Supreme Court New South Wales Medium Neutral Citation: Shannon v Gadens Lawyers Sydney [2013] NSWSC 417 Hearing dates: 22/04/2013 and 23/04/2013 Decision date: 23 April 2013 Jurisdiction: Equity Division Before: McDougall J Decision: Summons for preliminary discovery dismissed with costs against First to Third Defendants. Order that fourth defendant produce its files on payment to it of $30,000.00. Catchwords: DISCOVERY AND INTERROGATORIES - discovery - preliminary discovery - principles to be applied. PRACTICE AND PROCEDURE - jurisdiction - inherent jurisdiction - officers and processes of the court - application to restrain barrister from acting or appearing against former client - principles to be applied. Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Hatfield v TCN Channel Nine Pty Ltd [2010] (2010) 77 NSWLR 506 Kallinicos v Hunt (2005) 64 NSWLR 561 Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222 Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501 Category: Procedural and other rulings Parties: Geoffrey Anthony Shannon (First Plaintiff) C2C Developments Pty Ltd (Second Plaintiff) 33 Electra Pty Ltd (Third Plaintiff) Gadens Lawyers Sydney Pty Ltd (First Defendant) Peter Newton (Second Defendant) Commonwealth Bank of Australia Limited (Third Defendant) Crisp Pty Ltd (Fourth Defendant) Representation: Counsel: DMJ Bennett AC QC / G Slater (Plaintiff) CRC Newlinds SC / AC Kaufmann (First to Third Defendants) P Stokoe (Solicitor) (Fourth Defendant) Solicitors: Platinum Lawyers (Plaintiffs) Gadens (First, Second and Third Defendants) Crisp Legal (Fourth Defendants) File Number(s): 2013/112535 Judgment (EX TEMPORE - REVISED 23 APRIL 2013) 1HIS HONOUR: Mr Geoffrey Shannon, Mrs Linda Shannon and companies associated with them have been engaged in litigation with the Commonwealth Bank (including its former subsidiary and now subsumed entity Bankwest) for some years, and on many fronts. The bank has instructed Gadens Lawyers in the various proceedings between it and the Shannon interests. On some occasions, Gadens Lawyers have instructed Mr Peter Newton of Counsel. 2In 2010, Mr Shannon instructed the fourth defendant, Crisp Legal, in relation to a matter in this Court that was then listed before Davies J. Crisp Legal instructed Mr Newton for a time in those proceedings. Those proceedings are listed for hearing next month, with an estimate of two weeks, and it is expected that Sackar J will be the trial judge. Gadens Lawyers are, but Mr Newton is not, retained for the bank in those proceedings. 3Mr Newton is, however, briefed by Gadens Lawyers for the bank in other current proceedings against the Shannon interests. The present application 4The plaintiffs, Mr Shannon and entities associated with him, seek preliminary discovery from the bank, Gadens Lawyers and Mr Newton. The asserted purpose of that preliminary discovery is to assess whether to bring an action for an injunction to restrain Gadens Lawyers and Mr Newton from acting and appearing for the bank in proceedings against, or involving, the Shannon interests. The plaintiffs say that they have shown that they may have a right to such relief based on one of three principles. 5First, they say, they have shown that there may have been misuse of confidential information (in the sense, it is said, that Mr Newton may have received relevant confidential information in the course of his 2010 retainer, and at least subconsciously or inadvertently, might have disclosed relevant confidential material to Gadens Lawyers). 6Secondly, the plaintiffs say, they have shown that there may be a breach of the fiduciary duty of loyalty subsisting between them and their former legal adviser, Mr Newton. 7Thirdly, the plaintiffs rely on the Court's inherent power over its officers, to restrain conduct said to be inimical to the interests of justice. 8The plaintiffs also seek an order against Crisp Legal under s 728 of the Legal Profession Act 2004 (NSW) for delivery up of documents held by Crisp Legal in relation to its previous retainers on behalf of the Shannon interests. Preliminary discovery: the approach to be taken 9UCPR r 5.3 empowers the Court to order a prospective defendant to give discovery of documents to an applicant who asserts that it may be entitled to make a claim for relief against that prospective defendant, but that, having made reasonable inquiries, it does not have enough information to make a decision. I set out the rule: 5.3 Discovery of documents from prospective defendant (cf Federal Court Rules, Order 15A, rules 6, 7 and 9) (1) If it appears to the court that: (a) the applicant may be entitled to make a claim for relief from the court against a person (the prospective defendant) but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and (b) the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and (c) inspection of such a document would assist the applicant to make the decision concerned, the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person's possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief. (2) An order under this rule with respect to any document held by a corporation may be addressed to any officer or former officer of the corporation. (3) Unless the court orders otherwise, an application for an order under this rule: (a) must be supported by an affidavit stating the facts on which the applicant relies and specifying the kinds of documents in respect of which the order is sought, and (b) must, together with a copy of the supporting affidavit, be served personally on the person to whom it is addressed. (4) This rule applies, with any necessary modification, where the applicant, being a party to proceedings, wishes to decide whether or not to claim or cross-claim against a person who is not a party to the proceedings. 