Smith v New South Wales Crime Commission

Supreme Court of NSW|2024-11-11|Before: Schmidt AJ

Solicitors: Zali Burrows at Law (First and Second Plaintiff) Crown Solicitors (First, Second and Third Defendants) BlackBay Lawyers (Fourth Defendant) File Number(s): 2024/00165594 Publication restriction: Nil

Issues

There is no issue that: 1. relevant directions have been made by the NSW Crime Commission under the Crime Commission Act, which remain in force; 2. it is those directions which it is claimed have been breached, with resulting injury to the plaintiffs; 3. the Court has power both to join parties to proceedings and to restrain lawyers from acting for parties in proceedings, although the latter is an exceptional power to be exercised with restraint; 4. Mr Carroll was a sole practitioner before he came to be employed by Blackbay; 5. Mr Carroll was instructed to act for a company of which Mrs Smith was a director, in proceedings it pursued in the Local Court in respect of claimed damage to a machine, but it was Mr Smith who gave Mr Carroll instructions; 6. a costs agreement was entered; 7. the sole director of the defendant in the Local Court proceedings sent text messages which the plaintiffs claim were threatening and evidenced the claimed breaches of the Crime Commission's directions; 8. the plaintiffs left the country and later pleaded in their statement of claim that they had received threats as the result of the breaches of the Crime Commission's directions, which had left them in fear for their lives and those of their children, as well as for their physical safety and had caused them various injury; 9. Mr Carroll and Mr Smith discussed the claims advanced in these proceedings both before and after they were commenced; 10. but the plaintiffs retained Ms Burrows, not Blackbay to represent them in these proceedings; 11. after the proceedings were commenced Mr Smith provided Mr Carroll with a copy of the statement of claim and they discussed Blackbay being retained and Ms Burrows' retainer being terminated; 12. it was after Mr Carroll informed Mr Smith that Blackbay had been approached to represent the fourth defendant in these proceedings, that its retainer in respect of the Local Court proceedings was terminated and Ms Burrows was retained to act in them; 13. Blackbay was then retained to act for the fourth defendant; and 14. Ms Burrows and Ms Otavski later exchanged correspondence in which Blackbay's claimed conflict was raised and denied and it refused to cease acting for the fourth defendant.
There is also no issue that: 1. what the plaintiffs seek is the exercise of an exceptional jurisdiction which must be exercised with caution, due weight having to be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause; 2. the timing of such an application may also be relevant, given the cost, inconvenience or impracticality of requiring lawyers to cease to act, which may provide a reason for refusing to grant relief, even if otherwise warranted; 3. the well settled test which arises to be considered in such a case was discussed in Kallinicos v Hunt (2005) 64 NSWLR 561; [2005] NSWSC 1181 at [76]. What must be considered is "whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that the legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice"; 4. in Cleveland Investments Global Ltd v Evans [2010] NSWSC 567 Ward J, as her Honour then was, identified the three possible bases upon which a solicitor may be restrained from acting against a former client, at [37]: 1. first, that of ensuring the protection of confidential information that has been provided by the client to the lawyer in the course of the lawyer/client relationship: see, for example, Rakusen v Ellis Munday & Clarke [1912] 1 Ch 831; D & J Constructions; Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307; (1993) 115 ALR 112. 