Spincode Pty Ltd v Look Software Pty Ltd & Ors [2001] VSCA 248

5. In about April 1996 Brendan Norman James Kay and David Kay started working for the company. In January 1997 discussions took place between Moore, Rogers, Dee and the two Kays ("the participants") about an arrangement whereby shares should be allotted to the Kays with the result that the shareholdings would be as follows:

The making of an arrangement to that effect does not seem to be seriously in dispute, although Moore says it was conditional.

14. The history of the company's affairs, culminating in the litigation begun in May 2001, follows a course not unfamiliar where persons of limited capital come together and form a company to develop and sell a product. Work is done and expenses incurred with little or no revenue in the early stages. There are discussions about deferred remuneration and reimbursement and about shareholding and the division of the profits which it is hoped will ultimately be achieved. "Shareholders' agreements", sometimes oral, sometimes evidenced in part by writing, may be alleged to have been made.

17. In this case we are not concerned with the resolution of the disputes which have, not surprisingly, arisen except as regards one aspect of the means by which they are to be resolved. For we have before us an appeal by Spincode against an injunction granted to prevent a firm of solicitors from continuing to act for it in the proceedings it has taken to have the company wound up or obtain some relief short of winding up. The injunction was granted by Warren, J. on 17 August last. In the principal proceeding Spincode is plaintiff and the defendants are the company, Dee, G-Wiz and the two Kays. The plaintiff seeks either a winding up or an order for the purchase of its shares at a valuation and relies on the oppression and just and equitable grounds. The order of Warren, J. was made on an interlocutory application launched on 21 June 2001 in the principal proceeding by the defendants. That application was directed both to the plaintiff, Spincode, and to the solicitors concerned, McPherson + Kelley (who use not an ampersand but a plus sign in the name under which they practise). The solicitors were not represented on the hearing of the application; her Honour was told by counsel for Spincode that they adopted a neutral stance towards it. The order under appeal restrains McPherson + Kelley "from acting or from continuing to act in this proceeding on behalf of the plaintiff and/or Robert Louis Moore ... or either of them, until the final hearing and determination of this proceeding." The appellant has pointed out that Moore was not a respondent to the application for an injunction but has not suggested that we should for this reason vary the injunction.

20. The question whether a particular solicitor may act in litigation might be thought to be clearly interlocutory as between the parties to that litigation. As I have said, the solicitors, although made respondents to the application, played no part on the hearing. They have not appealed against the order. While no injunction was granted against the plaintiff restraining it from employing the solicitors, the present case would seem to be one "of granting or refusing an injunction" within the meaning of sub-paragraph (ii) of paragraph (b) of s.17A of the Supreme Court Act 1986, so as to make leave to appeal unnecessary. This might be thought anomalous.

23. The defendants to the winding up proceedings, including the company itself, have made common cause and have been represented by the same solicitors, Logie-Smith Lanyon. The application for an injunction was made by them all. Material treated by the parties as available to the judge for the purposes of the injunction application comprised the winding up application itself, the affidavit in support of it made by Moore, an affidavit by Dee, an affidavit by Rogers and an affidavit by Moore in response to that of Rogers. Two members of the firm of McPherson + Kelley made affidavits in opposition to the application, one of them being Paul Kirton, the member of the firm who had been concerned from about September 2000, and the other Sven Bier, the partner who had come into the matter in about January 2001. There were numerous exhibits to most of the affidavits. The only oral evidence was that of Kirton, who was cross-examined on his affidavit. There was in addition a good deal of other documentary evidence before the judge, much if not all of it coming from the file of McPherson + Kelley, access to which was ultimately obtained by the defendants. An order for an expedited hearing of the appeal having been made, and the two volume appeal book having been found to contain by no means all the necessary material, a supplementary appeal book was prepared at a late stage. Unfortunately many of the documents it contains are not indexed.

26. I return to my brief account of the history of the company before the dispute about representation which led to the injunction. I had reached the point of mentioning that there did not appear to be any serious dispute about the fact that an arrangement was made that shares should be held by five persons, not three, each with a given percentage, although Spincode says that this arrangement was subject to satisfactory performance of their duties by the Kays. It seems to be common ground that in the first half of 1997 discussions took place between the participants, not only about shareholdings in the five percentages I have mentioned, but also about profit distribution and the need for consulting fees for the services provided by each participant to be paid, not at the time of performance of those services, but when the company was in a financial position to make payment. Disputes arose, in particular about whether agreement had been reached, in about June 1997 or at all, for what is called in the defendants' affidavits "equalisation". It is the defendants' case, and both Rogers and Dee depose to the fact, that in about June 1997 the participants agreed that the company would be invoiced for services rendered to it by them at a rate only sufficient to meet their living expenses and that, once the company was in a position to pay, any differences in the total amounts paid in respect of the services of the five would be eliminated in order to achieve "equalisation". It is the defendants' case that Moore refused to honour this agreement. They say that in about September 2000 he proposed to implement the agreements that had been arrived at only to the extent of seeing that the participants or their companies held shares in the agreed percentages.

29. And so from about September 2000 there were disputes. The role played by Kirton in them is the real origin of the sense of grievance which I have no doubt Rogers, Dee and the Kays feel about the later conduct of McPherson + Kelley. I am not going to summarise in detail what the affidavits and other material disclose about the course of the dispute in the three months or so which ensued after it arose. There were numerous discussions between those concerned. At one stage Moore was hoping to induce Dee to agree to get rid of Rogers as a director. But in the end it was Moore himself who left the board.

32. McPherson + Kelley had a longstanding connection with the company. As I have said, they had acted on its incorporation. The uncontradicted evidence was that, at least until the time when internal disputes arose - in about September 2000 - the firm had acted for the company ever since its incorporation in all legal matters concerning it and that these included - there were evidently other matters - the drafting of software licence agreements, the drafting and reviewing of distributorship agreements and application service provider agreements, the registration of trademarks and agreements with contractors. McPherson + Kelley undoubtedly acted in relation to the disputes which arose in about September. Before us it was conceded by the appellant that in so acting they had the company as their client. It was also conceded by the appellant before us that the disputes in relation to which the firm acted for the company were disputes which, if not resolved, would naturally culminate in an application to wind up the company of the kind ultimately made. One of the remarkable things about this case is that the plaintiff, before her Honour, argued that in the months in question McPherson + Kelley had not acted for the company. It is also remarkable that McPherson + Kelley should itself have denied the existence of that retainer. I shall come back to this.

35. As regards the course of the dispute leading to the winding up application, and the role of the solicitors, I shall mention briefly a number of events, commencing in September 2000. On 27 September Moore telephoned Kirton and told him he wanted to change the shareholder set up and to have a shareholder agreement to change the controls or conditions on shareholding. As a result, on 10 October Kirton had a meeting with Moore, Dee and Jim Milligan, the manager of the company. At that meeting some person or persons expressed concern that Rogers was not contributing enough to the business and that he might have been disclosing information to the Kays about payments made to directors. Shareholders' agreements and employee share plans were discussed in a general way. Kirton's evidence, and his file note, show that someone told him of arrangements made between the participants about four years earlier; there is reference to the Kays and "7.5% each" and to distribution of profit 50% "in proportion" and 50% "equally". He was told that one of the two brothers was now saying that they did not agree (this probably means "had not agreed") and wanted more than 15% notwithstanding that he had taken money in accordance with the agreement. What Rogers wanted and whether he would take a payout was discussed.

38. On 5 October a meeting of the five participants had been held at Moore's home at which David Kay suggested that he and his brother should each be given not a 7.5% but a 15% shareholding. The defendants say that at the meeting Moore did not dispute the existence of the so-called equalisation agreement but said that payments made to each participant were "water under the bridge" and that equalisation payments should not be made. On 16 October Moore told Kirton that he would arrange another meeting next month to discuss a shareholders' agreement.

41. When access to the solicitors' file was ultimately obtained it disclosed that on 10 October Kirton had given instructions for the opening of a file in the matter of "shareholder advice", the company being named as client. The handwriting describing the "service" is hard to decipher but the words used were evidently to "provide initial and ongoing advice on the addressing the concerns of the shareholders". Having named the company as the client the checklist went on to give two contact names - those of Moore and Dee.

44. On 18 October McPherson + Kelley sent a letter addressed to "Mr Bob Moore, Look Software Pty. Ltd.", headed "Shareholder Advice" and setting out the terms of the agreement between "you" and the firm. The "agreed work" was described as advising on the issues concerning the shareholders of the company. It is convenient to record here that all the solicitors' bills of costs were directed to and paid by the company. Each of them, having been directed to the company, went on to refer to the costs of "acting on your behalf" in relation to the matter of "shareholder advice". Particulars were given of each item of work. The first bill of costs was dated 27 October and related to work done between 27 September and 16 October. It was for $1,287. The second bill covered the period 20-29 November and was for $2,325.40; it was dated 29 November. The third bill of costs, dated 21 December, was sent under cover of a letter dated 2 January to Milligan. It related to work between 8 and 21 December and was for $1,551. The fourth and last bill of costs was dated 30 January. It related only to a telephone conversation of 2 January with Moore and was for $165. No bill of costs was ever directed to Moore.

