this action. They do not appear to me to support the application of the legal principles to the facts of this action.

41 I accept the defendants' submissions that, currently, the solicitor is being instructed by two directors who, prima facie, have the right to instruct solicitors on behalf of the second and third defendants. Although, I note that I was not directed to a specific resolution to this effect. There is an absence of material before me to indicate that there is a real and sensible possibility that in advancing the case of the first and fourth defendants, personally, the solicitor may come into conflict with the duty to keep information given to them by the second and third defendants confidential or vice versa. Neither is it realistic to suggest that there is a likelihood of the solicitor receiving conflicting instructions. This is because the persons responsible for giving instructions on behalf of the second and third defendants are, in fact, the first and fourth defendants.

42 The plaintiffs' real complaint is that the solicitor is accepting instructions for the second and third defendants from the first and fourth defendants. Restraining the solicitor from acting does not resolve this concern of the plaintiffs. If a new solicitor was instructed to act for the second and third defendants, the first and fourth defendants would, no doubt, assume responsibility for instructing that solicitor. If, as I apprehend, the real concern is as to the nature of the instructions being given to the solicitor because those instructions are coming from the first and fourth defendants then that matter is not resolved by restraining the solicitor from acting, because the first and fourth defendants would continue to assume the right to instruct the new solicitor.

43 This is not a situation where the solicitor is wrongly adopting a hostile relationship towards a current client. Thus, there is no question of breach of duty of loyalty to any of the defendants.

44 I do not accept that the solicitors have an interest in this matter. On the material before me, this is not a case where any legal practitioner, being either a principal or employee of the solicitor, is likely to be called as a witness in the proceedings in relation to a material issue. Neither is it a situation where the solicitor, its principals or employed legal practitioners have any personal interests which may conflict with their duty to their clients. The mere fact that a firm of solicitors has given advice to clients to sue or defend proceedings is not a personal interest: Afkos Industries Pty Ltd v Pullinger Stewart at [29].

45 Being of the view that the plaintiffs have not made out their allegations, it is unnecessary for me to consider the defendants' submissions concerning delay and laches.

The Application of the Law to the Facts Relating to the Proposed Proceedings

46 There is a fundamental difficulty with this application insofar as it seeks orders restraining the solicitor from representing or advising the second and third defendants and the second and third defendants retaining or otherwise instructing the solicitor in proceedings relating to other matters. None of the cases to which I have referred are authority for, or in anyway indicate, that a judicial officer hearing an application made in one action, may make such orders which relate to the conduct of other proceedings or other proposed proceedings. I do not see that, in these proceedings, I can or should restrain the solicitor from acting for a party or restrain a party from retaining the solicitor in separate proceedings unless the representation of the party in the other proceedings impacts on this action. Presently, I cannot see how the representation in the proposed proceedings affects this action.

47 The plaintiffs seek to restrain the solicitor from representing the second and third defendants in, and to restrain the second and third defendants from instructing the solicitor in COR 8 of 2004.

48 I am not satisfied that the representation of the second defendant by the solicitors in COR 8 of 2004 adversely affects these proceedings. As currently instructed the solicitor is not aware of any actual or potential conflict of interest between the two sets of clients. Acting for the second defendant in COR 8 of 2004 will not involve any breach of the duty of loyalty owed to the second defendant. Neither will acting for the second defendant in COR 8 of 2004 give rise to the solicitors having an interest in this matter. I see no public policy reasons why the solicitors and the parties should be restrained in an application made in these proceedings from acting in COR 8 of 2004.

49 Given this view, it is unnecessary for me to make findings with respect to the defendants' submissions regarding the bona fides of the application in COR 8 of 2004 or its merits.

50 My finding in this regard does not in any way indicate what the decision ought to be if a similar application was made in COR 8 of 2004 to prevent the solicitor from acting for the second defendant in those proceedings. Such an application would have to be determined on the facts as then existed with respect to matters relevant to COR 8 of 2004.

51 I note that the order sought in this application is much wider than is necessary to restrain the solicitors from acting in COR 8 of 2004. It seeks to prevent the solicitors from acting for the second and third defendants in any proceedings related to the letters of demand. Such an order would include proceedings brought pursuant to s 236 of the Corporations Act 2001 if the second plaintiff was given leave to bring such an action in the company's name. I agree with the defendants' submission that it is premature to consider whether a conflict arises until leave to bring the proposed derivative action is granted.

52 With respect to the plaintiffs' application for orders to restrain the solicitor from representing or advising the second and third defendants in and the second and third defendants from instructing the solicitor in any proceedings or proposed proceedings in relation to the subject matter of the solicitor's letter dated 15 January 2004, I am not satisfied that the representation or advising of the second and third defendants in that matter affects the conduct of these proceedings in any way that would warrant me making the orders sought. Further, in my opinion, it is premature to consider whether any order should be made as sought by the plaintiffs until the proceedings are commenced. This is, in part, because until the action is commenced it is unclear who the parties will be and which solicitor will be acting for each of them.

53 The real issue between the parties is not which solicitor should act for the second and third defendants but rather who should instruct the second and third defendants' solicitor. Making the orders as sought by the plaintiffs will not resolve this issue. It was submitted to me by the plaintiffs that if separate solicitors were instructed it would enable the second and third defendants to properly consider whether the conflict between the directors could be resolved by the appointment of an independent director to give instructions in these matters. However, the current representation of the second and third defendants does not in any way prevent that from occurring. The reality of the situation is that if the orders were made as sought by the plaintiffs, there would be a continuing conflict with respect to who was authorised to give instructions to the new solicitor. The orders as sought by the plaintiffs would not resolve that conflict.

54 For the above reasons the plaintiffs' application for orders restraining the solicitor from representing or advising the second and third defendants in this and other proposed proceedings and restraining the second and third defendants from instructing the solicitor in this and certain proposed proceedings is dismissed.