HIS HONOUR: The defendants seek an order that the plaintiff's solicitor, Mr Di Mauro, be restrained from continuing to act as the plaintiff's solicitor in these proceedings. That order is sought upon the basis that the defendant's former solicitor (who acted for them in the conveyancing transaction that gave rise to the dispute that is now being litigated between the parties), Mr Alkhair, divulged to Mr Di Mauro, in response to questions asked by Mr Di Mauro, privileged or confidential instructions given to him by the defendants when he was acting for them.
The proceedings involve a dispute as to a loan that the plaintiffs say they made to the defendants for the purchase, in effect, in joint venture, of a property at Castle Hill. The transaction - at least the suggested loan part of it - was documented in a loan agreement prepared by Mr Di Mauro. At that time, Mr Alkhair was acting for the defendants. The loan agreement apparently recorded that the plaintiffs had advanced $400,000 or $450,000 to the defendants, which was to be repaid within six weeks of entry into the agreement, and which in some way was to be attributed to the purchase price of the Castle Hill property. The plaintiffs say that the loan has not been repaid and they seek repayment of it. The defendants say that no money was advanced and that none is owing. They say, further, that all the money that was utilised for the purchase of the Castle Hill property was provided by them or their associates, and that none was provided by the plaintiffs.
It is apparent immediately that a crucial question in dispute between the parties is whether, in fact, any money was lent by the plaintiffs to the defendants, and whether the defendants' apparent acknowledgment that a loan had been made, contained in the loan agreement, represented reality.
A separate solicitor, Mr Alameddine, is now acting for the defendants. He had a conversation with Mr Alkhair on 6 December 2017. Mr Alkhair said that he had discussed matters with Mr Di Mauro and one of Mr Di Mauro's clients, the first plaintiff, Mr El-Cheikh. Mr Alkhair said that there were three main topics of conversation: who was his point of contact, and who provided him with instructions in relation to the loan; whether the defendants ever denied receiving the funds said to have been advanced; and whether the defendants ever indicated that they would seek to repay the loan.
Mr Alameddine said that Mr Alkhair told him the answers he had given to those questions. However, Mr Alameddine has declined to disclose what was said because he does not wish to disclose confidential or privileged material. (In using the word "declined ", I am not to be taken as being critical.)
That account of the conversation has been fleshed out in subsequent evidence. Mr Di Mauro has filed an affidavit, in which he accepts that there were discussions of the kind to which Mr Alameddine referred. However, Mr Di Mauro goes further, and sets out the responses that, he says, Mr Alkhair gave to those questions.
Mr Di Mauro said, further, that he questioned Mr Alkhair with respect to a number (I think, about 22) of "open communications". Most of those related back to the time of the transaction in September to November 2016. However, five of them relate to a time from March to April 2017 when, it is clear, the parties were in dispute, and were heading to court. The summons was in fact filed in May - I think, 24 May - this year.
Mr Di Mauro said that the communications in question were all open communications passing between the parties. He has not reproduced them, he says due to their volume.
The other source of evidence as to what was discussed is contained in Mr Alameddine's affidavit, to which I have referred already. He made a number of enquiries of Mr Alkhair by email, and Mr Alkhair responded. He confirmed that, "Mr Di Mauro asked a serious [sic] of questions surrounding various correspondence" - presumably, the documents to which Mr Di Mauro referred in his affidavit. He confirmed the three main points discussed, as I have set them out above. He said that he would not discuss with Mr Di Mauro any matters in which Mr El Cheikh had not been involved.
It is reasonably apparent, as Mr Maconachie of counsel (who appeared for the plaintiffs) submitted, that when the transaction was documented and consummated back in 2016, the parties were dealing on a close, familiar and, indeed, friendly basis. It would appear to be the case that Mr Alkhair was known to both parties, and that in some way he may have used his position to enable the transaction to proceed smoothly.
It may also be the case, as Mr Di Mauro deposed and Mr Maconachie submitted, that all of the documents in question about which Mr Di Mauro questioned Mr Alkhair were open communications. I should note that Mr Maconachie said that if I came to a conclusion adverse to the plaintiffs, I should give Mr Di Mauro an opportunity to produce the documents. For reasons that will become apparent, I do not propose to do so.