2. second, where the court, acting under its inherent supervisory jurisdiction, considers that it is necessary to do so in order to ensure the due administration of justice: see, for example, Black v Taylor [1993] 3 NZLR 403; Grimwade v Meagher [1995] 1 VR 446; Newman v Phillips Fox (a firm) [1999] WASC 171; (1999) 21 WAR 309; Kallinicos v Hunt; 3. third (and most controversially), that of preventing a breach of an asserted fiduciary duty of loyalty owed by the lawyer to the former client notwithstanding the termination of the retainer: see, for example, Wan v McDonald (1992) 33 FCR 491; (1992) 105 ALR 473; Fordham v Legal Practitioners' Complaints Committee (1997) 18 WAR 467; McVeigh v Linen House Pty Ltd [1999] VSCA 138; [1999] 3 VR 394. 1. even if the plaintiffs never became clients of Blackbay, if Mr Smith conveyed confidential information to Mr Carroll, equitable principles may also require the maintenance of its confidentiality; 2. as explained in Australian Medic-Care Co Ltd v Hamilton Pharmaceutical Pty Ltd (ACN 008 204 635) [2009] FCA 1220; (2009) 261 ALR 501, there is not a "single test for determining when the communication of confidential information will import an obligation of confidence": at [634]; 3. in commercial settings, the two tests commonly employed were described at [637] to be: 1. if the circumstances are such that any reasonable person standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given in confidence, this should suffice to impose on that person the equitable obligation of confidence; 2. has confidential information been imparted for what was known, or ought reasonably to have been known, to be only for a particular purpose? If it has, its use must be limited to that purpose. 1. in Nash v Timbercorp Finance Pty Ltd (in liq) [2019] FCA 957 it was also explained at [77] that under the equitable doctrine of confidentiality, the duty of confidentiality lasts as long as the information in question remains outside the public domain. But once confidential information is characterised as having been released into the "public domain", it forever loses its confidential character.
What is in issue includes whether: 1. Ms Burrows' affidavit is admissible, given that it contains second hand hearsay and whether orders under s 135 of the Evidence Act 1995 (NSW) should be made in respect of it; 2. Jones v Dunkel (1959) 101 CLR 298 at 309; [1959] HCA 8 inferences should be drawn against Mr Smith, given that he gave no evidence in support of his motion, nor any explanation for having failed to do so; 3. Mr Smith was ever a client of Blackbay; 4. Mr Smith communicated any relevant confidential information to Mr Carroll, what was claimed to have been communicated not having adequately been disclosed by the evidence advanced; 5. the credibility of Mr Carroll's evidence; 6. the orders sought should be made, given: 1. that no proposed amended pleading identifying any cause of action or claims pursued against Blackbay has been served to support the motion; 2. the plaintiffs' delay in bringing the motion; and 3. the resulting prejudice it is claimed will flow from the proposed orders; 1. any duty of confidence would be breached if Blackbay continued to act for the fourth defendant; and 2. the Court's inherent jurisdiction to supervise the conduct of its officers and to protect the appearance and reality of the integrity of the judicial process should be exercised to restrain the fourth defendant from retaining BlackBay in these proceedings.