47. Late in November Kirton drafted a shareholders' agreement and an employee share plan and these, together with a service trust scheme he had prepared, were tabled at a meeting held at Moore's home on 30 November 2000 and attended by the five participants. (Before the meeting, Kirton had submitted a draft of the agreement to Moore and then altered the draft in accordance with Moore's suggestions.) At the meeting on 30 November Moore made a claim to be reimbursed $70,818, which he said represented expenses incurred in the preceding five years and not previously claimed by him. The others rejected this claim. Moore became annoyed, offered to resign as a director and declared the meeting closed.

50. Another meeting of the participants was held at Moore's home on 7 December, followed by a further meeting on 15 December and yet another on 22 December. It is not necessary to set out the parties' competing versions of what took place at those meetings. It is enough to say that Moore unsuccessfully pressed for acceptance of the shareholders' agreement and employee share plan prepared by Kirton, that by the end of the year the disputes were still unresolved and that in January an unsuccessful mediation was conducted.

53. Whatever might be said of Moore, the evidence was that all the other participants believed that Kirton was acting for the company at the meetings which took place.

56. The mediation, which obviously was never going to succeed, collapsed by about 22 January. On 1 February Dee, who had recently become managing director of the company, was surprised to receive, in that capacity, a facsimile letter from the company's solicitors, McPherson + Kelley, beginning "We act for Robert Louis Moore and Spincode Pty. Ltd.", making a series of allegations and complaints, raising the possibility that the company would be wound up or that the shares held indirectly by Moore would be acquired and ending with an implied threat of legal action if no settlement was arrived at. Dee, who had understandably regarded McPherson + Kelley as the company's solicitors, acting for it both generally and in the internecine disputes that had arisen, telephoned Kirton and expressed his surprise. Kirton said he was not aware of the facsimile. It had in fact been sent by another partner, Bier, who had acted for Moore in 1994. Shortly after this the defendants' present solicitors, Logie-Smith Lanyon, began to act for them and a prolonged correspondence ensued between the two firms of solicitors in which constant complaint was made that McPherson + Kelley, having always acted for the company, and having in particular acted for it in relation to the disputes which were now moving towards litigation, should act no further. The position taken up by McPherson + Kelley in this correspondence is remarkable and reprehensible. By letter dated 8 February, having identified "your client" as the company, McPherson + Kelley asserted that it had "not acted nor provided advice personally to your clients". Later, in its letter of 23 February, when faced with more documentary material, McPherson + Kelley modified its stance, asserting, "We no longer act for Look Software Pty. Ltd. Your firm does." The letter went on to assert that at the time of the dispute between the participants Kirton had been acting for Moore and also to assert, by clear implication, that he had been acting for no-one else. The bills of costs showing the firm to have acted for the company in the very matter of the dispute were dismissed on the ground that their delivery "does not give rise to a conflict of interest". It having been successfully established by Logie-Smith Lanyon, by the production of documents, that McPherson + Kelley had acted for the company in drafting distribution agreements, McPherson + Kelley observed, "Those distribution agreements do not bear the name of this firm", as if intending to rely on some difficulty of proof their former client might face.

59. Kirton does not come out of this affair well. He made an affidavit on 28 June which was filed by his firm on behalf of Spincode in opposition to the application for an injunction. (The firm acted for Spincode on that application but has not acted on the appeal.) It is a remarkable affidavit. I shall not go through it paragraph by paragraph. It is throughout calculated to give the impression that in everything which he did in relation to the company's affairs between September 2000 and early January 2001 he was acting for Moore, and for Moore alone. Kirton makes no reference to the bills of costs naming the company as the client and their payment by the company. Nor does he mention the form he filled out on 10 October naming the company as client and giving two "contact names" - not only that of Moore but also that of Dee. This checklist is obviously the foundation for the letter which McPherson + Kelley sent on 18 October. A "funds received advice" form of McPherson + Kelley was put in evidence naming the company as the client in relation to "shareholder advice". Journal vouchers named the company as client. So did a "producer's billing guide".

62. Cross-examined, and asked whether he denied that McPherson + Kelley acted for the company in relation to the shareholder advice matter, Kirton answered "I'm unclear on that. Initially I'm not too sure. I'd like to turn my mind to the issue of who we acted for." One would have thought he would have turned his mind to that question before entering the witness box and indeed before making his affidavit, not to mention the time at which he was providing his services. The whole of his cross-examination is worth reading.

65. The ambivalence characterising Kirton's evidence is reflected in his conduct in the months in question. One would have expected a solicitor acting for the company in an attempt to sort out disagreements among those who were or intended to become shareholders in it to act as an "honest broker" and not to seek to advance covertly the interests of one person at the expense of another. But "honest broker" Kirton was not. This is shown by his cross-examination and the documents obtained from his firm. His file note of 24 November contains the words "Bob wants total control" followed by an arrow and the words "veto right on issues of substance". An undated file note contains, in relation to the proposed shareholders' agreement, these striking words: "Bob wants control but can't explicitly state." The same note, opposite the word "allegiances", puts Moore and Dee on one side and Rogers and the Kay brothers on the other. The whole note is evidently a record of instructions given by Moore about the draft shareholders' agreement. A later note shows Kirton advising Moore on 2 January 2001 about a possible winding up. This piece of advice is the subject of the last bill of costs to the company, that dated 30 January, prudently dispatched before Bier wrote his letter of demand of 1 February which mentioned, among many other things, winding up. The company has paid that bill, like all the others.

68. Documents in the solicitors' file show that another solicitor in the practice provided Kirton with a memorandum dated 24 November dealing with the steps necessary to remove a director, and a notation shows that on the same day Kirton conveyed this information to Moore. The bill of costs of 29 November shows this advice being charged to the company. Other material shows that at this time Moore was trying to get Dee to agree to the removal of Rogers as a director because of the danger that Rogers would tell the Kays how much money the directors were receiving. The documents also show that Kirton reported by telephone to Moore when Rogers (who was, after all, a director) approached him to obtain company documents. The shareholders' agreement drawn by Kirton on instructions taken from Moore, and redrawn by Kirton on the instructions of Moore, was on the uncontradicted evidence warmly commended to the meeting by Kirton as the best solution. It was the solution for which Moore was pressing.

71. Warren, J. found that confidential information, relevant to matters in dispute in the litigation, had been obtained by the solicitors from the company. She was right to do so. It is shown by Kirton's own evidence that, when he attended meetings of some or all of the participants, they were on occasions discussing with him or at least in his presence (to use his own words) "whether there was an agreement between the shareholders, what constituted that agreement and whether there should be an agreement and what the content of that agreement should be"[1]. The affidavits make it plain that the disputes between the participants, to assist in the resolution of which the company employed the solicitors, included disputes about whether the participants had reached agreement on a number of points in the course of the company's history and about the terms upon which they had agreed. I have earlier mentioned a file note of Kirton's which shows that arrangements made between the participants about four years earlier were discussed, and the references made in it to the Kays and "7.5% each" and to distribution of profit 50% "in proportion" and 50% "equally" and to other relevant matters. The fact that Moore is said by Kirton to have been always present during these discussions does not mean that the information imparted was not confidential in the necessary sense; this fallacy underlay a submission repeatedly put to us by the appellant.

74. The potentially wide-ranging nature of the inquiry in the principal proceeding is relevant[2]. A range of matters discussed with or in the presence of Kirton are likely to be investigated. Despite the argument put to us I would not exclude the respective contributions of Moore and Rogers to the development of the NewLook software. There is evidence that the solicitors acted for the company in matters concerning ownership of the copyright in that software, a question likely to arise at least indirectly in the present litigation.

77. There is no reason to doubt the correctness of her Honour's view that the appellant had failed to show that there was no real risk of the misuse of the confidential information[3] and that the respondents had shown a real and sensible possibility of that misuse[4].

80. But the judge did not found herself on this alone and so her judgment raises a much wider question. Strictly, we need not consider that question. It would be enough to say that the decision below can be supported, on the most narrow view of the law, as resting on confidential information and its possible misuse. But I take the opportunity of considering the wider question.

83. When may a solicitor change sides? We have a decision of Lord Eldon on the point but unfortunately its basis is not clear. In 1812 Earl Cholmondeley brought a suit against Lord Clinton to recover great estates in Devon and Cornwall. Seymour and Montriou acted as the solicitors for Lord Clinton in it. After the suit had been on foot for some time the solicitors dissolved partnership, and in December 1814 Montriou told Lord Clinton he had been appointed as the plaintiff's solicitor. There was evidence that Montriou had acquired confidential information from Lord Clifford about the estates. Lord Eldon, after consulting all the judges, laid it down that a solicitor, not having been discharged by the party for whom he was acting in a cause but having discharged himself from the relationship of solicitor and client with that party, was not at liberty to become solicitor for the opposite party in the same cause. The Lord Chancellor's brief reasons say nothing about confidential information.[5] The decision has often been cited. In 1821[6] Lord Eldon himself said of it:

"There the gentleman who had been concerned for Lord Clinton discharged himself and went over to the other side. It appeared to me, and to all the Judges, that nothing could be more dangerous than to permit a solicitor employed by A. in a cause between him and B., to leave A. while still willing to retain him, and enter into the service of B."

