Lofthouse v Baxter & Anor [2007] FMCA 435

"2. In approximately October, 2006, I contacted Mr Simon Gardiner, counsel for the applicant, by telephone and requested him to advise and act for me in this proceeding.

3. Our telephone conversation lasted for several minutes. I informed Mr Gardiner of the outline of this proceeding and some of the difficulties which affected my position as second respondent. I can recall mentioning four difficulties in particular.

4. The first difficulty which affected my position is that I was adjudicated a bankrupt in, what I believe, were unfair circumstances. I outlined these circumstances. These included my being unrepresented on the critical morning, because counsel believed that he had not been paid in advance.

5. The second difficulty was that I wanted my family to retain the real property assets in my estate at all costs. This was a guiding strategic concern of mine.

6. The third difficulty was that the Court needed to be persuaded that the 20th December 200 Declaration of Trust should be enforced according to its terms.

7. The fourth difficulty concerned my personal illness and occasional incapacity. A major depressive illness was preventing my giving appropriate attention to interlocutory matters."(sic)

To understand the affidavit of the Bankrupt it is relevant to note that the application before this Court is an application by David James Lofthouse (the Trustee) as trustee of the property of the Bankrupt. The application is an application seeking certain orders and declarations in relation to four properties over which there is a dispute as to ownership and about which there is a dispute as to whether those properties do or do not form part of the bankrupt estate. It is not necessary to refer in further detail to the material at this stage.

Mr Gardiner has sworn an affidavit this day, where effectively he seeks to join issue with the assertions made by the Bankrupt. Specifically, he claims that the conversation which had occurred as alleged by the Bankrupt lasted perhaps one to two minutes. He claims that the Bankrupt did not give him any detail about the application or tell him anything about the position in regard to the application as stated in the affidavit of the Bankrupt, which I have incorporated in this judgment.

For present purposes, it is not necessary for me to resolve the dispute between the deponents. In considering the present application, I am prepared to accept, solely for the purpose of this application, the assertions made by the Bankrupt. I do so in a way which should not be thought to involve adjudication on the factual dispute between the parties, but solely for the purpose of identifying those matters which are claimed to have been conveyed to Mr Gardiner and which are now claimed to be the basis upon which this Court should consider making an order that Mr Gardiner be restrained from continuing to act for the Trustee in these proceedings.

Counsel appearing for Mr Gardiner submitted that in this instance the Court should not make the order sought for and on behalf of the Bankrupt. The Bankrupt's Counsel had argued that there is sufficient material before the Court to satisfy the Court that material had been conveyed of a confidential nature to Mr Gardiner, and essentially that it would not be just or fair to the Bankrupt to permit Mr Gardiner to continue to act for and on behalf of the Applicant. It was claimed that the material conveyed, referred to in the affidavit of the Bankrupt, was material which was embarrassing and/or material which was directed towards the strategy of the Bankrupt in these proceedings.

In response to those submissions, Counsel for Mr Gardiner referred the Court to a number of authorities. The first was a decision of Gillard J of the Supreme Court of Victoria in the matter of Yunghanns and Ors v Elfic Ltd (unreported decision dated 3 July 1998, 5970 of 1997). In that case Gillard J stated:

"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 (see Bricheno v Thorp (1833) 2 Cr and M 183[1833] EngR 139; , 149 ER 725.) 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 honestly 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."

It is noted in the extract set out above that His Honour referred to the case "Bricheno v Thorp". The correct citation for that case appears to be [1821] EngR 542; (1821) 37 ER 864. The citation given by His Honour relates to the decision of the Court in Johnson v Marriott (1833) 2 Cr and M 183[1833] EngR 139; , 149 ER 725 (Johnson). In Johnson, the Court when considering an application that an attorney be restrained from acting for the opposite party dealt with relevant issues. Gurney B concurring with the rest of the Court relevantly stated:

"... but I think that, at all events, it was incumbent on the plaintiffs to show in their affidavits that some confidential communication had been made, the disclosure of which might be prejudicial to them; and that not having been done in the present case, I think that this rule must be discharged." (emphasis added)

It is noted that in Johnson the Court referred to Bricheno v Thorp, though as indicated it is Gurney B who introduces the concept of a requirement to identify and establish if there was some "confidential" information provided.

Nevertheless, it is clear from the extract from the decision of Gillard J that His Honour has correctly identified matters which are relevant for this Court to consider in the present application. The fundamental issues identified by His Honour include, as indicated in the extract, 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. Balanced against that must be the right of a client to the maintenance of all confidential information obtained by the solicitor during the course of retainer.

