2nd edition of Professional Liability in Australia reviewed

I was already a fan of the first edition of Judge Stephen Walmsley SC, Alister Abadee, and Ben Zipser‘s excellent Professional Liability in Australia, published by Thomson, and had been waiting for the new edition with interest. I got myself a copy the other day. It’s good, and there are substantial additions since the first edition, including a lot on expert evidence, a new bit on professional discipline, analysis of the Financial Services Reform Act, 2001, analysis of the cases on the civil liability acts and a good analysis of proportionate liability.

It is a text which delves into all of the legislation which clusters around professional liability these days and grapples with it, a thankless task for an Australian text writer compelled to read and understand all of the states’ and territories’ regimes and then synthesise them. So the availability of compensation in professional discipline regimes is treated properly, as is the effect of professional standards legislation, which caps liability for scheme mebers. The research is wide-ranging and thorough: a VCAT decision is cited. It is written from a practical perspective rather than a theoretical perspective. There is not the over-reliance on English authority which sometimes characterises texts in this area. The writing tends to take positions rather than carrying on at great length about parallel or divergent lines of authorities without suggesting which is to be preferred. One suspects that bad decisions have simply been ignored in the hope that they will be forgotten. If only more text writers would operate in this fashion.

Professional negligence is one of those areas of law in which everyone claims to be a specialist. There are, for example, 387 barristers at the Victorian Bar who claim on their web profile to practise in professional negligence. Then there are undoubtedly many others, like me, who haven’t listed their practice areas using the scheme which allows for searching like that.

Thomson has kindly offered a 10% discount for readers of this blog if you go to their bookshop at 160 William St, Melbourne. Alternatively, the book can be purchased online, for $220 inclusive of postage and handling.

Continue reading “2nd edition of Professional Liability in Australia reviewed”

Solicitors’ liability paper; conflicts of lawyers acting for insurer and insured

Here’s a link to a little article on the law relating to the possible conflicts of duties faced by a lawyer retained by a liability insurer to act for its insured in the defence of proceedings against the insured. It discusses 3 English cases:

  • Brown v Guardian Royal Exchange Assurance;
  • TSB Bank v Robert Irvin; and
  • Zurich Professional v Karim.

And here’s a link to an excellent solicitors’ liability publication from Barlow Lyde & Gilbert. It deals with the new professional conduct rules in England, solicitors’ liability for mortgage fraud, lawyers’ obligations to their opponents, and an unusual case in which liability insurers were ordered by the Court to pay £1 million in legal costs of a failed defence even though the limit of indemnity had been exhausted by the judgment. That was ordered on the basis of these apparently unremarkable circumstances:

‘(i) the insurers determined that the claim would be fought; (ii) the insurers funded the defence of the claim; (iii) the insurers had effective conduct of the claim; (iv) the insurers fought the claim exclusively to defend their own interests; and (v) the defence failed in its entirety.’

Freshfields partner gets whacked $140,000 over conflict of duties to concurrent clients

Freshfields used to be Marks & Spencer’s go-to lawyers. Then they fell out of favour a bit. But they were still acting for Marks ‘n’ Sparks on one relatively small contract. A key partner then decided to accept instructions to act for a consortium trying to take over the supermarket chain. If the takeover went hostile, that one contract was likely to be contentious. There was a potential conflict of duties, the Court found in Marks and Spencer Group Plc v Freshfields Bruckhaus Deringer [2004] EWCA Civ 741, and restrained the firm from acting. Three years later, the wheels of justice have ground on, and the disciplinary sequelae of the injunction application have come to a head. Barry O’Brien copped a £5,000 fine from the Solicitors Disciplinary Tribunal, and a £4,000 fine for bringing the profession into disrepute. He pleaded, and ‘volunteered’ to pay prosecution costs of £50,000 which suggests that he had a good long think before pleading. Continue reading “Freshfields partner gets whacked $140,000 over conflict of duties to concurrent clients”

