Plaintiff v Defendant

Supreme Court of Victoria|2008-05-09|Before: JUDD J

The Applicant was further tested on this allegation and his final position was that "she's the one that's taken instructions from me, and I've said that she's taken instructions from me." In cross-examination the Applicant did not maintain as correct his evidence about what he had been told by Ms Gaber. Counsel for the Bank concluded his cross-examination of the Applicant with the following exchange:

Counsel: I showed you MK2, which is the draft of the defence and counterclaim. I drew your attention to the fact that you'd deposed that Ms Gaber said she'd drafted that. I also drew your attention to the fact that Ms Rothwell had said that she drafted it?

Counsel: I won't go through it, but that's what she - she gave some reasons. And what I invite you, after your solicitor has had a look at the file, to tell his Honour whether you found anything in the file that would suggest that Ms Gaber played any part whatsoever in the preparation of the defence and counterclaim?

Witness: And I'm responding to say that I recall a document to show that Annette Gaber had some dealings with Shield Mercantile.

Witness: It's either a file note sent to Shield or something like that, sir.

25 Shield Mercantile was the petitioning creditor in a matter that became known as Kyriackou v Official Receiver, or the sequestration proceeding, in which Mr Kyriackou sought compensation from the Official Receiver for refusing to adopt a contract of sale of real estate and allowing the Bank of Cyprus to take possession. The facts surrounding those matters have no relationship with the main proceeding, except insofar as both matters concern the affairs of the Applicant and an assertion (but nothing more) that the Official Receiver had investigated and prepared a report on the Applicant's claim against the Bank. The Applicant produced some documents from the relevant files as part of his evidence, including file notes and a memorandum to counsel. He did however maintain his overriding claim for legal professional privilege in relation to the balance of the files. This is another example of his selective production of material.

26 Ms Gaber said in her affidavit sworn 26 March 2008 that, while employed at Rothwells, she did not have the care and conduct of the Applicant's file concerning his dispute with the Bank. She states that to the best of her recollection she had no involvement in the matter and did not assist Ms Rothwell in connection with it. She also states that she does not recall ever having any conferences with the Applicant in relation to the matter. It was not put to Ms Gaber in cross-examination that she undertook any work on the bank file while employed at Rothwells. Rather, counsel for the Applicant challenged the accuracy of her recollection generally and sought to establish only that the file was available to her to inspect if she was so inclined. The opportunity for inspection later became the foundation for the argument that the file was merely at risk of being read by Ms Gaber and therefore Gadens should be restrained from further acting on behalf of the Bank. I note that in his affidavit sworn 13 December 2007, the Applicant said:

Gaber has acted in a legal capacity for me and in particular this case. Under the circumstances she has knowledge which can be detrimental to me, which now can be imputed to Gadens also having that knowledge, as Gaber now has care and conduct of this case for the Commonwealth Bank of Australia.

Ms Rothwell, in her affidavit sworn 26 March 2008, said that she had prepared the draft defence and counterclaim. I do not accept the Applicant's evidence on this topic. He proved careless with detail and was ready to assert important matters in his affidavit and readily abandon them under cross-examination

27 In my view, the Applicant's case that Ms Gaber acquired confidential information in relation to the Applicant's defence and counterclaim in the main proceeding does not rise above mere assertion by him and is against the weight of the evidence given by Ms Gaber and Ms Rothwell. The Applicant's application fails on the first ground. But that is not the end of the matter.

28 The second ground upon which a solicitor may be restrained from acting concerns the independent equitable obligation of loyalty. In Spincode v Look Software, Brooking JA[16] described the breach of duty by a solicitor as one in which the solicitor took up "the cudgels against a former client in the same or a closely related matter". This ground, if established, may prevent a solicitor from acting against a former client even though a likelihood of danger of misuse of confidential information is not shown.[17]

29 The equitable obligation of loyalty forbids a solicitor acting against a former client in the same or a closely related matter.[18] In Sent v John Fairfax, Nettle J put the proposition thus:

