These proceedings arose out of a dispute between a solicitor corporation, Eden King Lawyers Pty Limited ("EK"), the plaintiff, and its former client, Ms Makari, the defendant. In the course of preparing reasons for judgment, I identified a possible professional conduct issue involving Ms Claudette Gazi, the solicitor-director of EK. I directed that Ms Gazi show cause as to why I should not refer the issue to the Law Society.
The show-cause hearing took place before me on 5 April. I decided that I would not make a referral order. I now publish reasons for that decision.
The factual background is set out in the judgment that I delivered on 18 March: Eden King Lawyers Pty Ltd v Makari [2022] NSWSC 296. I will refer to that judgment as "J1". A summary of the background for the purposes of the present judgment follows.
Ms Gazi, through EK, acted for Ms Makari in a family law matter against Ms Makari's former husband. The matter was settled. Under the terms of the settlement, Ms Makari was to receive a sum of about $680,000, to be paid out of a controlled monies account operated by her former husband's solicitors, Mills Oakley ("MO").
Following the making of the settlement agreement, but before the time came for the settlement monies to be paid, Ms Gazi issued to Ms Makari a bill for EK's fees in the sum of $288,000. Ms Makari thought that this was excessive. After some debate with Ms Gazi, which extended over a period of a few weeks, Ms Makari wrote directly to MO. Ms Makari advised MO that Ms Gazi was no longer acting for her and asked MO to pay the settlement funds directly to her.
Ms Makari did not tell Ms Gazi that she was sending this letter. At the time, although relations between Ms Gazi and Ms Makari were strained, EK's retainer had not been terminated. Unaware of this, MO paid the settlement sum over to Ms Makari.
Soon afterwards, Ms Gazi discovered what had happened and the proceedings between EK and Ms Makari were commenced. EK obtained ex parte orders freezing the settlement monies in Ms Makari's hands. Ms Makari then paid the settlement sum into court. The proceedings were eventually resolved, except for the question of costs, which I dealt with in my earlier judgment.
The concern which sparked the show-cause hearing derived from some of the evidence which Ms Gazi gave in support of EK's successful ex parte application for a freezing order. In her affidavit (the "ex parte affidavit"), Ms Gazi stated at [34] (emphasis added):
The monies [paid to Ms Makari by MO] were initially paid to the Arab Bank and Ms Makari holds a Lebanese passport. Her entire extended family reside in Lebanon and with the end of the family law proceeding she has limited ties to Australia. The Plaintiff [EK] during the course of the family law proceeding became aware that Ms Makari has no other significant assets other than the funds that she has now received.
I thought that this paragraph, and in particular the last sentence, suggested that Ms Gazi had used information provided to her in the course of the retainer for EK's own advantage in pursuing its claim against Ms Makari for unpaid fees. I was concerned that there might have been a breach of Ms Gazi's professional obligations to Ms Makari.
Ms Gazi was not represented at the show-cause hearing by the same counsel that EK had retained for the purpose of suing Ms Makari. Instead, Ms Gazi was represented by independent counsel. Counsel read an affidavit from Ms Gazi (the "show-cause affidavit") setting out the circumstances in which the ex parte affidavit had been prepared, and attempting to explain her conduct. Counsel submitted that no referral was warranted.
The main thrust of Ms Gazi's show-cause affidavit was that in fact the information in paragraph 34 of her ex parte affidavit had not come from confidential or privileged sources. Ms Gazi acknowledged, and apologised for, the failure to make this clear in her affidavit. She explained this omission, but did not seek to justify it, on the basis of the urgency with which the application had been prepared.
In her show-cause affidavit, Ms Gazi explained that both she and Ms Makari are members of the same Lebanese church community. Ms Makari made the existence of her dispute with her ex-husband known within the community, and a charity event was held to support her. At the time, Ms Makari was being represented by other solicitors (see J1 at [3]). But, by 2019, she was unrepresented. Ms Gazi was approached through another member of the community to act for Ms Makari and eventually did so. Accordingly, even before she started acting, Ms Gazi was aware that Ms Makari was, or at least was claiming to be, short of money and dependent upon support from family and friends.
In her show-cause affidavit, Ms Gazi also suggested that the information in paragraph 34 of her ex parte affidavit, at least in part, reflected matters which had been disclosed on Ms Makari's behalf in open court at an earlier stage of the proceedings, before Ms Gazi had been retained. Ms Gazi exhibited to her affidavit some Family Court documents (including an interlocutory judgment). Referring to provisions of the Family Law Act 1975 (Cth), s 121, which prohibit the publication of anything in Family Court proceedings which might identify the parties, Ms Gazi asked in her affidavit that this evidence be treated as confidential.