The incapacitated client

client-capacity-guidelines-diagram.jpg

Here’s an interesting case about lawyers, incapacitated clients, paternalism, and the right to be represented. An Alzheimers affected woman hired a beak to oppose a guardianship application brought by her brother. The court appointed another lawyer to act for her, suspecting that the man she professed to want to marry had in fact been behind the first hiring. The Court-appointed lawyer successfully applied to remove her own lawyer for a conflict of duties owed to her and to the man. An appeal court in the US capital reversed the decision, saying that free will cannot be countermanded on the basis of a hunch as to competence. Sounds like an important principle to me, else some mandarin in the Federal Government might decide that a doctor was not only an illegal alien of thoroughly rotten character but incompetent to boot and appoint a nice government lawyer resident in Nauru to act for him. The NSW Law Society has published a set of Client Capacity Guidelines for Civil and Family Law matters. The diagram featured is from it.

I acted for a solicitor sued by a former client. She said her medication affected her so at the mediation that the lawyer should pay her the difference between the millions she should have got and the paltry amount she considered she did get. I know, it didn’t make sense to me either. Anyway, during the professional negligence case, the lady seemed to flicker in and out of competence depending on whether an adjournment was needed. Continue reading “The incapacitated client”

Chinese wall holds up at investment bank

Update, 13 November: Clayton Utz’s take on the case here.

Here’s a long Sydney Morning Herald article about the latest big Chinese wall case, this time not in the context of a law firm, but of Citigroup, an investment bank. Here’s The Age‘s shorter version. The case is ASIC v Citigroup Global Markets Australia Pty Ltd (No. 4) [2007] FCA 963. Here’s a summary by Corrs Chambers Westgarth. Here’s Minter Ellison’s effort. And here’s Allens Arthur Robinsons’ take. The bank’s Chinese wall was declared ok in a 40,000 word long judgment, and his Honour found that Citigroup had successfully contracted out of a fiduciary relationship from the outset, in its retainer letter. But the judge did have this to say about one of the Bank’s key witnesses at [454]ff: Continue reading “Chinese wall holds up at investment bank”

Supreme Court enjoins Legal Practice Board’s solicitors from continuing to act

ZG-W v CCW (a firm) (2007) VSC 235 is the latest in the saga of the Legal Practice Board’s practising certificate cancellation of Melbourne’s best known female criminal lawyer. She has succeeded in having the Board’s lawyers enjoined from acting further for the Board on the relatively rare basis that it would bring the administration of justice into disrepute if they were permitted to continue to act. They obtained a transcript of an Australian Crime Commission examiner’s interrogation of the solicitor. The solicitor is charged with giving false evidence in that examination which is one of the reasons why the Board refused to renew her practising certificate. Justice Bell said at [20]:

‘The solicitor at the [Office of Public Prosecutions] refused [CCW’s] request because the plaintiff was contesting the allegations and the presumption of innocence applied to her. If I may say so, this is important advice that everybody should keep firmly in mind.’

Because of the invasive powers of compulsion exercised against the solicitor as examinee, the transcript was not permitted to be used otherwise than for the purposes of the examination, though an exception was made for the purposes of the charge of giving false evidence in the examination. The Legal Practice Board, through its lawyers, procured a copy of the transcript for use in the solicitor’s VCAT challenge to the Board’s refusal to renew her practising certificate. The story involves a baptism of fire for a newly admitted solicitor: Continue reading “Supreme Court enjoins Legal Practice Board’s solicitors from continuing to act”

Legal Services Commissioner publishes annual report

The Legal Services Commissioner’s website is growing some content. Her annual report for the part-financial year ending 2006 is published there. In summary:

  • For those who enjoy the suffering of others, commencing at p. 22 there is a list of all the adverse disciplinary findings made by VCAT’s Legal Practice List, and it names the practitioners involved;
  • The Commissioner’s office has 3 executives in addition to Victoria Marles: Janet Cohen (formerly the Deputy Legal Ombudsman), David Forbes, and Diana Gillespie; 9 legal staff 2 of whom are part time; (2 out of the 13 mentioned are blokes) and 19 administrative staff;
  • She received 1,218 complaints under the new Act (6 a day), of which 664 were only disciplinary (55%), 310 were only civil (25%), and 244 were both (20%) (all of the complaints figures below are only about the new Act complaints received, except where indicated);
  • Only 33 were against barristers (3%);
  • 238 involved a costs dispute (20%), a surprisingly low figure, especially given that 553 of the complaints were about costs or bills (45%);
  • Only 117 involved a pecuniary loss dispute (10%) which shows that two-thirds of the 322 complaints characterised as being about “Negligence — including bad case handling and advice” were dealt with as disciplinary complaints or costs disputes which is most surprising;
  • Only 719 were handled by the Commissioner (59%) — the rest were referred to the Law Institute and the Bar for investigation and recommendation as to ultimate decision to be made by the Commissioner;
  • 67% of those delegated to the Law Institute involved a disciplinary complaint;
  • 14% were about wills and estates, 14% about conveyancing, 18% about family law, and only 5% about crime;
  • 6% were about conflicts;
  • There were 3 complaints of sexual impropriety;
  • There were no ‘other genuine dispute’ within the definition civil disputes in s. 4.2.2(2) of the Legal Profession Act, 2004;
  • No prosecutions were brought;
  • Not a single finalised disciplinary complaint was successful (and only 1 out of the 100 old Act complaints succeeded — it resulted in a reprimand);
  • There were 3 FOI applications to the Commissioner; and
  • The going tariff for a breach of the obligation to deliver up documents within time pursuant to the Commissioner’s power of compulsion seems to be a $500 fine and costs of $1,000.

The Office had revenue of $3.4 million (almost all from the Legal Services Board) of which $1.3 million went on staff, including training (an annualised average of $73,300 per employee, some of whom are part-time, but it gets a little complicated because the Commissioner spent $205,000 on temps), $1.1 million went to the Law Institute for functions the Commissioner delegated to it (there is a list of all delegations on p. 20) and $150,000 to the Bar for the same thing.

Astonishingly, 89% of all disciplinary complaints finalised were summarily dismissed pursuant to s. 4.2.10 of the Legal Profession Act, 2004. Almost 1 in 6 was chucked within 30 days, and almost 9 in 10 within 60. To be fair, this may represent the dross which has been sifted out, since 60% of the complaints received during the reporting period were still open at the end of the financial year, and 60% of them had been open for 2 months or longer. I say ‘astonishingly’ because I perceive it to be a radical departure from the practice of the Commissioner’s predecessors. In general, though, it is a good thing if the Commissioner uses her office’s limited resources to deal doughtily with the complaints which suggest conduct conducive of condine condemnation, while giving the drossmongers and feewhiners the short shrift they often deserve.

I saw the other day a set of circumstances which was unfortunate, and which I hope is not too often replicated. The Commissioner characterised a complaint as a pecuniary loss dispute (one of the species of civil dispute) and a conduct complaint. The particulars of the complaint read, in substance — “See the attached Family Court affidavit”. Rather hastily after the receipt of the complaint, the Commissioner exercised her discretion to bypass the dispute resolution procedures with which she is tasked in relation to civil disputes by giving the client a ticket to go off and agitate her professional negligence claim in VCAT. She referred to s. 4.3.6 of the Legal Profession Act, 2004 which says she can do so if she considers the dispute unsuitable for her to attempt to settle. The matter was referred to VCAT’s Legal Practice List. Then, the Commissioner realised that because the exact subject matter of the complaint was before the Family Court she had no power to deal with the complaint, which she dismissed pursuant to the power in s. 4.2.10(1)(e) of the Legal Profession Act, 2004, which says ‘The Commissioner may dismiss a complaint if— (e) the complaint is not one that the Commissioner has power to deal with’. Yet she did not withdraw the ticket she had mistakenly given to the c lient to refer the purported complaint to VCAT insofar as it amounted to a civil dispute in the belief that she did have power to deal with the complaint.

The Commissioner settled 10% of civil disputes. She let 5% through to VCAT’s pecuniary loss dispute jurisdiction, which would explain why it’s been quiet down in the Legal Practice List. That means 85% never went anywhere for various reasons. She summarily dismissed 53%. She refused to extend time 18 times.

