PROFESSIONS AND TRADES – LAWYERS – DUTIES AND LIABILITIES
– TO OTHER PERSONS – OTHER DUTIES AND LIABILITIES
– whether a
solicitor should be restrained from acting for a party in litigation –
Source
Original judgment source is linked above.
Catchwords
PROFESSIONS AND TRADES – LAWYERS – DUTIES AND LIABILITIES– TO OTHER PERSONS – OTHER DUTIES AND LIABILITIES– whether asolicitor should be restrained from acting for a party in litigation –where solicitor has never acted forthe party – where the opposite partywas previously represented by a firm with whom the solicitor had a professionalassociation– where solicitor was never a partner or employee of that firm– where solicitor was a consultant of that firmAustralianCommercial Research & Development Ltd v Hampson [1991] 1 Qd R 508, citedCarindale Country Club Estate Pty Ltd v Astill [1993] FCA 218(1993) 42 FCR 307115ALR 112, cited Farrow Mortgage Services Pty Ltd (in liq) v MendallProperties Pty Ltd [1995] VicRp 1[1995] 1 VR 1, cited Farrow Mortgage Services PtyLtd (In Liquidation) v Clayton Utz [1995] QSC 219, cited Flanagan vPioneer Permanent Building Society Ltd [2002] QSC 346, cited Fruehauf
Finance Corporation Pty Ltd v Feez Ruthning [1991] 1 Qd R 558, cited
Gillies v Dibbets [2001] QSC 459, cited
Grimwade v Meagher & ors [1995] 1 VR 445,
consideredMallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR
357, cited Mills v Day Dawn Block Gold Mining Co Ltd (1882) 1 QLJ 62,
considered National Mutual Holdings Pty Ltd v Sentry Corporation
(1989) 22 FCR 209, cited PhotoCure ASA v Queens University at
Kingston [2002] FCA 905, cited Prince Jefri Bolkiah v KPMG (a
firm) [1998] UKHL 52
[1999] 2 AC 222, considered Rakusen v Ellis, Munday &
Clarke [1912] 1 Ch 831, not followedSouth Black Water Coal Ltd v
McCullough Robertson [1997] QSC 77, considered Spincode Pty Ltd v
Look Software Pty Ltd [2001] VSCA 248
[2001] 4 VR 501, cited
Judgment (37 paragraphs)
[1]
[1] McMURDO J: The question for determination is whether a solicitor should be restrained from acting for a party in litigation, because the other party had been represented by a firm with which the solicitor has had a professional association. The solicitor has never acted for the party who now seeks to restrain her, and nor has she been a partner or employee of the firm previously retained by that party. An injunction is sought against the solicitor upon the argument that her former association with that firm, which was held out to be a consultancy, makes her case substantially the same as those in which solicitors have been restrained from acting against former clients.
[2]
[2] The applicant is Mr Pott, who is the defendant in proceedings commenced in this court in 1998[1] by Ms Niebour-Pott claiming to have been his de facto partner and entitled to orders against him under Part 19 of the Property Law Act1974 (Qld). The respondent solicitor is Ms Power, who has been the plaintiff's solicitor in those proceedings from their commencement and who intends to continue to act for her unless restrained by this application. From early 2000 until last year, Mr Pott was represented in those proceedings by the firm of Jones Mitchell.
[3]
[3] In 2002, Ms Power became interested in selling or otherwise disposing of part of her practice to allow her more time to pursue post graduate legal studies from the commencement of 2003. This led to an agreement between Ms Power and Jones Mitchell, whereby that firm would become the solicitors for many of Ms Power's then clients under what Ms Power described as a transfer of the relevant files to that firm. The agreement was made for Jones Mitchell by Mr Warrick Jones, who coincidentally had been the solicitor from the firm who had the carriage of Mr Pott's defence. But consistently with the agreement between the respective solicitors, some files remained with Ms Power. As Mr Jones later realised, one of those files was her file for the plaintiff in the proceedings against Mr Pott.
