Mark Smith is the solicitor for Corey Tuhaka, the plaintiff in one of the proceedings in this matter. In times past, Mr Smith also acted for Commercial & Domestic Restorations Pty Limited and Shane Wright, the plaintiffs in the other proceedings against Mr Tuhaka. Mr Wright is the defendant in Mr Tuhaka's proceedings. Mr Wright and Commercial & Domestic have applied for orders to preclude Mr Smith from continuing to act for Mr Tuhaka.
[2]
BACKGROUND
Mr Tuhaka and Mr Wright were joint shareholders in Commercial & Domestic. Mr Smith acted for Commercial & Domestic in relation to the departure of a former employee and shareholder, and also acted for it, Mr Tuhaka and Mr Wright in relation to a coronial inquiry concerning a fire. In relation to the coronial inquiry, Mr Wright denied any involvement in the fire and no adverse findings were made against Mr Wright, Mr Tuhaka, or Commercial & Domestic.
At the hearing of the application, no point was pressed about Mr Smith having acted for Mr Wright. Rather, it was because Mr Smith had acted for Commercial & Domestic that was submitted to be the reason why Mr Smith should not be permitted to act for Mr Tuhaka, given that Commercial & Domestic had a claim against Mr Tuhaka.
The proceedings concern disputes between Mr Tuhaka and Mr Wright arising out of the departure of Mr Tuhaka from involvement in Commercial & Domestic and the sale of his shares in it to Mr Wright. Mr Tuhaka says that Mr Wright has not paid for his shares. Mr Wright says he is up to date with progress payments for the shares.
Wright v Tuhaka; Tuhaka v Wright [2016] NSWDC 444 | Case summary | Zoe
Mr Wright also relies upon two other claims. Mr Wright claims that the contract for the sale of Mr Tuhaka's shares to Mr Wright was unjust under the Contracts Review Act 1980 and was a product of misleading representations by Mr Tuhaka.
Secondly, Commercial & Domestic has met certain lawnmower and motor vehicle expenses of Mr Tuhaka, both before and after the sale of Mr Tuhaka's shares, which Mr Wright says should not have been met by the company and must be repaid by Mr Tuhaka.
[3]
THE LAW
Mr Wright asserted that this Court was empowered to make orders injuncting Mr Smith from continuing to act, not pursuant to any inherent power but pursuant to s 46 of the District Court Act 1973. Mr Smith did not contest that power and I proceed on the basis that it is a power available to be exercised.
The basis for a court making an order precluding a solicitor acting against a former client is not because of any equitable or contractual duty of loyalty, but to protect confidential information of the former client. [1]
This jurisdiction is "exceptional", to be exercised with "caution" and "[d]ue weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause". [2]
In order to establish a proper case for the exercise of this power, the applicant needs to establish:
"(i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own." [3]
[4]
ANALYSIS
There can be no doubt that the interest of Mr Tuhaka is adverse to the interest of Mr Smith and Commercial & Domestic as they are opposing parties in proceedings. However, the real issue is whether Mr Smith is in possession of information confidential to Commercial & Domestic which is relevant to the present matter. [4]
I was referred to the New South Wales Professional Conduct and Practice Rules of the Law Society of New South Wales, which at r 10.2 states:
"10.2 A solicitor or law practice who or which is in possession of confidential information of a former client where that information might reasonably be concluded to be material to the matter of another client and detrimental to the interests of the former client if disclosed, must not act for the current client in that matter UNLESS:
10.2.1 the former client has given informed written consent to the solicitor or law practice so acting; or
10.2.2 an effective information barrier has been established."