10The approach to the application of the rule was discussed by the Court of Appeal in Hatfield v TCN Channel Nine Pty Ltd (2010) 77 NSWLR 506. McColl JA dealt with the basic principles at [46] to [52] of her reasons. Although Young JA differed from some aspects of the reasoning of McColl JA, and Sackville AJA likewise appears to have had some reservations about some aspects of her Honour's reasons, I do not think that there is anything in the paragraphs of her Honour's reasons to which I have referred that is controversial. 11First, her Honour said at [47], it is not necessary for an applicant for relief to satisfy the Court that it has a prima facie or pleadable case. Although her Honour did not expand on the concept of "prima facie case", it has to be acknowledged that the content of that term is somewhat uncertain. For example, in the context of interlocutory injunctions, it has been held authoritatively not to require that the applicant show that it has anything more than an arguable case, the strength of which needs to be assessed by reference, among other things, to the consequences of granting or withholding interlocutory relief. Of course, the principles expounded in relation to interlocutory injunctions are not directly relevant to applications under r 5.3. I mention that simply to show that the concept of prima facie case is itself a somewhat uncertain one. 12Returning to the reasons of McColl JA in Hatfield, the second point that her Honour made, at [48], was that mere assertion of a case is insufficient; but the test will be satisfied "if there is reasonable cause to believe that the applicant may have a right of action against the respondent resting on some recognised legal ground". 13At [49], her Honour noted that "belief requires more than mere assertion and more than suspicion or conjecture". It required, her Honour said, "an inclination of the mind towards assenting to, rather than rejecting a proposition". It requires more than a matter of mere possibility: "the evidence must incline the mind towards the matter or fact in question". 14The fourth point made by her Honour need not be dealt with: it concerns the difference of emphasis between r 5.3 and the equivalent rule applied by the Federal Court (Order 15A rule 6). 15The fifth point made by her Honour is important. Her Honour said at [51] that the question is not just whether the applicant has sufficient information to decide if a cause of action is available to it, but whether the applicant has sufficient information to decide whether to commence proceedings. Thus, as her Honour pointed out, one of the purposes for which preliminary discovery may be ordered is to enable the applicant to see what defences are available, and what their strength may be. It follows, as her Honour pointed out, that "application of the rule will not be precluded by the fact that the applicant already has available evidence establishing a prima facie case for the granting of relief". It may also be appropriate to give preliminary discovery to enable the applicant to see if "there might be matters of defence which could defeat a prima facie case". 16The sixth point, made by her Honour at [52], is that the rule is to be construed beneficially and given the fullest scope reasonably available on its language. Excess in its application is to be controlled by the discretionary nature of the rule itself. The jurisdiction to restrain lawyers from acting against former clients 17The case which the plaintiffs say they wish to investigate is the possibility of restraining Gadens Lawyers and Mr Newton from continuing to provide legal services to the bank, in litigation involving the Shannon interests. That requires some consideration to be given to the circumstances in which the Court intervenes to restrain lawyers from acting against their former clients. 