Findings
62 PhotoCure's case, based on the principles to which I have referred, and accepting that Freehills, or at least FCSB with whom the intellectual property team is integrated, is in the possession of confidential information which is relevant to the present proceeding was put in the following way:
"The present case is a striking example of one in which there can be no real confidence that highly relevant and confidential information of an old client in the possession of the solicitors and subject to legal professional privilege has not and will not find its way into the hands of those in the firm who are bound to act in the interest of the new client.
To allow the solicitors to continue acting in those circumstances for the new client at the expense of the old would seriously diminish public confidence in the administration of justice."
63 Freehills submitted that I should resolve the issue by asking whether there was a real and sensible possibility or risk of misuse of confidential information.
64 PhotoCure relied upon a number of circumstances and matters to support its submission that there was a risk that the confidential information had come or would come into the possession of the partners and employees of Freehills now acting for Dusa:
· the integration between FCSB and Freehills;
· the involvement of Mr Jones, Dr Davy and Mr Cherry in the retainer by PhotoCure;
· the file disclosed that Mr Jones had discussions about a matter involving PhotoCure with unnamed solicitors;
· Freehills refused to answer questions asked in PhotoCure's solicitors' letter of 16 May 2002;
· Mr Jones' recollection of the extent of the advice he gave was poor. Freehills' letter of 8 May 2002 to PhotoCure's solicitors recorded a conversation between Mr Jones and Mr Muratore in which Mr Jones referred to PhotoCure being interested in infringement issues. In his affidavit Mr Jones told Mr Muratore that he did not recall anything on the file being of a confidential nature and that he did not think that his advice had gone to the validity of the patent. PhotoCure contrasted this evidence with the contents of the confidential file;
· Mr Cherry had an imperfect recollection of his involvement in the file and the drafting of a letter which he signed;
· it was said that common experience is that persons within legal firms discuss matters with which they are dealing as a matter of common interest.
65 I accept that the integration between FCSB and Freehills, and in particular their intellectual property group is such that for present purposes I should treat FCSB as part of Freehills for the purpose of the application of relevant principles. However, I do not consider that there is a real risk of disclosure of the confidential information for the reasons to which PhotoCure has referred. Mr Jones and Mr Cherry are not involved, and have never been involved, in the retainer of Freehills by Dusa and Dr Davy left the firm over two years ago. Mr Wayne Condon had a fleeting connection with the PhotoCure file but left Freehills some time ago.
66 I am satisfied on the material placed before me that there is no risk that there has been disclosure by Messrs Jones and Cherry and Dr Davey of any material relating to PhotoCure to any of the persons presently acting for Dusa and that there is no likelihood of that occurring in the future. I am not satisfied that Mr Jones had discussions with unnamed solicitors with the consequence that there is a risk of disclosure to the persons presently acting for Dusa.
67 The failure or refusal of Freehills to answer the questions put to the firm by PhotoCure's solicitors in their letter of 16 May 2002 has now been cured by the material placed before the Court. I accept that there have been errors in recollection of Messrs Jones and Cherry but those errors of recollection are not such as to indicate a real risk that there has been, or will be, a dissemination of confidential information pertaining to PhotoCure to the persons now acting for Dusa.
68 Counsel for PhotoCure was critical of Mr Jones' apparent understanding of the nature of confidential information as he disclosed to Mr Muratore the fact that he had given advice to Frank B Dehn & Co "regarding the circumstances in which an interlocutory injunction might be granted". Such advice and the seeking of it was privileged information and entitled to a cloak of confidentiality. Nevertheless the evidence does not establish that Mr Jones made any further disclosure to anyone else at Freehills Patent Attorneys or FCSB or Freehills other than to those persons shown by the PhotoCure file to have been involved in the receipt of instructions and the preparation of advice.
69 Mr Jones also said in his affidavit that he told Mr Muratore that he did not recall anything on the PhotoCure file having been of a confidential nature. This was not a correct recollection, particularly because the subject‑matter of the file was the seeking and giving of advice on patent issues. However Mr Jones' statement must be considered in context. The PhotoCure file had not been active for around two years and he had not refreshed his memory by reference to the file other than to ask his secretary to read to him what he understood to be the opening paragraph of the last letter on the file. Mr Jones acknowledged in his affidavit that his recollection of the file was very incomplete and might be inaccurate. Against this background, his recollection was that nobody else worked with him on the file whether from the patent attorney firm in Victoria or New South Wales or from Freehills in Victoria or New South Wales. Again an examination of the PhotoCure file shows that this recollection does not accord with the facts.
70 It does not follow from Mr Jones' imperfect recollection of the contents of a file, over two years old, that there is a likelihood that he discussed with, or disclosed to, any person, other than those identified in the file, any of the contents of the file. The computer systems in place at relevant times make it improbable that there was any access to PhotoCure's file from any person in the Sydney firms of patent attorneys and solicitors.