The trust which a party to litigation reposes in their counsel is more often than not complete. It is and must remain beyond question that the trust is never abused, and accordingly the trust must not only be preserved but must be seen to be preserved. To sanction the prospect of counsel acting against a former client in a matter upon which there is a commonality of issue or inquiry would not be preservative of either.
Questions of "the same matter" and "closely related matter" may sometimes be problematic. But in the end they are questions of fact and degree. In litigation, at least, there can be no doubt about what constitutes the same matter, and I do not think that there should be much doubt about what constitutes a closely related matter. If there are significant issues in one matter that arise in another, or factors which are significant to one matter which will be significant to another, the matters are likely to be closely related.[19]

30 The existence and extent of the duty of loyalty depends upon a consideration of the relationship between the main proceeding and other matters in which Ms Gaber may have acted while employed by Rothwells. The first "matter" identified by the Applicant is his file, maintained by Rothwells, concerning his defence and counterclaim in the main proceeding. This matter undoubtedly constitutes the same matter as the main proceeding. In his final address counsel for the Applicant did not contend that Ms Gaber had seen that file or worked on it while at Rothwells. There was no evidence that she did. Counsel did, however, seek to establish a connection between the main proceeding and the proceeding known as Kyriackou v Official Receiver because, so it was submitted, there had been an investigation by the Official Receiver of the Applicant's complaint and case against the Bank and a separate related complaint made by the Applicant to the Banking Ombudsman. The product of the investigation was never disclosed in evidence, although the complaint to the Banking Ombudsman was produced. It was not put to Ms Gaber that she had seen any report by the Official Receiver and there is no evidence that she had.

31 The Applicant sought to attribute to Ms Gaber the condition of a practitioner acting in breach of her duty of loyalty by reference merely to her involvement as an employee in the firm Rothwells, who acted on behalf of the Applicant in his defence and claims against the Bank. As I have already found, the Applicant has not established any relevant involvement of Ms Gaber in that matter while at Rothwells.

32 The other matters which counsel for the Applicant submitted were closely related to the main proceeding were the sequestration proceeding, sometimes referred to as Kyriackou v Official Receiver. That matter arose out of proceedings against the Applicant brought by Shield Mercantile Pty Ltd. There was also a discovery application against the Bank of Cyprus. The matters are described by the Applicant in paragraph 8 of his affidavit sworn 12 February 2008. In substance, Shield Mercantile brought proceedings against the Applicant for a sum of money and entered a default judgment. A bankruptcy notice issued shortly thereafter. As a consequence, a sequestration order was made against his estate. That order was set aside in the Federal Court. In January 2005 Rothwells received instructions to act on behalf of the Applicant in relation to a non-party discovery application against the Bank of Cyprus. A proceeding was commenced by the Applicant against the Official Trustee in March 2005. In relation to that matter, the Applicant said in his affidavit:

I am not precisely sure when Annette Gaber became responsible for the care and conduct of the sequestration proceeding, but I can recall that we had a number of conferences discussing whether to join a third party to the sequestration proceeding, because the loss and damage that I had suffered was due to the actions of the Official Receiver in refusing to adopt a contract of sale for a property, in circumstances in which their authority to act in relation to my estate was subsequently held by Justice Weinberg not to exist and instead allowing the Bank of Cyprus to take possession of the property and to sell it for an amount that was less than the contract of sale that I had arranged. Thus, we had discussions about whether the Bank of Cyprus breached its duties to me by selling the property at an undervalue.

33 Ms Gaber said in her affidavit that she did not have the care and conduct of the sequestration proceeding and related matters and to the best of her recollection never had any involvement with them. Ms Gaber did not commence her employment with Rothwells until after the proceeding known as Kyriackou v Official Receiver had been commenced in the Federal Court. Under cross-examination, Ms Gaber was asked about a file note dated 15 April 2005 which became Exhibit 3. Having read the file note, Ms Gaber conceded that she had a conversation with Ms Rothwell in which she was asked by Ms Rothwell to telephone a solicitor on her behalf and request an adjournment. Ms Gaber was asked whether she had any involvement apart from that disclosed in the file note and replied, "Not that I recall". I accept that the extent of her involvement in that matter was confined to the communications outlined in the file note.

