New South Wales Supreme Court CITATION : Belan v Casey [2002] NSWSC 58 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 3909/01 HEARING DATE(S) : 29/1/02 JUDGMENT DATE : 4 February 2002 PARTIES : Derek Belan and Nicholas Belan (P) Arthur Benjamin Casey (D) JUDGMENT OF : Young CJ in Eq COUNSEL : L J Aitken (P) K M Dulhunty (D) SOLICITORS : Maurice May & Co (P) R L Whyburn & Associates (D) CATCHWORDS : EQUITY [374]- Injunctions- Injunction sought against opponent's solicitor- Solicitor a non-party- Whether suit competent. PROFESSIONS [96]- Solicitor- Whether may act against former client. LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act 1946, ss 5(1), 5(2) Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 Braithwaite v South Durham Steel Co Ltd [1958] 1 WLR 986 Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd [2001] 3 NZLR 343 Colonial Portfolio Services Ltd v Nissen (2000) 35 ACSR 673 Iveson v Harris (1802) 7 Ves 251 Kennelly v NSW [2001] NSWCA 71 McVeigh v Linen House Pty Ltd [1999] VSCA 138 CASES CITED : Mancini v Mancini [1999] NSWSC 800 Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2000) 178 ALR 322 Newman v Phillips Fox (1999) 21 WAR 309 Pradhan v Eastside Day Surgery Pty Ltd [1999] SASC 256 Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 Ranson v Platt [1911] 2 KB 291 Sinclair v Wm Arnott Pty Ltd (1963) 64 SR (NSW) 88 Spincode Pty Ltd v Look Software Pty Ltd [2001] VSCA 248 World Medical Manufacturing Corp v Phillips Ormonde & Fitzpatrick Lawyers [2000] VSC 196 DECISION : Orders made. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION 3909 of 2001 YOUNG CJ in EQ Monday 4 February 2002 BELAN v CASEY Judgment 1 His Honour: The plaintiffs are the executors of the late Frank Belan. 2 Frank Belan and the defendant, Arthur Casey, were co-defendants in two sets of defamation proceedings. They were unsuccessful and suffered verdicts against them. It would seem that their joint liability under those judgments is about $192,000. It would appear that Mr Belan has personally satisfied at least part of that liability. In these proceedings, his executors seek contribution from Mr Casey. 3 It would seem that the defamation was made in connection with an election for office bearers of the NSW Branch of the National Union of Workers in 1994 when the "Frank Belan Team" were seeking office. 4 Maurice May & Co, solicitors acted for both Messrs Belan and Casey in the defamation proceedings. However, during discussions relating to the appeal that was lodged, they parted company. Mr Casey consulted other solicitors. He demanded that Maurice May & Co cease acting for Mr Belan. The solicitors declined to comply with this demand. 5 The present proceedings were commenced by Mr Belan acting by Maurice May & Co on 8 August 2001. On 13 September 2001, Mr Casey filed a notice of motion which sought the following orders: (1) A declaration that Maurice May and Roshana May t/as Maurice May & Co have a conflict of interest in acting for the Plaintiff Frank Belan in his action for contribution against the Defendant Arthur Benjamin Casey. (2) An order that Maurice May and Roshana May t/as Maurice May & Co be restrained from acting or continuing to act for the Plaintiff Frank Belan in his action against Arthur Benjamin Casey. (3) In the alternative, an order that Maurice May and Roshana May t/as Maurice May & Co forthwith cease to act for the Plaintiff in his action against Arthur Benjamin Casey. (4) A declaration that Maurice May and Roshana May t/as Maurice May & Co have breached their retainer with Arthur Benjamin Casey by refusing to produce his file and by proceeding by way of Notice to Motion to set aside a subpoena seeking production, amongst other things, of the Defendant's own file. (5) A declaration that the District Court is the appropriate jurisdiction for these proceedings. (6) An order that these proceedings be transferred to the District Court pursuant to Part 74 of the Supreme Court rules. 6 This motion came before me on 29 January 2002. Ms K M Dulhunty of counsel appeared for Mr Casey and Mr L J Aitken of counsel for the solicitors. After hearing argument, I reserved my decision until today so that I could cogitate on the significant issues that were raised. 7 The questions that I need to consider in order to make rulings on this motion are as follows. I will state them and then deal with each in turn. 1. Can one seek an order that the opponent's solicitor be prevented from acting for the opponent in the action itself, or is one required to commence separate proceedings against the solicitor? 2. On what basis can a solicitor be restrained from acting? In particular, is it sufficient that there is a perceived conflict of interest between a former client and the present opponent? 3. In an action for contribution, what factors are considered by the judge in making the apportionment? 4. Does the evidence show that the solicitors have any confidential information of the applicant? 5. Should an injunction be made? 6. Should this case be transferred to the District Court? 7. What orders need to be made including orders for costs? 8 1. The general rule is as stated in Kerr on Injunctions, 6th ed (Sweet & Maxwell, London, 1927) p 632, "An injunction will not in general be granted unless the party against whom it is claimed is a party to the action." 9 This has been the law for centuries. Lord Eldon in Iveson v Harris (1802) 7 Ves 251, 256; 32 ER 102, 104 said, " …I have no conception, that it is competent to this Court to hold a man bound by an injunction, who is not a party in the cause for the purpose of the cause." See also Ranson v Platt [1911] 2 KB 291, 307. 