New South Wales Court of Appeal CITATION: Worth Recycling Pty Ltd v Waste Recycling and Processing Pty Ltd [2009] NSWCA 354 HEARING DATE(S): 6 October 2009 JUDGMENT DATE: 4 November 2009 JUDGMENT OF: Spigelman CJ at 1; Hodgson JA at 2; Campbell JA at 50 1 Leave to appeal granted. DECISION: 2 Notice of Appeal to be filed within fourteen days. 3 Appeal dismissed. 4 Appellant to pay respondent's costs of the application and the appeal. CATCHWORDS: LEGAL PRACTITIONERS - Solicitors - Obligations of confidence - Plaintiff's solicitor had acted for other parties against defendant in other proceedings raising similar issues - Those proceedings settled following mediation - Mediation agreement contained promise by parties not to disclose or use confidential information acquired in the course of the mediation - Whether plaintiff's solicitor owed an obligation of confidence to defendant - Whether there was a threat of breach of that obligation sufficient to justify an injunction against the solicitor acting for the plaintiff - Whether there was a basis for such an injunction in the inherent jurisdiction of the court LEGISLATION CITED: Trade Practices Act 1974 Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd (2001) 3 NZLR 343 House v The King [1936] HCA 40; (1936) 55 CLR 499 Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561 CASES CITED: Mitchell v Pattern Holdings Pty Limited [2000] NSWSC 1015 Smith Kline & French Laboratories (Aust) Limited and others v Secretary, Department of Community Services and Health (1990) 22 FCR 73 Tricontinental Corporation v Holding Redlich (Supreme Court of Victoria, 22 December 1994, unreported) Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531 Williamson v Schmidt [1998] 2 Qd R 317 PARTIES: Worth Recycling Pty Ltd (Appellant) Waste Recycling and Processing Pty Ltd (Respondent) FILE NUMBER(S): CA 40170/09 COUNSEL: R J Webb SC, A Douglas-Baker (Appellant) S Climpson (Respondent) SOLICITORS: Holman Webb (Appellant) Gilbert + Tobin (Respondent) LOWER COURT JURISDICTION: Supreme Court LOWER COURT FILE NUMBER(S): SC 50273/ 08 LOWER COURT JUDICIAL OFFICER: Einstein J LOWER COURT DATE OF DECISION: 5 May 2009 LOWER COURT MEDIUM NEUTRAL CITATION: [2009] NSWSC 356 - 18 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40170/09 SC 50273/08 SPIGELMAN CJ HODGSON JA CAMPBELL JA 4 November 2009 WORTH RECYCLING PTY LTD v WASTE RECYCLING AND PROCESSING CORPORATION t/as WSN ENVIRONMENTAL SOLUTIONS Judgment 1 SPIGELMAN CJ: I agree with Hodgson JA. 2 HODGSON JA: By Notice of Motion brought by the respondent (WSN) in proceedings in which the applicant (Worth) was suing WSN for damages, WSN sought orders against the solicitors Holman Webb and against Dermot Maxwell (one of the partners of that firm) restraining them from acting for Worth in the proceedings, and also certain other orders. On 12 May 2009, for reasons given on 5 May 2009, Einstein J made an order restraining Holman Webb and Mr Maxwell from acting as solicitors for Worth in the proceedings, otherwise dismissed WSN's motion, and ordered Worth to pay WSN's costs of the Notice of Motion. 3 Worth seeks leave to appeal from that decision. In my opinion, leave to appeal should be granted, and the appeal should be dismissed. Circumstances 4 Worth and WSN are competitors in the waste recycling and processing industry, and are two of the three major competitors in that industry in New South Wales, the other being Veolia Environmental Services (Australia) Pty Limited and associated companies (collectively, Veolia). 5 In 2005 Veolia brought proceedings against WSN claiming damages suffered by reason of contraventions by WSN of Part V of the Trade Practices Act 1974. Mr Maxwell and Holman Webb acted for Veolia in those proceedings. 6 Those proceedings had been fully prepared for hearing by the second half of 2008. Between June 2005 and February 2008, WSN gave extensive discovery, and between August and September 2008, WSN served its witness statements. The proceedings were fixed for hearing to commence in October 2008. 7 On 22 September 2009, Veolia and WSN participated in a mediation conducted pursuant to a mediation agreement executed by the parties and the mediator. Clauses 10 and 11 of that agreement provided as follows: Confidentiality and Privilege 10. (a) A person who acquires confidential information, whether oral or documentary, in the course of the Mediation will not disclose or use that information except in accordance with this agreement unless and until the information becomes public knowledge otherwise than by a breach of this agreement. (b) The Parties and their representatives may discuss confidential information that comes to their knowledge in the course of the Mediation for the purpose of the Mediation and with legal advisers and insurers and within their respective organisations (including parent organisations) on the condition that any confidential information is not further disclosed unless and until it becomes public knowledge otherwise than by a breach of this agreement. 