34 Counsel for the Applicant put to Ms Gaber that "there's a chance that you actually looked at the file during the course of these telephone conversations". Ms Gaber replied, "I doubt very much that I did. I - as I said, I recall the - the telephone calls were made over a relatively short period and they were - the calls that I made to the solicitor were made purely on the instruction of Ms Rothwell. I - I simply do not recall getting the file out and reading it". She gave similar evidence in relation to the Shield Mercantile matter, although when handed the file to examine she conceded that there were some file notes made by her, although these were not explored in evidence. The file is not part of the evidence, although, as I have already noted, the Applicant had produced some documents, including file notes, from the Kyriackou v Official Receiver file which was directly associated with the Shield Mercantile and Bank of Cyprus matters. Having regard to the selective production by the Applicant of material from the files, I am persuaded that he would have produced any relevant file notes if they provided material support for his application. While it seems that Ms Gaber did have some uncertain involvement in the Shield Mercantile matter, that involvement could only have occurred during the relatively time of her employment and after the Federal Court proceeding against the Official Receiver had been commenced.

35 In any event, I am not satisfied that the Shield Mercantile, Kyriackou v Official Receiver or the Bank of Cyprus matters are sufficiently related, if related at all, to the main proceeding so as to support the allegation that, by her limited involvement in the main proceeding while employed by Gadens or her continued employment by that firm, she (and thus Gadens) breached or threatened to breach a duty of loyalty to Mr Kyriackou. Ms Gaber no longer has any involvement in the main proceeding at Gadens.

36 The submission ultimately advanced by counsel for the Applicant was that these matters provided Ms Gaber with information about the assets and liabilities of the Applicant and his strategies in dealing with his affairs. This submission seems to invoke an obligation to protect confidential information which is not necessarily an element of this ground of complaint. Such information falls more readily into the "getting to know you" category identified by Gillard J in Yunghanns v Elfic.[20] I accept that Ms Gaber may have obtained some information about the financial affairs of the Applicant and his approach to litigation from her limited involvement in these matters and her involvement in a few other commercial transactions she undertook on his behalf. But the significance of that information to the main proceeding is remote to the point where it is difficult to consider how it might compromise her position as solicitor at Gadens or how it might reasonably be argued that Gadens had a duty not to act against the Applicant in the main proceeding. The relevant knowledge is imprecisely defined information about the Applicant's assets and liabilities which the Applicant alleges may translate into a view formed by Ms Gaber that he "did not have much funds with which to defend a case"; and the Applicant's history of non-compliance with court deadlines. If Ms Gaber did have that knowledge it was not, in my view, confidential, nor could it constitute the foundation for an allegation of breach of duty of loyalty in the present circumstances. After all, there is a default judgment in this proceeding. There was a default judgment entered by Shield Mercantile. The Applicant himself deposes that he does not have "much funds with which to defend a case". There are bankruptcy proceedings on foot.

37 In my opinion the Applicant has not established that Ms Gaber (or Gadens) threaten to act in breach of a duty of trust and confidence owed to the Applicant.

38 The third ground upon which a solicitor may be restrained from acting on behalf of a former client attracts the overriding jurisdiction of the court to intervene so as to protect the due administration of justice. In Grimwade v Meagher,[21] Mandie J, after reviewing a number of Australian, New Zealand and Canadian authorities said:[22]

I would respectfully adopt all of the above quoted statements of principle. In my view it cannot be doubted that this court has an inherent jurisdiction to ensure the due administration of justice and to protect the integrity of the judicial process as part of that jurisdiction, in an appropriate case, to prevent a member of counsel appearing for a particular party in order that justice should not only be done but manifestly and undoubtedly be seen to be done. The objective test to be applied in the context of this case is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice required that counsel be so prevented from acting, at all times given due weight to the public interest that a litigant should not be deprived of his or her choice of counsel without good cause.[23]

That passage was adopted with apparent approval by Brooking JA in Spincode Pty v Look Software.[24] Brooking JA elaborated on the circumstances in which a court may exercise its inherent jurisdiction to control its own processes. He said:[25]

If I thought that the solicitors in this case were subject neither to a negative equitable nor a negative contractual obligation I would say that what has been done by them - and I would have regard to the whole of their conduct here - is so offensive to common notions of fairness and justice that they should, as officers of the court, be brought to heel notwithstanding that they have not (on this hypothesis) infringed any legal or equitable right.[26]