Ms Burrows' evidence

Ms Burrows' affidavit was admitted provisionally at the hearing. She was not required for cross examination.
There was no issue that her affidavit contained second hand hearsay. But there was no suggestion that that the affidavit did not reflect instructions Mr Smith had given Ms Burrows, including about his various claimed conversations with Mr Carroll.
Having considered the cases the parties advanced, I am satisfied that the affidavit is admissible and that no orders should be made under s 135 of the Evidence Act to exclude it.
What weight it can be given is a different matter, also necessary to consider in resolving what otherwise lies in issue between the parties.

The proper construction of s 75 of the Evidence Act

The objection to Ms Burrows' affidavit in part rested on the proper construction of s 75 of the Evidence Act, her affidavit including first person accounts of conversations between Mr Smith and Mr Carroll for which she was not present.
Section 75 provides for an exception to the hearsay rule in interlocutory proceedings such as this, it providing that the rule "does not apply to evidence if the party who adduces it also adduces evidence of its source." Here there is no issue that the source of the disputed evidence was Mr Smith's instructions.
The hearsay rule is specified in s 59, which relevantly provides that evidence "of a previous representation made by a person is not admissible to prove the existence of a fact that it can reasonably be supposed that the person intended to assert by the representation" and that in determining "whether it can reasonably be supposed that the person intended to assert a particular fact by the representation, the court may have regard to the circumstances in which the representation was made": s 59(1) and (3).
Its purpose was considered in New South Wales Crime Commission v Vu [2009] NSWCA 349. There it was explained at [75] that it "is based on a recognition that interlocutory applications frequently need to be made on an urgent basis, when direct evidence may not be able to be gathered in sufficient time or where it is undesirable to alert the other party." In Bray v F Hoffmann-La Roche Ltd (2003) 130 FCR 317; [2003] FCAFC 153 it was accepted that to be admissible under s 75, evidence of a discussion need not be direct evidence: at [66].
Still reliance was placed on Chen v Chu [2024] NSWSC 1139, where Hammerschlag CJ in Eq had to consider affidavit evidence where direct speech had been used to recount conversations, which he did not see ethically problematic, unlike Jackman J in Kane's Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381 and two other cases: at [262]-[266]. His Honour also observed at [267] that: "where a party seeks to rely upon spoken words as a foundation for a cause of action the conversation must be proved to the reasonable satisfaction of the Court. This means that the Court must feel an actual persuasion of its occurrence or its existence. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319."
It was argued that this approach had to be adopted on this interlocutory application, despite what had been decided in United Dairy Power Pty Ltd v Murray Goulburn Co-operative Co Ltd [2011] FCA 762 at [53] about the proper construction of s 75. Dodds-Streeton J there concluding that "that the exception in s 75 is not confined to first-hand hearsay. Therefore, provided that the source is stated, second hand (or more remote) hearsay is, in my view, admissible, although, due to its relative frailty, may be accorded less weight."
Reliance was also placed on the Evidence (Interim) [1985] ALRC 26 report at [678]. There it was proposed that second hand hearsay should be inadmissible "except where some guarantee of reliability can be shown together with a need for its admissibility".
I am not persuaded that this can be accepted as an available approach to the proper construction of s 75. McCallum J, as her Honour then was, took the view, following Bray v F Hoffmann-La Roche Ltd (2002) 118 FCR 1; [2002] FCA 243 at [117], that under s 75 second hand hearsay was not necessarily inadmissible in an interlocutory proceeding, the section requiring evidence of its source to be adduced: Liu v The Age Company & Ors [2010] NSWSC 1176 at [38]-[39].
I am not persuaded that the ALRC report provides a basis for the conclusion that s 75 has been wrongly construed. To the contrary, I agree with the conclusions reached in these authorities about its proper construction, with the result that what was decided in Chen in relation to reliance on spoken words as a foundation for a cause of action, is not relevant to the receipt of Ms Burrows' evidence on this motion.
In the result it must be accepted that Ms Burrows' affidavit was admissible, the exception to the hearsay rule established by s 75 applying to it and the source of her evidence not being in issue.

Application under s 135 of the Evidence Act

I am also satisfied that the general discretion granted by s 135, which empowers the Court to refuse to admit Ms Burrows' evidence, cannot justly be exercised.
There was no issue as to the relevance of Ms Burrows' challenged affidavit. It being evidence given by a solicitor on the instructions of one of her clients, about his earlier conversations with Mr Carroll, on which the plaintiffs rely to advance their case on the motion about the communication of confidential information to the fourth defendant's solicitors. It must thus be accepted that the affidavit does have probative value.
A s 135 order requires it to be established that the probative value of the challenged evidence "is substantially outweighed by the danger that the evidence might - (a) be unfairly prejudicial to a party, or (b) be misleading or confusing, or (c) cause or result in undue waste of time." (my emphasis)
I am satisfied that this was not established.
That there was no opportunity to cross examine Mr Smith about his conversations with Mr Carroll is a relevant matter to take into account in resolving the s 135 application, but it is not decisive: Galvin v R [2006] NSWCCA 66; (2006) 161 A Crim R 449 at [40].
The challenged evidence was not misleading or confusing. Its receipt wasted no time, the fourth defendant having taken advantage of the opportunity to meet it with the evidence which she called from Mr Carroll, which corroborated aspects of Ms Burrows' evidence. There was thus no ambush or surprise.
In all of the circumstances, I am satisfied that the absence of the opportunity to cross examine Mr Smith does not have the result that the probative value of the evidence is substantially outweighed by the danger of unfair prejudice.
In the result, Ms Burrows' evidence will be admitted.

Credibility of Mr Carroll's evidence

I am also not satisfied that adverse credibility findings can be made about Mr Carroll's evidence, given what he deposed to and the evidence which he gave in cross examination. Aspects of that evidence being relied on by the plaintiffs, supporting as it does their case.
That Mr Carroll had the difficulties he explained in having Mr Smith swear an affidavit in the Local Court proceedings may be accepted. The result may have been that if it was sought to be relied on in those proceedings, it would not have been admissible. I am not satisfied that this establishes a proper basis for rejecting his evidence about what is in issue as not being credible.
All of the evidence must thus be considered and weighed.

Should Blackbay be joined?