[4]
[4] I accept Ms Power's evidence that this agreement was not reduced to writing, and that under it Ms Power was to be paid 20% of the fees rendered by Jones Mitchell on transferred files as well as a percentage of fees rendered on new files for clients referred to the firm by her. I also accept that as part of the agreement, Ms Power agreed to have her name appear on the letterhead of Jones Mitchell as a "consultant", as Mr Jones had requested.
[5]
[5] Jones Mitchell took over many if not most of Ms Power's files from 31 March 2003 pursuant to this agreement. From that date, Ms Power continued to practice under her own practising certificate and, as previously, under her own name. And she practised from different premises from those occupied by Jones Mitchell, although the premises she occupied until 20 June 2003 had previously been occupied by Jones Mitchell before being vacant for some months in advance of Ms Power moving to them. From June 2003, Ms Power practised from other premises to which she transferred her files including that for the Pott proceedings.
[6]
[6] Difficulties arose in the relationship between Ms Power and Jones Mitchell, one of which was the problem which has led to this case. Eventually, the relationship between the solicitors ended in December 2003. Ms Power's name was removed from the Jones Mitchell letterhead and from other material such as the firm's Internet site. Her name is still shown as a consultant to Jones Mitchell in certain publications such as the Yellow Pages until a new edition is published.
[7]
[7] During the period of her so called consultancy, Ms Power went to the offices of Jones Mitchell from time to time. However, most of her visits were related to a file which she had kept within her practice, rather than transferring it to Jones Mitchell. Because of limited space in her own premises, she kept this file stored at Jones Mitchell, and Ms Power and her employee worked on the file from a particular room at the firm's premises. That matter involved a trial in August and considerable preparation in the preceding month. Apart from her visits for that particular matter, I accept that Ms Power made few visits to the firm's office and that whilst she was there, she did not see any clients, other than those in the matter I have mentioned, or upon two occasions when she attended to assist in the introduction of her former clients to their new solicitors. At certain times Ms Power and her employee were also working from the Jones Mitchell offices upon another matter which had been kept by Ms Power. I also accept that on no occasion did Ms Power's visit to these offices occupy more than an hour, most of her visits occupied less than half an hour, and that at no time when there did she use a computer or look at the contents of any Jones Mitchell file.
[8]
[8] Mr Jones saw fit to cease acting for Mr Pott once there was this relationship between his firm and Ms Power. On 17 March 2003, he wrote to Mr Pott advising him that Jones Mitchell had acquired her practice, meaning most but not all of her files. He told Mr Pott:
[9]
"To the extent that we have some matters in common with Philippa Power such as your matter (Potts ats. Niebour-Pott) whereby we act on behalf of one of the parties and Ms Power acts for the other, there is an obvious conflict of interest which thereby precludes us from continuing to act for either party.
[10]
We have advised you that in those circumstances, we are not able to continue acting for you once Philippa Power arrives on 31 March. Understandably your first reaction was that in those circumstances, you too would not consent to Ms Power continuing to act on behalf of Ms Niebour-Pott. We have confirmed that on the basis of your objection, Ms Power will similarly be unable to act for Ms Niebour-Pott."
[11]
[9] After a meeting with Mr Pott, Mr Mitchell wrote to him on 27 March 2003 to confirm "that having regard to the conflict of interest or at least potential for conflict of interest arising as a result of Philippa Power joining our firm next week", Mr Pott's file was to be transferred to such other firm of solicitors as he wished to retain.
[12]
[10] Thereafter no work was performed by Jones Mitchell for Mr Pott, although for some months Jones Mitchell remained as his solicitors on the record. They were still on the record when Ms Power wrote to them on 27 June 2003 in these terms:
[13]
"We refer to the above matter. As you are the address for service of the Defendants, we forward this notice to you. If they have engaged a different firm of solicitors, can you please advise the details?
[14]
Pursuant to rule 389(1) of the Uniform Civil Procedure Rules 1999, there being no step taken for 1 year from the time the last step was taken, ...the plaintiff hereby gives 1 month notice of her intention to proceed before taking any further step in the proceeding."