Neither party suggests the provisos in r 10.2.1 and 10.2.2 have application in the present case. Indeed the rule ceased operation on 30 June 2015, to be replaced from 1 July 2015 by the Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 ("the Uniform Conduct Rules"). In any event, the rule emphasises the law to which I have referred, namely, that the solicitor is to be restrained from acting for a former client if the solicitor is in possession of confidential information of the former client and disclosure of that information would be detrimental to the interests of the former client. [5]
Mr Smith gave evidence on the application. He denied receiving any confidential information from Mr Wright and denied that he had received any confidential information regarding Commercial & Domestic after the time of the share sale agreement. He was not challenged on this evidence, nor was he asked about confidential information he possessed prior to the time of the share sale agreement.
Regarding the share sale agreement, Mr Smith orally, and Mr Wright in his affidavit, [6] gave evidence indicating that Mr Smith was acting for Mr Tuhaka. However, there was uncontested evidence that Mr Smith acted for Commercial & Domestic in respect of the agreement (the Shareholders Agreement) by which Mr Wright became a shareholder. [7] Accordingly, there is no real dispute that Mr Smith acted in times past for Commercial & Domestic. That alone is not sufficient to justify the injunction.
Mr Wright was unable to identify with precision any possible information of Commercial & Domestic that Mr Smith possessed which was confidential, possibly relevant to the present proceedings, and adverse to the interests of Commercial & Domestic if disclosed.
The claim by Commercial & Domestic concerns whether Mr Tuhaka was entitled to certain payments from Commercial & Domestic. Those entitlements would likely arise out of the Shareholders Agreement (in respect of expenses prior to the sale of his shares) or the share sale agreement.
As to the second agreement, Mr Smith did not act for Commercial & Domestic. As to the first, although he acted for Commercial & Domestic that is not enough. I was not satisfied that he possessed information that was both confidential and could impact on the proceedings. There was no suggestion that he could give evidence of matters that would impact on the meaning of the written contract: the subjective intention of one party is irrelevant to its construction.
No specific evidence was suggested in submissions and no questions about specific confidential information were put to Mr Smith in cross‑examination. Even if Mr Tuhaka, as the representative of Commercial & Domestic in times past, had conveyed to Mr Smith confidential information, it would have been known to Mr Tuhaka and thus not confidential to Commercial & Domestic as against him.
While it may be enough to establish a real risk of disclosure of relevant confidential information, there is no evidence before me to establish that Mr Smith possessed confidential information, let alone confidential information relevant to these proceedings that might be disclosed.
If Mr Smith possessed information relevant to the cross‑claim by Commercial & Domestic and sought to give evidence about it, then Commercial & Domestic may have a different basis to seek to have Mr Smith excluded, namely in accordance with the Uniform Conduct Rules pertaining to whether a solicitor should act in a matter in which he will be a material witness. [8] However, that is not the basis of this application. Mr Smith has given evidence that he will not be an advocate, which excludes the application of r 27.1 of the Uniform Conduct Rules. And in respect of r 27.2, there is no indication that Mr Smith will be a relevant witness in the proceedings. Nor am I satisfied that his continuing to act could be prejudicial to the administration of justice.
For these reasons, I dismiss the application with costs.
[5]
ORDERS
Accordingly, the orders of the Court are:
1. Dismiss the application with costs.
2. List for directions on Thursday, 7 April 2016 at 10am before the Judicial Registrar.
[6]
Endnotes
Kallinicos v Hunt (2005) 64 NSWLR 561 at [76]; Sanna v Wyse and Young International Pty Limited & Others (No.1) [2015] NSWSC 580 at [15]; Everett v Neale [2012] NSWDC 73 at [118].
Kallinicos at [76].
Prince Jefri Bolkiah v KPMG (a firm) [1999] 1 All ER 517 at 527; [1999] 2 AC 222, 237G.
See e.g. Maxwell-Smith v S & E Hall Pty Ltd [2014] NSWCA 146 at [1], [2], and [24]-[27].
See also Watson v Watson (Santow J, 25 May 1998, New South Wales Supreme Court, unreported) at p 6 of 9.
10/2/16 at [17].
See affidavit of Shane Wright, 10/2/16 at [6]-[7].
See r 27 of the Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015.
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Decision last updated: 01 April 2019