I can also see no basis on which an order joining Blackbay as a party to these proceedings can justly be made.
The plaintiffs have not served any proposed amended statement of claim which identifies what orders they may seek to pursue against it. Nor was that explained in the evidence.
The real issues currently lying between the parties concern whether the fourth defendant should be restrained from continuing to be represented by Blackbay. The fourth defendant resists the orders sought. While she called evidence from a partner and employee of Blackbay, it did not itself seek to be heard on that matter.
It follows that an order joining Blackbay as a party has not been established to be necessary on the current pleadings and that Blackbay does not need to be made a party to these proceedings, for the real issues raised by the motion to be resolved.

Delay

I am also not satisfied that delay alone is a basis on which the orders the plaintiffs sought can be refused.
A conflict was raised, it seems, but not accepted some two weeks after service of the statement of claim on the fourth defendant. The plaintiffs were later ordered to file and serve any motion seeking to restrain Blackbay from acting for the fourth defendant by 24 June. It was not filed until 28 August 2024, but still it was then listed for hearing.
In those circumstances, I am satisfied that justice requires that the motion be heard and determined on the evidence the parties led and if a basis for the orders sought is otherwise established, the late filing of the motion of itself provides no just basis for refusing to make the orders sought, given the stage the proceedings have reached.

Prejudice

I am also not satisfied that the prejudice raised by the fourth defendant warrants the refusal of the orders sought, given the stage these proceedings have reached, despite she no doubt having gained a level of trust in Blackbay's representation, as was her case.
Undoubtedly what is pleaded in the plaintiffs' lengthy statement of claim is complex and requires a deal of investigation and consideration. What is pleaded against the fourth defendant includes that in breach of Crime Commission's directions, she received information which she then disclosed to her clients, defendants in criminal proceedings. That having contributed to the position into which the plaintiffs have been placed and the injuries which they have suffered as a result.
But still no defence has yet been filed, no evidence has been served and no hearing date has been fixed.
What has not been revealed is whether what is pleaded in relation to the alleged breaches of the Crime Commission Act will be put in issue by the fourth defendant. That decision will undoubtedly depend in part on adherence to the requirements of s 56 of the Civil Procedure Act 2005 (NSW), which imposes obligations on all parties in respect of the overriding purpose there specified, the just, quick and cheap resolution of the real issues in the proceedings.
The submission that engaging new solicitors now, would result in duplication of some work undertaken by the current team for the fourth defendant, including by counsel, as well as further delay may also be accepted, even though that was not a matter addressed in the evidence. That all such work will be wasted, does not, however, necessarily follow.
In all those circumstances, given the still early stage of these proceedings, I am not persuaded that the prejudice which may result for the fourth defendant, if the orders sought are made, can dictate that they must be refused, if justice is to be done between these parties.

Should Jones v Dunkel inferences be drawn against the plaintiffs?

Such adverse inferences may arise to be drawn against a party as the result of the party's unexplained failure to call a witness, where it would be natural for the party to call that witness, or where the party might reasonably be expected to call that witness: Jones v Dunkel.
In that event an inference may be drawn that the witness' evidence would not have helped the party's case. Here it is the failure of Mr Smith, one of the plaintiffs, to give evidence which was relied on to establish that such an inference should be drawn.
This gives rise to three other considerations: RHG Mortgage Limited v Ianni [2015] NSWCA 56 at [75]-[96]. First, that the missing witness would be expected to be called by one party, rather than the other; secondly, that this evidence would elucidate a particular matter; and thirdly, that the absence is unexplained. If those conditions are satisfied, then as discussed in RHG Mortgage, the inference may then be used in two ways: at [79].
First, in deciding whether to accept any particular evidence given, either for or against that party, which relates to a matter about which the person not called as a witness could have spoken. Secondly, in deciding whether or not to draw inferences of fact, which are open in relation to matters about which that person could have spoken.
The fourth defendant urged the conclusion that there was no adequate explanation for Mr Smith not having put on an affidavit, he having earlier sworn affidavits in the Local Court proceedings, about which Mr Carroll was cross examined.
This was advanced despite evidence that the plaintiffs remain overseas and continue to have concerns of which Mr Carroll was aware, as Ms Burrows explained in her submissions, about the possible disclosure of their whereabouts. The plaintiffs having been threatened following the breaches of the Crime Commission's directions, about which complaint is made in these proceedings.
Mr Carroll was cross examined about how Mr Smith, who he had never met, had come to swear his affidavit and whether he had properly witnessed it. It is unnecessary to explain all of that evidence, which shed light on the difficulty in contacting and communicating with Mr Smith and taking steps necessary to have him swear an affidavit which Mr Carroll could witness.
This affidavit disclosed only where the plaintiffs had resided before they left the country. It was never used in the Local Court proceedings, which were settled after Blackbay's retainer was terminated while Ms Burrows was acting. Whether it could have been relied on had those proceedings not settled, need not be resolved.
What there can be no issue about was that there has been real difficulty in having an affidavit properly sworn by Mr Smith. That he has an ongoing concern about the disclosure of his whereabouts must also be accepted.
In the result I am not satisfied that Jones v Dunkel inferences can fairly be drawn against the plaintiffs' case.

