Industrial Relations Commission of New South Wales in Court Session CITATION: William McCausland v Surfing International Holdings Pty Ltd & ors [2006] NSWIRComm 261 APPLICANT William McCausland FIRST RESPONDENT Surfing Hardware International Holdings Pty Ltd (ACN 103 227 167) SECOND RESPONDENT SHI Holdings Pty Ltd (ACN 103 227 167) PARTIES: THIRD RESPONDENT Surf Hardware International Pty Ltd (ACN 085 260 920) FOURTH RESPONDENT Timothy Bosher FIFTH RESPONDENT Timothy Ford FILE NUMBER(S): 5174 of 2004 CORAM: Marks J CATCHWORDS: Conflict of Interest: Respondents changed legal representatives during course of litigation - retained firm that applicant had previously discussed this matter with - different solicitor retained by respondent than applicant had briefed - applicant had always objected to the respondents retention of new firm. Law firm erected information barriers and quarantined solicitors notes. Held: Each case involving allegations of conflict of interest to be determined by reference to its own circumstances - necessary to consider tangible matters concerning the communication of confidential information and also intangible matters which attach to discussions between solicitors and persons who seek their advice with respect to the litigation process and the prospects of sucess in proceedings - applicants' motions granted. LEGISLATION CITED: Industrial Relations Act 1996 Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd [2005] NSWSC 550 CASES CITED: Grant v Downs [1976] 135 CLR 674 Kallinicos v Hunt [2005] NSWSC 1181 HEARING DATES: 14/07/06 EXTEMPORE JUDGMENT DATE: 07/14/2006 APPLICANT Mr P Newall of counsel SOLICITOR: Mr G Dunstan Dunstan Legal Solicitors LEGAL REPRESENTATIVES: RESPONDENT Mr P Kite SC SOLICITOR: Mr G Robertson Harmers Workplace Lawyers JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: Marks J Friday, 14th July 2006 Matter No IRC 5174 of 2004 William McCausland v Surfing International Holdings Pty Limited & Ors Application under s 106 of the Industrial Relations Act 1996 Interlocutory Judgment on Conflict of Interest JUDGMENT (Ex Tempore) [2006] NSWIRComm 261 1 These are proceedings instituted by William McCausland as applicant against Surfing Hardware International Holdings Pty Limited, SHI Holdings Pty Limited, Surfing Hardware International Pty Limited, Timothy Bosher and Timothy Ford as respondents brought under s 106 of the Industrial Relations Act 1996. 2 The proceedings were originally commenced by summons filed on 1 September 2005. At all material times Dunstan Legal Solicitors have acted for the applicant in the proceedings and until about May 2006 Allens Arthur Robinson have acted for the respondents. 3 A notice of change of solicitor was filed by Harmers Solicitors on 23 May 2006 indicating that that firm now acted for the respondents. 4 The applicant has filed a Notice of Motion on 30 June 2006 seeking to restrain Harmers from continuing to act in the proceedings. The basis is that of a conflict of interest. 5 The evidence in the proceedings is that on 4 May 2006 Dunstan Legal wrote to Harmers asserting that Mr McClausand had consulted a Mr Stewart, a partner in the law firm Harmers, concerning matters which were the subject of s 106 proceedings and expressed concern that Harmers had a conflict of interest. 6 There was subsequently correspondence between Harmers and Dunstan Legal about this matter, the culmination of which was a denial on the part of Harmers that any relevant conflict of interest arose that would preclude them from continuing to act in the proceedings on behalf of the respondents. I should add that Harmers have, since commencing to act for the respondents, filed a Notice of Motion seeking to have the proceedings dismissed because the remuneration level provided for in s 108A has been exceeded. 7 Evidence given for the purpose only of these interlocutory proceedings indicates that Mr McClausand met with Mr Stewart and an employed solicitor, a Mr Richard Lewin, on 27 February 2005. 8 The subject matter of that meeting is deposed to by Mr Dunstan, solicitor, on the basis of information and belief furnished to him by Mr McClausand. No explanation has been given as to why the evidence before the Court has been adduced in this way, and I note the concerns expressed by Senior Counsel appearing for the respondents with respect to the presentation of the evidence in this way. In any event I proceed on the basis that because of certain corroborative evidence to which I shall shortly refer I accept that there was a general discussion between Mr McCausland and Messrs Stewart and Lewin concerning the circumstances which are relevant to s 106 proceedings which were ultimately commenced. 9 It was asserted by Mr Dunstan, on information and belief, that the discussions covered matters such as remuneration and other matters pertaining to the litigation process and what would be involved in connection with the litigation process from the point of view of an applicant. There is more detailed information contained within Mr Dunstan's affidavit but because of the grave concern expressed by Mr McCausland's counsel, which was not objected to by counsel for the respondents, concerning the confidential nature of what was discussed, I shall refrain from describing it in any further detail. 