11. Subject to this Agreement and any legal obligation: (a) neither the Mediation nor anything said or done during the Mediation other than a binding settlement will affect the rights of any Party in relation to any Dispute or part of a Dispute that is not resolved at the Mediation; (b) no admission, concession, proposal or other statement or document made, prepared or disclosed in connection with the Mediation other than a binding settlement will be disclosed after the Mediation; and (c) every admission, concession, proposal and other statement or document made, prepared or disclosed in connection with the Mediation other than a binding settlement will be entirely "without prejudice" and will retain the benefit of any privilege, including legal professional privilege, that would otherwise have applied and will not be disclosed or relied upon or be the subject of a subpoena to give evidence or to produce documents in any arbitral or judicial proceedings. 8 Mr Maxwell was present at the mediation and was familiar with the terms of the mediation agreement. 9 The mediation resulted in the settlement of the Veolia proceedings on terms recorded in Heads of Agreement signed at the mediation; and a Deed of Release was signed by Veolia and WSN on 25 September 2008 giving effect to the settlement. As a consequence, the Veolia proceedings were dismissed. 10 The Heads of Agreement, Deed of Release and one other document produced for the purposes of the mediation were made confidential exhibits in the proceedings before Einstein J, and this position was maintained before this Court. During the argument of the application to this Court, the Court indicated its intention to include cl 5 of the Deed of Release in its judgment, and the parties then before the Court could see no objection to this course. In my opinion, there is no possible detriment to Veolia (which was not before this Court) in setting out this clause. This clause provided as follows: 5. Confidentiality 5.1 Definitions For the purposes of this clause 5, professional adviser in relation to a party shall mean: (a) a legal adviser; (b) a tax adviser; (c) an auditor; (d) an accountant (e) an insurer; or (f) any other professional adviser who is subject to expressed or implied obligations of confidentiality to the party; 5.2 Confidentiality Subject to clause 5.3 below, the parties agree not to disclose the contents of this Deed or the terms of the settlement between the parties reflected in this Deed to any party. 5.3 Exceptions (a) Clause 5.2 above shall not apply to disclosure by any party of the contents of this Deed or the terms of the settlement reflected in this Deed to either a professional adviser of that party or to a Stakeholder of that party provided always that any such disclosure is made subject to an express or implied obligation owed to the party by the professional adviser or the stakeholder, as the case may be, not to disclose the contents of this Deed to any other person. (b) Clause 5.2 above shall not apply to disclosure by a party of the contents of this Deed or the terms of the settlement reflected in it: i. Under legal compulsion; ii. In order to comply with the requirements of any regulatory body; iii. With the prior written consent of each other party to this Deed; or iv. In proceedings between the parties or any of them arising out of or in anyway connected to the matters recited in this Deed. (It could be contended that the tendering of the Deed of Release as a confidential exhibit was itself a breach of this clause: however, I think the better view is that it falls within the exception in cl 5.3(b)iv, because I would not read "between" as requiring involvement of more than one of the parties, having regard to the words "or any of them".) 11 Mr Maxwell was familiar with the three confidential exhibits, including the Deed of Release. 12 In preparing for the Veolia case, Mr Maxwell had obtained a witness statement from Bob Cooper from Worth. After the case was settled, Mr Maxwell wrote to Mr Cooper and other witness telling them that Veolia and WSN had resolved the proceedings between them. 13 Mr Cooper then spoke to Mr Maxwell over the telephone. Mr Cooper said that Worth assumed the result of the case had been favourable to Veolia and that Worth wished to pursue their own claim against WSN. Mr Maxwell said to him that the terms and detail of the resolution between Veolia and WSN were confidential. Mr Cooper asked Mr Maxwell whether Veolia was happy with the resolution, and Mr Maxwell said that he believed it was. 14 On 1 October 2008 Mr Maxwell met Mr Cooper and another person from Worth in conference. On that occasion, it was agreed among other things that Mr Maxwell would not under any circumstances do anything that might in any way breach the terms of settlement between Veolia and WSN, which were confidential and could not be divulged. 15 Worth's proceedings were commenced on 24 December 2008. In them, Worth claimed damages against WSN in respect of essentially the same contraventions of Part V of the Trade Practices Act as had been alleged in the Veolia proceedings. Decision of primary judge 16 Before the primary judge, WSN sought the order restraining Holman Webb and Mr Maxwell for acting for Worth on the following grounds: (i) a threatened breach of a duty of confidence in relation to information disclosed during the course of the mediation and the subsequent confidential Deed of Release; (ii) the court's inherent jurisdiction to control solicitors to protect the integrity of the judicial process and the due administration of justice. 