Was Mr Smith ever a client of Blackbay?

The case advanced for the plaintiffs relied not only on Ms Burrows' evidence, but also on various documents. They included text and email communications and a costs agreement entered in September 2022 by Carroll & Associate Lawyers.
Mr Carroll's evidence corroborated aspects of the evidence given by Ms Burrows, as did documents, but Blackbay did not concede that Mr Smith had been a client. On the documentary evidence, however, Mr Smith was first a client of Mr Carroll and then of Blackbay.
Mr Carroll sent the costs agreement to Mr Smith, as the director of two identified entities, while he was still a sole practitioner. It identified Mr Smith to be "our client" in relation to the engagement with which the agreement was concerned. The scope of services identified included damage caused to a loader and recovery of the repair cost. The agreement also identified that this might require legal proceedings to be initiated for recovery of money. The document the plaintiffs tendered had only been executed by Mr Carroll. Despite its terms Blackbay contended that it did not establish that Mr Smith had ever become a client.
I am unable to accept this.
Mr Carroll gave no evidence about this agreement in his affidavit, where he said that he had first been retained by Mr Smith to act for a company of which he was a director and later for other companies. But they are not referred to in the costs agreement.
There is no evidence that another costs agreement was entered after Mr Carroll became an employee of Blackbay. But no issue that he continued to act in respect of the loader, with which the Local Court proceedings were concerned and on other matters about which Mr Smith also gave instructions. The proper inference is that Mr Carroll continued to act in accordance with the earlier written agreement, with which both Blackbay and Mr Smith were content.
In the result, I am not satisfied that it can be concluded that Mr Smith was never a client of Blackbay.

Was a duty owed to Mr Smith?

It follows that it must be accepted that first Mr Carroll and then Blackbay owed Mr Smith the fiduciary obligations and duties which the law recognises flowed from their retainers.
But it appears that despite the various discussions between Mr Smith and Mr Carroll about the matters pursued in these proceedings, neither Mr Carroll nor Blackbay were ever retained to advise the plaintiffs about, or otherwise act for them in these proceedings.
Still, there is no issue that if in those discussions Mr Smith conveyed to Mr Carroll confidential information, they also have equitable obligations in respect of that information.
In that event, that the Court also has the power to make the orders sought, was not disputed.

Was relevant confidential information communicated to Mr Carroll?

The plaintiffs' case was that the evidence established that Mr Smith had conveyed relevant confidential information to Mr Carroll, which provided a just basis for the orders sought.
That was disputed by the fourth defendant, who contended that the evidence did not provide sufficient details about the confidential information it was claimed had been conveyed to Mr Carroll, for it to be concluded that the orders sought could justly be made.