18To my mind, the starting point, or general rule, is that lawyers are free to accept instructions to act or appear against a former client, unless there are good reasons why they should not do so. That general rule, in my view, is reinforced, in the case of barristers, by the cab-rank rule. Thus, the undoubted power of the Court to restrain lawyers from acting should be seen as an exception to that general rule. 19The circumstances in which the Court may restrain a lawyer from acting against a former client, following the termination of the retainer by that client, appear to have given rise to some divergence of judicial opinion. In the United Kingdom, the position, established by Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222, is that restraint after termination of retainer can only be justified on the basis that it is necessary to avoid a significant risk of the disclosure or misuse of confidential information belonging to the former client. That position appears clearly from the speech of Lord Millet at 234. His Lordship's views enjoyed the support of all others who sat on the appeal. 20I do not think that Lord Millet meant to exclude from consideration the inherent power of a superior court to control its officers. That was not relevant in the case before the House of Lords, because it concerned auditors rather than lawyers. Thus, the reasons given by their Lordships need to be read with that in mind. I agree with what Brereton J said in Kallinicos v Hunt (2005) 64 NSWLR 561 at, in particular, [34], [35] on this point, as amplified at [36] to [48]. 21The alternative basis expounded in some cases is that misuse of confidential information is not the sole basis for intervention. That position appears most clearly from the reasons of Brooking JA in Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501, in particular at [52] to [58]. His Honour identified two additional bases of intervention. The first was intervention to restrain breach of the fiduciary obligation of loyalty or some equivalent contractual obligation arising out of the retainer. The second was the inherent power of the Court to restrain its officers, or as his Honour put it, bring them to heel, where the interest of justice so required. 22As I have said, in this case, the plaintiffs rely on all three bases. The parties' submissions 23Dr Bennett of Queen's Counsel, who appeared with Mr Slater of Counsel for the plaintiffs, submitted that it was appropriate to assess the matter on the basis that the first ground of restraint - misuse of confidential information - was clearly available, but that the second certainly, and the third possibly, might not be. Whilst I have no doubt that the third ground of restraint, based on the Court's inherent power, would be available in an appropriate case, I accept Dr Bennett's submission that the application needs to be assessed on the basis that his clients may need to fall back on misuse of confidential information if they are to obtain the restraint that they seek. 24For myself, although it is neither necessary nor appropriate to decide, I do incline to the view, as I have indicated, that the House of Lords did not intend to interfere in the well-established jurisprudence relating to the Court's control over its own officers. But having said that, I shall move on. 25Dr Bennett submitted that there was evidence, sufficient to engage r 5.3, to show that there was a real possibility that his clients would be entitled to an injunction to restrain misuse of confidential information. He relied on a number of matters, including what he said was the inherent likelihood that, in the course of his retainer by the Shannon interests in 2010, Mr Newton would have been put in receipt of confidential information that was relevant to the general state of affairs as between the Shannon interests and the bank. Dr Bennett called in aid, among other things, "probabilities, human nature et cetera". 26Mr Newlinds of Senior Counsel, who appeared with Mr Kaufman of Counsel for the bank, Gadens Lawyers and Mr Newton, submitted that the evidence raised no more than a conjecture or a mere possibility. Decision 27It is convenient to start by noting that the rule contains two requirements that must be satisfied before the discretion is enlivened. The first is that it appear to the Court that the applicant may be entitled to make a claim for relief against a prospective defendant. The second is that, having made reasonable inquiries, the applicant is unable to obtain sufficient information to make the decision whether or not to commence proceedings. 28I accept, as I have indicated, that the objects of the rule extend to enabling an applicant to assess the strength of its case, and thus the availability and strength of defences. 29However, even accepting that broad application of the rule, I conclude that the plaintiffs fail at each stage of the inquiry. 30The evidentiary foundation to this aspect of their case is that Mr Shannon had no direct contact with Mr Newton. It was said that he instructed Crisp Legal, who in turn instructed Mr Newton. 31To the extent that there is evidence relating to Mr Newton's retainer and work done by him, it is gleaned from documents that have been produced on this application. 32On 28 April 2010, Crisp Legal wrote to Mr Shannon about certain proceedings in this Court. They noted, among other things, that: "Peter Newton, barrister, has been briefed on your instructions, to provide advice, settle correspondence in relation to the above matter and attend the directions hearing before Justice Davies on 27 April 2010. Mr Newton is working to a 'fee cap' limit of [an amount was stated] and will advise us when that figure has been reached." 