Again nothing is said in terms about confidential information. In another case in the same year[7] his Lordship remarked:

"The case of Cholmondeley v. Clinton was no more than this. A gentleman discharged himself from being solicitor for Lord Clinton, and the question was whether, whether the Court would permit him to turn his back on his client, and to go into the service of the person against whom he had been employed."

That passage makes no mention of confidential information, but some months later, in the same case, the Lord Chancellor referred to Cholmondeley v. Clinton again and observed that in it there was no doubt much important information that might be communicated and that "the Judges were of opinion that [the solicitor] could not carry over to the other side the information acquired in the service from which he had discharged himself."

90. In the Irish case of Hutchins v. Hutchins[8] Sir William McMahon, M.R. appears to treat Cholmondeley v. Clinton as depending on confidential communications. Lord Eldon's decision was again considered in Johnson v. Marriott[9]. Understandably, having regard to the words used by Lord Eldon in Cholmondeley v. Clinton, all three members of the Court treated that case as dependent upon the solicitor's having been discharged by his own act. That was not what had happened in Johnson v. Marriott, where the solicitor had been discharged by his client. Gurney, B. said, at 189, "I do not mean to say, that, if an attorney conducts himself in such a way as to procure his discharge, the Court would not restrain him from acting for the other side, for, in that case, his discharge would be caused by his own act ...". All three judgments appear to proceed upon the basis that in such a case communication of confidential information need not be proved. Griffiths v. Griffiths[10] was, like Cholmondeley v. Clinton, a case in which a firm of solicitors, employed by one party to a cause, dissolved partnership. It was held by Sir James Wigram, V.C., applying what had been said in Cholmondeley v. Clinton, that the solicitors had, by dissolving the partnership, dissolved the relationship of solicitor and client and brought the retainer to an end. But there the question was, not whether a member of the former firm was free to act for the other side in the litigation, but whether the retainer had been brought to an end by the firm or the client for the purpose of the rules governing the terms on which a client could obtain the papers held by his former solicitor. Nothing is said about the questions with which we are concerned.

93. Parratt v. Parratt[11] is more to the point on the facts, but it still does not help to clarify what Cholmondeley v. Clinton stands for. A bill filed by the residuary legatees under a will alleged breaches of trust on the part of the managing executor. The solicitor for the plaintiffs had for several years been the solicitor for the managing executor, but that relationship had come to an end some time before, and it had been the client who had brought it to an end. Knight Bruce, V.C. said that one had to have regard to the circumstances of the case and that the circumstances did not warrant the grant of an injunction to restrain the solicitor from acting for the plaintiffs. The Vice-Chancellor observed that this refusal of an injunction was not inconsistent with Cholmondeley v. Clinton, since in that case it was an ingredient ("I do not say that it was an essential ingredient") that Montriou had acted with Seymour as the solicitor in the very cause; the Vice-Chancellor also observed that the case before him was one in which the client had discharged the solicitor and was to be contrasted with cases in which the solicitor had virtually discharged himself.

96. In Re Holmes; In Re Electric Power Co. Ltd.[12] was an application to restrain Holmes from acting for the petitioners in a winding up on the ground that he had acted for the company. He had been employed in its incorporation in March 1874 and had attended one or two board meetings, at one of which he was formally appointed solicitor to the company. His bill relating to the incorporation had been paid in June 1874 and since that date he had not acted for the company. In March 1876 the company entered into negotiations for a loan with another firm of solicitors, and in May 1876 Holmes acted as solicitor for a debenture holder on a petition to wind the company up, which was dismissed by consent; no objection was then raised by the company to his acting for the petitioner. The pending petition was presented in February 1877. Hall, V.C. dismissed the application, remarking that the fact that no objection had been taken to Holmes's acting on the earlier winding up petition showed that the application for an injunction was not bona fide. The Vice-Chancellor would in any event have dismissed the application on the merits, being of opinion that the solicitor had not acquired private information of any significance as a result of his former retainer. He went on to refer to authorities which included Cholmondeley v. Clinton, Beer v. Ward and Parratt v. Parratt and to the fact that in the first and third of these cases the solicitor had discharged himself. Five years later, in Little v. Kingswood Colleries Co.[13] Hall, V.C. restrained a solicitor from acting against his former client. What is said in that judgment must be read subject to what took place when the case reached the Court of Appeal. My present concern is not with the breadth of the view taken by Hall, V.C. but with his opinion about the basis of Cholmondeley v. Clinton. The Vice-Chancellor noted that Cholmondeley v. Clinton had been referred to by Lord Cottenham, L.C. in Dietrichsen v. Cabburn[14] (not a case of seeking to have a solicitor restrained) as an example of the equitable jurisdiction to restrain by injunction an act which the defendant by contract or duty was bound to abstain from.

99. Finally I mention what was for many years the leading case on when an injunction would be granted to restrain a solicitor from disclosing confidential information imparted by a client, Rakusen v. Ellis, Munday and Clarke[15]. At 837 Cozens-Hardy, M.R. said of Cholmondeley v. Clinton:

"I have read and re-read that case, and in my opinion it lays down no such principle. It was, as explained by Lord Eldon in a subsequent case, Bricheno v. Thorp, a case in which a solicitor, one of the members of the firm, in the middle of a litigation discharged himself and went over to the other side. It was a question of breach of contract and not merely a breach of duty, and Lord Eldon and the judges he consulted really decided that case on a ground which is not now treated by counsel on either side, and I think is properly not treated by them, as conclusive of the matter. Lord Eldon proceeded on the footing that the solicitor could not by discharging himself in the middle of a suit deprive the client of the right which he had by the contract of retainer to the services of that solicitor." (Footnote omitted.)

This seems to suggest that the fact that the solicitor had discharged himself was relevant but not conclusive. The Master of the Rolls evidently viewed as the "breach of contract" the solicitor's failure to continue to serve Lord Clinton, not his commencing to act for the Earl (in breach of an implied term of his contract with Lord Clinton). The second member of the Court, Fletcher Moulton, L.J., remarked, at 841-2, that Cholmondeley v. Clinton must be read with the authoritative explanations of it given by Lord Eldon in Beer v. Ward and Bricheno v. Thorp. The third judge, Buckley, L.J., said, at 844, that a careful reading of Cholmondeley v. Clinton showed that Lord Eldon and the judges whom he consulted were basing themselves on the fact that the solicitor had discharged himself and was going into the service of the opposing litigant. His Lordship continued -

"and they, I think, drew the inference that having discharged himself he was going into the employment of a new client with the result, or the possible result, or the anticipated result, that there would be a breach of the confidential duties which he owed to his former client. Of course he owes his former client the duty not to disclose that which he has learned confidentially ...".

This seems to treat Cholmondeley as dependent upon the apprehended use of confidential information.

106. One cannot say with confidence what Lord Eldon and the judges whose opinion he took were intending to lay down in Cholmondeley v. Clinton. In particular, it is not possible to say with confidence what the significance was thought to be of the solicitors' having discharged themselves or whether Cholmondeley v. Clinton, at all events as subsequently explained by Lord Eldon, is to be regarded as based on the danger of the misuse of confidential information[16].

109. Since the earliest days of attempts to prevent solicitors from acting against their former clients it has been recognised that a basis - I use the indefinite article advisedly - of the jurisdiction is that which the court has over solicitors as its officers. Sir Samuel Romilly, for Lord Clinton, said that there were two heads of jurisdiction: irreparable injury which supports an injunction and in addition the general jurisdiction over an officer of the Court. In Beer v. Ward motion was made in the suit for an injunction restraining the solicitor. Lord Eldon dealt with the application on its merits while observing that objection might have been taken to the form of the proceeding on the ground that, being an application to the general jurisdiction of the Court over its officers, it ought to have been made in the matter of the complainant, not by motion in the cause. In Davies v. Clough[17] Sir Lancelot Shadwell, V.C. said:

"The cases ... appear to afford this general principle, namely, that all Courts may exercise an authority over their own officers as to the propriety of their behaviour; for applications have been repeatedly made to restrain solicitors who had acted on one side from acting on the other, and those applications have failed or succeeded upon their own particular grounds, but never because the Court had no jurisdiction."

In that case the application was made by motion in the suit and the order sought was one restraining the plaintiffs from employing the solicitors. What had been said by Lord Eldon on the question of procedure in Beer v. Ward was discussed by Sir Michael O'Loghlen, M.R. in the Irish case of Biggs v. Head[18]. The Master of the Rolls thought that the jurisdiction which the Court possessed over solicitors could be exercised on an application made in the existing cause and pointed out that if application was made in the cause the Court was able to enjoin not only the solicitor but also the client. In Rakusen v. Ellis, Munday and Clarke, Cozens-Hardy, M.R., at 835, spoke of the special jurisdiction over solicitors, Fletcher-Moulton, L.J., at 841, referred to "the power that we certainly possess of directing what the officers of the Court should and should not do" and Buckley, L.J., at 843, referred to the jurisdiction over solicitors as officers of the Court. Buckley, L.J. at 842, noted that at times an injunction was sought against both the new client and the solicitor while at other times the injunction was asked for only against the solicitor[19].