[15]
[11] Until receipt of this letter, Mr Jones had assumed that Ms Power had ceased to act in these proceedings. He passed on her letter to Mr Pott under cover of a letter of 17 July in which he wrote:
[16]
"You will appreciate that I was surprised to receive the letter. I had understood that Mrs Niebour-Pott's file had been referred elsewhere. I have however, again raised the matter in correspondence with Philippa Power and I expect that the file will indeed be referred elsewhere. They were your previous instructions. I assume that that is still the case. If you or your current solicitors have any alternate instructions then please let us know or alternatively if either you or your current solicitors have any enquiries or wish to discuss any matters then please call me."
[17]
[12] On 18 August 2003, Mr Jones again wrote to Mr Pott, saying that whilst he had by then uplifted his file from Jones Mitchell, Ms Power continued to act for his opponent and did not accept that there was a conflict of interest as Mr Jones had perceived. He then wrote:
[18]
"I cannot force Ms Power to cease acting for her. Ms Power is a consultant to our firm but she is not employed by this firm. Ms Power practices outside the ambit and the auspices of Jones Mitchell.
[19]
No part of your file remains at our premises. You have removed the file and taken it elsewhere. Ms Power maintains a separate office at Main Beach and she informs me that the whole of Mrs Niebour-Pott's file is kept there.
[20]
Ms Power comes to our office rarely. She has been here for less than five hours in any week and some weeks she has not come here at all. Except for discussions about this issue of a possible conflict of interest in your matter, there has been no discussion at all between Philippa Power and me or any member or staff of our separate firms in relation to your matter, and there never will be."
[21]
[13] I accept the truth of what Mr Jones, who gave some brief oral evidence upon this application, there said. It is consistent with Ms Power's version. Plainly, these two solicitors had different understandings when the consultancy arrangement commenced as to whether either of them would continue to act in Mr Pott's proceedings. But there is nothing in Mr Jones' evidence from which to doubt Ms Power's evidence that she has had nothing to do with Mr Pott's file whilst it was at Jones Mitchell and that nothing has been learnt by her of the confidential content of that file. Mr Collins, who appears for Mr Pott, points out that Jones Mitchell retained some documents from Mr Pott's file, in the way that solicitors are entitled to keep those documents from their files which are their own property. He suggests that this gives rise to some risk that documents remained within Jones Mitchell and that their contents in some way became known to Ms Power. Accepting as I do Ms Power's evidence, I conclude that there is no risk that that has occurred or that she has learnt of any information for which Jones Mitchell owed a duty of confidence to Mr Pott.
[22]
[14] Mr Pott brought this Originating Application against Jones Mitchell as first respondent, and Ms Power as second respondent. It sought an injunction against Jones Mitchell to restrain it "by its servants, agents, consultants or otherwise" from acting for Ms Niebour-Pott. This suggested a misunderstanding that a restraint upon Jones Mitchell could effectively restrain Ms Power as one of its "consultants". But the application against Jones Mitchell was not pressed at the hearing, and although Mr Jones gave some evidence, there was no appearance on behalf of his firm. The relief sought against Ms Power is an injunction restraining her from acting or continuing to act as the solicitor for Ms Niebour-Pott in the subject proceedings.
[23]
[15] Upon what basis should Ms Power be restrained? The applicant's submissions are that this case is no different from one where a party's former solicitor or a member of that solicitor's firm, seeks to act for that party's adversary.
[24]
[16] The jurisdictional basis for restraining a party's former lawyer from acting against him has been variously described in recent cases. In Prince Jefri Bolkiah v KPMG (a firm)[1998] UKHL 52; [1999] 2 AC 222, the House of Lords founded the jurisdiction on the right of the former client to the protection of his confidential information.[2] Lord Millett, with whom the other members of the House agreed, compared such a case with where the court's intervention is sought by an existing client of the solicitor or firm, where the jurisdiction is founded on the fiduciary obligation owed to a client, and "the inescapable conflict of interest which is inherent in this situation".[3] Whilst rejecting the application of "an absolute rule, such as that adopted in the United States, which precludes a solicitor or his firm altogether from acting for a client with an interest adverse to that of the former client in the same or a connected matter",[4] Lord Millett held that the duty of confidence itself was absolute, requiring the solicitor to keep the client's information confidential, and that the court should intervene unless it is satisfied that there is no risk of disclosure of that information to the new client. Such a risk need not be a substantial one, but it must be real and not merely fanciful or theoretical.[5] Accordingly, the approach as to the required likelihood of the disclosure of confidential information which came from Rakusen v Ellis, Munday & Clarke[1912] 1 Ch 831 was rejected.
