FEDERAL COURT OF AUSTRALIA Waiviata Pty Ltd v New Millenium Publications Pty Ltd [2002] FCA 98 LEGAL PRACTITIONERS ‑ Solicitors ‑ Former client seeking to restrain solicitors acting for opposing party in litigation ‑ No claim that solicitors misusing confidential information ‑ Whether breach of duty ‑ Extent of solicitors' obligation to former client ‑ Source of duty Carindale Country Club Estate Pty Ltd v Astill (1993) 115 ALR 112 cited Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 cited Spincode Pty Ltd v Look Software Pty Ltd [2001] VSCA 248 considered and distinguished WAIVIATA PTY LIMITED v NEW MILLENIUM PUBLICATIONS PTY LIMITED, DANIEL TOBIAS NISSEN, KAY THORNTON‑COHEN and NATHAN NISSEN V 1177 OF 2001 SUNDBERG J 15 FEBRUARY 2002 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 1177 OF 2001 BETWEEN: WAIVIATA PTY LIMITED (ACN 005 577 873) APPLICANT AND: NEW MILLENIUM PUBLICATIONS PTY LIMITED (ACN 007 016 202) FIRST RESPONDENT DANIEL TOBIAS NISSEN SECOND RESPONDENT KAY THORNTON-COHEN THIRD RESPONDENT NATHAN NISSEN FOURTH RESPONDENT JUDGE: SUNDBERG J DATE OF ORDER: 15 FEBRUARY 2002 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The motion notice of which was filed on 21 December 2001 be dismissed. 2. The applicant pay the respondents' costs of the motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 1177 OF 2001 BETWEEN: WAIVIATA PTY LIMITED (ACN 005 577 873) APPLICANT AND: NEW MILLENIUM PUBLICATIONS PTY LIMITED (ACN 007 016 202) FIRST RESPONDENT DANIEL TOBIAS NISSEN SECOND RESPONDENT KAY THORNTON-COHEN THIRD RESPONDENT NATHAN NISSEN FOURTH RESPONDENT JUDGE: SUNDBERG J DATE: 15 FEBRUARY 2002 PLACE: MELBOURNE REASONS FOR JUDGMENT THE PROCEEDING 1 The applicant has sued the respondents claiming relief in relation to · contravention of consumer protection provisions of the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1999 (Vict) · passing off · defamation · inducing breach of contract · breach of duty of trust and confidence. In its statement of claim the applicant alleges · that for many years it has been engaged in the business of selling advertising space to parties desirous of promoting their businesses or products in a series of tourist books published under the title "Welcome To …" ("the Series"), and publishing and distributing, free of charge, copies of books belonging to the Series to hoteliers and others providing 5 star accommodation to members of the public in Australia ("the market") · that the second, third and fourth respondents are former employees of the applicant · that the applicant has acquired a substantial reputation in relation to the Series within the market · that the respondents have represented to and within the market that the applicant is in liquidation, that the Series has gone out of publication, that the first respondent is the successor of the applicant, that a tourist information booklet published by the first respondent under the title "Destinations" is the successor to the Series, and that the first respondent is supplying hoteliers with copies of "Destinations" when in fact a number of such hoteliers are not distributing copies of "Destinations". This is the conduct that is alleged to be misleading and deceptive, to constitute passing off and to be defamatory. It is then alleged that the respondents, being aware of existing contracts between the applicant and advertisers and hoteliers, interfered with the contracts intending to cause a breach thereof or prevent their performance by the advertisers or hoteliers. Further, as former employees possessed of the applicant's confidential information, the respondents are alleged to have acted in breach of their duty of trust and confidence by disclosing it to the first respondent. The information disclosed includes information relating to the first respondent's client base, advertising rates, and the names and addresses of contacts within the market with whom the applicant has contracts. 2 On 23 November 2001 Merkel J granted the applicant an interlocutory injunction restraining the respondents from engaging in the conduct complained of. THE MOTION 3 The applicant has applied for an order that the respondent's solicitors, Norton Gledhill, be restrained from acting for them and from disclosing any confidential information acquired during the course of acting for the applicant or any associated company or individual. An affidavit sworn by a director of the applicant, Nicholas Dower, in support of the motion discloses that · Minter Ellison were the solicitors for the Waivcom Group of companies ("the Group"), of which the applicant is a member, during 1999 · Anthony Seyfort, a solicitor at Minter Ellison, undertook much of the work for the Group · The matters in which Mr Seyfort acted for the Group included the preparation of a deed of employment between the holding company and the fourth respondent, the preparation of employment agreements between a member of the Group and the second, third and fourth respondents, and the provision of advice in relation to a company which, though not a member of the Group, was 50 per cent owned by the holding company · Mr Dower had contact with Mr Seyfort up until March 2001 on at least a weekly basis during which the latter provided advice on a wide range of issues · In May 2000 Mr Dower sold his publishing company to the holding company and joined the latter's board of directors · Mr Seyfort left Minter Ellison in mid‑2000 and became a partner at Norton Gledhill who then became solicitors to the Group · Mr Seyfort acted for the Group in negotiations that resulted in the holding company obtaining its current lease over premises in St Kilda · In May 2001, through a company structure, Mr Dower purchased the applicant from administrators of the Group · In November 2001 when Mr Dower discovered that Norton Gledhill were acting for the respondents, he spoke to Mr Seyfort and asked that Norton Gledhill no longer act for the respondents on the ground of a conflict of interest · Norton Gledhill refused to cease acting for the respondents. 