One matter that is clear from the present case is that at no stage can it be suggested that the Bankrupt has retained the services of Mr Gardiner. At best, all that has occurred is that there has been an unsuccessful attempt to retain the services of Mr Gardiner. What remains in issue is whether, in that attempt to retain Mr Gardiner as Counsel, confidential information was conveyed to Counsel by the Bankrupt of a kind which would lead the Court to conclude that in this instance there was indeed a difficulty which has arisen causing a conflict of interest for Mr Gardiner.

To understand whether or not there is indeed a conflict of a kind which might present a difficulty, it is also relevant to note the authority referred to by Counsel for Mr Gardiner of the decision of Hayne J in the Farrow Mortgage Services Pty Ltd v Mendall Properties Pty Ltd and Others (1995) 1 VR (Farrow) at page 6 where His Honour states:

"The plaintiff's submissions described the information that "must have been received" in the course of the retainer as being information about the accounting and financial arrangements of F.M.S. However, it is by no means clear what is encompassed by this description. In particular it is by no means clear to me what is the information that I am asked to conclude that the firm received in the course of its retainer that was confidential at the time that it was given to the firm and remains confidential. Both sides accepted it was necessary for the plaintiff to show that confidential information had been imparted which related to the matters the subject of the present action and accordingly the plaintiff's submissions focussed upon "accounting and financial information" that related to the defences of illegality and sham. Thus reference was made to the flow of funds between the building societies and F.M.S. and the borrower but, at least as I understood them, the plaintiff's submissions never articulated what information it was said that I should conclude had been conveyed to the firm by the plaintiff in the course of the earlier retainer and that was information relating to these matters which still remains confidential."

It is clear in the decisions of Gillard J to which I have referred and Hayne J in Farrow, that an essential task for the Court to perform in considering an application of this kind is to seek to identify and establish that there was some confidential information provided relevant to the substantive application.

This requires in the present case, in my view, an analysis of the matters referred to by the Bankrupt in her affidavit, to which I have already referred. There are four 'difficulties' identified by the deponent. In her affidavit she claims to have informed Mr Gardiner of what are described as "some of the difficulties which affected my position as Second Respondent".

The first of those difficulties relates to what I regard as an irrelevant issue namely, the perception by the Bankrupt that the sequestration order made against her was made in "unfair" circumstances. Whilst it is understandable that the Bankrupt may have a grievance concerning past orders, I cannot in the light of the application before this case see any relevance at all in that information, even if I were to assume that it was conveyed to Mr Gardiner.

The second difficulty referred to by the Bankrupt is her claim that she wanted her family to retain the real property assets in her estate at all costs. This is referred to as, and I quote, "A guiding strategic concern of mine." In my view, that difficulty is properly construed as a concern, and indeed properly reflected in the documents before this Court as to the attitude of the Bankrupt. I do not regard that item of information as being information which could in any way be properly referred to as information of a confidential kind. It is, indeed, information which is patently obvious on the public documents readily available in these proceedings.

The third difficulty identified by the Bankrupt in her affidavit is described as, "The Court needed to be persuaded that the 20 December 2000 declaration of trust should be enforced according to its terms." Again, that appears to me to be a live and transparent issue in these proceedings which may or may not have relevance in the ultimate determination of the dispute between the Trustee and the Bankrupt. I do not regard it of itself as being information which could properly be characterised as confidential information of the kind contemplated by Gillard J in the authority to which I have referred.

The fourth difficulty described by the Bankrupt relates to her personal illness. As I indicated during the course of exchange with Counsel, it seems clear to me that there is affidavit material referring to that factor. But again, I cannot see that factor as being a factor that would otherwise constitute for the purpose of this application confidential information provided to Mr Gardiner. It is certainly information of some limited relevance, but otherwise is information which appears in other material before the Court.

In my view, the difficulties referred to by the Bankrupt in her affidavit are difficulties which may well be perceived by the Bankrupt to be matters of genuine and sincere concern. I have little doubt that the Bankrupt, upon becoming aware that Mr Gardiner was retained by the Applicant, may have had a feeling of unease and discomfort. This no doubt has led her to instruct Counsel to make this application on her behalf this day. However, that unease and discomfort, having regard to the authorities to which I have referred, does not of itself lead this Court to conclude that the material referred to could properly be regarded as material establishing that confidential information was provided by the Bankrupt to Mr Gardiner.

I have indicated earlier in this judgment that I have dealt with the application on the basis that the assertions made by the Bankrupt are assertions of fact and that the information was actually conveyed. As I have indicated earlier, the Court has not necessarily adjudicated on the disputed facts but rather taken the Bankrupt's allegations at their highest. Even taking them at their highest, I am not satisfied, having regard to the authorities to which I have referred, that it would be appropriate to accede to the order requested for and on behalf of the Bankrupt. Accordingly, the application for a restraining order is dismissed.

I shall direct that the reasons I have just given be transcribed, and upon review shall constitute my reasons for the judgment in this matter.

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of McInnis FM