Gujarat NRE India Pty Ltd v Wollongong Coal Limited

The Motion

1. The applicable law may be shortly stated. Where a retainer is no longer active, the Court's jurisdiction to intervene at the suit of a former client to restrain a solicitor from acting is founded on obligations of confidence and is not connected with principles of conflict of interest: Prince Jefri Bolkiah v KPMG [1999] 2 AC 222, Maxwell-Smith v S & E Hall Pty Limited [2014] NSWCA 146; (2014) 86 NSWLR 481 at [24].
2. There is no continuing equitable or contractual duty of loyalty to provide the basis of the Court's intervention. So, for a former client to restrain a former solicitor from acting against it, the former client must ordinarily show: (1) that the former solicitor has the client's confidential information, to the disclosure of which the former client has not consented; and (2) the information may be relevant to the new matter in which the interests of the solicitor's new client may be adverse to those of the former client.
3. But the Court also has inherent jurisdiction to restrain solicitors from acting in particular cases as an incident of its inherent jurisdiction over its officers and to control its processes in aid of the administration of justice: Kallinicos at [32].
4. The test to be applied in the exercise of this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice: Kallinicos at [76]. The jurisdiction is to be regarded as exceptional and is to be exercised with caution: Kallinicos at [76]. Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause: Kallinicos at [76]. And the timing of the application may be important, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief: Kallinicos at [76].

Does the Administration of Justice Require that Mr Gillard Not Act?