17 The information referred to in ground (ii) was the confidential information, defined in the Schedule to the Notice of Motion to mean: (a) the information contained in WSN's position paper dated 19 September 2008 provided to the Respondents for the purposes of a mediation of the Veolia Proceedings which occurred on 22 and 25 September 2008 (the Mediation ); (b) any information disclosed, discussed or otherwise communicated by or on behalf of WSN to the Respondents at the Mediation, including, without limitation: (i) the information contained in WSN's opening statement; (ii) all discussions concerning the parties' perception of the relative strengths and weaknesses of their, and their opponents', case; (iii) any settlement offers made during the course of the Mediation; (iv) WSN's attitude to any settlement offers; (v) negotiating positions adopted by WSN at the Mediation; and (vi) WSN's attitude to the issues discussed at the Mediation and to settlement of the Veolia Proceedings generally; (c) the information contained in the heads of agreement signed by the parties to the Veolia Proceedings on 22 September 2008, including the terms thereof; and (d) the information contained in the deed of release signed by the parties to the Veolia Proceedings on 25 September 2008, including the terms thereof. 18 The primary judge accepted (at [17]) that the solicitors (meaning at least Mr Maxwell) had a duty of confidence in relation to information disclosed by WSN during the mediation. He considered the cases of Mitchell v Pattern Holdings Pty Limited [2000] NSWSC 1015, Tricontinental Corporation v Holding Redlich (Supreme Court of Victoria, Mandie J, 22 December 1994 unreported), and Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd (2001) 3 NZLR 343. He then addressed some of the evidence, and continued: [36] I am satisfied that there is a real and sensible possibility of misuse (albeit unconsciously) of the confidential information obtained by Mr Maxwell. It appears to be the case that Ms Yeo is in the same position as Mr Maxwell in this regard. Depending on precisely which other staff within Holman Web may have received or been privy to the same confidential information [or similar confidential information] there may be a real and sensible possibility, also by them, of misuse of that information. The information obtained certainly by Mr Maxwell as I understand it, critically included the process of offer and acceptance and the settlement sum. That fact alone, together with the virtually identical pleading of these proceedings with the Veolia proceedings is sufficient in itself to demonstrate the real and sensible possibility of misuse. [37] There is also the real possibility of Mr Maxwell making use of the negotiation moves and strategies that were adopted during the mediation; and what was said during the course of the negotiations (including strengths and weaknesses; offers and counter offers). Here again the position of other staff requires to be treated with. [38] As the defendants have submitted, the real and sensible possibility of misuse of the information becomes apparent when one asks what the likely course of events would be in a mediation between the parties to the current proceeding if, during closed session, the plaintiff in these proceedings were to say to Mr Maxwell or Ms Yeo "should we take that offer?" or "what offer should we make?". To suggest that an answer by either of them to that question would not, in all likelihood, involve the real and sensible possibility of misusing the information gained in the Veolia mediation is quite unrealistic. 19 The primary judge concluded (at [44]), on the basis of ground (i), that Mr Maxwell should remove himself completely from being involved in any aspect of the current litigation; and also concluded that a fair-minded reasonably informed member of the public would conclude that the proper administration of justice required that Mr Maxwell be restrained from acting for Worth in the proceedings, thus indicating that he would also have granted relief on ground (ii). However, it did not seem to him that, subject to certain undertakings to the court, the firm Holman Webb might not continue to act as solicitors for Worth. In the event, however, Holman Webb did not seek to take that course, and in the result the injunction was given against Holman Webb as well as against Mr Maxwell. Issues on appeal 20 Worth seeks to rely on the following grounds of appeal: 1 The trial judge erred in holding that there was a real and sensible possibility of misuse (albeit unconsciously) of information obtained by Mr Maxwell, of the solicitors for the appellant, in the course of acting for another client (Veolia) against the respondent in a mediation between them in September 2008 and from the Heads of Agreement, Deed of Release resulting from that mediation ("the information"). 2 The trial judge erred in holding that Mr Maxwell and the solicitors for the appellant owed to the respondent an obligation of confidence in relation to the information. 