10 There were produced for the purpose of the evidence in the proceedings on a strictly confidential basis the notes taken by Messrs Stewart and Lewin of the interview conducted on 27 February. Again, I shall not describe them in any particularity because of the confidential nature. However, they show extensive discussions over a period, which the Court has been informed would be in excess of one hour, during which a number of matters clearly related to the possibility of unfair contract proceedings being instituted were discussed. 11 There is also evidence of further telephone conversations, one with Mr Lewin on 1 April 2004 and one with Mr Stewart on 3 May 2004, in each case with Mr McCausland. Included in the latter is a reference to the remuneration cap provided for by s108A. In that conversation, I accept that Mr McCausland told Mr Stewart that Harmers were not retained in the proceedings. 12 There is also evidence that on 4 May 2004 Mr McCausland informed Mr Stewart that he was concerned that Harmers might be instructed by the respondents to represent them in these proceedings. Upon this being communicated Mr Stewart contacted Mr Gregory Keith Robertson, Harmers' general counsel, who quarantined Mr Stewart's notes after perusing them and then instituted the creation of information barriers in purported accordance with protocols established by the Law Society of New South Wales. Mr Robertson also ensured that personnel involved in the proceedings would be quarantined and that all solicitors and other staff involved in the proceedings on behalf of the respondents signed undertakings with respect to the disclosure of confidential information. 13 I assume that the information barriers were established for the benefit of the respondents but nevertheless they would have had the effect of erecting a barrier against any confidential information that Mr McCausland gave to Mr Stewart and Mr Lewin. 14 The applicant expressed concern, again through his solicitor, about the content of Harmers' web site. That appears to make reference to the firm's culture having at its heart "…principles of openness and consultation. Unlike many organisations, the primary decision-making body in the firm is the "Full Firm" which meets fortnightly and at which all members of staff actively participate. The decision-making ability of the Full Firm is enhanced by the firm's commitment to openness and consultation. All staff members are permitted access to all information relevant to the management of the firm, including all accounts information." 15 Through his solicitor, Mr Dunstan, the applicant expressed concern that all of the confidential material that he had given to Messrs Stewart and Lewin was therefore open for discussion and dissemination throughout the firm. Mr Robertson in his affidavit was at pains to point out that in reality the openness and consultation was confined to management information and accounts information but would not involve the sharing of detailed information on every file open in the firm. Nevertheless it is a matter about which Mr McCausland expressed concern. 16 In essence, the applicant asserted that Harmers had been given confidential information by Mr McCausland and he had not consented to its disclosure and the firm should be restrained in acting adverse to his interests where that confidential information could, if made known to anyone representing the respondents, be used against his interests. 17 In essence, the respondents submitted that firstly, any confidentiality that did apply to the information given to Messrs Stewart and Lewin will be lost when the applicant filed lengthy affidavit material. 18 Secondly, it was submitted that in any event the information barrier is sufficient to ensure that no confidential information could be disclosed, nor could it be used for interests adverse to Mr McCausland. 19 Thirdly, it was said that there could only have been a limited amount of confidential information furnished during a conference that lasted not much more than one hour. 20 The relevant principles are conveniently set out in the judgment of Brereton J in the Supreme Court of New South Wales in Kallinicos v Hunt [2005] NSWSC 1181. Having discussed the relevant authorities, Brereton J summarised the principles, which relevantly for the purposes of these proceedings may be derived from them in the following terms: (omitting reference to authorities). At [76]: · Once the retainer is at an end, however, the court's jurisdiction is not based on any conflict of duty or interest, but on the protection of the confidences of the former client (unless there is no real risk of disclosure). · After termination of the retainer, there is no continuing (equitable or contractual) duty of loyalty to provide a basis for the court's intervention, such duty having come to an end with the retainer. · However, the Court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over it's officers and to control its process in aid of the administration of justice. · The test to be applied in this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice. · The jurisdiction is to be regarded as exceptional and is to be exercised with caution. · Due 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. · The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief. 21 All of these principles must