1. WCL criticizes Mr Gillard's involvement in slightly wider aspects of the transaction than have already been identified in the relatively compressed summary of circumstances above. For example, Mr Gillard was apparently also involved in negotiations concerning an Original Security Deed made on 26 March 2013 between Gujarat, WCL and UIL. Under that Original Security Deed Gujarat granted a security interest over Gujarat's 150,000,000 shares in WCL to UIL. But under clause 13.6 of the Original Security Deed Gujarat as grantor could not utilize its rights of subrogation in respect of the secured party, being UIL, until the secured money had been paid in full.
2. In the main proceedings Gujarat now alleges that the Original Security Deed contained an implied term that Gujarat had such rights as were specified in clause 13.6, including subrogation, indemnity and set off, against WCL, but subject to the secured money being paid in full. The thrust of the contention in the main proceedings is by the implication of terms and other devices to enable Gujarat to make maximum use of its ordinary rights of subrogation, indemnity and set-off against the other obligor, WCL. These additional issues about the Original Security Deed, clause 13.6 feature in Gujarat's final pleading in the main proceedings, the Amended Statement of Claim. But they do not raise any issues that are very different from those that arise in respect of the dispute about Override Deed clause 5.3.
3. In order to focus debate about how Mr Gillard's knowledge and memory of transactions might be deployed to WCL's disadvantage in the main proceedings, the Court requested Mr Spencer provide a summary list of the issues raised in the ASOC that showed why Mr Gillard should not be permitted to act. That summary was then the subject of a response from Gujarat. In my view the list does not establish that there is any affront to the administration of justice, in the sense required by the authorities, from Mr Gillard continuing to act. On the contrary, the list shows that Mr Gillard's actual knowledge and memory either cannot or will not be deployed in the litigation to WCL's disadvantage.
4. It is convenient to structure the Court's analysis by reference to that list of issues. All paragraph references in this section are to paragraphs of the Amended Statement of Claim or the Amended Defence ("AD"). It can be assumed for the purposes of analysis that WCL has taken issue with all the allegations described here.
5. ASOC [36], [40], [59], [69], [70], [71], [120] and [121]. In different ways all of these parts of the ASOC plead the same general species of allegation: that either the Original Security Deed, clause 13.6 or the Override Deed, clause 5.3, or associated clauses, carried with them various implied terms, that were implied in fact or law. The pleaded implication of terms in fact is based upon conventional principles: BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266. The implication of terms in law is generally pleaded as arising from no more than the rights of contribution and indemnity and subrogation that exist as a matter of general law from surety relationships. WCL identifies in the particulars of the terms implied in fact (that because the implications in fact must be reasonable and equitable and necessary to give business efficacy to the contract) that Mr Gillard's knowledge may be used against WCL.
6. But this argument is not persuasive. The argument takes insufficient account of the fact that terms implied in contracts are intended to reflect the presumed intention of the parties, not the parties' actual subjective intention. The principle of implication of terms for reasons of business efficacy is limited by the constraint that it is intended to reflect that presumed intention. A term that was unreasonable or inequitable could hardly be presumed to be part of a party's intention.
7. Similarly, classic analysis of what is necessary to give business efficacy to a contract is a matter of objective analysis of what terms are needed to effect the commercial or practical result which the contract contemplates. Ordinarily that does not require a court to look at what a party says in negotiating the contract. And the objective nature of the task is already recognised in many of Gujarat's ASOC particulars: see for example ASOC, 70, "implied in fact as it was…(f) the objective intention between the parties".
8. ASOC, [52], [53], [57] (AD [38]). These parts of the pleadings raise questions as to the proper construction of the Override Deed. Gujarat pleads that: clause 5.3 was inserted into the deed at the request of the creditor, UIL; and, that fact together with the then common ownership of WCL had consequences for how clause 5.3 should be construed. Similar allegations are made in relation to the construction of the Original Security Deed, clause 3.6.
9. Much judicial ink has been spilled on the issue of the proper approach to construction of commercial contracts. The latest authority is that of the High Court in Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640; [2014] HCA 7 at [35], and applied by Gageler, Nettle and Gordon JJ in Simic v New South Wales and Housing Corporation [2016] HCA 47 at [78]. Those cases reaffirm the traditional principle that an objective approach is to be adopted in determining the rights and liabilities of parties to a contract and that the meaning of its terms is to be determined by what a reasonable business person would have understood those terms to mean. Neither in the way that the construction issue is pleaded nor by reason of traditional principle is it likely that Mr Gillard's evidence could bear upon the construction issues raised in the main litigation.
10. ASOC, [114] and [115]. Gujarat also pleads an estoppel by convention that both it and WCL were under a number of common assumptions upon entering into the Override Deed about the operation of clause 5.3. The common assumptions are particularised as having been held by a number of officers of Gujarat and WCL, including Mr Arun Jagatramka and Mr Sanjay Sharma. Mr Gillard is not mentioned. Mr Sharma is now associated with WCL. And some correspondence is also mentioned in the particulars.
11. Whether or not these common assumptions are established will depend solely on the evidence of Mr Arun Jagatramka on the one side and Mr Sanjay Sharma on the other. They represent the directing mind and will of the negotiating parties, not Mr Gillard, who even if he were called to give evidence would not ordinarily be permitted to express his own assumptions about the contract.
12. AD [45], [56], [72], [74], [95]. These paragraphs of the Amended Defence all variously raise allegations of fact about the solvency of WCL at various times in 2013 when these agreements were executed and a capital raising occurred. They also take issue with the common assumptions pleaded in the ASOC and plead the intentions of Gujarat, WCL and related companies to satisfy their external obligations. These various allegations have either already been dealt with in the analysis of the ASOC, are uncontroversial matters of fact, or cannot be the subject of Mr Gillard's evidence. I do not see how they assist WCL's case on the motion.
13. ASOC, [78] - [80]. Gujarat originally alleged that the Override Deed should be rectified because it does not reflect the intention of the parties. But this pleading was abandoned.
14. WCL pressed upon the Court the alleged similarities between this case and Cleveland Investments Global Limited v Evans [2010] NSWSC 567 ("Cleveland"), a decision of Ward J, as her Honour then was. WCL submitted that Cleveland was very close to the present. But in my view the analogy is not made good. In Cleveland a solicitor had acted for one party after litigation had commenced and was subsequently proposing to act on the other side of the litigation against the original client. That is not this case. And because of the Court's above analysis, in my view, Mr Gillard would not be likely in the eyes of a fair-minded and reasonably informed observer to be able to make use of the benefit of information given to Gujarat by WCL. The reality in this case as Mr Gillard is not giving evidence, is that the only evidence of communications between these parties which will be before the trial judge are the written communications which are being made available under the subpoena. In my view this is not a case like Cleveland.