10 However, as Kerr acknowledges on the same page, there are some significant exceptions to the general rule. The question that arises is whether the present case is within an exception. 11 Ms Dulhunty points out that there are many examples in the decided cases where relief has been given in proceedings between A and B restraining X from acting as B's solicitor. 12 I do not consider that there is any real purpose in examining those examples. 13 In Spincode Pty Ltd v Look Software Pty Ltd [2001] VSCA 248, Brooking JA said in footnote 19: "It would be possible, but tedious and unprofitable, to deal with the 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 process 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." 14 With respect, I do not fully agree with this statement. There is often utility in insisting on proper procedure in a modern court as in any other. Furthermore, his Honour's statement is influenced by his almost unique view that the pre Prince Jefri confusion as to the jurisdiction to make an injunction in the present context should continue. However, the fact remains that, over the last two hundred years, many courts have granted relief in the existing proceedings. I must now assume that the present type of case is a further exception to Kerr's general rule. 15 2. Up until Prince Jefri Bolkiah v KPMG [1999] 2 AC 222, courts had gleaned three bases for granting injunctions in the present situation. These were: (1) breach of a duty to hold information confidential; (2) breach of a duty of loyalty; and (3) the Court's inherent jurisdiction over solicitors. In Prince Jefri, Lord Millett, with whom four other Law Lords agreed, said at 234-5 that the jurisdiction in a case where the retainer was no longer active was solely founded on confidential information and was not, nor could it be, connected with some principle of conflict of interest. 16 In Spincode Pty Ltd v Look Software Pty Ltd [2001] VSCA 248, Brooking JA made it quite clear that he considered that the House of Lords in Prince Jefri had not conducted a thorough enough consideration of the authorities and that the principle espoused was too narrow. However, on any view, the Spincode case could be decided the same way if the Court had followed Prince Jefri: indeed that is how the other two judges, Ormiston and Chernov JJA did decide it. 17 Prince Jefri decided two basic points: (a) the basis of the claim is the fiduciary duty to maintain information as confidential; and (b) that it is sufficient if the plaintiff demonstrates that there is a real and not fanciful risk of disclosure of confidential information, though it is not necessary to show that the risk is substantial. 18 Prince Jefri has been followed on almost every occasion when the present situation has arisen, except in Victoria. It is true that it is proposition (b) that has met with approval, though it is hard to see how this can be truly divorced from proposition (a). The Court of Appeal followed it in Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1, 48 as did the Full Court of South Australia in Pradhan v Eastside Day Surgery Pty Ltd [1999] SASC 256 (Bleby J with whom Doyle CJ and Prior J agreed). It was followed in New Zealand in Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd [2001] 3 NZLR 343, and (though he slightly modified proposition (a)) by Steytler J in Newman v Phillips Fox (1999) 21 WAR 309, 315, by Conti J in Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2000) 178 ALR 322, by Rolfe J in Colonial Portfolio Services Ltd v Nissen (2000) 35 ACSR 673 and by Gillard J in World Medical Manufacturing Corp v Phillips Ormonde & Fitzpatrick Lawyers [2000] VSC 196. 19 In Victoria, a Court of Appeal seemed to decide contrary to Prince Jefri in McVeigh v Linen House Pty Ltd [1999] VSCA 138, but that decision must be regarded as being per incuriam as Prince Jefri was neither cited to the Court nor referred to by it. 20 Some of the authorities to which Ms Dulhunty referred were decided before Prince Jefri and so are of little assistance. Others pay lip service to Prince Jefri yet continue to flirt with the ideas of conflict mentioned in some of the pre 1999 authorities. 21 In my view, the overwhelming weight of authority is to the effect that where the applicant to restrain a solicitor is a former client, the sole consideration is whether there is a real risk of disclosure of confidential information and one does not delve into matters of conflict of interest or conflict of duty. In other situations this delving may well be material. 22 Thus, question 2 must be answered that the applicant must demonstrate a real risk of breach of the duty to hold information confidential. 23 In Mancini v Mancini [1999] NSWSC 800, Bryson J said that where a claim is made on the basis of possible misuse of confidential information, it is necessary to state precisely what information is being protected. That case was not one dealing with solicitors, but the proposition must be generally applicable. 24 There is little in the evidence to show what confidential information Maurice May & Co may have the disclosure of which may come out in this case. 25 What I will say under question 3 shows the limited area which a judge explores for the purpose of making an apportionment in an action for contribution at law. Of course, there could be confidential information that would be helpful to counsel in cross-examination as to credit. If, for instance, (and I am sure that this is not so in the present case) the former solicitor had confidential information that the former client had three convictions for perjury, one could see the need for an injunction. 