The evidence

Ms Burrows' evidence included that: 1. It was in September 2023, while Mr Carroll was retained by Mr Smith, that Mr Carroll sent him two text messages with hyperlinks to an article in the Sydney Morning Herald entitled "High profile criminal lawyer sues herself into bankruptcy". His message included "...just be mindful that Zali Burrows is effectively bankrupt. I would not be providing her with any money on trust at this stage." 2. Ms Burrows' unchallenged evidence was that she was not then a bankrupt and that later, a 2022 creditors petition was dismissed by the Federal Circuit and Family Court, in June 2024. 3. In November 2023 Mr Smith discussed with Mr Carroll the claims the plaintiffs pursued when these proceedings were commenced in 2024, as well as him acting for the plaintiffs. 4. Between then and 3 June 2024, they had 31 phone calls during which, regularly, they discussed this claim, with Mr Carroll repeatedly asking if Mr Smith wished to retain him. 5. After the statement of claim was filed, Mr Smith sent it to Mr Carroll on 7 May. In a 32-minute telephone conversation: 1. Mr Smith communicated confidential information about his claims; conversations he had had about them; his personal and financial circumstances; concerns which he had about safety and his whereabouts; his attitude to litigation and costs; as well as his attitude to both the director of the company being sued in the Local Court and the fourth defendant in these proceedings, who Mr Carroll had understood had a different name; 2. Mr Carroll had advised Mr Smith: that his claims in these proceedings had good prospects of success and "if handled correctly you'll succeed in getting a substantial damages award in the vicinity of the $3-4 million mark. It would be a great case to run because the evidence is compelling": 3. They also discussed the merits of Mr Smith's claim against the fourth defendant. 1. Mr Smith had never authorised Mr Carroll to disclose what they had so discussed to anyone else. 2. They had also further discussed these proceedings in later conversations. 3. It was on 3 June 2024 that Mr Carroll disclosed to Mr Smith that Blackbay was now representing the fourth defendant in these proceedings and that: "…I told the partner who has it that you are my client and that it's possibly a conflict of interest. Your case has high prospects of success and if done right, it would be a substantial claim. If you sack Zali Burrows and transfer the matter to me, the other partner of my firm would put in papers right now to cancel her representation of [Jane Doe], and I would take over your case." 1. It was on 6 June that Mr Smith advised Mr Carroll by WhatsApp message that his firm was no longer instructed. 2. That day, Blackbay wrote to Ms Burrows advising that they acted for the fourth defendant and would accept service.
Mr Carroll's evidence included that: 1. He had been retained before he ceased practice as a sole practitioner on 23 October 2023, when he joined Blackbay. 2. Mr Smith continued to retain him in the Local Court proceedings and to discuss other legal matters which he and his companies had, including the claims later pursued in these proceedings, as well as his dissatisfaction with Ms Burrows' representation. 3. He could not recall the exact content of discussions that took place during these calls, but he remembered Mr Smith frequently expressing his belief that the value of his claim was in the "millions" and that he was dissatisfied with Ms Burrows as his lawyer and indicated a preference for Mr Carroll. 4. They had discussed the claims pursued in these proceedings in April 2023, when Mr Carroll wanted his opinion about what his claim was worth, having had advice from Ms Burrows. Mr Carroll advised that it was impossible to tell, he needed to see the pleadings and evidence and "to consider any similar cases in which damages have been awarded. I have never run this sort of case before, so it's difficult for me to assess even at a general level what goes into a damages assessment for this kind of claim." But he could not see how his loss got him anywhere near the numbers he was referring to. 5. Mr Carroll denied having requested a copy of the filed statement of claim, not knowing the stage the proceedings had reached. 6. He also denied having advised Mr Smith on 7 May 2024 that he had good prospects of success, that he would obtain $3-4million in damages and that the evidence was compelling, having not seen any evidence. 7. Mr Carroll did agree that he advised Mr Smith that the claim would need to be well or competently managed,. But he denied having offered to provide an opinion as to the merits of his claim against the fourth defendant. 8. Mr Carroll said his calls with Mr Smith mainly concerned the loader claim. He was having difficulty contacting him overseas and took two affidavits which he swore over the phone. 9. Mr Carroll denied giving any opinion about the damages Mr Smith hoped to be awarded against the State. But he agreed that they had discussed his background, the Crime Commission and what he believed had been leaked to members of the underworld, which had led to the plaintiffs' departure from Australia. But that Mr Smith had not communicated "in any clear or explicit terms" what he had told certain persons. 10. Mr Carroll also said he had formed no view about the plaintiffs' appetite for litigation in connection with their concerns about their personal safety. 11. Information Mr Smith had communicated to him relevant to these proceedings included his beliefs about what the fourth defendant had done, although Mr Carroll then understood that she had a different name. But he had never provided any opinion about the merits of his claim against the fourth defendant. 12. Upon realising that the fourth defendant, who Blackbay had been asked to represent, was the person he had earlier discussed with Mr Smith, he called him and advised that: "I'm just calling you in relation to your claim against the Crime Commission. My firm has been asked to act for one of the defendants in that proceeding. So, if you want me to act for you in that proceeding, you'll need to let me know. Otherwise, my colleague will accept the instruction which will bar me from being able to act for you in the matter at a future date if you later change your mind". 13. After indicating that it was the fourth defendant who wanted to retain Blackbay, Mr Smith said that he would discuss it with his wife and come back to Mr Carroll. Later that day his retainer was terminated. 14. Mr Carroll denied having told Mr Smith to sack Ms Burrows. But he had informed him on more than one occasion that he could not act for him, in his claim against the State, while she was on the record. 15. He had also discussed with Mr Smith his financial circumstances, but in the context of his unrelated legal exposure to a NSW Environment Protection Authority investigation into a property he said he owned. 16. Mr Smith had not communicated the plaintiffs' general attitudes to litigation and its costs, other than his complaints about Ms Burrows requests about being put into funds.
On all that evidence I am satisfied that in their discussions Mr Smith did convey confidential information to Mr Carroll. That is information which is not in the public domain and which the plaintiffs are entitled to have Blackbay keep confidential, given the circumstances in which it was conveyed to Mr Carroll, the solicitor with whom Mr Smith was pursuing ongoing discussions about it being retained in these proceedings and about the plaintiffs' prospects of success.