114. The Full Court of Queensland, in Mills v. Day Dawn Bloch Gold Mining Co. Ltd.[20], said that the jurisdiction rested on the power of the Court to keep control over all its officers and that in an appropriate case both the solicitor and the new client could be restrained. Further authority recognising the power of the court over its officers as a basis of the jurisdiction to restrain solicitors from acting against the former client will be found in Black v. Taylor[21]; Kooky Garments Pty. Ltd. v. Charlton[22]; Macquarie Bank Ltd. v. Myer[23]; Grimwade v. Meagher[24]; World Medical Manufacturing Corporation v. Phillips Ormonde & Fitzpatrick Lawyers[25].

117. According to Finn, Fiduciary Obligations, p.139:

"The courts will restrain a solicitor if he discharges himself for the purpose of acting for the opponent. But otherwise the courts will only restrain a solicitor from acting for the opponent or against a former client if he actually discloses the secrets of his former client of (sic) if in the circumstances of a particular case that `mischief is rightly anticipated'." (Footnotes omitted.)

The authorities cited for the first proposition include Cholmondeley v. Clinton. The passage treats Cholmondeley v. Clinton as not dependent upon the danger of the communication of confidential information.

122. In 1999 the House of Lords rejected the suggestion that a former client could prevent a solicitor from acting for another by invoking something other than the need to protect confidential information. In the leading speech Lord Millett said this:

"In Rakusen's case the Court of Appeal founded the jurisdiction on the right of the former client to the protection of his confidential information. This was challenged by counsel for Prince Jefri, who contended for 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. In the course of argument, however, he modified his position, accepting that there was no ground on which the court could properly intervene unless two conditions were satisfied: (i) that the solicitor was in possession of information which was confidential to the former client and (ii) that such information was or might be relevant to the matter on which he was instructed by the second client. This makes the possession of relevant confidential information the test of what is comprehended within the expression `the same or a connected matter'. On this footing the court's intervention is founded not on the avoidance of any perception of possible impropriety but on the protection of confidential information. My Lords, I would affirm this as the basis of the court's jurisdiction to intervene on behalf of a former client. It is otherwise where the court's intervention is sought by an existing client, for a fiduciary cannot act at the same time both for and against the same client, and his firm is in no better position. A man cannot without the consent of both clients act for one client while his partner is acting for another in the opposite interest. His disqualification has nothing to do with the confidentiality of client information. It is based on the inescapable conflict of interest[26] which is inherent in the situation. ... Where the court's intervention is sought by a former client, however, the position is entirely different. The court's jurisdiction cannot be based on any conflict of interest, real or perceived, for there is none. The fiduciary relationship which subsists between solicitor and client comes to an end with the termination of the retainer. Thereafter the solicitor has no obligation to defend and advance the interests of his former client. The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality of information imparted during its subsistence."[27]

126. What Lord Millett said about the inability of a solicitor to act at the same time both for and against the same person reflected the view expressed by Staughton, L.J. in Re a Firm of Solicitors[28].

129. In Bolkiah the House of Lords disposed of the question whether a basis could be found for restraining a solicitor from acting against a former client other than the protection of confidential information without discussing it at any length. Quite apart from decisions in the United States there is and was a considerable body of authority bearing on that question. I have already drawn attention to some of the many cases which accept that, where a solicitor is an officer of the court, the jurisdiction of the court to restrain the solicitor from acting may be founded not only on the general power which a court exercising equitable jurisdiction has to grant injunctions for the protection of a right but also on the control which a court may exercise over its own officers. Lord Eldon himself was one of the first to speak of this other jurisdiction, and he seems to have been the first to raise the procedural question whether it could be exercised in a cause, in the absence of objection from the solicitor to a defect in the procedure. It may be argued that the existence of the special jurisdiction over officers of the court is not inconsistent with the view that the only basis on which that jurisdiction will be exercised is the existence of a right to prevent the misuse of confidential information. On the other hand, it may be said that the nature and object of the jurisdiction exercised over officers of the court are such as to prevent its being so confined.

132. There is a good deal of authority for the view that a solicitor, as an officer of the court, may be prevented from acting against a former client even though a likelihood of danger of misuse of confidential information is not shown. I have already discussed what was said by Lord Eldon in Cholmondeley v. Clinton and what has been later said about that case. In 1837 Sir Lancelot Shadwell, V.C. spoke of "this general principle, namely, that all Courts may exercise an authority over their own officers as to the propriety of their behaviour"[29]. Decisions cited by the Vice-Chancellor included Cholmondeley v. Clinton, Beer v. Ward and Bricheno v. Thorp. The application was made to Shadwell, V.C. on motion in the suit and the injunction granted was not against the solicitor but against the new clients.[30] There was evidence that Mrs Clough herself had imparted confidential information to the solicitors, but it is not clear whether the Vice-Chancellor regarded that as essential to the grant of relief. For he said, at 267:

"The question to be considered is whether he ought to be permitted to act as the solicitor of the Plaintiffs in this suit, the object of which is to set aside that very transaction which was brought to maturity by himself, when he was acting as the solicitor of Mrs Clough."

136. Interesting decisions from New Zealand and Canada were not discussed by the House of Lords in Prince Bolkiah v. KPMG. Black v. Taylor[31] is a decision of the Court of Appeal of New Zealand. N.A. Taylor had sued the estate of his late uncle, J.B. Taylor, for breach of a contract or promise to leave property by will. The Court of Appeal upheld a declaration - a change from the usual injunction and the only example I have noticed - that a practitioner should not act further as counsel for the defendants. He had for decades acted as solicitor or counsel or both to members of the Taylor family, including the plaintiff's uncle and at times the plaintiff himself. In upholding the declaration the Court founded itself on the inherent jurisdiction of the court to control its own processes and so prevent 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. Shortly after that decision was given a judge of the High Court of New Zealand, Thomas, J., similarly rested his judgment on the principle of protecting the integrity of the judicial process.[32] In Black v. Taylor Richardson, J. referred to Canadian decisions[33] on whether an appearance of impropriety could justify restraining a practitioner from acting in litigation.

139. The two New Zealand decisions were considered by Mandie, J. in Grimwade v. Meagher[34]. His Honour adopted statements of principle in them and restrained counsel from acting for the plaintiffs in a proceeding in order, as he said at 455, "to ensure the due administration of justice and to protect the integrity of the judicial process and in order not only that justice be done but be manifestly and undoubtedly be seen to be done". Mandie, J. considered that a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice required that the counsel concerned be prevented from appearing in the action because of real risks of lack of objectivity and of conflict of interest and duty.

142. The need for justice to appear to be done and the likely impressions of a properly informed and reasonable observer where a lawyer changes sides have been mentioned time and again in the cases. Bryson, J. of the Supreme Court of New South Wales has said that "the spectacle or the appearance that a lawyer can readily change sides is very subversive of the appearance that justice is being done".[35]

145. "Duty of loyalty" is a phrase used in recent years by judges and others in discussing whether a solicitor who acts or has acted for one client may be prevented from acting for another.[36] The currency of the expression in this connection is undoubtedly the result, at least in part, of the writings, before his appointment to the Bench, of Professor Finn. I have not noticed any reference to a duty of loyalty in his work Fiduciary Obligations (1977), although Chapter 22, headed "Conflict of Duty and Duty", begins with the words "To ensure a loyalty which is undivided ...". Writing in 1988, Professor Finn said that the "fiduciary" standard enjoined one party to act in the interests of the other - to act selflessly and with undivided loyalty. Later in the same paper he described the fiduciary principle as insisting upon a fine loyalty in the service of the interests of another[37]. Chapters 21 and 22 of a fairly recent work on lawyers[38] are entitled "Duties of Loyalty", while Chapter 12 of a very recent book on lawyers[39] is headed "Conflict of Interest: Loyalty". Professor Finn considers at some length in a later paper[40] questions which arise when solicitors or other fiduciaries act either in "same-matter conflicts" (where the fiduciary acts in the same matter for different parties having adverse interests in it) and "former-client conflicts", where a solicitor or other fiduciary, having acted for a client in a particular matter, later acts against that client in the same or a related matter. Near the outset of the discussion of "same-matter conflicts"[41] this is said:

"These are in the very heartland of fiduciary law, though English law in contrast with some Commonwealth jurisdictions (particularly Canada and New Zealand) has been slow to appreciate the full significance of this. The agent or adviser acting for two parties with adverse interests in the same matter not only owes each party those common law duties of care, skill, and the like appropriate to the function assumed, he also owes each a duty of loyalty. We are only now beginning to appreciate how much the latter can overshadow the former in importance. Loyalty's effect is twofold. First, if the fiduciary is being remunerated by either or both of the parties, the `conflict of duty interest' theme in the fiduciary's obligation requires him to disclose to each client that he is being remunerated by the other. Secondly, much more importantly, until each client agrees to the contrary, or unless there is a legally acknowledged custom to the contrary, each client is entitled to, and is entitled to assume that he has, the undivided loyalty of the fiduciary he has engaged. The rule here is simple and inexorable: `Fully informed consent apart, an agent cannot lawfully place himself in a position in which he owes a duty to another which is inconsistent with his duty to his principal.'" (Footnotes omitted.)

