Li v Wu

THE INTERLOCUTORY APPLICATION 1 By an interlocutory application filed on 23 November 2011 the respondent, Tao (also known as Tom) Wu, seeks to restrain a solicitor, Steven Gavagna, and any solicitor from his firm Goodman Law, from acting as legal representative for the applicant (Yu Xin Li). 2 The interlocutory application also sought orders for security for costs. Mr Li has agreed to pay security for costs. The parties requested that paragraphs 2, 3 and 4 of the interlocutory application be adjourned to a convenient date, in anticipation of the filing of proposed consent orders to be made in chambers. Orders will be made to that effect.

RELEVANT PRINCIPLES 3 The principles applicable to the application to restrain a solicitor from acting were not in dispute. In the present case, Mr Wu relied upon two grounds in support of the proposed order. First, the protection of confidential information said to have been communicated by Mr Wu to Mr Gavagna when Mr Wu, or entities to which he was connected, were clients of Mr Gavagna, or his firm. Second, the protection of the due administration of justice. 4 In Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307; [1993] FCA 218 Drummond J identified the following propositions from the earlier authorities: (1) "…a solicitor is liable to be restrained from acting for a new client against a former client if a reasonable observer, aware of the relevant facts, would think that there was a real, as opposed to a theoretical possibility that confidential information given to the solicitor by the former client might be used by the solicitor to advance the interests of a new client to the detriment of the old client" (at 312). (2) "…the cases all indicate that before a solicitor will be restrained from acting for a new client at the behest of an old client, not only must there be a threat of disclosure of information given in confidence, but there must be evidence that such disclosure will be to the former client's disadvantage" (at 312). (3) "If the solicitor receives information in confidence from the former client which remains confidential at the time application is made to restrain the solicitor from acting for the new client, the solicitor will, in general, only be able to avoid being enjoined if it is clear that the confidential information in question relates only to matters which are remote from the matters relevant to the discharge by the solicitor of his retainer for his new client" (at 313). (4) "…it has long been recognised that a solicitor who, with the best will in the world, is determined not to make use of one client's confidential information for the benefit of another client may still subconsciously draw on that information to the disadvantage of the former" (at 313). (5) "It is a basic requirement that before material will be recognised as having the character of confidential information, the information in question must be identified with precision and not merely in global terms" (at 314). (6) "The more general the description of the information which a plaintiff seeks to protect, the more difficult it is for the court to satisfy itself that information so described was imparted or received or retained by a defendant in circumstances which give rise to an obligation of confidence": Independent Management Resources Pty Ltd v Brown (1987) VR 605 at 609" (at 314). 5 In Yunghanns v Elfic Ltd (formerly known as Elders Finance & Investment Co Ltd) (unreported, Supreme Court of Victoria, Gillard J, 3 July 1998) (Yunghanns), Gillard J identified "three different bases for the grant of an injunction to restrain a solicitor acting against his former client" as being the protection of confidential information, the duty of loyalty (subsequently doubted as a continuing duty), and the protection of the administration of justice. Gillard J said: In my opinion, the three bases for the jurisdiction are to be considered in the present application. The authorities establish that there are a number of factors which must be considered and weighed on an application such as the present, namely - (i) the right of a solicitor to act for any client and the right of all members of the community to retain a solicitor of their own choice; (ii) the right of a client to the maintenance of all confidential information obtained by the solicitor during the course of the retainer, which right continues until the client expressly or impliedly consents to the discharge of the obligation of confidence; (iii) that as a general rule it is necessary to identify and establish that there was some confidential information provided …But the degree of particularity of the confidential information must depend upon all the circumstances. Often it cannot be identified for fear of disclosure. In considering this factor it must be borne in mind that a solicitor makes notes, forms views and opinions of clients and observes things that the client may have forgotten or overlooked. In some cases the circumstances of the retainer and the nature of the legal work will be sufficient to establish the nature of the confidential information. In this regard the relationship between solicitor and client may be such that the solicitor learns a great deal about his client, his strengths, his weaknesses, his honesty or lack thereof, his reaction to crisis, pressure or tension, his attitude to litigation and settling cases and his tactics. These are factors which I would call the "getting to know you" factors. The overall opinion formed by a solicitor of his client as a result of his contact may in the circumstances amount to confidential information that should not be disclosed or used against the client. (iv) That a solicitor must, consistent with his retainer, act in the best interest of his client which means not only exercising skill but also putting at his client's disposal all relevant knowledge and if a solicitor is in a position where he is unable to reveal all his knowledge to a client he should not act for him… This must be especially the position where the solicitor has acted for two clients in relation to one transaction and then thereafter acts for one against the other in relation to matters arising out of the same transaction. 