33On 27 April 2010, Crisp Legal reported to Mr Shannon on what had happened in this Court before Davies J that day. The email confirmed "that we instructed Peter Newton at the Directions Hearing...". It stated that the plaintiff had said that it intended to file a notice of motion seeking security for costs, and making other applications, and that it had sought an order for the Shannon parties' evidence to be served. The email noted that the making of this latter order "was opposed by Peter Newton." 34The material also includes an email of 22 April 2010 from Crisp Legal to Mr Newton. That email (omitting formal parts) reads as follows: We refer to our conference this afternoon. Attached are copies of the following: 1. Extract of mortgage memo 9390023 ("Electra Mortgage Memorandum") (as referred to in the particulars to paragraph 4(g) of the statement of claim). 2. Caveat lodged by Snowball (as referred to in the particulars to paragraph 8 of the statement of claim). 3. Letter from Gadens to 33 Electra dated 7 October 2008 (as referred to in paragraph 11 of the statement of claim). 4. Letter from Gadens to 33 Electra dated 6 November 2008 (as referred to in paragraph 13 of the statement of claim). You will note that an "Encumbrance" under the Electra Mortgage Memorandum includes a caveat. Further, a "Security Interest" as set out in the relevant clause 12.1(I), which Bankwest pleads at paragraph 4(g), includes an Encumbrance, and therefore includes a caveat. In short, lodgement of a caveat is an event of default. Letters 3 and 4 set out the defaults relied upon. I am checking with mr Shannon as to the dates funding was switched on and off. I will also forward a revised draft letter to Gadens to you concerning particulars of the loss claim. 35It is apparent from that email that there had been a conference between the author and Mr Newton, at which the matters referred to in the email were discussed. It is also at least an available inference from that email that Mr Newton was to be instructed to settle the "draft revised letter to Gadens". 36The evidence also includes some itemised details of fees rendered by Crisp Legal for professional services. In relation to one matter, those records show that Mr Newton was briefed on 3 March 2010 and that there were conferences with him on 15 March 2010 and 19 March 2010. 37In another matter, those records show that there were "meetings" with Mr Newton on 26 March 2010. 38That is the extent of the evidence relating to work done by Mr Newton or instructions given to him. However, there has been correspondence (written no doubt with a view to this application being made) which makes further assertions in relation to Mr Newton's role. I do not propose to set out, or act on the truth of, the detail of that correspondence, because it is in the main contentious, and certainly unsupported by other and properly admissible evidence. 39It seems that Mr Shannon has little doubt that he has given confidential information to Mr Newton. A national daily newspaper, The Australian, has taken an interest in this dispute. There have been reports which contain what purport to be, and what I have no doubt are, quotations of matters stated by Mr Shannon to the reporter or reporters involved. On 18 March, Mr Shannon, who is described as "founder of the Unhappy Banking group which is dedicated to overturning injustices to bank customers", said that he did give confidential information to Mr Newton. I set out some of what was attributed to Mr Shannon in the report of 18 March 2013: "(The barrister's) sister worked at the law firm I was using," Mr Shannon told The Australian. "I sent her my documents and chronology and I have emails confirming that the barrister now acting against me was briefed." "It was the furthest thing from my mind that a barrister who worked for me would go and work for the other side." "I believe the whole Bank West case is now tainted." "It's impossible for me to get a fair trial of the issues." 40At that stage, Mr Newton was not identified. It became plain, however, in particular from what happened before Slattery J that day and from what was reported the following day, that it was Mr Newton who was being referred to. 41It might be noted also that Mr Shannon appears to have made a complaint to the Legal Services Commissioner against Mr Newton, asserting, among other things, that Mr Newton has, and may have misused, confidential information given to him by or on behalf of Mr Shannon. 42At this stage, I observe that one would think that anyone prepared to make allegations of the kind that were made to the press, and to the Legal Services Commissioner, would have had a very good idea of what was the confidential information in question, and what were the bases on which it was said it was likely to have been misused. 