3 The trial judge erred in holding there was a real and sensible possibility of misuse of the information by Mr Maxwell because the pleadings in the Veolia proceedings and the pleadings in principal proceedings were virtually identical. 4 The trial judge erred in finding that because the pleadings were virtually identical the appellant and its solicitors bore the burden of showing there was no danger of misuse of the information. 5 The trial judge erred in holding that the information of which there was a possibility of misuse included negotiation moves or strategies of the respondent in the conduct of the mediation between Veolia and the respondent. 6 The trial judge erred in holding that there was a real and sensible possibility of misuse of the information because the appellant retained the solicitors on the basis Veolia was happy with its performance in the mediation. 7 The trial judge erred in finding there was a real and sensible possibility of misuse of the information because the appellant retained the solicitors on the basis that Veolia was happy with its conduct of the mediation. 8 The trial judge erred in failing to find the respondent had not proved its entitlement to an injunction. 9 The trial judge erred in finding that the respondent was entitled to injunctive relief on the inherent jurisdiction ground. 21 WSN raised no objection to the granting of leave, and in my opinion leave to appeal should be granted. 22 I will consider in turn the following issues: (1) Did Mr Maxwell owe an obligation of confidence to WSN, and if so, what was the content of that obligation? (2) Was there a threat of breach of that obligation sufficient to justify an injunction? (3) Was there a basis for the injunction in the inherent jurisdiction of the Court? Obligation of confidence 23 Mr Webb SC for Worth submitted that the primary judge accepted that Mr Maxwell had a duty of confidence, but did not identify the source or nature of the obligation or to whom it was owed. He submitted that the obligation Mr Maxwell owed was to Veolia, and that the solicitor for one party did not separately owe an obligation of confidence directly to another party. However, Mr Webb accepted that the obligation owed to Veolia might be enforceable by WSN in the event of a threatened breach, referring to Williamson v Schmidt [1998] 2 Qd R 317 at 330. 24 Mr Webb submitted that the primary judge erred in rejecting (at [39]) Worth's submission that the mediation agreement only imposed an obligation to preserve as confidential all information properly characterised as such at general law. He submitted, that in the absence of a fiduciary relationship between Mr Maxwell and WSN, relief required satisfaction of the conditions specified by Gummow J in Smith Kline & French Laboratories (Aust) Limited and others v Secretary, Department of Community Services and Health (1990) 22 FCR 73 at 87, namely: A general formulation apt for the present case of an equitable obligation of confidence has four elements: (i) the plaintiff must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question, and must be able to show that; (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge); (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence, and (iv) there is actual or threatened misuse of that information, without the consent of the plaintiff. The authorities from which these elements are drawn are collected in Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 at 443 ; 74 ALR 428 ; 10 IPR 53. In addition, it has been suggested that the breach must inflict or be likely to inflict "detriment", a matter to which I will return later in these reasons. 25 Gummow J discussed the issue of detriment later in the judgment, and concluded as follows at 112: The authorities have been recently assembled and discussed by Mr R Dean in his work The Law of Trade Secrets (1990), pp 177–8. They disclose that the question remains an open one in this country. I share the view of this learned author, and of Professor Birks in his note "A Lifelong Obligation of Confidence" (1989) 105 LQR 501, that equity intervenes to uphold an obligation and not necessarily to prevent or to recover loss: see also F Gurry, Breach of Confidence (1984), pp 407–8. The cases dealing with recovery from errant fiduciaries of profits which their principals could not have made illustrate a similar point. The basis of the equitable jurisdiction to protect obligations of confidence lies, as the present case illustrates, in an obligation of conscience arising from the circumstances in or through which the information, the subject of the obligation, was communicated or obtained: Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (at 438). The obligation of conscience is to respect the confidence, not merely to refrain from causing detriment to the plaintiff. The plaintiff comes to equity to vindicate his right to observance of the obligation, not necessarily to recover loss or to restrain infliction of apprehended loss. To look into a related field, when has equity said that the only breaches of trust to be restrained are those that would prove detrimental to the beneficiaries? 