6 In Yunghanns the injunction was granted having regard to the facts, including: - (i) the solicitors had acted for Mr Yunghanns for some 30 years, (ii) the solicitors held some 140 files on behalf of Mr Yunghanns, (iii) Mr Yunghanns gave evidence that he imparted confidential information to the solicitors about strategy, risks and returns in litigation, takeovers and other business dealings and the solicitors had obtained an intimate understanding of his approach to these matters, and (iv) the firm was involved in advising both parties about the transactions which founded Mr Yunghanns' claims in the litigation. 7 In Kallinicos v Hunt (2005) 64 NSWLR 561; [2005] NSWSC 1181 Brereton J dealt with a case in which the plaintiff sought to invoke the third ground, protection of the administration of justice. After an extensive review of the authorities Brereton J (at [76]) summarised the applicable principles in these terms (excluding case references): • During the subsistence of a retainer, where the court's intervention to restrain a solicitor from acting for another is sought by an existing client of the solicitor, the foundation of the court's jurisdiction is the fiduciary obligation of a solicitor, and the inescapable conflict of duty which is inherent in the situation of acting for clients with competing interests. • Once the retainer is at an end, however, the court's jurisdiction is not based on any conflict of duty or interest, but on the protection of the confidences of the former client (unless there is no real risk of disclosure). • After termination of the retainer, there is no continuing (equitable or contractual) duty of loyalty to provide a basis for the court's intervention, such duty having come to an end with the retainer. • However, the court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice. • The test to be applied in 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. • The jurisdiction is to be regarded as exceptional and is to be exercised with caution. • 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. • The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief. 8 In Geelong School Supplies Pty Ltd v Dean (2006) 237 ALR 612; [2006] FCA 1404 Young J also dealt with an application brought on the ground of the protection of the administration of justice. At [31] Young J provided a convenient summary of some of the decisions which Brereton J considered in Kallinicos v Hunt. The summary is useful because it highlights examples which have been accepted as satisfying the principle that the jurisdiction is to be regarded as "exceptional". Young J noted as follows: [31] In the course of his examination of the authorities, Brereton J referred to the observations of Bergin J in Mitchell v Pattern Holdings Pty Ltd [2000] NSWSC 1015 ('Mitchell'), Heenan J in Holborow v MacDonald Rudder [2002] WASC 265 ('Holborow') and Hasluck J in Bowen [Bowen v Stott [2004] WASC 94]. In Mitchell, Bergin J stated that, as an incident of its inherent jurisdiction, the court may decide upon the propriety of a legal practitioner representing a party in a particular case to ensure justice and the appearance of justice: at [34]. In Holborow, Heenan J said that this power had been invoked in cases where there was a potential that the legal practitioner might be a witness; where the subject matter of the litigation was likely to involve an evaluation of the conduct of the solicitor; and where the efficacy of documents prepared by the solicitor was likely to be in issue: at [23]. In Bowen v Stott, Hasluck J said that it may be appropriate to invoke the inherent power in cases where the solicitor had some direct pecuniary interest in the outcome of the case, where the solicitor might feel impelled to justify or defend his conduct in representing a client, or where the practitioner's credibility is at stake as a potential witness: at [47], [53] and [55]. 9 In Ismail-Zai v State of Western Australia (2007) 34 WAR 379; [2007] WASCA 150 Steytler P made this statement (at [29]) about the so-called "getting to know you" considerations in Yunghanns: [29] These comments were made in the context of a case where the former client had had a very close relationship with a firm of solicitors spanning some 30 years. The former client had initially worked as an employee solicitor for the firm for five years and, subsequently, the firm had acted for him in many commercial transactions. The firm consequently had "many opportunities to form opinions as to [the former client's] modus operandi in business and legal work" (at 13). The case was consequently unusual. If these so-called "getting to know you" factors, to the extent that they involve knowledge of the client rather than of anything imparted in confidence by the client concerning his or her affairs, can constitute confidential information (a proposition that seems to me, with respect, to be questionable: see Black [Black v Taylor [1993] 3 NZLR 403]at 412 per Richardson J), they will only rarely do so: Mintel International Group Ltd v Mintel (Australia) Pty Ltd [2000] FCA 1410; (2000) 181 ALR 78; and see Black at 406 per Cooke P, at 408, 412 per Richardson J. However, the misuse of information of that kind might be such as to undermine the due administration of justice.