Perananthasivam v Telstra Corporation Limited [2007] FMCA 1261

At the commencement of today's hearing I invited the applicant to pursue his application for an adjournment and discussed with him the order in which I proposed to deal with the various interlocutory applications I had before me. I declined to adjourn the present interlocutory proceedings because I was not satisfied that there was any sufficient reason to do so. I was satisfied that both parties had had an adequate opportunity to prepare for the hearing of both the application in the case and a separate interlocutory application to summarily dismiss the substantive proceedings. I was also satisfied that a medical opinion obtained by the applicant from his treating doctor did not provide any medical reason for an adjournment, although it did indicate that the applicant required a reasonable time to prepare and present his case. I am satisfied that the applicant has had that reasonable opportunity.

The applicant sought to support his application in the case by reference to an affidavit filed on 25 July 2007. That affidavit was objected to both as a whole and in relation to particular parts of it. I found it impracticable to attempt to dissect from the affidavit particular objectionable parts. Read as a whole the affidavit is a submission and I decided to receive it on that basis.

I did receive as evidence a bundle of documents, essentially email correspondence and other correspondence, relating to the conduct of an investigation into a workplace complaint made to Telstra by the applicant. That bundle of documents was annexed to an affidavit filed by the applicant on 26 July 2007. I received the bundle as an exhibit (exhibit A1).

Essentially, the applicant's complaint about Deacons is that there was an investigation conducted into a complaint made by him to Telstra in relation to an incident that occurred in the workplace on 9 February 2004 involving the applicant and another Telstra employee. The applicant contends that because of the conduct of that investigation Deacons should be restrained from now acting for Telstra in these present proceedings.

There is a significant history of conflict between the applicant and Telstra in relation to his employment. The culmination of that conflict was the dismissal of the applicant from his employment by Telstra. That resulted in proceedings in the Australian Industrial Relations Commission ("the AIRC") based on an allegation of unfair dismissal. Senior Deputy President Hamberger dealt with that claim on 15 June 2005 and gave reasons. The applicant sought leave to appeal from that decision to the Full Bench of the AIRC but was unsuccessful.

The applicant was also in dispute with Telstra in relation to an alleged workplace injury caused by Telstra which resulted in proceedings in the Administrative Appeals Tribunal ("the AAT"). The Tribunal dealt with that matter pursuant to the Safety Rehabilitation and Compensation Act 1988 and published a decision on 1 June 2006. It appears from that decision that the applicant was in essence successful before the AAT in relation to the workers compensation claim.

Deacons acted for Telstra before the AIRC but not before the AAT, and continues to act for Telstra in these present proceedings.

The applicant objected to Deacons acting for Telstra before the AIRC. That objection was dealt with by Deputy President Hamberger in his decision at paragraph 152 where he says:

The applicant objected to Deacons appearing for the respondent on the basis that they might have gained some privileged information about him in the investigation of the incident on 9 February 2004. Telstra submitted that given the nature of the investigation the information which Deacons would have accessed was not privileged information about the applicant. I accepted this submission and ruled that it was not improper for Deacons to represent Telstra.

In his document, which I accepted as a submission, the applicant deals with his employment and the complaint made by him as well as the request made by him for an investigation into his complaint. He deals with discussions he had with individuals at Telstra and with Mr Noakes, who conducted the investigation. He deals with the conduct of Deacons at the AIRC and with what he describes as flaws in the conduct of the "independent" investigation and alleged collusion with Telstra. He also deals with the AAT proceedings. He alleges fraudulent conduct on the part of Deacons during the investigation of his complaint to Telstra and asserts a need to obtain further evidence from Deacons, possibly relating to the alleged fraudulent conduct, in order to assist him in his substantive proceedings in this Court. He also asserts that Deacons obtained confidential and personal information during the investigation about him which he fears would be used against him in the present proceedings. He believes that Deacons failed in their professional responsibility and perverted the course of justice. He believes particular individuals did not act ethically during the investigation.