43Mr Shannon's solicitor, Mr Douglas Laing McClelland, has sworn an affidavit describing what is claimed to be confidential information in Mr Newton's possession. It is a matter of some surprise that Mr Shannon has not seen fit to put his oath to his claims, in circumstances where, as I have noted, he appears to have entertained little doubt, in his dealings with the press and with the Legal Services Commissioner, that there is a real likelihood of misuse of confidential information. It has not been suggested that Mr Shannon was, for some reason, unavailable to give evidence on this question in support of the claim for preliminary discovery. 44In his principal affidavit sworn 11 April 2013, Mr McClelland referred to a number of proceedings between Shannon interests and the bank, and then, at paras 12 and 13 said the following: 12. Based on the foregoing (and contents of my confidential affidavit), I believe that the 2nd Defendant (Mr. Newton, a barrister) was previously briefed on behalf of Mr Geoffrey and Mrs Linda Shannon, C2C Developments Pty Ltd, C2C Investments Pty Ltd and/or 33 Electra Pty Ltd during 2010, and was variously opposed to CBA/Bankwest who were (and remain) represented by the 2nd Defendant (a solicitors firm, Gadens) as against the Shannon Group. 13. Based on the above, I believe that at a time presently unknown, Mr. Newton was subsequently briefed by Gadens to act against his former clients, and may have already been working for Gadens in unrelated matters at the when he accepted the brief to act for the Shannon Group interests and/or appeared on behalf on their behalf. 45Mr McClelland returned to the topic at para 19, and again at para 23 (it is a little difficult to follow the affidavit because, for reasons known only to the drafter, paragraphs 14 to 16 follow paragraph 22, and are themselves followed by paragraphs numbered 17 to 19, which replicate numbers used earlier in the affidavit). But, leaving those word processing difficulties aside, that appears to be the extent of the evidence in Mr McClelland's affidavit. I set out those further paragraphs: 19. The above observation remains the case even with the benefit of the (limited) material in my confidential affidavit setting out what client communications did exist between Crisp Legal, Mr. Newton and the Shannon Group, and could reasonably be expected to reveal further specific contents of conferences held with Mr. Newton concerning the Shannon Group. ... 23. As a result, I believe from the foregoing that there is a real and ongoing risk that the 1st-3rd Defendants, and particularly the partners and employed solicitors of Gadens, jointly and separately:- (a) have direct, indirect, subconscious and/or inadvertent use of privileged client communications (including mental impressions, insights, tactics and/or other vulnerabilities) that came into possession of the 2nd Defendant as a result his previously acting for my clients as a barrister in several matters; (b) have direct, indirect, subconscious and/or inadvertent use disclosure of privileged client communications over the Shannon Group that is effectively a closely held group of family companies with director personal guarantees, securities (and so on) that renders their litigation and factual matrix inextricably linked with one another; (c) have direct, indirect, subconscious and/or inadvertent use disclosure of privileged client communications (including mental impressions about my clients, insights, tactics and/or other vulnerabilities) that a fair minded, reasonably informed member of the public might or would reach the conclusion that the proper administration of justice was jeopardised by the appearance and/or actuality of privileged client communications of former client(s) of the 2nd Defendant (Mr. Newton) being placed at risk of being subconsciously and/or inadvertent used against the former client(s) by the 1st and/or 2nd Defendants (Mr. Newton and Gadens) for the benefit of their client, the 3rd Defendant (the CBA). 46In his second affidavit, Mr McClelland referred to various documents. I have summarised the effect of those documents above. 47Mr McClelland was cross-examined on the alleged confidential information. It was put to him that the most he knew of Mr Newton's involvement was that he had acted. Mr McClelland replied that he knew that Mr Newton had acted, did not have full details, but that "there is sufficient information in the documents that I do have to, in my view, support this information". 