71 It is relevant in this context that the original personnel dealing with the PhotoCure retainer in 1999/2000 came from the Melbourne office and the persons now acting for Dusa in relation to the patent come from the Sydney office. Although there is obviously communication and particular information technology connections between the firms in Melbourne and Sydney the evidence established that there has not been any contact between Sydney and Melbourne in relation to the PhotoCure file.
72 Although it may be common experience that legal practitioners and patent attorneys talk amongst themselves about the nature of the work they are undertaking from time to time it is speculative and theoretical, in the light of the evidence, that there has been dissemination of confidential information relating to PhotoCure to the persons presently acting for Dusa. Mr Jones and his group were located in Melbourne and Mr Muratore and his group are located in Sydney. I do not consider that there is a real likelihood of there having occurred a casual comment by Mr Jones or anyone else who worked on the PhotoCure file which was communicated to anyone in Mr Muratore's group who will be acting for Dusa.
73 PhotoCure submitted that confidential material may have already been disclosed and therefore might be available in some way that could never be traced to the disadvantage of PhotoCure. It was also submitted that inadvertent disclosure of such confidential material might occur hereafter and that the difficulty which Freehills and its deponents had in identifying relevant confidential material showed that I could not be confident that in the future there might not be inadvertent disclosure.
74 Although there were inconsistencies in Freehills' evidence as to the nature of the confidential information imparted by PhotoCure to Freehills, and indeed whether what was imparted was confidential, I am not satisfied that there is a real risk of future disclosure of any of the information which is confidential to PhotoCure to anyone at Freehills or FCSB who may be acting for Dusa. Although that risk is theoretically possible, I do not consider it to be a real risk from a practical point of view. The dissemination of the confidential information between November 1999 and May 2000 was to a limited group of persons in Melbourne who did not have regular contact with the people who will be in Mr Muratore's team in Sydney acting for Dusa. There is also substantial protection from disclosure to those persons in the future available from the undertaking which have been proffered.
75 The undertaking proffered is in the following terms:
"I, , Solicitor, undertake to the Federal Court and to PhotoCure ASA (PhotoCure) as follows:
1 not to discuss, or seek to discuss, with Paul Jones, James Cherry, Anne Gsodam, Joanna Mulrooney, David Opperman, Jennifer Galatas or Gavin Bell, any matter relating to:
(a) Federal Court proceeding No. V214 of 2002 (Proceeding);
(b) any advice previously provided by Freehills Patent Attorneys (FPA) or Freehills Carter Smith Beadle (FCSB) to PhotoCure in relation to Australian Patent No. 624985 (Patent); or
(c) any information obtained by FPA or FCSB, from PhotoCure or any person on its behalf in relation to the Patent;
2 not to seek or obtain access to any files or documents, including electronic files and documents, in the possession or custody of FCSB or Freehills relating to advice previously provided to PhotoCure in relation to the Patent;
3 not to work from any floor in the Melbourne office of Freehills on which FCSB is located in connection with the Proceeding;
4 not to store any hard copy documents drafted or obtained by me, or under my control, in relation to the Proceeding, on any floor in the Melbourne office of Freehills on which FCSB is located;
5 to restrict access to all documents created by me or at my direction and stored electronically so as to permit access only to those persons in Freehills undertaking work in relation to the Proceeding.
…………………………………
Signed
Date:"
The persons nominated in par 1 of the undertaking are persons, presently principals of, or employed by, Freehills and FCSB in Melbourne, who have had contact with the PhotoCure file. Ms Anne Gsodam is Mr Jones' secretary, Ms Joanna Mulrooney was Dr Davy's secretary. Mr David Opperman is a partner in Freehills' litigation section in Melbourne, Ms Jennifer Galatas is a solicitor in the Freehills' litigation section in Melbourne who was involved in the transmission of the PhotoCure file from Freehills to counsel acting for Freehills on the motion and Mr Gavin Bell is Freehills' Chief Operating Officer.
76 In Bolkiah an injunction was granted. Lord Millett was not satisfied that KPMG had discharged the burden of showing that there was no real risk that information in its possession confidential to Prince Jefrimight unwittingly or inadvertently come to the notice of those persons working adversely to his interests. Although Lord Millett expressed the opinion at 239 that:
"an effective Chinese wall needs to be an established part of the organisational structure of the firm, not created ad hoc and dependent on the acceptance of evidence sworn for the purpose, by members of staff engaged on the relevant work",
he was faced with a substantially different situation than is present in this case. It should be noted that earlier in his reasons, Lord Millett had accepted that there was no rule of law that Chinese walls are insufficient to eliminate the risk of disclosure of confidential information.