Written submissions in relation to the application in the case were filed on 31 July 2007 by Telstra. Those submissions deal with the objection to the affidavit which I accepted as a submission. The submissions also deal with the basic facts and deal with principles in relation to the Court's ability to restrain a solicitor from acting for a party. The relevant principles are usefully set out in paragraphs 5.1 to 7.4 of those submissions and I adopt them for the purposes of this judgment:

In Rakusen v Ellis Munday & Clarke [1912] 1 Ch 831, the Court of Appeal held that there was no general rule that a solicitor who had acted for some person either before or after the litigation began could in no case act for the opposite side. Cozens-Hardy MR said (at 835):

A solicitor can be restrained as a matter of absolute obligation and as a general principle from disclosing any secrets which are confidentially reposed in him. In that respect it does not very much differ from the position of any confidential agent who is employed by a principal.

See Little v Kingswood Collieries Co (1882) 20 Ch D 733 at 742, per Jessel MR.

The principles were set out by Goldberg J in PhotoCure ASA v Queen's University at Kingston [2002] FCA 905, at [47] to [48]:

[47] The principles upon which the jurisdiction to grant an injunction restraining the solicitor from acting against a party in a proceeding vary depending upon whether the person seeking to restrain the solicitor from acting in the proceeding is a present client or a former client of the firm of solicitors. The distinction between the two situations was clearly drawn by the House of Lords in Prince Jefri Bolkiah v KPMG [1998] UKHL 52; [1999] 2 AC 222 ("Bolkiah"). Lord Millett, with whom the other Law Lords agreed, drew a clear distinction between the basis of the court's jurisdiction to intervene on behalf of an existing client and the basis of the court's jurisdiction to intervene on behalf of a former client. The jurisdiction where the court's intervention is sought by an existing client is predicated upon the existence of a conflict of interest. Lord Millett said at 234-235:

... a fiduciary cannot act at the same time both for and against the same client, and his firm is in no better position. A man cannot without the consent of both clients act for one client while his partner is acting for another in the opposite interests. His disqualification has nothing to do with the confidentiality of client information. It is based on the inescapable conflict of interest which is inherent in this situation.

[48] Where a former client is involved the jurisdiction is rather based upon the protection of confidential information. Lord Millett said at 235:

Where the court's intervention is sought by a former client, however, the position is entirely different. The court's jurisdiction cannot be based on any conflict of interest, real or perceived, for there is none. The fiduciary relationship which subsists between solicitor and client comes to an end with the termination of the retainer. Thereafter the solicitor has no obligation to defend and advance the interests of his former client. The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality of information imparted during its subsistence.

Accordingly, it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious. I do not think that it is necessary to introduce any presumptions, rebuttable or otherwise, in relation to these two matters. But given the basis on which the jurisdiction is exercised, there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case. In this respect also we ought not in my opinion to follow the jurisprudence of the United States."

In Bolkiah, and also in cases such as Carindale Country Club Estate Pty Limited v Astill [1993] FCA 218; (1993) 42 FCR 307, reference is made to the importance to the administration of justice that a solicitor should not act in any way that might appear to put confidential information at risk of coming into the hands of someone with an adverse interest. Once again the obligation to be enforced arises from 'the special fiduciary position of a solicitor'; Carindale, at 311.

In D & J Constructions Pty Ltd v Head (t/a Clayton Utz) (1987) 9 NSWLR 118 Bryson J said, at 124-125:

Where confidential information has been communicated by a client to a solicitor and is relevant to litigation in which the client is now engaged and still available to the solicitor, the Court should take a cautious approach to any proposal that it should allow the solicitor to act against that client.

(emphasis added)

The probability that real prejudice and real mischief will result must be proved. The substance not the form of the matter must be looked at: see Rakusen v Ellis Munday & Clarke, per Cozens-Hardy MR (at 835), and per Fletcher Moulton LJ (at 841); D & J Constructions v Head, per Bryson J (at 122, 133). In Rakusen v Ellis Munday & Clarke, Buckley LJ (at 845) put the test slightly less rigorously, referring to the necessity that `there exists or ... may be reasonably anticipated to exist a danger of a breach of duty of confidentiality'.

See also Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357 at 362-363; Pradhan v Eastside Day Surgery Pty Ltd [1999] SASC 256 per Bleby J).

The power to make orders supervising the conduct of solicitors is part of the inherent jurisdiction of a Superior Court of record and is not normally an incident of courts of limited jurisdiction.

Non Clients

In D & J Constructions Bryson J ultimately found, in refusing the order, that the firm had not acted as the solicitors for the plaintiff (at 123G) and therefore the 'special principles' that apply when a client seeks to restrain the use of information provided to a solicitor did not assist, leaving the plaintiff in 'the same position as other litigants who seek protection for their confidential information' (at 124 B-C).