48Nonetheless, Mr McClelland agreed, he knew no more than Mr Newton had acted for Mr Shannon or for companies associated with him. I set out that passage of Mr McClelland's cross-examination (T 8.35 - .50): Q. Can I just ask you this question. The most you know of Mr Newton's involvement with your client or companies associated with your client in the past is that he acted; correct? A. The most I know is that Mr Newton has acted for the Shannon group in the past, the full details of which I am not privy to because I do not have Crisps' file. However, there is sufficient information in the documents that I do have to in my view support this application. Q. Have you finished that answer? A. Yes. Q. What I want to suggest to you is you that you don't know anything more than the bare facts that Mr Newton acted for Mr Shannon or for companies associated with him in the past. Do you agree with that or disagree with that? A. I'd agree with that. 49Mr McClelland returned to the topic of confidential information. He acknowledged that Mr Shannon had "suspected that there had been some leaking of confidential information...about tactics". Mr McClelland identified those tactics as being, in effect, the corporate structure associated with Mr Shannon and the relationships between the various entities and trusts. I set out this passage of Mr McClelland's cross-examination (T 9.21 - 10.40): Q. You know that Mr Shannon has said on his oath in the past that he suspected that there had been some leaking of confidential information to Gadens about tactics? A. That is correct. Q. Now, just pause there. Do you know anything about what those tactics are said to be? A. Yes. Look, I've acted-- Q. Just answer the question? A. I'm trying to. Q. Do you know what tactics Mr Shannon suspects have been passed on to Gadens? A. Yes. The company, the various company structures that have been set up between Mr Shannon's building companies, development companies, finance companies. It's quite a complex matrix of associations of corporations, trusts and individuals. It's, the development that he was working on was quite a substantial development. It wasn't just one house. 50Finally, on this topic, Mr McClelland returned to the theme that the confidential information given to Mr Newton was "all the company structures, all the information that's necessary to defend or prosecute one's claim" (T 14.9 - .10). This aspect of Mr McClelland's cross-examination concluded with the proposition, to which, remarkably, he acceded, that he "probably" had not asked Mr Shannon what confidential information he gave to Crisp Legal. I set out the sequence of questions and answers culminating with that (T 14.4 - .44): Q. What else have you got? A. We've got Mr Newton acted. We've got the possibility of the use or misuse of confidential information that Mr Newton and Crisps would have obviously needed to transfer to each other as part of briefing a barrister. Q. But what information? A. All the company structures, all the information that's necessary to defend or prosecute one's claim. Q. Company structures are a matter of public record, aren't they? A. Not the intercompany relations and how they all fit into the matrix of particular people's set-ups. Q. Mr Shannon could come along and tell us today, albeit with the difficulties of memory no doubt, at least in general terms what instructions he gave Crisps, could he not? A. Could he come? Q. Come along and swear an affidavit and say hello, I'm Mr Shannon. I gave Crisps the following instructions? OBJECTION BENNETT: That is not a question Mr McClelland can answer. NEWLINDS Q. I do not ask it as a legal proposition but just as a fact. He could do that, couldn't he? HIS HONOUR: As a fact I allow it. WITNESS: I presume he could. NEWLINDS Q. You don't know? A. No, I don't know. Q. You don't know. Is that because you have not asked him what confidential information he gave to Crisps, is it? A. Probably. 51To my mind, considering the evidence (both documentary and oral) as a whole, it falls far short of showing that Mr Newton may have received relevant confidential information of the plaintiffs, let alone that there is any risk of misuse, subconscious or otherwise, of such information as Mr Newton may have received. To my mind, and returning to the words used by McColl JA in Hatfield, this aspect of the evidence goes no further than mere assertion or mere suspicion or conjecture. It does not incline my mind towards assenting to the proposition that Mr Newton may have received, and may subconsciously or otherwise misuse, confidential information. The evidence leaves the matter at no more than the stage of mere possibility. 52The evidence that was given must be assessed bearing in mind, as I have pointed out already, that Mr Shannon has not seen fit to give evidence on this topic. If, as Lord Mansfield observed many years ago, all evidence is to be assessed according to the power of one party to produce it and the other to rebut it, the failure of Mr Shannon to grace the witness box with his appearance tells very strongly against acceptance of this aspect of the plaintiffs' case. Although it should not need repeating, I do point out that, as Mr McClelland acknowledged, Mr Shannon was alive and well, and there was no stated reason why he could not have given evidence. 53Finally, on this point, I note that the proceedings in which Mr Newton had been briefed for a time in 2010 are ongoing. They are the proceedings that are listed for hearing next month. Mr Newton is not briefed for the bank in those proceedings. I see no reason to think that a reputable law firm and a reputable member of the Bar, dealing with each other in the course of other litigation on behalf of the bank, would discuss a matter in which the barrister had been briefed for an opposing party, but in which he had no current involvement. 