Of the complaints summarily dismissed, 41% were dismissed for being frivolous, vexatious, misconceived or lacking in substance. 9% were dismissed because the Commissioner formed the view the complaint required no further investigation. One-third were dismissed on the basis the Commissioner did not have jurisdiction.

The regulator’s regulator, the Ombudsman, criticises Migration Agents’ bureau de spank

The Ombudsman has been looking into the performance of a regulator, MARA, the Migration Agents Registration Authority. He was critical. His press release is here, the full report here. Reproduced below are the bits about impartiality and the avoidance of conflicts of duties ‘in the case where an industry representative body is also the regulatory body and complaint-handling organisation’.  Though the Legal Services Commissioner does not fall into that category, the Uber-regulator’s review of a professional regulator may nevertheless be of interest to those who deal with her.  The Ombudsman suggested that oral complaints be taken, reduced to writing by regulator staff, and confirmed by sending out the writing to the complainant.  I think that would be an efficient way of dealing with complaints against lawyers by unsophisticated clients.  It would be a case of a stitch in time saves nine, and would prevent lawyers from having to respond to allegations which are incomprehensible and legally embarrassing. The Legal Services Commissioner ‘may’ provide assistance to members of the public in making complaints: s. 4.2.12(c) Legal Profession Act, 2004. Under s. 123(5) of the Legal Practice Act, 1996, the Law Institute’s Professional Standards were obliged to assist if asked, but to my knowledge they rarely did so, and I am aware of instances where assistance was formally sought but refused. Now, that extract from the report I mentioned: Continue reading “The regulator’s regulator, the Ombudsman, criticises Migration Agents’ bureau de spank”

The US take on past client / current client duty conflicts based on the ‘getting to know you factors’

America’s Legal Profession Blog had posted yesterday on a conflicts case about what we in Australia would call “the getting to know you factors”. The case was Hurley v Hurley, decided on 22 May 2007 by a 5 judge bench of the Maine Supreme Judicial Court. The background is that a lawyer may be prevented from acting against a former client even in a matter unrelated to the earlier retainer and where no specific confidential information was obtained in the earlier retainer which could be put to use against the former client in the new retainer. A lawyer may be prevented from acting in those circumstances where the earlier retainer or retainers was or were of such an intimate character that the lawyer came to know so much about the former client in a general way that it would be unjust to let them loose on a former client’s opponent.

The seminal case is probably Yunghanns v Elfic Ltd, a 3 July 1998 decision of Victoria’s Supreme Court’s Justice Gillard. (The rule does not apply, in general, to barristers acting against institutional litigants such as insurance companies and banks for whom they have acted in the past: Mintel International Group Ltd v Mintel (Australia) Pty Ltd [2000] FCA 1410 at [43] to [44]). In the American case, one personal injury retainer, in which the lawyer gained insights into the former client’s ‘ability to testify under oath, her reactions to her adversary, her patience with the protracted process, her ability to accept compromise, her ability to handle stress, and the way in which she relates to her attorney’ was sufficient to disentitle him from acting against her in a contested divorce. Now, that post in full: Continue reading “The US take on past client / current client duty conflicts based on the ‘getting to know you factors’”

Updates: big words, Texan legal writing, conflicts of duties

In my post “Judge uses big word”, I commented on President Mason’s use of “tergiversation”. Now David Starkoff at Inchoate has noted another’s analysis of the odds of each of the High Court judges other than Justice Kirby being responsible for the appearance of “epexegetical” (which seems to mean “explanatory in a way supplementary to the principal or original explanation”) in a decision on migration. (10/1 odds: Justice Gummow.) Love how the judiciary tends to save up these little diamonds of language for those least likely to have the resources to look them up.