Confidential Information

The principles governing the grant of relief to protect confidential information are set out in the decision of the Court of Appeal in Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 and are summarised by Megarry J in Coco v AN Clark (Engineers) Ltd (1968) 1A IPR 587, at 590; [1969] RPC 41 at 47. Megarry J considered (1A IPR, at 590) that three elements are normally required if, independently of contract, a case of breach of confidence is to succeed:

First, the information itself ... must "have the necessary quality of confidence about it". Secondly, that information must have been imparted in circumstances importing an obligation of confidence. Thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it.

In D & J Constructions Bryson J said, at 124 B-C:

... it must be shown that the information was confidential to the plaintiff when it was communicated, involving the plaintiff in the necessity of showing facts and circumstances which show that it should then have been kept confidential or secret, and necessarily as part of that, what information was so communicated ...

In Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266; (1987) 14 FCR 434, at 443, Gummow J regarded it as settled that a plaintiff or applicant must satisfy four criteria to make out a case in equity for the protection of allegedly confidential information:

The plaintiff: (i) must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question; and must also be able to show that (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge); (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence; and (iv) there is actual or threatened misuse of that information.

... 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: Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266; (1987) 14 FCR 434 at 443 and cf O'Brien v Komesaroff [1982] HCA 33; (1982) 150 CLR 310 at 327. The requirement is insisted upon even though it may necessitate disclosing to the court the very information the confidentiality of which it is sought to preserve by the action. (emphasis added)

I accept from those submissions that there is no question of Deacons being restrained from acting for Telstra on the basis that they formerly acted for the applicant. At no stage has there been any relationship of solicitor and client between the applicant and Deacons. Neither is there any basis to restrain Deacons from acting for Telstra because of a need to protect confidential information. The applicant asserts such a need but the assertion is general.

The documents comprising exhibit A1 include a number of documents which are expressed as being confidential or privileged. However, to the extent that there was ever any confidentiality in those documents or indeed any privilege, it has been lost as between the applicant and Telstra. Their disclosure in these proceedings establishes the loss of any privilege or confidentiality. I have not been taken to any particular information disclosed by the applicant to Deacons for the purposes of the investigation that continues to be confidential and in respect of which the confidentiality needs to be preserved.

The real issue in this case is whether the Court should restrain Deacons from acting for Telstra in accordance with general principles of the interests of the administration of justice and pursuant to a general power in the Court to control legal practitioners as officers of the Court. This principle has been discussed in two recent cases in the Federal Court. The most recent of those was Bahonko v Nurses Board of Victoria (No 3) [2007] FCA 491. At [4] Middleton J said:

Justice Young in Geelong School [2006] FCA 1404 recently set out the relevant legal principles to be applied when considering whether to restrain a legal practitioner from acting for a particular party to litigation, there being three possible grounds for so restraining a legal practitioner.

(a) the danger of misuse of confidential information: Geelong School [2006] FCA 1404 at [24];

(b) breach of a fiduciary duty of loyalty not to act against a client or against a former client in the same manner or a closely related matter. Geelong School [2006] FCA 1404 at [24]; and

(c) the inherent jurisdiction of the court to control the conduct of legal practitioners as officers of the Court: Geelong School [2006] FCA 1404 at [24], [32] and [33].

At [11] his Honour said, in relation to the third element:

The crucial question is whether, on the evidence before the Court, a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that the legal practitioner be restrained from acting for its client in the proceedings: Geelong School [2006] FCA 1404 at [35].

In Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404 at [35] Young J referred to a decision of Goldberg J in PhotoCure ASA v Queen's University at Kingston [2002] FCA 905; (2002) 56 IPR 86. At [35] of that decision the Court stated:

The crucial question, therefore, is whether on the evidence before me a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that [the solicitors] be restrained from acting for [the party] in the proceedings. In answering this question it must be borne in mind that this is an application for a permanent injunction: Yunghanns v Elfic Ltd (unreported, Supreme Court of Victoria, Gillard J, 3 July 1998). It must also be borne in mind that the Court's jurisdiction is an exceptional one; it is to be exercised with appropriate caution and due weight must be given to the public interest in a litigant not being deprived of a solicitor of its choice without due cause.