77 Of the order of 168 KPMG personnel had worked on the assignment for Prince Jefri between 1996 and 1998, including twelve partners and 81 assistant managers or above and a substantial body of confidential information was involved. In the present case the involvement of Freehills Patent Attorneys, FCSB and Freehills' personnel was much more limited. The facts in Bolkiah are distinguishable from those in the present case.
78 Although the information barrier or Chinese wall created in the present case is an ad hoc arrangement I am satisfied that, taken in conjunction with the other matters to which I have referred, it is effective to ensure that there is no real risk of disclosure of any of PhotoCure's confidential information to Mr Muratore and his team.
79 In this respect I have adopted a similar approach to that of Ryan J in Bureau Interprofessionnel Des Vins De Bourgogne v Red Earth Nominees Pty Ltd (t/as Taltarni Vineyards) (supra) in which the Chinese walls had been erected on an ad hoc basis. Ryan J accepted that there was no principle of law that Chinese walls or arrangements designed to quarantine information to particular persons could never eliminate the risk of disclosure of confidential information and referred to Lord Millet's observation in this respect in Bolkiah in par [51] above. Ryan J also noted the reluctance of courts to assume the efficacy of Chinese walls and information barriers where, without them, the risk is real and referred to MacDonald Estate v Martin 77 DLR (4th) 249 at 269 and D & J Constructions at 122‑123. Notwithstanding that the Chinese walls were erected on an ad hoc basis, Ryan J was satisfied that there was no real risk that any relevant confidential information would come into the hands of those in the firm acting for the applicants.
80 In Newman v Phillips Fox (supra) Steytler J concluded that the Chinese wall proposed by the firm of solicitors was inadequate with the consequence that there was a risk of inadvertent disclosure. Steytler J was particularly concerned with the expected interaction between the persons who had previously acted for the former client and the persons now acting for the other party whose interests were adverse to that former client. That extent of interaction does not exist in the present circumstances particularly having regard to the different cities in which Mr Jones and his team and Mr Muratore and his team work. The facts in the present case are distinguishable from those in Newman v Phillips Fox (supra).
81 I am therefore satisfied that Freehills has discharged the evidentiary burden of establishing that, notwithstanding the fact that Freehills through its association and integration with FCSB is in possession of confidential information of PhotoCure relevant to the present proceeding, there is no real risk that the confidential information will come into the possession of, to the knowledge of, or be used by, those persons in Freehills who will be acting for Dusa in the proceeding if Dusa is given leave to be joined as a party or if, in the events which turn out, Freehills act for the respondent.
82 There is a theoretical risk that the contents of the PhotoCure file may be disclosed to the persons in Mr Muratore's team who are and will be acting for Dusa as they are part of the same integrated organisation and they could seek access to the file within the offices in which the firms carry on their practices. However that theoretical risk is not a real risk or a real possibility having regard to the manner in which the PhotoCure file has been quarantined, the inability of the persons in Mr Muratore's team to access it through their information and recording systems and the undertakings which have been proffered.
83 I am satisfied that notwithstanding the integration and co-operation between FCSB and Freehills and their predecessor firms that there has not been a dissemination of the instructions which were received by Freehills Patent Attorney in Victoria in November 1999 and thereafter or the advice which that firm gave to Frank B Dehn & Co and to PhotoCure thereafter beyond the persons identified in the file to any of the persons who are or may be involved in acting for Dusa against PhotoCure in relation to the patent.
84 Further, I am satisfied that the procedures and safeguards which Freehills have in place and the undertakings which the persons acting for Dusa in a proceeding are prepared to give, are such, in the words of Sopinka J in MacDonald Estate v Martin (supra) at 269 that:
"all reasonable measures have been taken to ensure that no disclosure will occur."
I also adopt the words of Lord Millet that the steps taken by Freehills and FCSB will be "effective" to ensure that no disclosure will occur. I am satisfied that Freehills have demonstrated that there is no real risk that the confidential information contained in the PhotoCure file will come into the possession of those persons in Freehills now acting for Dusa.
85 Adopting and adapting the observations of Drummond J in Carindale Country Club Estate Pty Limited v Astill (supra), I consider that a reasonable observer, aware of the relevant facts relating to the relationship between Freehills and FCSB, and their predecessor firms, the identity of the persons who were involved in the PhotoCure file, the extent to which it is said that there has not been any disclosure of its contents, the identity of the persons who will be acting for Dusa and the undertakings which have been proffered, would not think there was a real, as opposed to a theoretical, possibility or risk that information confidential to PhotoCure given by it to FCSB's predecessor firm might be used by Freehills to advance the interests of Dusa to the detriment of PhotoCure.
86 Provided Freehills are prepared to undertake to the Court to procure that any solicitor, patent attorney or paralegal person from FCSB or Freehills acting for or in relation to the retainer of Freehills by Dusa in relation to the patent, signs an undertaking in the form to be annexed to the order, the application should be dismissed.
87 The motion will be dismissed.
I certify that the preceding eighty-seven (87) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.