26 WSN did not suggest that Mr Maxwell became contractually bound by the terms of the mediation agreement of the Deed of Release; and in those circumstances, I agree that the grant of relief to WSN does turn on the requirements set out in Smith Kline. However, if those requirements are satisfied, there is in my opinion an obligation of confidence owed directly to WSN by Mr Maxwell. To the extent that Williamson v Schmidt suggests otherwise, I would respectfully disagree. 27 In this case, the information in question is identified with specificity in the Schedule to the Notice of Motion, and much of it is contained in the confidential exhibit. Any further identification in this judgment of the particular parts of the material thus specified that have the necessary quality of confidence, beyond that given by the primary judge in pars [36]-[38] quoted above, would itself tend to prejudice their confidentiality. 28 As suggested in the previous paragraph, there are clearly, in my opinion, parts of the information specified in the schedule and contained in the confidential exhibit that have the necessary quality of confidentiality referred to by Gummow J; and again, to expand on the reasons for confidentiality beyond what was said by the primary judge would tend to prejudice confidentiality. I accept that, to satisfy this requirement, the information must have the necessary quality of confidentiality under the general law; and to the extent that the primary judge suggested to the contrary (at [39]), this is incorrect; but the question of whether there is the necessary quality of confidentiality is very much informed by the terms of the mediation agreement and the circumstances of the mediation. 29 This confidential information was in my opinion imparted to Mr Maxwell in such circumstances as to import an obligation of confidence, owed directly to WSN as well as to his own client. 30 It is to be noted that the mediation agreement did not merely provide that admissions and the like were "without prejudice" and thus not admissible: a provision to that effect would not necessarily make the admissions confidential, or preclude use of them to inform the gathering of evidence or the conduct of the case. However, in cl 10, the mediation agreement provided explicitly that "a person" (which would include Mr Maxwell) "who acquires confidential information … in the course of the mediation will not disclose or use that information except in accordance with this agreement", subject to a qualification applying if the information becomes public knowledge otherwise than by breach of the agreement. Thus, Mr Maxwell knew that his client had promised WSN that Mr Maxwell would not use confidential information except in accordance with the mediation agreement, and he participated in the mediation in that knowledge. In my opinion that clearly establishes that the confidential information acquired by Mr Maxwell at the mediation itself was acquired by him in such circumstances as to import an obligation of confidence owed directly to WSN, not to disclose or use the information except in accordance with the mediation agreement. In the context of the mediation agreement, made in the course of litigation, this would not I think preclude Mr Maxwell continuing to act in the same litigation; but it could preclude him in acting in other proceedings against WSN. 31 The Deed of Release also provides for confidentiality, although in terms of disclosure only and not in terms of use. Mr Maxwell was aware of this, and also of the provision to the effect that the contents could be disclosed to professional advisers only if the disclosure was made subject to an obligation to the party not to disclose the contents to any other person. It could be argued that the obligation of confidentiality imported by the communication to Mr Maxwell of the terms of the Deed extended only to an obligation not to disclose these contents to other persons and did not include an obligation not to use them. I do not think this matters: in circumstances where the Deed of Release gave effect to a settlement reached at the mediation, to use the information in the Deed of Release that reflected information acquired in the mediation would be a breach of the obligation not to use information acquired in the mediation. Threatened misuse? 32 Mr Webb submitted that the primary judge erred to the extent that he relied (at [26]) on the decision of the New Zealand Court of Appeal in Carter Holt Harvey Forest Limited v Sunnex Logging Limited [2001] 3 NZLR 343, to proceed on the basis that, because there were common factual elements in the Veolia proceedings and the Worth proceedings, the burden shifted to Worth or its solicitors to show there was no danger of misuse of the knowledge gained in the course of the mediation. He submitted that the primary judge should have proceeded on the basis that it was for WSN to discharge its burden of showing the necessary risk of misuse of confidential information. 33 Mr Webb submitted that Mr Maxwell had agreed with Worth that he would not, and they would not require him to, do anything that might breach the obligations of confidence. He submitted that the primary judge erred in finding (at [31]) that the likelihood was that Mr Cooper had contacted Veolia concerning whether the resolution of its proceedings was favourable, and (at [32]) that the risk of misuse of the information was highlighted by Worth's decision to retain Holman Webb because they had attended the mediation and Veolia was happy with the settlement. 