There is probably a question whether this Court, which while it is a court of record, is not a superior court, has the inherent jurisdiction asserted and applied in the Federal Court. The Court no doubt has statutory powers to issue injunctions and must be able to control its own processes. In that, the Court needs to be in a position to control officers of the Court who appear before it. For the purposes of this application I proceed on the basis that the Court has the power referred to by the Federal Court in Geelong School and Bahonko.

However, on the material before me I am not satisfied that an order restraining Deacons from acting for Telstra is properly called for. The facts are that Mr Perananthasivam had been involved in an incident in the workplace which caused him to make a complaint to his employer. He sought an investigation of that complaint and his request was met. It appears likely from the material that the expectations of the applicant and Telstra about that investigation were not the same. It also appears in the material that the difference in expectations was never satisfactorily resolved.

Nevertheless, the applicant elected to participate in the investigation. The basis of the investigation as understood by Deacons is set out in a letter dated 18 March 2004 from the solicitors to the applicant. It states as follows:

We have been retained by Telstra Corporation Limited (Telstra) to conduct an independent investigation into your complaint concerning your treatment in an incident that is said to have occurred on 9 February 2004.

The investigation will be undertaken primarily by way of interviewing relevant persons, being you, the managers named by you as being involved in the incident on 9 February 2004 and any witnesses to the incident. In this regard, we would be grateful for the opportunity to meet with you as soon as possible. We will contact you shortly to make the necessary arrangements.

Once we have considered the relevant evidence we will prepare our report to Telstra on our conclusions and recommendations as to the appropriate course to be adopted as a consequence of the outcome of our investigation. You will be notified of the outcome of our investigation as soon as possible.

It is plain from that letter that Deacons had been engaged by and retained by Telstra to undertake certain professional work. To the extent that there was any relationship of solicitor and client, it was between Telstra and Deacons.

The reference to an "independent" investigation is an odd and probably unfortunate one. Because Deacons had been engaged by Telstra to inquire and report to it, the investigation was not independent in any sense that has significance to me. What was probably meant was that the solicitors would interview relevant persons and draw factual conclusions themselves and that that task would not be undertaken by Telstra management. In the event, a report was prepared which set out the allegations and the response to the allegations and made factual findings. No recommendations appear in the report. The report, while being made to Telstra, was disclosed to the applicant.

In my view, while the description of the investigation as "independent" was probably unfortunate and may have lead the applicant to a misapprehension of the investigation process, there is nothing in the fact of the investigation or the conduct of the investigation by Deacons which justifies an order restraining them from now acting for Telstra in the present proceedings. The solicitors were, on behalf of Telstra, simply finding facts and reporting them. The interests of the administration of justice do no require those solicitors to be restrained from acting for their client in this subsequent proceeding which has only a remote link to that inquiry and report.

Having regard to those conclusions, I will dismiss the application in the case.

The application having been dismissed, costs should follow the event. The question to be resolved is the quantification of those costs. The Federal Magistrates Court scale in schedule 1 deals with an interim or summary hearing as a discreet event. In a general federal law proceeding, an amount of $1,250 is prescribed plus a daily hearing fee. The hearing of the application took half a day and the daily hearing fee applicable would therefore be $750. In addition, Telstra would be entitled to receive 150 per cent of that for the attendance of counsel, which was necessary and for which a certificate would be given. There would no doubt also have been some disbursements to attend to.

Telstra quantifies its party/party costs of the application at $6,500. Counsel for Telstra points to the seriousness of the application and the degree of preparation that was required of Telstra in order to deal with it. The applicant considered that the amount of costs sought was excessive but essentially left the matter in the Court's hands.

Any application to restrain solicitors from continuing to act for their client in the midst of legal proceedings is a very serious matter and needs to be dealt with seriously. I accept that significant preparation was required, both in relation to the identification of evidence and presentation of submissions. The issue was not a simple one. In the circumstances I do not think that scale costs provide an adequate recompense to the successful respondent to the application. I consider that costs of not less than $5,000 would have been reasonably and properly incurred by Telstra in responding to the application when considered on a party and party basis. That includes the costs of counsel's preparation and attendance.

I will therefore order that the applicant pay the respondent's costs and disbursements of and incidental to the application in the case, fixed in the sum of $5,000.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Driver FM