The Discretionary Considerations

1. Many discretionary considerations weigh against WCL's success on the motion. But for the reasons earlier explained, delay is not one of them. These discretionary considerations add to the reasons to dismiss the motion in addition to the Court's conclusion that here there is no affront to the administration of justice in permitting Mr Gillard to continue to act for Gujarat.
2. Mr Gillard has a long-standing professional relationship with the principal of Gujarat, Mr Arun Jagatramka. Good reason has been shown for Gujarat to engage Mr Gillard at this point in preparation for the main proceedings. The authorities give considerable weight to the important principle: that parties to litigation before the courts should be able to engage the lawyer of their choice.
3. And there could be very considerable disadvantages to the administration of justice if the only other person who is readily qualified to conduct this case on behalf of Gujarat, Mr Leather, were now required to come back into the matter. Having Mr Leather try to focus on two demanding commercial cases, risks him failing in both of them. This in turn would multiply the potential adverse effects on the administration of justice.
4. Even without any criticism against WCL for the timing of its application, as none is warranted, the circumstances nevertheless mean that were the Court to make orders now, Gujarat would be forced to change solicitors only a few working days before the listed date for the commencement of hearing. There would be very high risk that the hearing date would be vacated if Gujarat were required to change solicitors at this point. Particularly in a case which has been set down for hearing for so long, that is not an outcome which is desirable in the administration of justice.
5. There is little or no risk that Mr Gillard will be giving evidence in the proceedings. No attempt to field him as a witness on Gujarat's behalf was made, even when the former solicitors acted for Gujarat. And I expect that Gujarat would have difficulty in now persuading the trial judge to permit Mr Gillard to give evidence, especially after the contest that has taken place on this motion.
6. The jurisdiction WCL invokes here should be exercised with caution and in exceptional circumstances. Some particular ground associated with the administration of justice should ordinarily be identified in order to overcome that caution. I do not see such a ground here. Curiously, the nature of what remains of this litigation after the rectification claim has been dropped makes Mr Gillard as much a bystander in the action as anyone else. Here his knowledge and memory of the key communications with Gujarat or WCL, not already recorded in correspondence that can be tendered, is either irrelevant or is now incapable of use.

Conclusions and Orders

1. For these reasons I will dismiss the motion. Cost should follow the event. But if any party wishes to apply for a special costs order they may do so by putting argument on that issue as soon as is convenient after the delivery of this judgment. But the parties may regard that as too much of a diversion of their energies and resources this close to the hearing. Another option is to delay such argument until after the hearing next week.
2. For the reasons indicated above the Court will order as follows: 1. The motion is dismissed. 2. Order that the defendant (the applicant on the motion) pay the respondent's (Mr Gillard's) costs of the motion. 3. If any party wishes to apply for a special costs order they should do so either immediately or at a date to be agreed between the parties and fixed in consultation with my associate.

After the Delivery of Written Reasons for Judgment

1. After the Court delivered its written reasons the parties put further submissions on costs. The Court then determined those costs issues.
2. Gujarat's written submissions recorded: that in the event of Mr Gillard's success it sought indemnity costs; and, that any costs awarded to Mr Gillard should be payable forthwith, rather than paid at the general costs of the proceedings: Uniform Civil Procedure Rules 2005 ("UCPR"), r 42.7.
3. As to the issue of indemnity costs, upon hearing submissions upon the delivery of judgment the Court indicated, it did not regard such an argument as very persuasive, given the Court's reasons for judgment. Gujarat decided not to press the application further.
4. As to the issue of whether Mr Gillard's costs should be paid forthwith, in my view, this is a situation well within the cases where principle indicates that costs should be payable forthwith. The issues on the motion are entirely severable from, or only peripherally related to, the issues in the main proceedings: see Jazabas Pty Limited v Haddad [2006] NSWSC 880. Therefore the Court will make an order that Mr Gillard's costs be payable forthwith. (4) The Court notes that any application for indemnity costs is not pressed. (5) The Court orders the defendant (the applicant on the motion) pay Mr Gillard's costs of the motion forthwith.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 March 2017