No experienced solicitor of sound judgment would have done what has been done in this case. And in my view the nature and objectives of the jurisdiction which the court exercises over its officers, and the breadth of the discretion, permit regard to be had, not only to the nature of the dispute before litigation ensued, and the former retainer, and the new one, but also to the conduct of the solicitors at all stages.[27]

39 Counsel for the Applicant pointed to various aspects of the conduct of Rothwells, Ms Gaber and Gadens as being so offensive as to justify the intervention of the court in the exercise of its inherent jurisdiction to supervise officers of the court. The Applicant relied upon the fact that Gadens, who employ Ms Gaber, act on behalf of the Bank in a matter in which Rothwells once acted for the Applicant; the risk that confidential information relating to the main proceeding might have been obtained; the use or the risk of use of that confidential information by Gadens; the knowledge Ms Gaber had of the Applicant's financial affairs and strategies employed by him in dealing with litigation; an allegation that Ms Gaber and Ms Rothwell engaged in unethical, if not criminal activity, when signing letters on behalf of Edwards; the preparation of a brief to counsel without authority from Edwards; the discussions that occurred between Ms Rothwell and Gadens in connection with the preparation of Ms Rothwell's affidavit; and the fact that Gadens procured an affidavit from Ms Rothwell in support of its opposition to the Applicant's summons.

40 I have already dealt with the alleged breach of confidentiality and equitable duty. But, as Brooking JA observed in Spincode v Look Software,[28] the absence of a breach of contract or equitable duty will not determine the matter. When considering this final ground, I am entitled to have regard to all relevant conduct to determine whether "a fair-minded, reasonably informed member of the public would conclude" that Gadens should be prevented from continuing to act for the Bank.

41 This case is unlike Yunghanns v Elfic[29] in which Gillard J gave five reasons why an injunction should be granted. Firstly, the firm had a substantial body of information concerning Mr Yunghanns and his group acquired over a period of 34 years. Some of it was confidential and included information in relation to his business activities, strategies, facts relevant to the proceeding in which the application was brought, his attitude to litigation and assessments and opinions formed by persons within the firm about Mr Yunghanns.

In other words, personnel of the firm have got to know Mr Yunghanns very well over some 34 years and got to know a lot about him.

The firm had returned 140 files to Mr Yunghanns and there was no evidence as to the nature of the information contained in some of those documents. There was found to be a risk that the information may be misused.[30]

42 Secondly, the very transactions which were the subject of the litigation in which Mr Yunghanns made his application arose out of the firm acting for the Fosters Brewing Group formerly known as the Elders Group and the Yunghanns Group jointly and severally.[31]

43 Thirdly, there was a prospect that because of the issues raised in the pleadings of that case, the plaintiffs would have to seek information from the partners and staff of the firm which would become nearly impossible in the circumstances if the firm continued to act for Elfic.[32]

44 The fourth reason given by Gillard J in Yunghanns v Elfic was that:

It is not in the interests of the administration of justice that a firm which has acted for a client for so many years in so many transactions and who would be considered to have an intimate knowledge of the client should then act in a proceeding in which some of the events which are relevant to the issues occurred at a time when the firm was acting for both groups of parties. It brings the legal profession into disrepute that a firm of solicitors is prepared to act in those circumstances. It offends what right thinking people would think is the obligation of solicitors in those circumstances.

In my opinion, there is a real and sensible risk that confidential information may be used contrary to the interests of Mr Yunghanns and his Group. The undertaking proffered is not sufficient to overcome the risk.[33]

45 The fifth matter considered by his Honour was the erection of Chinese walls as a possible means to prevent the seepage of confidential information. Gillard J concluded that the risk of seepage within the firm was high because of the duration and depth of dealings between Mr Yunghanns and personnel in the firm over many years.[34]

46 Counsel for the Bank submitted, not surprisingly, that the circumstances and conduct in Yunghanns v Elfic contrast with the association between Ms Gaber and the Applicant. While that is no doubt true, the comparison does not necessarily answer the question whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice required that Gadens be prevented from acting.