34 Accordingly, he submitted, the primary judge erred in finding that there was a threat of misuse sufficient to justify an injunction. This was particularly so in view of the public interest in a litigant not being deprived of the lawyer of its choice: Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561 at [76]. 35 Mr Webb referred to four previous decisions in which a party had applied to restrain a solicitor acting against it, on the basis of claimed duty of confidence arising from circumstances where the solicitor had previously acted for another client in other proceedings against it, namely Tricontinental, Williamson, Mitchell and Carter Holt. 36 Tricontinental was a case in which solicitors had acted against Tricontinental Corporation Limited in proceedings brought against it by Natwest Markets Australia Limited. Tricontinental sought an injunction to restrain the solicitors from acting against it in other proceedings brought by the State Bank of South Australia. In the previous proceedings, judgment had been given against Tricontinental, after a contested hearing, in the sum of $11.5 million. Tricontinental appealed, and the appeal was compromised on terms which included a term that their terms and the circumstances surrounding their creation should remain confidential. Senior counsel for the solicitors in that case accepted that the test to be applied was whether there was a real and sensible possibility of misuse of the confidential information, albeit submitting that this test derived from cases where the solicitors had previously acted for the party seeking the restrain, that that a more robust view should be taken where this was not the case. Mandie J considered that the likely differences between the issues and the evidence in the two proceedings were such as to render the alleged confidential information of negligible use or relevance. Accordingly, he refused the injunction. 37 In Williamson, the plaintiff sought to restrain solicitors from acting against them in a pending District Court action, on the basis that one of them had acted against the plaintiff for different clients in similar proceedings, which were settled as a result of mediation. The parties to the mediation had signed an agreement including a term that they would keep confidential and on a "without prejudice" basis all information and documents concerning the dispute disclosed during the mediation. However, the position statement of the plaintiff seeking the injunction, and the settlement agreement itself, were not kept confidential but were put on the public record in the proceedings. Lee J held that the onus was on the plaintiff to discharge a burden of proving at least a real and sensible possibility of misuse, and perhaps a probability of misuse; and that this onus had not been discharged. 38 In Mitchell, the defendants in the proceedings sought an order restraining solicitors from acting for the plaintiffs, where the solicitors had previously acted for other parties in proceedings raising similar issues, which were settled on the basis of a deed of settlement that provided that its terms not be disclosed directly or indirectly by either of the parties except in specialised circumstances. Bergin J held that there was an onus on the defendants to establish a real and sensible possibility of misuse of confidential information; and in circumstances where there was no evidence of the contents of the deed of settlement or of the negotiations (it appears there was no mediation), she was not satisfied this onus had been discharged. 39 In Carter Holt, the plaintiff sought to restrain solicitors from acting in proceedings brought against it, where those solicitors acted for a party making similar claims against it in previous proceedings, and had participated in a mediation settlement of those proceedings, having themselves signed a confidentiality agreement in relation to the mediation. The judge at first instance held that the solicitors were in possession of confidential information obtained in confidence, that disclosure of the settlement terms could adversely affect Carter Holt in settlement negotiations in the later proceedings, and there was a real risk that the settlement terms would be disclosed if the solicitors participated in settlement discussions; but did not accept that the information would otherwise adversely affect Carter Holt, and held that the lawyers could continue to act, as long as they took no part in any settlement negotiations that might arise. 