And, by way of update to my post “Finally, some scholarship on Australian lawyers’ conflict of duties”, here is a long article on conflicts of duties in America, “I’m All Verklempt!” by Kendall M. Gray et. al., including a long analysis of the Yanks’ position on Chinese walls. The relationship between establishing a conflict of duties and the entitlement to compensation of one of the people to whom the conflicting duties is owed is a bit complicated in Australia. It certainly does not follow that every breach of fiduciary duty gives rise to a right to money in the victim from the lawyer. But in Texas, there is a principle of fee forfeiture which applies in cases of clear and serious breaches of fiduciary duty, a remedy born in Burrow v. Arce 997 S.W.2d 229 (Tex. 1999). Where an attorney was found to have grossly overcharged, fee forfeiture was imposed so that the attorney lost all his fees rather than just those which exceeded a reasonable fee: In re Allied Physicians Group, P.A., No. 397-31267-BJH-11, Civ. A.3:04-CV-0765-G, 2004 WL 2965001, at *5 (N.D. Tex. Dec. 15, 2004) (unpublished), aff’d, 166 F. App’x 745 (5th Cir. 2006).

Mr Gray’s style cannot be described as stuffy, and exemplifies what is good about Texas, namely plain talking: Continue reading “Updates: big words, Texan legal writing, conflicts of duties”

The American version of the Briginshaw standard of proof

In a stinging dissent against the conclusion of a majority of the Supreme Court of Washington that a lawyer had breached a conflict of duties rule in representing multiple parties, one judge set out what sounds a lot like the US version of the Briginshaw standard of proof which prevails in Australian and English disciplinary hearings, at least in relation to serious allegations of wrongdoing. The case is In re Discipline of Marshall. Hat tip to Legal Profession Blog for bringing the case to my attention. The majority judgment is here. The dissenting opinion is here. It said: Continue reading “The American version of the Briginshaw standard of proof”

Chinese wall crumbles in big litigation and Optus loses its lawyers 2 years in

Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd [2007] NSWSC 350 is a decision with wonderfully appalling facts. In the rush to agree consent orders before a directions hearing one morning, a megafirm sent a document to the other side which handed proof on a platter of a flagrant breach of a Chinese wall put in place less than 2 years earlier which had been unsuccessfully attacked by the other side at the time. Partners signing letters and court documents in large firms to the exclusion of all others is generally said to be a risk management exercise. In truth, a partner with no idea about a file will often be a worse choice of responsibility taker than a more junior lawyer who does know a lot about the file, as this sorry tale well illustrates. This was one of those moments when the file’s supervising partner was unavailable, and a solicitor cast around for another partner, any partner, to sign a document. One feels for the firm in this situation, between a rock and a hard place: it either says “Yes, the partner signed it but he didn’t really look at the document,” or “He gave it all appropriate attention despite the hurry, and inexplicably failed to notice the obvious fact that it was a document in the case he went to court about and promised to have nothing to do with.” The firm plumped, more or less, for the second alternative. Here, the Chinese wall had supposedly been operational for nearly 2 years between people in one location used to working with each other.

I hazard to guess that this particular megafirm would be keen to avoid further publicity for ethics violations after an unlucky run recently. So the announcement “I inadvertently signed orders on behalf of the new client in the matter which I swore the year before last in that conflict of interest hearing I would and could ensure I would have nothing to do with” would have been met at that week’s partners’ lunch with foul temper if not foul language. Continue reading “Chinese wall crumbles in big litigation and Optus loses its lawyers 2 years in”

Affair over 6 years and a $100,000 payment earn psychiatrist an 18 month holiday

H v Medical Practitioners Board of Victoria [2007] VCAT 526 was a rehearing of a case before the Medical Practitioners Board (the decision of which is here). VCAT, constituted by Vice President Harbison and Associate Professor Davis, reduced the severity of the outcome of an unprofessional conduct prosecution for an intimate relationship with a former patient, which continued after the psychiatrist had paid her $100,000 conditional on her not suing him or lodging a disciplinary complaint. VCAT suspended him for 18 months in lieu of the deregistration imposed on him by the Board, the majority of which had concluded that:

‘Dr [H] is unlikely to engage in unprofessional conduct of the nature of a sexual relationship with a patient or former patient again. … However we note that some of factors in Dr [H’s] personal background that formed the context within which this relationship developed remain unresolved. … on balance, … there is likely to be a benefit to the public in Dr [H] continuing to practise his profession. However, through our knowledge as members of this Board, we are aware that the predictive capacity of bodies such as ours in relation to repetition of sexual misconduct is poor. Therefore it is incumbent upon us to be cautious.’