4 Steven Metter, the applicant's financial controller, deposed that Mr Seyfort advised the Group on all corporate governance issues including · the issuing of shares and the granting of options in the holding company · ASX compliance requirements · assistance with the convening and conduct of directors' and shareholders' meetings and the preparation of agendas and minutes · advice as to the construction and interpretation of agreements relating to the sale of Mr Dower's company to the holding company · taxation planning · employer‑employee relations · foreign exchange dealings. Mr Metter also sought advice from Andrew Green, a solicitor at Norton Gledhill, about various matters. 5 The material relied on by the applicant was in a number of respects controverted by Norton Gledhill. But in the view I take of the matter I need not record these differences. THE LAW 6 In Carindale Country Club Estate Pty Ltd v Astill (1993) 115 ALR 112 at 118 Drummond J said: "In my opinion, a solicitor is liable to be restrained from acting for a new client against a former client if a reasonable observer, aware of the relevant facts, would think that there was a real, as opposed to a theoretical possibility that confidential information given to the solicitor by the former client might be used by the solicitor to advance the interests of a new client to the detriment of the old client." His Honour went on to say that before information will be recognised as confidential, it must be identified with precision and not merely in global terms (at 120). 7 In Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 the House of Lords adopted a similar approach. Lord Millett, with whom the other Law Lords agreed, having referred to the situation where relief is sought by an existing client who can point to a subsisting fiduciary relationship with his solicitor and need not rely on the imparting of confidential information, said (at 235) "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. Accordingly, it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client 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." 8 A more expansive view of the basis of the Court's jurisdiction has been taken in other cases. A recent elaborate discussion is that of Brooking JA in Spincode Pty Ltd v Look Software Pty Ltd [2001] VSCA 248. In par 52 of his reasons his Honour said: "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." His Honour went on to discuss the Court's jurisdiction over solicitors as officers of the court, which I understand to be the second basis for an interdict. He summarised the position by saying (par 60) that he rested the grant of an injunction against the solicitors in that case "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." Ormiston JA based his decision on misuse of confidential information, reserving his position as to the other bases (par 61). Chernov JA took the same view, though he said that Brooking JA had made a compelling case as to the other bases (par 63). The motion was argued on the basis of the approach in Spincode, though I think it would be correct to say that the respondents reserved their position as to its correctness. CONCLUSION 9 Counsel for the applicant conceded that it was essential to his case that the law was as stated by Brooking JA in Spincode. He could not point to confidential information that is or may be relevant to the instant proceeding. Although counsel made a passing reference to the loyalty basis for intervention, it was Brooking JA's third basis upon which he fastened. Before dealing with this, I should say that counsel's approach is understandable. There is no satisfactory basis on which it could be said that the present proceeding is the same or closely related to matters in which Mr Seyfort or Norton Gledhill had earlier been engaged. Nor do I think this is a case in which Norton Gledhill should be restrained from acting on the basis applicable to their status as officers of the Court. The present case could not be more different from Spincode. There, in discussing the officers of the Court basis of intervention, Brooking JA said (at 58): "what has been done by [the former solicitors] ‑ 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. … 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." 10 No such set of circumstances exists here. In Spincode, solicitors who had acted for Look Software since its incorporation (including recently in disputes with Spincode), wrote to Look Software saying they acted for Spincode, made a series of allegations and complaints, raised the possibility that Look Software would be wound up, and concluded with an implied threat of legal action if no settlement was arrived at. When Look Software expressed surprise at this, the solicitors contended they had never acted for the company. This, said Brooking JA, was "remarkable and reprehensible". Spincode was a very clear case, where the injunction granted at first instance was sustained on appeal, at least by Brooking JA, on three independent grounds: misuse of confidential information, breach of the duty of loyalty and in reliance on the Court's control over its officers. In Spincode, the foundation for relief based on the Court's control over its officers consisted of the threatened misuse of confidential information and breach of the solicitors' duty of loyalty. What is striking about the present case is that no misuse of confidential information is asserted, and no serious case is propounded of a breach of the solicitors' duty of loyalty. Rather reliance is placed on the Court's control over its officers. It may be that an unusual case could arise when there is no threatened misuse of confidential information and no breach of the solicitor's duty of loyalty, yet it is appropriate to grant relief, but this is not such a case. The motion must be dismissed. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg. Associate: Dated: 15 February 2002 Counsel for the Applicant: S Marantelli Solicitors for the Applicant: Hall & Wilcox Counsel for the Respondent: R Macaw QC and J Davis Solicitors for the Respondent: Norton Gledhill Date of Hearing: 8 February 2002 Date of Judgment: 15 February 2002