I should say at the outset that I have not the faintest idea how Mr Di Mauro could have thought it was appropriate, given this litigation, to question the defendants' former solicitor as to matters passing between him and the defendants at the time in 2016 when the transaction was being negotiated and documented. Nor do I have the faintest idea how Mr Alkhair could have thought it proper to answer those questions. That, however, is not the present point. It is the defendants' case, which on an application of this nature I think I must accept, that the disclosures occurred without their authority. I do not see any reason why Mr Di Mauro should have been entitled to assume that they were made with authority, and I do not accept Mr Maconachie's submission in that behalf.
There appeared to be no dispute that the Court does have the power to make the order sought. There have been a number of cases discussing the basis on which the Court may restrain a solicitor from acting. For obvious reasons, most of them concern an application by a former client to prevent his former solicitor from acting against him. Kallinicos v Hunt [1] was such a case. So, too, was Cleveland Investments Global LTA v Evans [2] .
The authorities (in particular, the decision of Brereton J in Kallinicos), discussed by Ward J in the latter case, seemed to her Honour to establish three conclusions. First, during the subsistence of a solicitor's retainer, the Court's jurisdiction to restrain the solicitor from acting for another client flows from the solicitor's fiduciary obligation and the inherent conflict of duty which would arise were the solicitor not so restrained.
Second, once the retainer is at an end, the jurisdiction is based, not on conflict of duty or interest, but on protection of confidences of the former client (assuming, of course, that there is a real risk of disclosure).
Third, after termination of the retainer, there is no continuing duty of loyalty (whether equitable or contractual) to provide the Court with power to intervene. That does not appear to be of particular significance in this case, because the application is based fairly and squarely on the second basis - protection of the confidences of the former client.
Ward J pointed out, and again it is uncontroversial, that the Court has the inherent power to restrain solicitors from acting in a particular case as an incident of its inherent jurisdiction over its officers and to control the process in the administration of justice. The jurisdiction is exceptional and must be exercised with caution. It is necessary to recognise the public interest in litigants having, and not being deprived of, the services of the lawyers of their choice. It is also necessary to have regard to discretionary considerations, such as cost, inconvenience and impracticality.
The cases to which I have referred are not directly analogous, because they were applications by a former client to restrain the former solicitor from acting against the client in new proceedings. Facts closer to the present are to be found in the decision of Hollingworth J in GT Corporation Pty Ltd v Amare Safety Pty Ltd. [3] In that case, privileged documents were inadvertently discovered and copies of those documents were given to the party having the benefit of discovery. The lawyers for that party (the plaintiff, GT Corporation) considered the documents. Amare sought an order restraining the lawyers (including counsel) from continuing to act.
Hollingworth J considered the basis on which the Court could make the orders sought. It is not necessary to refer to her Honour's discussion of the authorities, because I see nothing in it which is inconsistent with what I have said already as to the general bases of the court's power. In the particular case, her Honour said that it was not clear that the solicitors had paid any great attention to the contents of the documents, but that it was clear that counsel had. Thus, her Honour said of them: [4] "As the persons who would be cross-examining Amare's witnesses, there must be very real concerns about their capacity to put out of their mind everything they had seen in the folders of privileged documents".
The cases to which I have referred make it clear that the question is to be judged from the perspective of a fair minded and reasonably well informed member of the public. Would that hypothetical (and, it may be, non-existent) person conclude, in all the circumstances of the case, that the public interests relating to the protection of the integrity of judicial process and the due administration of justice, including very importantly the requirement that justice must always be seen to be done, necessitate that a particular practitioner be restrained from acting or from continuing to act.
In the present case, the questions asked by Mr Di Mauro of Mr Alkhair went directly to a fundamental question of fact that is in issue between the parties. The defendants say in their quasi-pleadings and in their evidence, that no money was lent to them, no money was advanced by the plaintiffs towards the purchase, and all the purchase price (for the Castle Hill property) was provided by them, or by their associates. On any view of the facts, Mr Di Mauro asked Mr Alkhair, who I repeat was the solicitor for the defendants in the transactions that have given rise to the dispute, from whom he took instructions; whether anything had been said as to whether money had been advanced; and whether any question had been raised as to the loan (that particular formulation comes from Mr Di Mauro's affidavit). In addition (and this comes from Mr Alameddine's affidavit), Mr Di Mauro apparently asked whether the defendants had ever indicated that they would attempt to repay the loan. It is common ground that Mr Alkhair gave substantive answers to each question.