Should the Court exercise its discretion to make the orders sought?

What must next be considered is whether the Court should exercise its inherent jurisdiction to restrain the fourth defendant from continuing to retain Blackbay, as an incident of its inherent jurisdiction over its officers and to control its process, in aid of the administration of justice.
I have concluded that the jurisdiction must be exercised.
Mr Carroll's evidence establishes that he did discuss the claims the plaintiffs wished to pursue in these proceedings with Mr Smith, given the events which triggered the litigation and their consequences, both before and after they were commenced. They also discussed him being retained to act, eventually in place of Ms Burrows.
There is nothing unusual about a client retaining different solicitors to represent or advise them about different legal matters, or to seek second opinions about their prospects of success, or to consider terminating a retainer and engaging different solicitors.
Mr and Mrs Smith were directors, either solely or together, of various companies for whom Mr Smith gave Mr Carroll instructions, the September 2023 costs agreement Mr Carroll provided having been entered.
Mr Carroll's evidence also establishes the nature of the relationship which he developed with Mr Smith. His evidence being that over the course of Mr Smith's calls, "I sensed that Mr Smith had grown to trust my judgment and to value my advice. As I did not charge Mr Smith for these calls except where they related directly to the Loader Claim, I did not create any financial disincentive for Mr Smith that discouraged him from calling me."
It was during the course of the Local Court matter that text messages were received from a director of the defendant in those proceedings, which the plaintiffs rely on to establish the breaches of the Crime Commission's directions which they pursue in these proceedings.
That helps explain how Mr Smith came to discuss what is now pursued in these proceedings with Mr Carroll, even before these proceedings were commenced.
There is nothing unusual or improper in Mr Carroll having sought to be instructed to act in these proceedings when the plaintiffs' claims were raised with him. Nor after Ms Burrows had been retained, when Mr Smith pursued his discussions about the plaintiffs' claim with Mr Carroll.
That accords with Mr Carroll's evidence that Mr Smith not only wanted to discuss his reservations about Ms Burrows' representation, but also sought his views about the plaintiffs' prospects in these proceedings, he having come to value his advice. It must be accepted that this is why Mr Smith sent Mr Carroll the statement of claim, which they also discussed.
Their history explains the view Mr Carroll came to about Mr Smith valuing his advice. That accords with Mr Smith discussing these proceedings with him in April 2023, repeatedly seeking his opinions about the claims pursued and on 7 May sending him the statement of claim to consider.
The number and length of their phone conversations is not disputed. There is no issue that they had three long phone conversations on 17 May, 21 May and 29 May, of 20, 53 and 21 minutes. On Mr Smith's evidence they then discussed these proceedings. Mr Carroll cannot remember what they then discussed. But he believed that they had discussed the statement of claim a few days after he received it.
Had they been discussing other matters in these conversations, in respect of which Blackbay was retained, no doubt file notes and fee memoranda would have evidenced these discussions. But no such evidence was led.
It must be inferred that this was because Mr Carroll was not charging Mr Smith for their discussions about these proceedings, not wanting to create any financial disincentive that discouraged Mr Smith from calling him, he still pursuing Blackbay's retainer to act for the plaintiffs in these proceedings, instead of Ms Burrows.
While it may be accepted that Mr Smith did not provide Mr Carroll with documentary evidence to consider, that they discussed the claims the plaintiffs were pursuing, including against the fourth defendant, was not in issue. What he was told permitted Mr Carroll to perceive the novelty of the claims advanced and to advise about the legal skillset necessary to pursue them.
That Mr Carroll received confidential communications, including about the subject matter of these proceedings, in the course of these discussions, including after he was provided with the complex statement of claim which had been filed, is not surprising, even though he was not provided with documentary evidence to consider as well.
