In Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404, the facts and outcome of which are described in the previous post, Justice Young went to some lengths to summarise the law on the third basis articulated by Brooking JA in Spincode for restraining solicitors from acting. The relevant parts of the decision are reproduced below.
“24 In Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501 (‘Spincode’) at 521-524 [52]-[58], Brooking JA identified three possible grounds for restraining a solicitor or counsel from acting for a particular party to litigation: the danger of misuse of confidential information; a breach of a fiduciary duty of loyalty not to act against a client, or against a former client in the same matter or a closely related matter; and the inherent jurisdiction of the court to control the conduct of solicitors and counsel as officers of the court. These three grounds represented the orthodox legal position in Australia prior to the decision of the House of Lords in Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222 (‘Bolkiah’) which held that the duty of loyalty did not survive the termination of the relationship with the client. Brooking JA’s analysis in Spincode has been consistently followed and applied in Victoria: see Sent v John Fairfax Publication Pty Ltd [2002] VSC 429; Pinnacle Living Pty Ltd v Elusive Image Pty Ltd [2006] VSC 202; and Adam 12 Holdings Pty Ltd v Eat & Drink Holdings Pty Ltd [2006] VSC 152. But it has not been followed in New South Wales.
25 In Belan v Casey [2002] NSWSC 58 (‘Belan’) at [15]-[21], Young CJ in Eq held that since the House of Lords decision in Bolkiah the overwhelming weight of authority establishes that the jurisdiction of the court to intervene at the suit of a former client to restrain a solicitor from acting is founded solely on the real risk of disclosure of confidential information, and is not connected with some principle of conflict of interest. The decision in Belan has been followed and applied in New South Wales: British American Tobacco Australia Services Ltd v Blanch [2004] NSWSC 70 (Young CJ in Eq) at [97]-[104]; Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd [2005] NSWSC 550 (Bergin J) at [51]-[55].
26 Although the Supreme Court of New South Wales has declined to follow Spincode, insofar as Brooking JA held that the equitable obligation of loyalty owed by a solicitor to his or her client survives the termination of the retainer, the decisions in New South Wales do not cast any doubt upon the court’s inherent power to restrain solicitors from acting in a particular case having regard to the interests of the administration of justice. Similarly, the court’s inherent supervisory jurisdiction over solicitors and counsel was not relevant to the House of Lords decision in Bolkiah.
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28 In mounting a case based on the inherent powers of the Court to control the conduct of solicitors and counsel, counsel for the Dean interests relied on the principle enunciated by Mandie J in Grimwade v Meagher [1995] 1 VR 446 (‘Grimwade’) at 452:
‘In my view it cannot be doubted that this court likewise has an inherent jurisdiction to ensure the due administration of justice and to protect the integrity of the judicial process and as part of that jurisdiction, in an appropriate case, to prevent a member of counsel appearing for a particular party in order that justice should not only be done but manifestly and undoubtedly be seen to be done. The objective test to be applied in the context of this case is whether a fair-minded reasonably informed member of the public would conclude that the proper administration of justice required that counsel be so prevented from acting, at all times giving due weight to the public interest that a litigant should not be deprived of his or her choice of counsel without good cause.’
In Grimwade, the restraining order was directed to senior counsel who had previously prosecuted the plaintiff in criminal proceedings and who proposed to act against him in civil proceedings. There was no question of the plaintiff being a client or former client of the senior counsel. In what Mandie J described as unique, extraordinary and highly exceptional circumstances, he made an order restraining senior counsel from acting in the civil proceedings. He did so on the basis that there was a real and sensible risk of a lack of objectivity by the first defendant which not only gave rise to an undue risk of unfairness or disadvantage to the plaintiff but also gave rise to a substantial concern that a fair trial would not be had: at 455.
29 [It was] argued that there is no proper basis for granting an injunction in this case as [the solicitor had] never acted for the [applicant for the restrain of the solicitor], and there is no risk of misuse of confidential information. [The argument] relied on Goldberg J’s judgment in PhotoCure and the New South Wales decisions to which I have referred. This argument is misconceived. It is based on the false premise that the authorities that have rejected Brooking JA’s view that a solicitor’s duty of loyalty survives termination of the solicitor’s retainer also rejected the third ground for judicial intervention. This is not the case. A long line of authorities makes it very clear that the third ground for judicial intervention remains in full force and effect, both in New South Wales and elsewhere in Australia.
30 In Kallinicos v Hunt (2005) 64 NSWLR 561 (‘Kallinicos’), Brereton J undertook a comprehensive examination of the authorities concerning the court’s supervisory jurisdiction over solicitors. His Honour concluded that there are many authorities which maintain the same view of the court’s supervisory jurisdiction as that which had been expressed in the cases prior to Bolkiah: see eg McVeigh v Linen House Pty Ltd [1999] 3 VR 394, Oceanic Life Ltd v HIH Casualty & General Insurance Ltd (1999) 10 ANZ Ins Cas 61-438; Newman v Phillips Fox (a firm) (1999) 21 WAR 309; Bowen v Stott [2004] WASC 94 (Hasluck J) (‘Bowen v Stott’); see also Westgold Resources NL v St Barbara Mines Ltd [2002] WASC 264.