This paper was given in 1991. In a paper delivered in 1987[42] the learned author frequently refers to a fiduciary's duty of loyalty. The 1987 paper, like so much of Professor Finn's work, has proved influential[43].

150. In Wan v. McDonald[44] Burchett, J., having referred to a solicitor's duty to safeguard confidential information of his client, continued:

"But there are at least two other aspects of the problem to which attention has more recently been drawn; a solicitor's duty of loyalty, which cannot be treated as extinguished by the mere termination of the period of his retainer, and the important consideration of public policy which gives a special quality to the relationship of solicitor and client that the law will not generally permit to be stained by the appearance of disloyalty. It is obvious that, at least in the application of these principles to particular circumstances, there is likely to be a great difference between cases such as Rakusen and D & J Constructions, on the one hand, and cases, on the other, where the one solicitor, having acted for both parties, seeks to act against one of his former clients, and in the interest of a preferred client, in litigation arising out of the very matter in which he himself acted for both. In my opinion, it could only be in a rare and very special case of this latter kind that a solicitor could properly be permitted to act against his former client, whether or not any real question of the use of confidential information could arise."

154. In his paper given in 1987,[45] some years before the decision of the House of Lords in Prince Bolkiah v. KPMG, Professor Finn made an interesting suggestion. I quote at some length from pp.15-16 of the paper:

"Beneficiary protection apart, another more subtle purpose seems also to be at work in the conduct regulation of at least some types of fiduciary. This warrants emphasis. In some spheres conduct regulation would appear to be becoming an end in itself and this because there can be a public interest in reassuring the community - not merely beneficiaries - that even the appearance of improper behaviour will not be tolerated. The emphasis here seems, in part at least, to be the maintenance of the public's acceptance of, and of the credibility of, important institutions in society which render `fiduciary services' to the public. We encounter often enough the observation that fiduciary duties are `more intense' in some relationships than in others. We likewise are familiar with the notion that the courts will exact from court officers standards more stringent than those imposed on others. Often the `intensity' observation merely signifies that the opportunity for impropriety is the greater with some types of fiduciary than with others and that supervision will therefor be the more vigilant. But in some instances, as also with court officers, the law is, I suggest, in fact committed to imposing standards of behaviour more severe than is usual with the ordinary run of fiduciary - and, I propose, for the public interest reason I mentioned earlier. I have laboured this point because it seems to me to be at the heart of the controversy over when lawyers in particular can act against former clients. I will later suggest that the `public interest' may be a factor which may dissuade courts from too ready an acceptance of `Chinese Wall' defences in legal and financial institutions and this because an apprehended community scepticism about the efficacy of such devices may lead to an erosion of public confidence in such institutions. But I would like for a moment to dwell on the lawyer acting against a former client. It is well known that lawyers, like all professionals, are subject to a legal and not merely an ethical duty to maintain the secrecy of information acquired fromm or about their clients when acting in their professional capacity. This duty knows limited exceptions, that alone of note for present purposes being that information so acquired cannot be used or disclosed without the client's consent. The duty, furthermore, is one which subsists after the termination of the professional-client relationship. It has traditionally been considered that it is this duty, primarily, which sets the limits to when a lawyer can act against a former client. The difficulty lies in determining how that duty should be applied in favour of clients and against lawyers." (Footnotes omitted.)

There is a footnote to the word "primarily" in the second last sentence of this passage:

"An aspect of the fiduciary's duty of loyalty would seem to have some part to play where a solicitor discharges himself from a retainer and then acts against his former client: see Cholmondeley v. Lord Clinton [1815] EngR 511; (1815) 19 Ves. 261; 34 E.R. 515."

160. I have little doubt that the learned author, in speaking in this footnote of the fiduciary's duty of loyalty, was not thinking in terms, or in terms only, of a continuing duty, after termination of the retainer, not to misuse confidential information.

163. In his 1987 paper Professor Finn is particularly concerned with what he calls the duty of loyalty, an expression which recurs throughout it. At p.13 it is the "duty of loyalty" which is treated either as giving rise to or as another way of stating "the conflict of duty and duty rule". This is enlarged on by the author at pp.24-25, where he speaks of "fiduciary duties of disinterest and of loyalty". The duty of disinterest is either equated with or treated as giving rise to the conflict of duty and interest rule. The duty of loyalty, or of "undivided loyalty", is said to be or to find its expression in a quite distinct fiduciary duty, quite distinct, that is, from the duty of disinterest[46]. The entitlement to the undivided loyalty of a fiduciary whom one has retained is said to find its expression in a duty not to place oneself in a position in which the fiduciary owes a duty to a client which is inconsistent with the duty owed to another client. It is, as I have said, with the fiduciary's duty of loyalty that the paper is mainly concerned. The conflict of duty and duty rule is discussed in relation to two situations, between which the distinction is first drawn at pp.23-24. The first is where the fiduciary acts for two unrelated beneficiaries in the same matter where the interests of the two are, or are potentially, adverse. This the author calls "same matter conflict". The second situation is where the fiduciary, in acting or having acted for one client in one matter, acquires confidential information which is relevant to the service the fiduciary is rendering to another beneficiary in a separate matter - "separate matter conflict". "Same matter conflicts" are discussed at pp.24-29. At p.28 Finn says:

"[T]he duty of loyalty is not one concerned as such with the use and abuse of information. Its concern is with beneficiary loyalty ...".[47]

Under the heading "Same Matter Conflicts" Finn discusses only cases of what, at p.36, he calls examples of "concurrent adverse representation". In other words, he does not deal with the problem of the fiduciary acting in succession for different clients in the same or a related matter. His only discussion of the problem of what might be called "successive adverse representation" is a tantalisingly brief mention in the sentence from p.16 of this paper which I cited a little earlier and its appended footnote. He there says that it has traditionally been considered that it is primarily the duty to maintain secrecy of information which sets the limits to when a lawyer can act against a former client, and explains the word "primarily" by the footnote already cited, which, in reliance upon Cholmondeley v. Lord Clinton, states that an aspect of the fiduciary's duty of loyalty would seem to have some part to play where a solicitor discharges himself from a retainer and then acts against his former client. This footnote may be compared with the passage I earlier cited from the same author's work on fiduciary obligations, where it is apparently accepted that Cholmondeley v. Lord Clinton should be treated as authority for the view that, quite apart from the matter of possible disclosure of confidential information, a solicitor will be restrained from acting in the same matter for his former client's opponent if he discharges himself for the purpose of so acting.

168. It should be noted that in his discussion of the duty of loyalty Finn is in general not concerned with what are nowadays called "perceptions": he founds himself on the entitlement in equity of a client to the undivided loyalty of the fiduciary who has been retained. There is nevertheless in addition the suggestion made at pp.15-16 of the 1987 paper that in some instances, as with court officers, the law is in fact committed to imposing standards of behaviour more severe than is usual with the ordinary run of fiduciary by reason of the public interest in the maintenance of confidence in important institutions in society which render "fiduciary services" to the public.[48] Finn devoted s.3.2 of the paper delivered in 1991 to "Former-client Conflicts". At pp.27-28, dealing with the Australian approach to whether a solicitor may act first for and then against the same person in the same or in a significantly related matter, he says:

"Issues of public interest and public policy which bear on the importance to be attributed to maintaining public confidence in the integrity of the particular type of first-client relationship in question, have a heavy impact on the protective stance to be taken. In the context of law firms, for example, the twin needs of creating a lawyer-client environment in which uninhibited communication can be fostered by assured information security, and of maintaining public confidence in the legal system itself, have been made paramount to the interest of `second clients' in being able to engage the lawyer of their choice. The general inference to be drawn from this - and it is one of importance to other professions and businesses - is that public policy is likely to have a variable impact on the treatment given this type of conflict on an industry by industry basis. What holds for a law firm might not hold (at least to the same extent or with the same severity) for accountants."

172. I come now to two judgments of J.D. Phillips, J., the first given as a member of the Full Court and the second sitting at first instance. From the first, Macquarie Bank Ltd. v. Myer[49], I take but a single sentence (at 359):

"Obviously the court will not readily countenance a solicitor who has acted for one client accepting a retainer from another to act against that former client in the same matter or in a related matter (although, as the cases demonstrate, there cannot be said to be any absolute rule)."

This I find extremely difficult to square with the notion that misuse of confidential information is the only basis on which "successive adverse representation" will be checked.