Mr Carroll does not deny that Mr Smith wanted to discuss the plaintiffs' prospects of success in these proceedings. That necessarily would have depended on confidential information which Mr Smith was able to convey, despite Mr Carroll not having yet been retained to act.
As I have explained, I am satisfied that the matters that Mr Carroll does not deny Mr Smith disclosing to him in their discussions, are sufficient to establish that confidential matters were discussed.
Ms Burrows' hearsay evidence about what Mr Smith and Mr Carroll discussed did not disclose the details of those communications, in respect of which privilege was not waived. Ms Burrows was not sought to be cross examined about this, it seemingly being accepted that the plaintiffs were entitled to claim such privilege, given the provisions of the Evidence Act.
Mr Carroll did deny aspects of the claimed conversations and otherwise Blackbay argued that what was established by Ms Burrows' evidence was insufficient to satisfy the onus which falls on the plaintiffs, to establish a proper basis for the orders which they seek.
On reflection, I have concluded that given what is common ground, this cannot be accepted.
That Ms Otavski is not familiar with the matters in which Mr Carroll had acted and Mr Smith gave instructions, or what he discussed with Mr Smith about the claims pursued in these proceedings, is not to the point. Contrary to her understanding, it must be accepted that Mr Carroll did discuss with Mr Smith not only Blackbay representing the plaintiffs in these proceedings, but also various confidential matters relevant to what they pursue in these proceedings, including against the fourth defendant.
What is not clear is when Mr Smith and Mr Carroll discussed various matters. But what is established is that the topics they discussed over time, included not only Mr Smith's personal circumstances, but the background to how the Crime Commission came to make the directions the plaintiffs rely on; the circumstances in which they are claimed to have been breached; the consequences; the claims pursued in these proceedings, including as to the ongoing adverse consequences for the plaintiffs in relation to their safety; the case pursued against the fourth defendant; and Mr Smith's finances.
It must be accepted that these are not all matters which are in the public domain, even after the statement of claim was filed. The result is that the plaintiffs are entitled to have confidentiality maintained in what Mr Smith disclosed to Mr Carroll about the matters which remain confidential, even if it be accepted that Mr Carroll was unable to express any views about the plaintiffs' prospects of success in these proceedings.
I am thus satisfied, having balanced all of the competing matters which must be considered, including that Mr Smith was not available to be cross examined and that the power to make the orders sought must be exercised cautiously, that the fourth defendant must be restrained from continuing to retain Blackbay, as the plaintiffs seek.
That is because on the evidence it must be accepted that a fair minded, reasonably informed member of the public would conclude, in all these circumstances, that the proper administration of justice requires such orders. It being appreciated that Mr Smith provided Mr Carroll and Blackbay with confidential information about matters with which these proceedings are concerned, or are relevant to their conduct and pursuit, at times when they were seeking to be retained by the plaintiffs, information which still remains confidential.
And further, that the proper administration of justice requires that another party such as the fourth defendant, against whom the plaintiffs pursue considerable damages, should thus not be represented by those same legal practitioners in these proceedings.
That being what the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice, require in the circumstances which have arisen for consideration.

Costs

The usual costs order under the Uniform Civil Procedure Rules is that costs follow the event: r42. In this case that is an order that the fourth defendant bear the plaintiffs' costs of the motion.
Unless the parties approach with short written submissions within 14 days, that will be the Court's order.

Orders

For these reasons I order that: 1. the fourth defendant is restrained from retaining Blackbay to advise and represent her in the proceedings; and 2. Unless the parties approach with short written submissions within 14 days, the fourth defendant is to bear the plaintiffs' costs of the motion, as agreed or assessed.

Amendments 20 December 2024 - Amended to reflect pseudonym orders made by Schmidt AJ 20 December 2024 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 December 2024

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Cases Cited (31)