40 On appeal, the New Zealand Court of Appeal noted that the lawyers' ability to act in the proceedings must depend upon the contractual obligations they undertook; and also that it should not be required of a party seeking to protect confidential information that it spell out the particular matters of concern. They continued (at [28]): It is therefore appropriate when a plaintiff in the position of CHHF, facing a number of potential claims, has been able to show that there appears to be a common factual element underlying those claims, that the burden should shift to the person who has promised to preserve confidentiality to demonstrate that there is no danger of disclosure or misuse of knowledge gained in the course of the mediation. Unless the court can be satisfied that the claim in which the lawyer wishes to act is sufficiently dissimilar that the course of the prior mediation has no relevance to it, the lawyer should be prohibited from acting. The threshold having been surmounted, it is for the lawyer to negative that risk. 41 Their ultimate conclusion was expressed as follows: [34] Therefore, while it may be accepted that the lawyers have acted in good faith and that they have not broken their promises to preserve confidentiality, and that they intend not to do so, it has not been demonstrated to the satisfaction of the Court that there is no risk of a future breach occurring accidentally or unconsciously. Especially because there is a risk of a breach of this nature it would not be appropriate to require CHHF to rely upon undertakings from the lawyers that in representing Sunnex in its particular claim they will continue to preserve confidentiality concerning the Rua mediations and settlement. Nor do we believe that the partial ban imposed by the High Court, extending to settlement negotiations only, suffices to protect CHHF. We have not been persuaded that the perceived risk is confined to disclosure or misuse of information in connection with any settlement negotiations between CHHF and Sunnex. The risk appears to exist if the lawyers are permitted to conduct the litigation. In any event, it may well prove to be completely artificial to try to separate settlement discussions from the course of the litigation. Anyone involved in an attempt to settle is likely to need to discuss what is transpiring with counsel who has conduct of the litigation, particularly if a settlement proposal is made close to or during trial. The suggested separation of functions may place an undesirable inhibition on exploration of settlement possibilities. 42 In my opinion, whatever may be the position where solicitors owe a fiduciary duty to the party seeking an injunction, or where (as in Carter Holt) they owe an explicit contractual duty, in a case such as the present the onus does lie on the party seeking the injunction to show a threat of misuse sufficient to justify the injunction; and I do not think the existence of a common factual element is sufficient to shift the onus of proof. However, proof of a real and sensible possibility of misuse may be sufficient to justify an injunction. 43 In my opinion, pars [36]-[38] of the primary judge's judgment, quoted above, show that the primary judge was affirmatively satisfied that there was a real and sensible possibility of misuse of confidential information, and that he did not rely on a shifting of the onus of proof, as referred to in Carter Holt. 44 The finding of a real and sensible possibility of misuse is one which this Court could overturn on the basis of the principles in Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531. However, in my opinion no error is shown in this conclusion of the primary judge. Misuse would be almost inevitable if Mr Maxwell should take part in any settlement negotiations; and as pointed out by the New Zealand Court of Appeal in Carter Holt, it is very difficult indeed to keep the settlement negotiations quarantined from the conduct of the proceedings generally. 45 Once it is accepted that a real and sensible possibility of misuse is shown, then in my opinion the question of whether an injunction should be granted is a discretionary decision which would be overturned only on the basis discussed in House v The King [1936] HCA 40; (1936) 55 CLR 499. In my opinion, there is clearly no such basis in this case. 46 For those reasons, in my opinion, the appeal should be dismissed. Inherent jurisdiction 47 Having regard to my view on the previous issues, it is not necessary to determine this. 48 I would comment, however, that in my opinion there is such a jurisdiction; but I am doubtful if it would be exercised in many cases, on the basis of confidential information, where an injunction would not be granted on the principles I have been discussing. Orders 49 For those reasons, in my opinion the following orders should be made. (1) Leave to appeal granted. (2) Notice of Appeal to be filed within fourteen days. (3) Appeal dismissed. (4) Appellant to pay respondent's costs of the application and the appeal. 50 CAMPBELL JA: I agree with the reasons of Hodgson JA. I add that the New South Wales Barristers' Rules provide, in rule 87: "A barrister must refuse a brief or instructions to appear before a court if: (a) the barrister has information which is confidential to any other person other than the prospective client, and: (i) the information may, as a real possibility, be helpful to the prospective client's case; and (iii) the person entitled to the confidentiality has not consented to the barrister using the information as the barrister thinks fit in the case." 51 While there is no corresponding solicitors' rule, it would be surprising if solicitors were subject to less stringent obligations than barristers concerning the topic of this rule. 52 I agree with the orders proposed by Hodgson JA. ********** 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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