177. The second case is Holdsworth v. M.R. Anderson & Associates Pty. Ltd.[50], in which the facts need not be further recited. It is enough to say that Phillips, J. was doubtful whether it had been shown that the former clients had disclosed to their solicitors confidential information which merited protection, but found it unnecessary to decide the point. For Phillips, J. rejected the view that would, some four years later, find favour with the House of Lords. He referred to a number of the cases, from Davies v. Clough to Wan v. McDonald, and described the case before him as one of solicitors who, having once been engaged for a client to effect some transaction, were then retained by another to act against the former client in litigation involving that very same transaction. He continued, at 17-18:

"In such a situation, I am strongly disposed to the view that the solicitor ought not to act, and I do not think that that depends upon the existence or not of confidences imparted on the earlier occasion that now merit protection. It seems to me to depend rather upon the existence of the contract of retainer that was made in the first place, than upon the existence of confidences disclosed and meriting protection against misuse. Consider, for example, the case of a solicitor acting for both vendor and purchaser, which nowadays (at least in this State) may occur only after certain safeguards have been put in place, and I refer to Council of Law Institute of Victoria v. A Solicitor [1993] VicRp 26; [1993] 1 V.R. 361, especially at pp.366 to 368 and the reference there to the Solicitors' Professional Conduct and Practice Rules 1984. But suppose the transaction of sale and purchase goes off for want of payment on the due date, and an argument develops over the delivery of the purchase price to the solicitor. There may be nothing confidential about the facts by which alone that dispute will be resolved, but can it be supposed that the solicitor, having been retained by both vendor and purchaser to act, and having accepted that retainer, and having acted, can then act for one against the other in the resolution of that dispute? It is surely part of the contract of retainer that the solicitor will use his best endeavours in the interests of his client and he does not do that by placing his own particular knowledge of events in which he took part as the agent of both at the disposal of one to the exclusion of the other. It is on that basis that I think that (at least in the ordinary case) a court of equity would restrain the solicitor from acting for either vendor or purchaser in the dispute between them. Nor do I think that anything turns on whether that dispute first arose before or after the formal conclusion of the work which the solicitor had been engaged to transact on behalf of both."

Later his Honour cited passages from Wan v. McDonald referring to a solicitor's duty of loyalty and observing that "the issues of loyalty and propriety" loom more large where a solicitor who has acted for both parties continues to act for one of them after a conflict has arisen.

182. Finally, there is McVeigh v. Linen House Pty. Ltd.[51], a decision of the Court of Appeal given on applications day. The principles taken by Batt, J.A. from the authorities were not challenged by counsel resisting the application. Prince Bolkiah v. KPMG was not cited. Batt, J.A., with whose judgment Callaway, J.A. agreed, said this, at 398, citing a judgment of Burchett, J. from which I have already quoted:

"The authorities establish that a court will restrain a solicitor from acting for a litigant not only in order to prevent disclosure of confidences of a client or former client, but also to ensure that the solicitor's duty of loyalty to the former client is respected, notwithstanding termination of the retainer, and to uphold as a matter of public policy the special relationship of solicitor and client. Thus, in Wan v. McDonald [1992] FCA 4; (1992) 33 F.C.R. 491 at 512-13 Burchett, J. said: `The emphasis in the judgments was placed on the solicitor's duty to safeguard confidential information of his client. But there are at least two other aspects of the problem to which attention has more recently been drawn; a solicitor's duty of loyalty, which cannot be treated as extinguished by the mere termination of the period of his retainer, and the important consideration of public policy which gives a special quality to the relationship of solicitor and client that the law will not generally permit to be stained by the appearance of disloyalty. It is obvious that, at least in the application of these principles to particular circumstances, there is likely to be a great difference between cases such as Rakusen and D & J Constructions, on the one hand, and cases, on the other, where the one solicitor, having acted for both parties, seeks to act against one of his former clients, and in the interest of a preferred client, in litigation arising out of the very matter in which he himself acted for both. In my opinion, it could only be in a rare and very special case of this latter kind that a solicitor could properly be permitted to act against his former client, whether or not any real question of the use of confidential information could arise.'"

186. A little later, at 399, Batt, J.A. cited two passages I have already set out from the judgment of Phillips, J. in Holdsworth v. M.R. Anderson & Associates Pty. Ltd.:

"In such a situation I am strongly disposed to the view that the solicitor ought not to act, and I do not think that that depends upon the existence or not of confidences imparted on the earlier occasion that now merit protection. It seems to me to depend rather upon the existence of the contract of retainer that was made in the first place, than upon the existence of confidences disclosed and meriting protection against misuse. ... It is surely part of the contract of retainer that the solicitor will use his best endeavours in the interests of his client and he does not do that by placing his own particular knowledge of events in which he took part as the agent of both at the disposal of one to the exclusion of the other. It is on that basis that I think that (at least in the ordinary case) a Court of equity would restrain the solicitor from acting for either vendor or purchaser in the dispute between them. Nor do I think that anything turns on whether that dispute first arose before or after the formal conclusion of the work that the solicitor had been engaged to transact on behalf of both."

190. How, then, do matters stand? I think it must be accepted that Australian law has diverged from that of England and that the danger of misuse of confidential information is not the sole touchstone for intervention where a solicitor acts against a former client. That danger can and usually will warrant intervention, but it is not the only ground. There are two other possible bases for an interdict. In the first place, it may be said to be a breach of duty for a solicitor to take up the cudgels against a former client in the same or a closely related matter. What is the origin of the duty? What is its content, and, in particular, what is the significance, if any, of the fact - if it be the fact - that the solicitor, in Lord Eldon's words, "discharged himself" before he "went over to the other side"? It is of course difficult to consider the origin of a possible duty without at the same time considering its content.

193. Three possible sources of a relevant duty suggest themselves. The first is that there is an equitable obligation of "loyalty", which forbids not only the concurrent holding of two inconsistent engagements by different clients in the same matter[52] but also the holding of two successive inconsistent engagements. To speak of two successive inconsistent engagements might be thought to beg the question whether equity imposes a bar; in the view of the House of Lords there is in this sense no inconsistency. By "inconsistent" I mean only that the solicitor who formerly acted for one client in the same matter now acts in that matter for a client with an interest adverse to that of the former client. In their Lordships' view, the duty of loyalty largely perishes along with the retainer from which it sprang, the only survivor being that aspect of the duty which protects confidential information. Once the retainer has gone "the solicitor has no obligation to defend and advance the interests of his former client"[53]. But what can be drawn from this last proposition? Once the contract of retainer comes to an end the solicitor does, it is true, cease to have active duties to perform for the former client. But why should we not say that "loyalty" imposes an abiding negative obligation not to act against the former client in the same matter? The wider view, and the one which commends itself to me as fair and just, is that the equitable obligation of "loyalty" is not observed by a solicitor who acts against a former client in the same matter.

196. But if this result cannot be achieved as a matter of equitable obligation why should not the law impose, and the court enforce, an obligation arising otherwise than in equity? In the passage earlier cited from Holdsworth v. M.R. Anderson & Associates Pty. Ltd. Phillips, J. referred to the contract of retainer, and to what might be said to form part of that contract. A possible approach would be to say that it was an implied term of the contract of retainer between the solicitors and the company in the present case that the solicitors would not act against the company in the dispute in relation to which they had been retained by it.[54] But I need not pursue this, since in my view a negative equitable obligation arose, and it is to this obligation that I now return.

199. Professor Finn accepts that some fiduciary obligations have an effect enduring beyond the termination of the fiduciary relationship[55]. In the first of the cases cited by Finn, Laskin, J., delivering the judgment of the Supreme Court of Canada, said, at 607:

"An examination of the case law in this Court and in the Courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired."

The second case cited by Finn was one of competition after resignation by a person held to have been a fiduciary. With the decision of the Supreme Court of Canada may be compared that of Roskill, J. in Industrial Development Consultants Ltd. v. Cooley[56], another case of a director who disengaged himself from the company being held liable for breach of fiduciary duty, and that of the Full Court in Green & Anor v. Bestobell Industries Pty. Ltd.[57], yet another case of a fiduciary's being held accountable despite the termination of the fiduciary relationship.

204. The proposition that fiduciary duties can survive the termination of the fiduciary relationship is supported by decisions dealing with whether a trustee may avoid disqualification as a purchaser of trust property by retiring from his fiduciary office. Lord Eldon thought that a fiduciary could not do this "unless he shakes off the character altogether; putting himself altogether out of the trust; and not then without a little more than merely parting with the character"[58]. A trustee who retires after making arrangements for the impugned transaction cannot escape[59]. Jacobs, J. has given this explanation of equity's approach[60]:

"It is my view that the basis of the rule that a trustee cannot retire for the purpose of effecting a transaction between himself and the trust is twofold. First, in the ordinary case, the fact that he retires in order to effect that purpose means that the decision to effect that purpose has been taken during the period of his trusteeship when he was actually performing the duties of a trustee; in other words the decision to deal with the trust is his own. Secondly, the trustee who has been actively managing the trust has all the advantage of the information and knowledge which comes to him as trustee and which he should use in no way for his own benefit, but purely for the benefit of the beneficiaries."

The first of these two bases is independent of the second. At least in a case like the present, where the fiduciary terminates the relationship with a view to acting against the client in the same matter, may it not be said by analogy that, leaving aside altogether the use of any special "information and knowledge" that had come to the fiduciary as such, a fiduciary, who cannot retire in order to escape from the conflict of duty and interest rule, cannot quit his or her position in order to escape the conflict of duty and duty rule? I call to mind again what Lord Eldon said in Cholmondeley v. Clinton and Beer v. Ward.