54Thus, I am not satisfied that there has been shown any basis for thinking that any relevant confidential information has been given by the plaintiffs or any of them to Mr Newton. Nor am I satisfied that if (despite my view) some such information were given to Mr Newton, there has been shown any possibility of its misuse. 55I turn to the question of reasonable inquiries. 56Crisp Legal, who it will be recalled had acted for the Shannon interests and had retained Mr Newton on their behalf, had agreed to make its files available to the Shannon interests in return for a payment of $30,000. That sum had been proposed by Mr Shannon as a full and final settlement of the (much higher) amount of outstanding fees claimed by Crisp Legal. Had Mr Shannon honoured the agreement that he had negotiated, he would, by now, have had access to all Crisp Legal's files. Mr Shannon did not honour the agreement that was made. There is no evidence as to why he did not: for example, because he could not afford to pay. 57Mr McClelland was cross-examined on this topic also. He said that he was aware of the offer, although not aware of its acceptance (I interpose to note that the unchallenged evidence for Crisp Legal is that there was an accepted offer, and thus a concluded agreement). However, Mr McClelland would not concede that the reason why Mr Shannon did not perform the agreement was because he could not pay the amount that he himself had offered. I set out the relevant passage of cross-examination (T 7.44 - 8.33): Q. You know that at some stage Crisps offered to your client that they would accept $30,000 in full discharge of their claimed outstanding fees? A. I'm aware of that. Q. And you are aware, aren't you, that your client accepted that offer? A. I'm not aware that he accepted it. Q. Well, he didn't pay the money within the prescribed time, but for a period of time you anticipated that the problem with the lien would be resolved by your client paying Crisps $30,000; correct? A. I'm aware of that situation, yes. Q. And you know the reason he didn't pay Crisps $30,000 is that he doesn't have any money available to him to pay anyone any amount of costs; correct? A. I don't think that's - look, I can't answer that question. Q. Surely you know, you're his solicitor? A. Sure. Q. He doesn't have any money available to him, does he? A. I don't believe that's a correct - that's correct at all. Q. And if his Honour was to order preliminary discovery, your client would not have the ability to pay the costs of that process, correct? A. I don't believe that's correct, either. Q. Do you have any basis for that belief that you can offer up? A. Well, I'm aware of Mr Shannon's precarious financial position for sure, but that's not particularly his fault and he has access to other funds outside of his-- Q. The funds that he has access to are funds that have been raised by the unhappy bankers' group, correct? A. Not necessarily. Q. What other funds does he have? A. He has the support of family, friends and others. Q. And if they choose to help him they might, but if they don't choose to they won't? A. Well, that's quite true. That's the same as for anyone, isn't it? 58I do not think that the implied requirement to make reasonable inquiries has been satisfied in circumstances where: (1) Mr Shannon negotiated an agreement for the release to him of all Crisp Legal files, on payment of $30,000 (an amount proposed by him); (2) Mr Shannon did not perform his side of that agreement, and thus did not get hold of the files; and (3) Mr Shannon has not said that he was prevented from performing that agreement by supervening circumstances. 59It may be, of course, that access to the Crisp Legal files would be insufficient for the plaintiffs' purposes. But one would expect those files to show what (if any) truly confidential relevant information had been passed on to Mr Newton. Regardless, even if the files are not a sufficient source of information, they are, in my view, a necessary part of the inquiry. Thus, the unexplained failure of Mr Shannon to avail himself of the opportunity that he himself negotiated to have access to those files is a reason for concluding that he has not made reasonable inquiries. 60In this case, in my view, reasonable inquiries would extend to seeking to obtain the files. If it had not been possible to negotiate an agreement of the kind that was in fact made, then reasonable inquiries might require the prosecution of a claim under s 728 of the Legal Profession Act. But in circumstances where the agreement was made, reasonable inquiries, in my view, would extend to performing it. Certainly, having regard to the circumstances in which the agreement was made, it cannot be concluded, at least without some explanation, that the price negotiated was unreasonable. 61Thus, as I have said, I regard the unexplained failure to perform the agreement as demonstrating failure to make reasonable inquiries. 