however, in my opinion, be seen in the context of the nature of the solicitor/client relationship and the legal professional privilege which attaches. The solicitor/client relationship requires an obligation of confidence that is at the heart of principles by which legal professional privilege is established. It is the act of communication between solicitor and client as much as the nature of what is communicated that is important in this context. (See the joint judgment of Stephen Mason and Murphy JJ in the High Court of Australia in Grant v Downs [1976] 135 CLR 674.) At 685, Their Honours stated: " The rationale of this head of privilege, according to traditional doctrine, is that it is to promote the public interest because it assists and enhances the administration of justice by facilitating the representation of clients by legal advisers, the law being a complex and complicated discipline. " 22 In my opinion it is also necessary to take into account not only tangible matters concerning the communication of confidential information but also intangible matters which attach to discussions between solicitors and persons who seek their advice with respect to the litigation process and the prospects of success in proceedings. This would cover matters such as a person's general attitude to litigation and whether he or she was enthusiastic about the process as well as matters concerning the financial and other resources that a person would be able to devote to litigation. These are matters that on the evidence of the applicant as relayed by his solicitor for the purpose of these proceedings were of concern to him. 23 In determining this matter it is necessary to balance the competing interests of the applicant and of the respondents who seek to retain the solicitors of their choice. In this latter regard the evidence is that the respondents were introduced to Harmers by the solicitor with the carriage of the matter after he left Allens and joined another firm. There is no evidence that Harmers had any special or unique features or practised any particular speciality that would dictate that they should be retained by the respondents. Indeed, I infer from the evidence that the respondents had never used the services of that firm previously. This is a matter that I take into account in determining these proceedings in addition to the fact that their involvement in the proceedings has only occurred recently and that involvement has always been over the objection of the applicant through his solicitor. 24 There can be no doubt that confidential information was conveyed by Mr McCausland to Messrs Stewart and Lewin. I accept also that Harmers had put in place information barriers that seek to accord with the guidelines established by the Law Society. 25 Each case involving allegations of conflict of interest must be determined by reference to its own unique circumstances. I observe prima facie the factual background to the proceedings before Bergin J in Asia Pacific Telecommunications Ltd v Optus Networks Pty Limited [2005] NSWSC 550 are seemingly even more stark than the proceedings in this case; yet I have, on balance, come to the opposite view. 26 However, there are subtle and not so subtle differences in the circumstances applying to the retention of the solicitors in each of those proceedings and the nature and extent of the confidential information as well as the sophistication and concerns of the applicant in these proceedings as opposed to the moving plaintiff in those proceedings. 27 I have already said that for the purpose of exercising the discretion inherent in the determination of these proceedings and in balancing the competing interests of the parties, I will take into account the personal concerns of Mr McCausland, the circumstances of the proceedings and the short period in which Harmers has been involved in the proceedings always over the objections of Mr McCausland. 28 I am persuaded, on balance, that the interests of justice dictate that the applicant's motion should succeed even allowing for the erection of the information barriers. I have reached this conclusion in conformity with the principles to which I have referred and in particular the inherent jurisdiction referred to by Brereton J in Kallinicos. 29 Accordingly, I order that Messrs Harmers Workplace Lawyers be restrained from continuing to represent the respondents in these proceedings. 30 Whilst I have not received detailed submissions with respect to parallel proceedings commenced by Mr McCausland's wife Yvonne McCausland, I shall proceed on the basis that it would be inappropriate to permit Harmers to continue to represent the respondents in her proceedings having determined that they should not do so in connection with the proceedings instituted by the applicant. 31 The interlocutory applications with respect to both sets of proceedings were heard concurrently. On this basis, therefore, the order that I have made in connection with these proceedings will apply to the proceedings in which Yvonne McCausland is an applicant, being matter number IRC4589 of 2005. 32 The respondents are to pay the applicant's costs in and about these interlocutory proceedings in an amount assessed under the Legal Profession Act in default of agreement. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.