209. Three other decisions bearing on the survival of the fiduciary duty of loyalty may be mentioned, two from the United States[61] and one from Canada. The first of these is a relatively early decision of the Court of Appeals for the District of Columbia, where this was said[62]:

"[P]laintiff's claim for attorneys' fees is void and unenforceable, since it is in conflict with the well-established rule of public policy that where an attorney has acted for a client he cannot thereafter assume a position hostile to the client concerning the same matter, or use against the client knowledge or information obtained from him while the relation existed." (My emphasis.)

The second is a decision of the United States District Court holding that the receipt of confidential information was not a prerequisite to disqualification[63]:

"[T]he basis for the rule against representing conflicting interests is broader than the basis for the attorney-client evidentiary privilege. The evidentiary privilege and the ethical duty not to disclose confidences both arise from the need to encourage clients to disclose all possibly pertinent information to their attorneys, and both protect only the confidential information disclosed. The duty not to represent conflicting interests, on the other hand, is an outgrowth of the attorney-client relationship itself, which is confidential, or fiduciary, in a broader sense. Not only do clients at times disclose confidential information to their attorneys; they also repose confidence in them. The privilege is bottomed only on the first of these attributes, the conflicting-interests rule, on both."

The Canadian case, a decision of the Ontario Court of Appeal, was one in which confidential information had undoubtedly been imparted. But the words used by the Court suggest that the fiduciary duty held to survive termination of the retainer was not confined to a duty not to misuse confidential information[64]:

"If she lied to him, it in no way relieved him of his fiduciary duty towards her, nor did the fiduciary duty of Mr Lockyer or of Mr Pinkofsky cease when the services had been terminated. ... It was fundamental to her rights that her solicitor respect her confidences and that he exhibit loyalty to her. A client has every right to be confident that the solicitor retained will not subsequently take an adversarial position against the client with respect to the same subject-matter that he was retained on. That fiduciary duty, as I have noted, is not terminated when the services rendered have been completed."

217. If I thought that the solicitors in this case were subject neither to a negative equitable nor to 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. The authorities supporting this approach need not be mentioned again. It may be that one should refer to this head, rather than that of misuse of confidential information, the advantage that McPherson + Kelly would have by reason of their knowledge of such things as the personalities and reactions of the participants and what changes may have taken place in the past as regards what Kirton in his diary note called "allegiance"[65]. I am not deterred by the suggestion that, once infringement of legal or equitable rights ceases to mark off what may be proscribed, solicitors and their would-be clients will be subject to a great and unfair uncertainty, being unable to say in advance what view the Court will take. 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. This includes the partisan approach of Kirton when he acted for the company and his undisclosed attempts to serve Moore's interests, the peremptory and unseemly way in which the solicitors changed sides, their denials that it was the company which had been their client and the uncandid affidavit of Kirton in which he tried to give the impression that the company had not been the client. It would, as they used to say, be pessimi exempli if McPherson + Kelly were not called to account.

220. I return to the equitable duty of loyalty. McPherson + Kelley were still acting for the company in the dispute at the time they began acting for Moore and Spincode in that dispute. But I should be sorry to think, and reluctant to hold, that whether a solicitor's fiduciary duty of loyalty stood in the way of acting against a former client

in the same matter depended on whether the solicitor had, in Lord Eldon's words, "discharged himself". If there is such a requirement, it is met in this case. But I would deny the existence of the requirement.

224. So far I have not said much about her Honour's reasons for decision. But that is only because Warren, J.'s reasoning seems to me, in its essentials, to accord with the approach which I would adopt of resting the injunction against this firm of solicitors 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. Her Honour's order should be upheld. Whichever foundation of the jurisdiction one is considering, there is no discretionary or other consideration which would lead to the conclusion that the relief sought should not be granted. I do not elaborate on this: I have certainly turned my mind to it in the light of such arguments as were advanced.

229. In this matter I have had the very considerable advantage of reading the judgment of Brooking, J.A. in draft form. In my opinion, essentially for the reasons he puts forward as necessary for his decision, I would dismiss the appeal. I would like to have been able to reach a conclusion also on the other aspects raised in his judgment, especially the principle of fiduciary "loyalty" and the precise obligation owed by solicitors to former clients. Those aspects do raise, however, issues only touched upon in argument and authorities and papers, especially those by Paul Finn, given when a professor and before his appointment to the Federal Court, which were not discussed in argument. If I had had the luxury of further time to consider them, I may have reached agreement with Brooking, J.A. on each of those aspects, but the case came on urgently and was given an expedited hearing, so that the litigation proper, involving potentially the winding up of the subject company on the ground of oppression, could proceed with reasonable expedition. In these circumstances, having a clear view as to the proper outcome of the appeal, it would not be right to delay giving judgment, however important the more general issues are.

232. 62 This was, as Brooking, J.A. has demonstrated, a most obvious case where information of a confidential kind on many matters pertaining to the company, its formation and the interests of other parties in that company must have been disclosed to the appellant's solicitors over the years and in particular over the last few months before the appellant and the other parties fell out. More importantly, the litigation itself commenced by the appellant raised, and still has the potentiality to raise, a large number of issues and involve the investigation of many facts connected with the company in ways which are obvious to a large degree but which may in the fullness of time be thought, by one party or the other, to be relevant in a way which cannot presently be predicted. This is inevitable in an oppression application and a claim to wind a company up on the just and equitable ground, each kind of proceeding involving almost invariably the widest possible enquiry into the history and affairs of the subject company. Howsoever one should characterise presently the information available to the appellant's solicitors as confidential, there can be no doubt that there is a real risk that some information of that kind will be capable of being used against the respondents in ways which cannot so far be identified. Whatever be the precise limits of a former solicitor's obligations, the risk here is such that there should never have been any question of the company's former firm acting for the appellant and the appellant has no basis for complaining that it has been restrained from using that former firm.

237. I have had the considerable benefit of reading the draft reasons for judgment of Brooking, J.A. and, essentially for the reasons there expressed, I agree that the appeal should be dismissed. His Honour's reasons make it abundantly clear that the solicitors should not continue to act for Spincode in the principal proceeding. As his Honour makes obvious, the information which they obtained when acting for the company and its members was confidential to them and the appellant has not established that there was no risk of its misuse in the context of the potentially wide ranging ambit of the principal proceeding in which, inter alia, oppression is alleged.

It is not necessary to decide for the purposes of this appeal whether there is an absolute obligation on solicitors not to act against their former clients in the same or substantially the same proceeding, although, if I may say so with respect, the learned judgment of Brooking, J.A. makes a compelling case for such a view.

[1] See paragraphs 37 and 38 of Kirton's affidavit. Of course this is by no means the only evidence on the point.

[2] Black v. Taylor [1993] 3 N.Z.L.R. 403 at 405 per Cooke, P.

[3] Prince Bolkiah v. KPMG [1998] UKHL 52; [1999] 2 A.C. 222.

[4] Farrow Mortgage Services Pty. Ltd. (In liq.) v. Mendall Properties Pty. Ltd. [1995] VicRp 1; [1995] 1 V.R. 1 per Hayne, J.

[5] Cholmondeley (Earl) v. Clinton (Lord) [1815] EngR 511; (1815) 19 Ves. Jun. 261; 34 E.R. 515.

[6] Beer v. Ward [1821] EngR 306; (1821) Jac. 77 at 82; [1821] EngR 306; 37 E.R. 779.

[7] Bricheno v. Thorp [1821] EngR 542; (1821) Jac. 300 at 301; [1821] EngR 542; 37 E.R. 864.

[9] [1833] EngR 139; (1833) 2 C. & M. 183; 149 E.R. 725.

[10] [1843] EngR 524; (1843) 2 Hare 587; 67 E.R. 242.

[11] [1848] EngR 450; (1848) 2 De G. & Sm. 258; 64 E.R. 116.

[12] (1877) 25 W.R. 603.

[13] (1882) 20 Ch. D. 733.

[14] (1846) 2 Ph. 52; 41 E.R. 861.

[15] [1912] 1 Ch. 831.

[16] Finn, Fiduciary Obligations, p.139, in a passage cited in Fruehauf Finance Corporation Pty. Ltd. v. Feez Ruthning [1991] 1 Qd.R. 558 at 570, treats Cholmondeley v. Clinton as not depending on confidential information and derives from it a rule that "the courts will restrain a solicitor if he discharges himself for the purpose of acting for the opponent". Finn's views on the "duty of loyalty" will be discussed later.

[17] (1837) 8 Sim. 262; 59 E.R. 105. The decision was affirmed by Lord Cottenham, L.C.

[19] In re Holmes; In re Electric Power Co. Ltd. (1877) 25 W.R. 603 is an example of an application made in the matter of the solicitor coupled with a motion made in the existing proceeding. It would be possible, but tedious and unprofitable, to deal with numerous cases one by one, noting those in which an application was made in the matter of the solicitor, those in which an application was made in the existing proceeding, those in which an action or other originating proceeding was launched claiming an injunction and those in which two procedures were employed. And one could catalogue the cases in which an injunction was sought against the client, those in which an injunction was asked for against the solicitor and those in which both were sought to be enjoined. But this would be a barren exercise. No modern court would be constrained in its grant of a remedy by the form of the proceeding in a matter of this kind.