Depending upon the content of the answers that Mr Alkhair gave, it could be thought that the defendants, in the course of the conveyancing transactions last year, had spoken and acted in a way that is directly in conflict with their factual case in the present litigation. Indeed, on Mr Di Mauro's account of what was said, it could certainly be inferred that the evidence that they now give, or wish to give is not consistent with what they said and did a year ago.
In those circumstances, it seems to me, as I have said, that the communications go to the heart of the factual dispute.
It is not immediately clear if the communications in question were attended by client legal privilege. I say that because it is not immediately clear whether they were communications made, as is required by s 118 of the Evidence Act 1995 (NSW), for the dominant purpose of Mr Alkhair providing legal advice to the defendants. However, what seems to me to be crystal clear is that they were communications of a kind that the defendants were entitled to expect would be kept confidential. A client is entitled to expect that when his or her lawyer questions him about a transaction, seeking instructions on aspects of it, the responses that are given will be kept confidential unless the client otherwise authorises.
I do accept, as Mr Maconachie submitted, that it is common for lawyers to tell other lawyers, "We are instructed that...", and then to set out the substance of the instructions. However, the circumstances in which that is usually done (in a conveyancing transaction, replies to requisitions on title; in a litigious controversy, replies to requests for particulars and responses to offers of settlement are circumstances that come to mind), it is easy to infer that the client has agreed that the communication should be disclosed. There is nothing in the nature of the communications apparently disclosed by Mr Alkhair to Mr Di Mauro that would suggest that there was any such expectation. On the contrary, the obvious expectation is that, as one would normally expect, the communications would be kept confidential.
Mr Maconachie submitted that the questions and answers were asked in the context of open communications passing between the parties. That may be so. It may be that much of what was said could not have offended any duty of confidence. However, I am not concerned with the generality, but with the particular: the specific questions and answers that I have referred to already. Further, the mere fact that questions may have been asked with relation to open communications does not mean that the answers themselves were restricted to matters that were non-confidential. To the extent that the submission was put in those terms, it is, in my view, falsified by the evidence.
I am conscious that restraining a solicitor from acting, and requiring the client to retain a new solicitor, is a serious step to take. I am conscious that it is not one that should be taken lightly. However, in my view, the hypothetical fair-minded and reasonably well informed member of the public who considered the circumstances to which I have referred would conclude that public confidence in the administration of justice, and in the integrity of the court's processes, would be threatened if Mr Di Mauro were to be permitted to continue to act. I come to that conclusion because, as I have said, Mr Di Mauro solicited and received information, from the defendants' former solicitor, going to the heart of the present factual dispute.
I take into account the circumstance that the plaintiff's evidence is not complete. Undoubtedly, there will be a cost in retaining other lawyers to complete it. Undoubtedly, over and above that cost, there will be a cost in retaining other solicitors to come up to speed and to act. But to the extent that that is a consideration, it is a consideration that has been triggered by what I regard as the inexplicable action taken by Mr Di Mauro in questioning Mr Alkhair about matters in controversy in the litigation. I think that the defendants are entitled to present their case as best they may, without being challenged by cross-examination based on confidential communications that should not have been disclosed to the plaintiffs or their legal advisers.
The notice of motion sought ancillary relief in relation to return of documents and destruction of copies. Although counsel did not specifically address those orders, they do not seem to me to be inappropriate. On the contrary, they seem to me to be necessary to ensure that the defendants are not deprived of the benefit of the principal order that they seek.
I should mention that there was a subsidiary dispute about the requirement for the plaintiffs to nominate an address for service in New South Wales. Given the time at which the application was brought and the time at which these reasons are delivered, I do not propose to deal with that subsidiary aspect.
The consequence is that I make orders in accordance with paragraphs 1, 2 and 3 of the defendants' notice of motion filed in court on 8 December 2017.
I order the plaintiffs to pay the defendants' costs of that notice of motion.
[4]
Endnotes
(2005) 64 NSWLR 561.
[2010] NSWSC 567.
[2007] VSC 123.
At [91].
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Decision last updated: 15 December 2017