The concern about s 121 was well taken. But there was another problem which proceeding in this way did not address.
Where a person is provided with a copy of a document, questions of privilege fall to be determined by reference to the copy document, not the original: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501. So, too, should questions of confidentiality. The documents exhibited by Ms Gazi to her affidavit were evidently copies of court documents which Ms Gazi had obtained as a result of taking the file over from previous solicitors, or copy documents that Ms Gazi had added to the file herself. As such, they were documents which had been obtained by Ms Gazi in her capacity as Ms Makari's solicitor. Indeed, if, as seems likely, Ms Makari was billed for the copying, the copies belonged to her: Wentworth v De Montfort (1988) 15 NSWLR 348 at 355-356.
In these circumstances, the use of the documents to advance Ms Gazi's own personal interests at the show-cause hearing was problematic. Indeed, it presented exactly the same problem as had given rise to the show-cause hearing in the first place. Ms Gazi was only able to put the copy documents into evidence at the show-cause hearing because she had obtained them as Ms Makari's solicitor. There was no suggestion that Ms Makari's permission had been sought to use them in this way.
If the documents on Ms Gazi's file had been obtained from Ms Makari's ex-husband by a compulsory process of the Court, it would have been impermissible for Ms Gazi to use them for her own purposes, even if they had, in whole or part, been read in open court (Harman v Secretary of State for the Home Department [1983] 1 AC 280). No lesser obligation would attach to documents obtained by Ms Gazi from her own client.
There was no suggestion that Ms Gazi had herself been present when the documents were read in the Family Court. Even if she had been, her freedom to disclose information garnered from the hearing would have been restricted by s 121. But the fundamental point is that the reading of the documents in open court at an earlier stage did not authorise Ms Gazi to make copies of them from her client's file and use those copy documents for her own purposes.
When I raised this with counsel for Ms Gazi, counsel acknowledged the problem. The relevant parts of Ms Gazi's show-cause affidavit were not read, and the relevant exhibits were not tendered. The content of the documents (which I did not read) has played no part in deciding the show-cause hearing.
In her show-cause affidavit, Ms Gazi stated that, in preparing her ex parte affidavit, she had read and considered an earlier judgment of mine in Malouf v Constantinou [2017] NSWSC 923. In particular she quoted what I had said at [99]-[100]:
99. In many cases, particularly at the outset of the retainer, a solicitor will not know and will not have occasion to ask for information concerning the client's ability to pay the costs to be charged, or to provide security. Even in cases where the solicitor does ask for that information, it may be obvious to the client that the solicitor is seeking to obtain the information for the solicitor's own commercial purposes in dealing with the client. But the present case is different. Because of the property dispute in the family law proceedings, the Solicitor needed (and in fact obtained) instructions on the Husband's financial position. The information obtained from the Husband and his parents in the initial conferences on 4 and 9 February 2016 (and any information obtained in the initial discussion between the Solicitor and Mr Gould) was obtained before the Solicitor formulated the terms on which he was prepared to act (in his letter to the Husband on 12 February 2016). If the Husband had not accepted the Solicitor's terms and no retainer had resulted, the information would still have been confidential and the Solicitor would have been unable to use it for the advantage of his other clients or for his own advantage.
100. In my opinion, the financial information provided to the Solicitor fell squarely within the area of the Solicitor's fiduciary responsibility, namely to act for the Husband in the family law proceedings. When the Solicitor stipulated for security to be provided over the properties, and for payment to be made by the client in the event of the properties being sold, the Solicitor was using information which had been provided to him in his capacity as solicitor. If it had not been part of the Solicitor's instructions, the Solicitor might never have even found out about the Roselands property, for instance. Furthermore, the rights of security which the Solicitor was seeking to obtain potentially affected the assets which would be available to the Husband, and hence the Husband's ability to prosecute the family law proceedings, should the Husband wish to retain a different solicitor. The Solicitor was advancing his own commercial interests by seeking to obtain favourable terms from the client as to payment and as to security for undertaking the case, when he was in a position of fiduciary conflict.
Counsel for Ms Gazi also referred to this passage from my judgment. Counsel submitted that the situation in that case was different from the present one. There was no question of Ms Gazi obtaining any advantage in bargaining with her client based on information which had been disclosed for the purposes of the retainer.
I accept counsel's point, so far as it goes. But it does not go far enough to exonerate Ms Gazi.