62It is not necessary to deal with discretionary factors. They are outlined in some detail in the written submissions put by Mr Newlinds and Mr Kaufman for the first to third defendants. Some of those discretionary factors have disappeared (for example, because the width of the request for documents has been narrowed in an acceptable way, and undertakings in respect to the cost of production have been given). It is unnecessary to say more except that, had it been necessary to look in detail at the discretionary considerations, I would have regarded the question of delay in bringing the application as very significant indeed. 63For those reasons, the claim against the first to third defendants fails. The claim under s 728 64I turn to the claim under s 728. I start by observing that, on the evidence, it was Crisp Legal who terminated the retainer. 65Section 728 of the Legal Profession Act reads as follows: 728 Supreme Court may order delivery up of documents etc (1) On the application of a client of a law practice, the Supreme Court may order the law practice: (a) to give to the client a bill of costs in respect of any legal services provided by the law practice, and (b) to give to the client, on such conditions as the Supreme Court may determine, such of the client's documents as are held by the law practice in relation to those services. (2) Subsection (1) does not affect the provisions of Division 11 of Part 3.2 with respect to the assessment of costs. (3) This section does not apply to the client of a law practice retained on the client's behalf by another law practice. (4) In this section, a reference to a law practice includes a reference to: (a) in the case of a person who was a sole practitioner when the legal services concerned were provided: (i) the former sole practitioner, or (ii) the executor of the will of the former sole practitioner, or (iii) the trustee or administrator of the estate of the former sole practitioner, and (b) subject to any other applicable arrangements: (i) the persons who were the partners of a former law firm or multi-disciplinary partnership when the legal services concerned were provided, and (ii) in the case of a law firm or multi-disciplinary partnership where there has been a change of partners since the legal services concerned were provided-subject to any other applicable arrangements, the firm or partnership as currently constituted, and (iii) the assignee of a law practice or former law practice, and (iv) the receiver of a law practice or former law practice appointed under this Act, and (c) any person of a class prescribed by the regulations for the purposes of this subsection. 66There is no doubt that the discretion to make an order under the section may be exercised subject to conditions. 67A condition frequently imposed is that the former client, and its present lawyers, will act so as to preserve the lien, and that the documents produced under compulsion of s 728 will be returned to the former lawyer when they are no longer needed. 68In this case, undertakings to that effect are now given. 69However, to my mind, the facts of this case call for the imposition of a further condition: namely, that the documents should be released only on payment of the agreed amount of $30,000. 70Although the agreement was made some time ago, Crisp Legal has indicated, in the course of submissions, that it is prepared to stick to it, and to produce its files if paid. If the agreement had been performed, then there would have been no need to consider exercising the s 728 power. 71In those circumstances, there is to my mind a real question as to whether the Court should make any order, or whether it should leave the parties to their bargain. 72It is difficult to avoid the conclusion that Mr Shannon fixed his sights on s 728 as being, in effect, a lower cost alternative to honouring the bargain that he had offered and struck. I do not think that the Court should allow its processes and powers to be misused in the way that, at least prima facie, is being sought in this case. That is so at least in circumstances where there is no evidentiary basis for thinking that performance of the bargain would have imposed an undue or harsh burden on the plaintiffs. 73However, and with some reluctance, I have come to the view that it is better to settle the position now, but on the basis that Crisp Legal will be no worse off than it would have been had the agreement been performed, and that the plaintiffs will be no better off. Orders 74For those reasons I make the following orders: (1) Order that the summons be dismissed with costs as against the first to third defendants. (2) Order that upon payment to the fourth defendant of the sum of $30,000, the fourth defendant produce to the plaintiff's solicitor such of the documents specified in schedule 2 to the amended summons as are in the possession of the fourth defendant. (3) Order the plaintiffs to pay the fourth defendant's costs of these proceedings, including the reasonable costs of production of documents. ********** 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. Decision last updated: 24 April 2013