47 The complaints made concerning the signing of letters on behalf of Edwards and the preparation of a brief to counsel in the Kyriackou v Official Receiver proceeding do not, in my view, have any substance. The Applicant gave evidence that Edwards had engaged Rothwells as its agent. Mr Edwards was not called to give evidence.

48 The allegation of impropriety on the part of Gadens when procuring Ms Rothwell to swear an affidavit in defence of the application herein is one of the few matters which directly concerns the conduct of Gadens. There were discussions between Ms Rothwell and Gadens in advance of the preparation of her affidavit. While the Applicant argued that there was a risk that Ms Rothwell may have communicated confidential information about the Applicant's case against the Bank, there is no evidence that she did. Mr Reichenberg, who conferred with Ms Rothwell, was not cross-examined. While Ms Rothwell was accused in cross-examination of taking an adverse position to her former client it must be remembered that this application is made against Gadens, not Ms Rothwell or Rothwells.

49 Ms Rothwell was asked about the nature and extent of her discussions with Mr Reichenberg and Ms Pinto of Gadens for the purpose of preparing her affidavit. She denied that she was asked about the content of any document on her file or instructions given by the applicant and denied that she gave any such information to Gadens. While her loyalty to her former client was criticised by the Applicant in submissions, the uncontradicted evidence is that she did not divulge any confidence to Gadens. Accordingly, there is no substance in the Applicant's complaint in this regard.

50 That leaves for consideration the conduct of Ms Gaber having become acquainted with the more general information about the financial affairs of the Applicant and his litigation strategies. I have already dealt with the Applicant's allegations in that regard. In my view, his complaint about the risk of prejudicial use of such information is without substance. Ms Gaber had a relatively brief association with Rothwells and the Applicant. I do not accept the Applicant's evidence concerning the numerous conferences said to have taken place with Ms Gaber. Nor do I accept the Applicant's evidence that he provided instructions directly to Ms Gaber in relation to the preparation of the defence and counterclaim in this proceeding. I am satisfied that if the Applicant's files, over which he made blanket claims of legal professional privilege, contained anything that would have assisted his case it would have been produced.

51 Mr Reichenberg has given evidence that when a question concerning Ms Gaber's connection with the file maintained by Rothwells in relation to the main proceeding was raised by the Applicant's solicitors, the care and conduct of this proceeding was transferred to Ms Natalie Pinto under the supervision of Mr Reichenberg. Ms Gaber no longer has any involvement in the matter. Given the short duration of her employment at Rothwells, her limited involvement in the main proceeding while at Gadens and her junior status in that firm, I am satisfied that she can be, and I am told has been, isolated from any involvement in the main proceeding.

52 In all of the circumstances, I am of the opinion that a fair-minded, reasonably informed member of the public would not consider the continued involvement of Gadens as solicitors acting on behalf of the Bank to be offensive to common notions of fairness and justice or that the administration of justice requires the firm to be prevented from acting or that by continuing to act it would bring the legal profession into disrepute.

53 The application made by summons dated 12 December 2007 is dismissed with costs.

[9] O'Brien v Komesaroff [1982] HCA 33; (1982) 150 CLR 310, 327; Pioneer Concrete Services Ltd v Galli [1985] VicRp 68; [1985] VR 675 at 711.

[11] Supreme Court of Victoria, Gillard J, 3 July 1998 (unreported).

[13] Murphy v Liesfield [1930] VicLawRp 24; [1930] VLR 142; Orio Holdings Pty Ltd v Costi & Co (No. 1) [2007] SASC 403; Dew v Richardson Supreme Court of Queensland, (Chesterman J), 18 August 1999 (unreported); Meerkin & Apel v Rossett Pty Ltd [1998] 4 VR 54 at 66.

[14] [1999] VSC 514 at [25] and [26].

[18] Ibid (Brooking JA) at [25]-[53]; Sent and Anor v John Fairfax Publications Pty Ltd and Anor [2002] VSC 429 at [98] - [110].

[20] Supreme Court of Victoria, Gillard J, 3 July 1998 (unreported).

[29] Supreme Court of Victoria, Gillard J, 3 July 1998, unreported at 15.

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