That conclusion was recounted in VCAT’s judgment as a finding ‘that it was unlikely that Dr Honey would be likely to engage in unprofessional conduct of the nature of a sexual relationship with a patient again [sic.]’.

The Board’s decision is notable for containing a dissenting opinion. Disciplinary tribunals are often constituted by panels of lawyers and non-laywers, but I do not recall ever seeing a legal disciplinary tribunal publish majority and minority reasons. Continue reading “Affair over 6 years and a $100,000 payment earn psychiatrist an 18 month holiday”

No absolute bar in England to representing and opposing same client in two different matters

Goubran shares my view that a solicitor can act for and against the one man at the same time. Just not in relation to the same thing. In fact, there is a degree of relation which makes it impermissible, and Goubran sets out the practically meaningless judicial utterances on the test for the requisite degree of relation. He does so by tackling the following passage from Bolkiah v KPMG [1999] 2 AC 222, 234 (Lord Millett) which I have always thought to be overarching: Continue reading “No absolute bar in England to representing and opposing same client in two different matters”

Role of professional conduct rules in conflict of duties injunctions

On the relationship of the conduct rules to injunctions to restrain lawyers acting in the face of a conflict of duties, Goubran cites some useful authorities. I have always been astonished by what I thought was the Australian courts’ universal and complete disregard in these kinds of applications to the professional conduct rules’ conflicts provisions. All the moreso since the introduction of the rule dealing with current-client and past-client confidential information conflicts was introduced into the Law Institute’s rules of conduct for solicitors. But Goubran’s diligence has turned up the following judicial comments on the use to be made of the rules: Continue reading “Role of professional conduct rules in conflict of duties injunctions”

Finally, some scholarship on Australian lawyers’ conflicts of duties

Finally, someone has gone a long way towards synthesising the law relating to injunctions to restrain lawyers from acting in the face of a conflict of duties. The Melbourne University Law Review article is “Conflicts of Duty: the Perennial Lawyers’ Tale — A comparative Study of the Law in England and Australia”, [2006] MULR 4. Sandro Goubran has done an extraordinary amount of reading and has distilled things well. The last such effort was Matt Connock’s ‘Restraining Lawyers from Acting in the Face of a Conflict: Discussion and Advice in Australia’ (1995) 12 Australian Bar Review 244. (There is a whole blog devoted to the subject in America.)

As an index to pin-point citations in relation to the various issues which arise, the work will be of immense practical value to counsel who have to argue these relatively common applications. I wonder whether Goubran thinks, having read all the cases, it was rewarding academically. I have also read most of them, and the abiding impression I have is that — certain judges aside — this area of the law is one in which judges making it up as they go along is more than usually rife. Further, no one reads and considers the same 10 of the 100 or so generally single judge decisions swimming around out there on the question before deciding these cases. The lines of authority are fractured. Goubran’s article might do something to remedy this, but that all depends on how many people read the MULR I suppose.

Goubran is with me in being mystified by the sometimes hysterical reaction adverse to Justice Brooking’s judgment in Spincode v Look Software (2001) 4 VR 501, and astute to point out that the duty of loyalty is only ever considered in the context of the taking up of the cudgels against a former client in the same or a closely related matter.

I have selected two matters raised by him in the two successive posts for special comment.