31 In the course of his examination of the authorities, Brereton J referred to the observations of Bergin J in Mitchell v Pattern Holdings Pty Ltd [2000] NSWSC 1015 (‘Mitchell’), Heenan J in Holborow v MacDonald Rudder [2002] WASC 265 (‘Holborow’) and Hasluck J in Bowen v Stott. In Mitchell, Bergin J stated that, as an incident of its inherent jurisdiction, the court may decide upon the propriety of a legal practitioner representing a party in a particular case to ensure justice and the appearance of justice: at [34]. In Holborow, Heenan J said that this power had been invoked in cases where there was a potential that the legal practitioner might be a witness; where the subject matter of the litigation was likely to involve an evaluation of the conduct of the solicitor; and where the efficacy of documents prepared by the solicitor was likely to be in issue: at [23]. In Bowen v Stott, Hasluck J said that it may be appropriate to invoke the inherent power in cases where the solicitor had some direct pecuniary interest in the outcome of the case, where the solicitor might feel impelled to justify or defend his conduct in representing a client, or where the practitioner’s credibility is at stake as a potential witness: at [47], [53] and [55].
32 Brereton J concluded his discussion of the authorities by enunciating the following principles (at 582-583 [76]):
‘… the court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice (Everingham v Ontario; Black v Taylor; Grimwade v Meagher; Newman v Phillips Fox; Mitchell v Pattern Holdings; Spincode Pty Ltd; Holborow; Williamson v Nilant; Bowen v Stott; Law Society v Holt). Prince Jefri Bolkiah does not address this jurisdiction at all. Belan v Casey and British American Tobacco Australia Services Ltd are not to be read as supposing that Prince Jefri Bolkiah excludes it. Asia Pacific Telecommunications Ltd appears to acknowledge its continued existence.
• The test to be applied in this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice (Everingham v Ontario; Black v Taylor; Grimwade v Meagher; Holborow; Bowen v Stott; Asia Pacific Telecommunications Ltd).
• The jurisdiction is to be regarded as exceptional and is to be exercised with caution (Black v Taylor; Grimwade v Meagher; Bowen v Stott).
• Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause (Black v Taylor; Grimwade v Meagher; Williamson v Nilant; Bowen v Stott).
• The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief (Black v Taylor; Bowen v Stott).’
33 In this Court, there is unambiguous authority that the Federal Court has the inherent power to restrain solicitors or counsel acting in a particular matter for a particular client where such a course is required by the interests of justice. In the Full Court’s decision in Western Australia v Ward (1997) 76 FCR 492, Hill and Sundberg JJ said at 498:
‘Enough has been said to show that the requirements of natural justice do not involve an absolute right to the legal adviser of a party’s choice. The instances in which courts have prevented chosen counsel or solicitors from acting have involved misconduct, potential use of confidential information and a real risk of lack of objectivity and of conflict of interest and duty: Grimwade v Meagher. The present case is only another example of situations in which the “integrity of the judicial process”, the “interests of justice”, and the “need to preserve confidence in the judicial system”, to use some of the notions that lie behind the inherent jurisdiction to exclude counsel or solicitors, may override the public interest that a litigant be able to be represented by the lawyer of its choice. That public interest is “an important value”: Black v Taylor at 408.’
In Lincoln, Goldberg J referred to this passage with approval and applied the test stated by Mandie J in Grimwade: at [10]. His Honour did not doubt that this Court has inherent jurisdiction in an appropriate case to prevent practitioners appearing for a particular party in order that justice should not only be done but should be seen to be done.
34 In PhotoCure, Goldberg J did not refer to his earlier decision in Lincoln. This is not surprising because there is no conflict between the two decisions. PhotoCure concerned an application by a former client based primarily on the risk of misuse of confidential information. His Honour’s discussion of Bolkiah, Belan v Casey and Spincode was directed to the question whether a former client was confined to the ground of misuse of confidential information, or whether the client could also rely upon the ground of breach of a duty of loyalty as suggested by Brooking JA in Spincode. Goldberg J did not express any concluded views concerning the Court’s supervisory jurisdiction. At 98 [57], his Honour said that:
‘Even if the basis of loyalty to the client or supervision by the court of solicitors as officers of the court is relevant, there is no room for the operation of those principles in the present circumstances as none of the persons who were involved in the receipt of instructions from, and the giving of advice to, PhotoCure between November 1999 and May 2000 are involved in acting for Dusa in relation to the present proceeding.’
His Honour also said at 98 [58] that he was troubled because an initial reaction to the issue was that it was inappropriate for a solicitor to act against a former client where the subject matter of the retainer is the same as the retainer by the former client. In my opinion, nothing in PhotoCure should be read as foreclosing this Court’s power to exercise inherent jurisdiction over the conduct of solicitors and counsel in litigation in this Court.
35 The crucial question, therefore, is whether on the evidence before me a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that [the solicitor] be restrained from acting for GSS in these proceedings. In answering this question it must be borne in mind that this is an application for a permanent injunction: Yunghanns v Elfic Ltd (unreported, Supreme Court of Victoria, Gillard J, 3 July 1998). It must also be borne in mind that the Court’s jurisdiction is an exceptional one; it is to be exercised with appropriate caution and due weight must be given to the public interest in a litigant not being deprived of the solicitor of its choice without due cause.”