In the end, I did not understand counsel to submit that the information about Ms Makari in Ms Gazi's affidavit in support of the ex parte application derived wholly from what Ms Gazi had learned as a member of the same church community as Ms Makari, before she was retained by Ms Makari in these proceedings. Ms Gazi did not say that when she prepared her ex parte affidavit she tried to put information she had obtained in the course of acting for Ms Makari out of her mind.
In fact, by the end of the show-cause hearing, I thought that the impression I had received from her ex parte affidavit was confirmed. It seems that Ms Gazi simply made use of whatever information she had which she thought would assist her in her application for a freezing order. She appears not to have turned her mind to the question of confidentiality at all.
One of the ironies in this case is that EK, at all times, had an equitable lien over the settlement proceeds which was sufficient to restrain those proceeds from being dealt with by Ms Makari, or MO for that matter, in a way which would prejudice the lien: Firth v Centrelink (2002) 55 NSWLR 451 at [32]-[34]. There was no need, in the ex parte application, to demonstrate a risk of dissipation, such as would be required for a freezing order in support of an unsecured claim. The paragraph of Ms Gazi's affidavit which has caused the trouble was probably unnecessary all along.
But, as counsel for Ms Gazi accepted, this was no justification. Ms Gazi sought to have the Court grant relief in her company's favour by relying on information which was, at least in part, derived from having acted for Ms Makari. In fact, the information was used against Ms Makari herself.
Counsel for Ms Gazi faintly suggested that there might have been a question of waiver, based on Ms Makari's conduct in attempting to cut EK out of its lien by obtaining the settlement funds directly from MO. I accept, of course, that Ms Makari was wrong to do this (see J1 at [52]). No doubt her conduct was a repudiation of her obligations under the retainer which justified its termination by Ms Gazi on behalf of EK. Termination of the retainer did not, however, discharge Ms Gazi from her obligation of confidence.
It is easy to understand Ms Gazi's frustration with Ms Makari's conduct. But the facts of this case illustrate how insidious conflicts can be between solicitors' duties to their clients and the pursuit of their own interests (Jones v Mortgage Acceptance Nominees Ltd (Federal Court of Australia, Davies J, 10 November 1995) at 39). As I have said, it seems that Ms Gazi simply did not consider the question of client confidentiality at all.
Documents on EK's file, such as the Family Court documents, were the client's documents, not the solicitor's. Upon the termination of Ms Gazi's retainer, her prima facie obligation was to hand the documents over with the rest of the file to Ms Makari.
In the present case Ms Gazi may have been entitled to retain the file until her lien was satisfied. Even after that, she was entitled to retain, at her own expense, a copy of the file, so that if a claim was later made against her and an issue arose as to what documents she had on file, she would be able to defend herself. But, otherwise, there was no justification for looking at the file at all. Once the retainer had been terminated, the file should have been packed up and put to one side.
I was informed by counsel for Ms Gazi that the original paper file was later returned to Ms Makari. Ms Gazi retained an archive copy. But it is clear from the course of the show-cause proceedings that Ms Gazi had access to the archive file for further purposes of her own, not in any way connected with defending herself against Ms Makari.
At the request of counsel for Ms Gazi, a draft version of this judgment was provided to her legal representatives before publication. Counsel submitted that I should not refer in the judgment to the Family Court documents being exhibited to Ms Gazi's show-cause affidavit. Counsel pointed out that the documents were withdrawn when the issue was raised, they were not the subject of submissions, and no referral was made.
I have not acceded to that submission. Although the documents were not in the end used in evidence or made the subject of submissions, the fact that Ms Gazi exhibited them in the first place raised a point about solicitors' confidentiality obligations which I think is important. It only reinforces what I have already said about how necessary it is for solicitors to be on their guard against conflicts of duty and interest when disputes arise with clients or former clients.
In the end, I do not think that Ms Gazi has provided an explanation for her conduct which is altogether satisfactory. But her evidence was that she lacked experience in ex parte applications of the type made in these proceedings. And her counsel submitted that I could proceed on the assumption that, having retained independent lawyers for the purpose of the show-cause hearing, she has been properly advised and now clearly understands her obligations.
I accept counsel's submission. There is no reason to think that there will be any repetition of these unfortunate events. Ms Gazi's evidence also discloses that the events have already had a severe impact on her personally.
In all of these circumstances, I have decided not to take the formal step of referring the matter. So far as the Court is concerned, the issue is closed.
[2]
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Decision last updated: 21 April 2022