Solicitor-executor’s work not legal work

Patterson v S [1998] VLPT 11 is a decision of the Legal Profession Tribunal dealing with a sole practitioner who was the executor of a priest’s will. It held that executors’ work carried out by an executor who happens to be a solicitor is not legal work, and so fees for the work were not within a clause in the will entitling professional executors to charge their “usual or reasonable charges”. Continue reading “Solicitor-executor’s work not legal work”

Chief Legal Counsel at BHP-Billiton cans firms’ conflicts awareness

Lawyers Weekly‘s 2 February 2007 edition reported the following comments from John Fast, Chief Legal Counsel of BHP-Billiton:

‘“The area where I think the biggest difficulties arise is in … conflicts, and that is an area where increasingly firms that do not have a very clear conflicts of interest policy are at a disadvantage, and will lose business,” he said. Continue reading “Chief Legal Counsel at BHP-Billiton cans firms’ conflicts awareness”

Lawyer’s defamation suit against former client founders on absolute privilege

In Sexter & Warmflash, P.C. v Margrabe, 2007 NY Slip Op 00065, a woman hired lawyers to represent her and her brother in a dispute with a cousin. The lawyers charged a reduced fee but could charge a 50% premium upon resolution of the dispute. The dispute was settled, but the woman thought the lawyers were progressing too fast towards final resolution (and their premium payment) at the expense of her interests. She fired them and copied her brother in on her none-too-complimentary letter of dismissal, which she also sent to two other lawyers she had retained for second opinions. Essentially, she alleged a concurrent conflict between duty and interest, as well as incompetence. The lawyers sued her in defamation for at least US$1 million, and then represented themselves, a step which raises real questions in my mind about their strategic competence, one of the things criticised in the controversial letter. The case was summarily dismissed. The New York Supreme Court Appellate Division‘s statement of the law of absolute privilege is reproduced: Continue reading “Lawyer’s defamation suit against former client founders on absolute privilege”

The solicitor and “the other side’s witness”, part II

Part I is the extraordinary story of a leading labour lawyer in Melbourne who was found to have induced breach of contract in taking a statement from an ex-employee of the other side in a class action in which the lawyer was the plaintiffs’ solicitor. Unbeknownst to him, the ex-employee continued to be bound by a confidentiality agreement.

Part II is a simple case in which the defendant’s solicitor applied to enjoin the plaintiff’s solicitor from continuing to act, based on a conflict of duties, Grego v Great Western Insurance Brokers Pty Ltd [2006] WASC 284. It was a workers’ compensation case brought by a fisherman in relation to an injury said to have been sustained on the remote Abrolhos Islands. The defendant said the payment of wages by the company which engaged in the fishing activities (of which the plaintiff and his wife were the directors) was a retrospective fiddling of the books after the alleged accident. The plaintiff interviewed the defendant’s accountant in relation to discovered documents, having alleged a fraudulent conspiracy to claim loss of wages. The accountant willingly cooperated in the preparation of an affidavit. Its contents were not damaging to the plaintiff [20]. This was said to amount to an “obvious breach of the duty of confidence” owed by the accountant to the plaintiff as his client.

There is no criticism of the defendant’s solicitor in the judgment because there is no property in a witness. The accountant must have woken up to the inappropriateness of what he was doing, though, because he sent the draft affidavit to the plaintiff’s lawyer for comment before signing.

When told of this, the defendant’s lawyer objected, saying that the accountant had disclosed a privileged document to the plaintiff’s lawyer. He said a draft witness statement is privileged under the litigation limb of legal professional privilege (a normally uncontroversial proposition) and the accountant had interfered with the defendant’s privilege by providing it to the plaintiff’s solicitor. The accountant did go on to swear an affidavit in the terms of the draft, having taken counsel’s advice and having been advised by the plaintiff’s solicitor that it was entirely a question for the accountant whether he signed the affidavit or not (the judge found at [39] that this constituted the implicit conveying of the plaintiff’s consent to the swearing of the affidavit). So by the time of the injunction application, that had already occurred, and could not be restrained. There was no attempt to restrain the use of the affidavit in the litigation. The defendant applied for the plaintiff’s solicitor to be restrained on the basis that the solicitor had:

“2.1 wilfully infringed against the legal professional privilege of the [defendant] in a draft affidavit;

2.2 have placed [himself] in a position where [his] duties to the plaintiff and [his] duties to a material witness necessarily conflict;

2.3 by [his] actions have created a perception that [he] interfered with a witness in the giving of evidence.”

His counsel’s argument met with about as little success as is possible. Justice Peter Blaxell said: Continue reading “The solicitor and “the other side’s witness”, part II”