[25]
[17] In Rakusen, it was held that a solicitor should be restrained from acting for the new client only if the former client could demonstrate "that real mischief and real prejudice will in all human probability result if the solicitor is allowed to act".[6] Although the test was expressed in different terms by the three members of the court, the effect of Rakusen has been regarded as requiring proof that confidential information will probably be misused by the solicitor. As Lord Millett said[7] in Prince Jefri, the test from Rakusen has been the subject of criticism in modern cases in Australia, England and Canada, and his Lordship cited the judgments of Gummow J in National Mutual Holdings Pty Ltd v Sentry Corporation(1989) 22 FCR 209 and Drummond J in Carindale Country Club Estate Pty Ltd v Astill[1993] FCA 218; (1993) 42 FCR 307; 115 ALR 112. So far as Queensland is concerned, the correctness of Rakusen did not have to be determined by Mackenzie J when granting an injunction in Australian Commercial Research and Development Ltd v Hampson[1991] 1 Qd R 508.Rakusen was applied by Lee J in Fruehauf Finance Corporation Pty Ltd v Feez Ruthning [1991] 1 Qd R 558.[8] However, it was at least doubted by White J in Farrow Mortgage Services Pty Ltd (in liquidation) v Clayton Utz (unreported, 4 September 1995); Muir J in South Black Water Coal Ltd v McCullough Robertson ; and Helman J in In my view, the test according to does not represent the law in Queensland. The approach has been rejected now by several decisions of the Supreme Courts of other States and the Federal Court: see especially J); ; which was apparently approved by the Victorian Court of Appeal in ; ; ; and ; 56 1PR 86. Within these cases, the preferred test has not always been expressed in precisely the same words, but the effect of the judgments is that the court must intervene when there is a real risk of the use of information which is confidential to the former client. This rejection of the approach in derives, broadly speaking, from the development of the law in relation to the protection of confidential information and, as Ipp J observed in , the strong emphasis in modern cases on the importance of legal professional privilege, and its facilitation of the seeking and obtaining of legal advice or assistance without apprehension of the prospect of subsequent disclosure of confidential communications.
[26]
[18] In my view the majority approach in Rakusen is also inconsistent with the decision of the Full Court in Mills v Day Dawn Block Gold Mining Co Ltd (1882) 1 QLJ 62, where a solicitor was restrained from acting against a former client with whom he had conferred on relevant matters. In that case, there was a conflict of testimony between the solicitor and the former client as to whether any confidential information had been communicated in the course of the conference. The Court held that this conflict should not be resolved, but that it should be assumed in the client's favour that the solicitor had received confidential information. In my view, this is consistent with the decision in Prince Jefri and the prevalent Australian view, because the client's testimony in Mills did raise a real risk of the misuse of confidential information, from which the solicitor should be restrained from acting without the client having to prove that risk as a probability.
[27]
[19] Insofar as the basis for this application lies in the protection of confidential information, I have approached this case then by asking whether there is a real possibility that confidential information undoubtedly disclosed by Mr Pott to Jones Mitchell has come or will come into the possession of Ms Power. In my view this is not a real possibility. I see no reason to doubt her evidence that she has not discussed Mr Pott's matter with anyone from Jones Mitchell, or seen any document or file at the firm's offices that relate to this matter. One reason why I readily accept that evidence is that at any relevant time, Jones Mitchell had ceased to act for Mr Pott. His file, whilst it remained at Jones Mitchell, was not the subject of any work during any time during which Ms Power was associated with that firm. And it must be kept in mind that she was not a member of that firm and nor was she an employee. The effect of her evidence is that she did no substantial professional work for Jones Mitchell but her only assistance to the firm was by facilitating in the introduction of some former clients to their new solicitors. Insofar as the application is based upon the protection of confidential information, I conclude that it must fail.