26 Probably the thinness of the evidence of confidential information made Ms Dulhunty spend so much energy on her conflict of interest submission. All Mr Casey really says is that he himself had no malice towards the plaintiffs in the defamation proceedings, but Kirby J found him liable on the basis that he was "infected" with the malice shown by Mr Belan. Counsel advised Mr Casey that he (Casey) had a good chance of upsetting the verdicts against him, but Mr Belan would still be liable. After discussions with Mr Belan, Mr Casey knew that the Union had held fund raising functions to pay for the verdict and costs, he was assured that if he went quietly the verdict and costs would be paid by the Union and that a deed of indemnity would be executed to protect Mr Casey. Mr Casey says that he relied on these statements, yet his opponents reneged, the Union changed its position and the deed was never executed. 27 There is nothing in this scenario to show that Maurice May & Co (who appear to be the Union's solicitors) had any confidential information about Mr Casey nor that there is any real risk of confidential information being exposed in the instant case. 28 3. As Messrs Belan and Casey were joint tortfeasors, the present claim is one for contribution under s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act, 1946. 29 That paragraph, so far as is relevant provides, "any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is … liable in respect of the same damage …" 30 Section 5(2) of the Statute says: "In any proceedings for contribution under this section the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage; and the court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity." 31 There is relatively little authority on what factors a court considers when assessing just and equitable contribution under s 5(2). The statute points to the relative extent of responsibility for the damage as the key factor. 32 The Full Court considered the question in Sinclair v Wm Arnott Pty Ltd (1963) 64 SR (NSW) 88. In that case an occupier and an employer were tortfeasors who caused an employee's injury. The concept of responsibility for the injury was fleshed out at p 96 and the occupier was ordered to bear two-thirds of the damages and the employer, one-third. See also Braithwaite v South Durham Steel Co Ltd [1958] 1 WLR 986, 993 (where no reasons are given) and Kennelly v NSW [2001] NSWCA 71. 33 There does not appear to be any room in s 5(2) for subjective considerations between the tortfeasors. However, it may be that, in defamation, if one tortfeasor was deliberately malicious and the other was merely infected by that other's malice, an unequal apportionment might be made. Again, a contract of indemnity or conduct amounting to an estoppel against making a claim for contribution would, if established, operate to defeat a claim for contribution. 34 4. The facts associated with any claim in contract or by way of estoppel may involve some problem with confidential information. However, the assessment of responsibility under s 5(2) would not seem to me to do so. In any event nothing of this nature has yet been alleged by Mr Casey. 35 Thus this question must be answered, "No". 36 5. It follows that this question must also be answered, "No." 37 6. Ms Dulhunty puts the present as a simple case of apportionment. She has cited a number of authorities to show that the present is a relatively small money claim and well within the ordinary jurisdiction of the District Court. 38 Mr Aitken suggested that there might be some equitable flavour about the claim in that equity often considers questions of contribution between insurers. However, the present appears to be a simple case of a claim under s 5(2) of the Statute. 39 However, the proposed defences reflected in the affidavit evidence and enunciated during argument do seem to involve complicated questions of estoppel. 40 It seems to me that the verdict in defamation was given in the Supreme Court, ordinarily any apportionment would have been made by the trial judge. Furthermore, awkward questions of estoppel may arise. My view is that the proceedings should remain here at least until the issues are settled. At that stage the defendant may move for transfer. However, the present motion is premature. 41 7. It follows that the present motion must be dismissed. To ensure that there is no ambush and the matters said to arise in defence are expressly stated, I should order pleadings. The solicitors and indeed the plaintiffs have succeeded on the motion, and there is no reason why the defendant should not pay the costs of it (limited, of course, to one set of costs). 42 Accordingly, I order that: 1. The defendant's notice of motion of 13 September 2001 be dismissed. 2. The proceedings continue by way of pleadings. 3. The plaintiffs are to file a duly verified statement of claim within 14 days. 4. The defendant is to file a duly verified defence within 28 days. 5. The defendant is to pay the costs of the plaintiffs and the solicitors, Maurice May & Co of the said motion (limited to one set of costs). 6. The matter is adjourned to the Registrar's list on 19 March 2002 at 9:30 am. ******************** Last Modified: 02/15/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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