[21] [1993] 3 N.Z.L.R. 403.

[22] [1994] 1 N.Z.L.R. 587.

[23] [1994] VicRp 22; [1994] 1 V.R. 350 per Marks, J. at 351-2.

[24] [1995] VicRp 28; [1995] 1 V.R. 446.

[25] [2000] VSC 196 at [88].

[26] This plainly means conflict between the interests of the two clients. But in view of the fact that "conflict of interest" is ordinarily used to describe a clash between the interest of the fiduciary and the duty owed to the client, it seems preferable, with respect, to speak in the present connection, as Professor Finn and a number of other learned authors do, of conflict of duty with duty. Compare the reference to competing duties in Pilmer v. Duke Group Ltd. (In Liq.) [2001] HCA 31; (2001) 75 A.L.J.R. 1067 at [77]- [78].

[27] Prince Bolkiah v. KPMG [1998] UKHL 52; [1999] 2 A.C. 222 at 234-5.

[28] [1992] Q.B. 959 at 972.

[29] Davies v. Clough (1837) 8 Sim. 262; 59 E.R. 105. (My emphasis.)

[30] This is an early example of successful invocation of the special jurisdiction over solicitors on an application made in the cause itself.

[31] [1993] 3 N.Z.L.R. 403.

[32] Kooky Garments Ltd. v. Charlton [1994] 1 N.Z.L.R. 587.

[33] In particular, Everingham v. Ontario (1992) 88 D.L.R. (4th) 755.

[34] [1995] VicRp 28; [1995] 1 V.R. 446.

[35] D & J Constructions Pty. Ltd. v. Head (1987) 9 N.S.W.L.R. 118 at 123. See too, for example, Fruehauf Finance Corporation Pty. Ltd. v. Feez Ruthning [1991] 1 Qd.R. 558 at 566; Wan v. McDonald [1992] FCA 4; (1991) 33 F.C.R. 491 at 513-4; Carindale Country Club Estate Pty. Ltd. v. Astill [1993] FCA 218; (1993) 115 A.L.R. 112; McVeigh v. Linen House [1999] VSCA 138; [1999] 3 V.R. 394 at 398; Westend Entertainment Centre Pty. Ltd. v. Equity Trustees Ltd. [1999] VSC 514 at [27]; World Medical Manufacturing Corporation v. Phillips Ormonde & Fitzpatrick Lawyers [2000] VSC 196 at [87] and [88].

[36] References to a solicitor's duty of loyalty will be found, for example, in Farrington v. Rowe McBride & Partners [1985] 1 N.Z.L.R. 83 at 90 ("A solicitor's loyalty to his client must be undivided"), Wan v. McDonald [1992] FCA 4; (1991) 33 F.C.R. 491 at 513 per Burchett, J. (cited, for instance, by Drummond, J. in Carindale Country Club Estate Pty. Ltd. v. Astill (1993) 115 A.L.R. at 117 and by J.D. Phillips, J. in Holdsworth v. M.R. Anderson & Associates Pty. Ltd., unreported, 26 August 1994, at p.23), McVeigh v. Linen House Pty. Ltd. [1999] VSCA 138; [1999] 3 V.R. 394 at 398 per Batt, J.A. and Westend Entertainment Centre Pty. Ltd. v. Equity Trustees Ltd. [1999] VSC 514 at [27] per Mandie, J. Some years ago now "the trustee's duty of loyalty" was made the subject of an article by Professor McLean in (1968-69) 7 Alberta L.R. 218. But the notion can be found even earlier. In 1928 Cardozo, C.J. spoke of the rule of undivided loyalty affecting those bound by fiduciary ties: Meinhard v. Salmon 249 NY 458 at 464; 164 NE 545. And in 1939, in the first edition of his Law of Trusts, section 170, Professor Scott described the duty of loyalty as the most fundamental duty of a fiduciary. So does Bogert, Law of Trusts and Trustees, 2nd ed. revised, pp.217 and 250. Parkinson, Principles of Equity, pp.327 and 353 speaks of the solicitor's duty of loyalty. Ford, Principles of the Law of Trusts, para. 9010, describes undivided loyalty as the fundamental duty of all fiduciaries, and it seems to me that Finn would agree with that characterisation. In Bristol and West Building Society v. Mothew [1998] Ch.1 at 18 Millett, L.J., as his Lordship then was, described the obligation of loyalty as the distinguishing obligation of a fiduciary. Kirby, J. has accepted Finn's description of "a duty of loyalty": Pilmer v. Duke Group Ltd. (In Liq.) [2001] HCA 31; (2001) 75 A.L.J.R. 1067 at [136] (his Honour dissented as to the proper outcome of the litigation).

[37] "The Fiduciary Principle", in Equity, Fiduciaries and Trusts, ed. Youdan, p.1 at pp.4 and 27.

[40] "Fiduciary Law and the Modern Commercial World", Commercial Aspects of Trusts and Fiduciary Obligations, ed. McKendrick (1992).

[42] "Conflicts of Interest - The Businessman and the Professional", Seminar on Professional Responsibility, University of Auckland, 28-29 May 1987.

[43] It was referred to by Burchett, J. in Wan v. McDonald [1992] FCA 4; (1991) 33 F.C.R. 491 at 512-3, by Gummow, J. in National Mutual Holdings Pty. Ltd. v. Sentry Corporation (1989) 22 F.C.R. 209 at 229-30 and by Lee, J. in Fruehauf Finance Corporation Pty. Ltd. v. Feez Ruthning [1991 1 Qd.R. 558 at 564.

[44] [1992] FCA 4; (1991) 33 F.C.R. 491 at 513.

[45] Seminar on Professional Responsibility, University of Auckland, 28-29 May 1987.

[46] The drawing of this distinction may be compared with what the same author said in his paper on "The Fiduciary Principle" earlier mentioned, with its references to acting selflessly and with undivided loyalty and to a fine loyalty in the service of the interests of another. As I have earlier said, I doubt whether Professor Finn would quarrel with the statements I have cited that the duty of loyalty is the most fundamental duty of a fiduciary. In those statements the duty of loyalty is a very wide conception. In this wide sense it underlies or finds in part its embodiment in "the duty of disinterest" - the conflict of duty and interest rule. At times Professor Finn, in concentrating attention on the conflict of duty and duty rule, uses "loyalty" in a narrower sense than, for example, Cardozo, Scott and Ford, and treats it simply as that which is embodied in the conflict of duty and duty rule.

[47] Like Finn, Ford, Principles of the Law of Trusts, para. 9010, and Parkinson, Principles of Equity, pp.353-6, deal with the problem of solicitors acting for two clients concurrently or successively by deriving from a solicitor's duty of loyalty an obligation to avoid a conflict between duty and duty. The phrase "conflict of duty and duty" has now attained a considerable currency.

[48] Compare Finn's suggestion in his 1991 paper (p.23, note 102) that the law has on occasion used the "officer of the court" notion to enhance lawyer-client obligations.

[49] [1994] VicRp 22; [1994] 1 V.R. 350.

[51] [1999] VSCA 138; [1999] 3 V.R. 394.

[52] Throughout I comprehend in this a closely related matter.

[53] [1998] UKHL 52; [1999] 2 A.C. 222 at 235.

[54] I have in mind, not a term attached by the law as an incident of every contract of retainer between a solicitor and a client, but a term implied in fact, answering the requirements of BP Refinery (Westernport) Pty Ltd v. Shire of Hastings (1977) 180 C.L.R. 266 at 282-3.,

[55] "The Fiduciary Principle", Equity, Fiduciaries and Trusts, ed. Youdan, p.1 at p.2, note 14, citing Canadian Aero Services v. O'Malley, [1974] S.C.R. 592; Hudson's Bay Co. v. McClocklin, [1986] 5 W.W.R. 29.

[56] [1972] 1 W.L.R. 443.

[57] [1982] W.A.R. 1.

[58] Ex parte James [1803] EngR 536; (1803) 8 Ves. Jun. 337 at 348; [1803] EngR 536; 32 E.R. 385.

[59] Wright v. Morgan [1926] UKPC 2; [1926] A.C. 788; Holder v. Holder [1968] Ch. 353 at 398.

[60] Gould v. O'Carroll (1964) N.S.W.R. 803 at 805.

[61] Where there is a body of authority dealing with successive representation. See, for example, "Conflicts of Interest in the Legal Profession", (1981) 94 Harvard L.R. 1244, especially at 1315-34.

[62] Gesellschaft fur drahtlose Telegraphie M.B.H. v. Brown 78 F. 2d 410 at 412 (1935).

[63] E.F. Hutton & Co. Inc. v. Brown 305 F. Supp. 371 at 394 (1969).

[64] Re Regina and Speid (1983) 43 O.R. (2d) 596 at 600.

[65] This has been considered more than once in the cases. See, in particular, Black v. Taylor [1993] 3 N.Z.L.R. 403 at 406 per Cooke, P. and at 407-8 and 412 per Richardson, J.