[28]
[20] However the application is put on a broader basis, in reliance upon the judgment of Booking JA in Spincode, where after an extensive review of the authorities, his Honour concluded that the jurisdiction to restrain solicitors from acting against a former client rests on three independent bases: "first, the danger of misuse of confidential information; secondly, breach of the fiduciary's duty of loyalty; thirdly, the desirability of restraining the solicitors as officers of the court".[11] The other members of the court found it unnecessary to discuss this matter because the confidential information ground was established. For Mr Pott, it is argued that the view of Brooking JA should be preferred to that of the House of Lords in Prince Jefri which held that the sole basis was the protection of confidential information. From this it was argued that the third of the bases identified by his Honour, which is concerned with the prevention of a practitioner from acting in relation to litigation in a way which would cause reasonable members of the community to lose confidence in the judicial system, is a sufficient basis for the injunction sought in the present case.
[29]
[21] Clearly the court has power to control its own officers, and to that end to restrain a solicitor from acting in a way which unduly interfered with the administration of justice by undermining the confidence of reasonable persons in the judicial system. That is what Mandie J was referring to when granting an injunction against a barrister in Grimwade v Meagher[1995] VicRp 28; [1995] 1 VR 446, where his Honour said at 452:
[30]
"In my view it cannot be doubted that this court likewise has an inherent jurisdiction to ensure the due administration of justice and to protect the integrity of the judicial process and 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 giving due weight to the public interest that a litigant should not be deprived of his or her choice of counsel without good cause."
[31]
I am prepared to assume, without deciding, that this third basis of jurisdiction can provide a ground for restraining a lawyer from acting for a former client although it is shown that there is no risk of the use of confidential information.
[32]
[22] But applying these principles, what must be attributed to the fair minded member of the public is a knowledge of the relevant facts so that he or she is "reasonably informed". The member of the public should be assumed to know the true facts of the matter, at least as they are known to the court which is asked to restrain the conduct of its officer. In this case, it requires the court to assess the reaction of this reasonable observer by attributing to him or her knowledge of the relevant circumstances from which Ms Power came to be described as a "consultant", as well a knowledge of the facts and circumstances from which I have concluded that there is no serious possibility that she has received any information confidential to Mr Pott. But now that these facts and circumstances are revealed by the evidence in this case, could a reasonable member of the public lose confidence in the judicial system if Ms Power is permitted to continue to act for her client? In my view that question must be answered in the negative. The reasonable observer would see that Ms Power was described as a consultant to the end of assisting Jones Mitchell to enjoy most of what had been the goodwill of her practice. It did not at all reflect any professional association whereby Jones Mitchell consulted Ms Power, at least for the purpose of obtaining legal assistance or advice from her for the benefit of its clients. The properly informed member of the community would know that Ms Power had been in no fiduciary relationship with Mr Pott. At no time has she been his solicitor, or a member of the firm which were his solicitors.
[33]
[23] I hold no doubt that Mr Pott is genuinely aggrieved by Ms Power continuing to act in his case. He must feel that there is an unfairness in a situation where he has had to engage other solicitors for that matter, but his opponent has not. That gives him a perspective of the situation which understandably differs from that of an informed observer. It is undesirable that he be left with a concern that his proceedings against Ms Niebour Pott will not be fairly conducted and concluded. If there was a real possibility that the fairness of those proceedings could be affected, I would grant the injunction sought. But as I conclude that there is no such possibility, then there is no arguable basis for granting this injunction, and it would be unfair to deprive the other party of the continuing services of Ms Power if there is no possible risk to the interests of Mr Pott.
[34]
[24] The application must be dismissed and the applicant ordered to pay to Ms Power her costs to be assessed.
[35]
[8] Although in Flanagan v Pioneer Permanent Building Society Ltd[2002] QSC 346, Dutney J regarded Fruehauf as consistent with the decision in Prince Jefri
[36]
[9] Finn: "Conflicts of Interest and Professionals" (published by the New Zealand Legal Research Foundation in Professional Responsibility) and cited in National Mutual v Sentry at 229