A duty not to tempt witnesses to breach likely confidentiality obligations?

Update, 22 December 2009: I came across this article recently: ‘Using Information: Witnesses Under Obligations of Confidence’ (2002) 22(11) Proctor 16.

Original post:

AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464; Bernard Murphy “Witnesses and Confidential Information” Litigation Lawyers’ Section Newsletter, March 2006

Melbourne class action litigator Bernard Murphy was found by the NSW Supreme Court to have engaged in the tort of inducing breach of contract by acting with a reckless disregard as to whether asking questions of a “smoking gun” ex-employee witness was likely to involve a breach of the witness’s confidentiality obligations to GIO. [Update, Jan 2007: compare this case.]
He won me over with his tale of the iniquity of it all. As far as I am concerned, a lawyer’s duty is to ask the questions, and the potential witness’s duty is to answer them consistently with his or her obligations. The giving of information by prospective witnesses to lawyers in breach of some obligation of confidence is an everyday occurrence. If the witness wants to take the risk, so be it. Any other way of looking at things is inconsistent with the way our society is organised, and places too great a distinction between lawyers’ fact finding and journalists’. How is a lawyer supposed to know whether the dainty veil of confidentiality has remained intact over the years? What if the employer’s conduct amounted to a repudiation of an implied term in the employment contract so that there was no ongoing duty of confidentiality? What if the witness knew that the confidential information had already been published by someone else on another occasion?

There is no confidentiality in an iniquity; “fraud undoes all” is a very useful maxim to keep in mind in legal practice as a counterpoint to the hysteria with which the law approaches the proposition that people might engage in — shock, horror — a spot of wilful lying a bit more often than now and again. But, though breach of s. 52 of the Trade Practice Act, 1974‘s prohibition on misleading and deceptive conduct may be either innocent or fraudulent, the judge doubted that breach of it would amount to an “iniquity” for the purposes of the exception in the law of confidential information. And the only prima facie evidence of the iniquity was in the evidence’s witness statement which the judge would not look at, so that he never had to consider whether the evidence described an iniquity or not. Accordingly, his comment about s. 52 and “iniquities” was dicta, and the contrary decision of Sheppard J in Allied Mills Industries Pty Ltd v Trade Practices Commission (1981) 37 ALR 105 was not overruled, just doubted. (See also Gummow J, Corrs Pavey Whiting and Byrne v Collector of Customs (1987) 14 FCR 434 at 455).

Murphy acted for some shareholders who won $112 million in a class action against GIO, but not before the whole litigation was almost derailed by the ruling inadmissible of crucial evidence and injunctions against the continued involvement of lawyers privy to the evidence, namely almost the whole legal team. The shareholders said GIO had engaged in misleading and deceptive conduct. Murphy took a witness statement from a key ex-employee of GIO. When he told the Federal Court he would be calling evidence from this witness, GIO sought, and obtained, an injunction to prevent not only the shareholder plaintiffs using the evidence, but also to prevent the continuing involvement of all of their lawyers who knew what the witness had told them.

Unbeknownst to Murphy, the witness had signed a confidentiality agreement as part of his employment with GIO. As Murphy points out, this is rather beside the point, since the assumption would be that any employee owes a duty of confidentiality either by way of an implied term, or in equity. Murphy says he was hindered by an inability to disclose privileged information in resisting the finding that he was reckless to the possibility that taking the witness statement was a breach of a confidentiality obligation owed by the witness to his employer. He now reveals that he had senior counsel’s advice that taking the witness statement was legal.

Despite the finding that he and his firm had engaged in the tort of inducing breach of contract, he managed to keep in the case, and win it, by finding the same evidence from three other witnesses who were not bound by the same confidentiality obligations because GIO ultimately did not resist applications for findings that their witness statements disclosed prima facie “iniquities”. It seems that those other witness statements had already been taken at the time of the injunction; otherwise it is hard to believe the Court would have tolerated lawyers using the ill-gotten fruits of the forbidden tree as a roadmap for the cobbling together of substitutes.

The significance of this for professional indemnity lawyers, and for professional regulators is clear enough. They often desire evidence from lawyers, and employees of lawyers, who must be presumed to owe duties of confidentiality to their clients, positive ethical duties (even in the absence of instructions to do so) to protect legal professional privilege which may also gather round confidential statements, and, in the case of employees of lawyers, duties of confidentiality to their employers. Regulators have the advantage of bunker buster clauses such as s. 149 of the Legal Profession Act, 1996 and s. 4.4.11 of the Legal Profession Act, 2005 which can penetrate confidentiality of whatever species, legal professional privilege, and the privilege against incrimination. In fact the the s. 4.4.11 power is expressly one which may be exercised after the investigation has concluded and the prosecution has commenced. That puts the prosecuted lawyer at a considerable disadvantage and undelines the acute need for procedural fairness in his or her prosecution.

By way of postscript: The Whistleblowers’ Protection Act, 2001 has been the subject of recent amendment restricting the ambit of the protection where the whistle is blown to private firms as opposed to the government or its Ombudsman. But that only applies to wrongdoing by public officers anyway.

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