FEDERAL COURT OF AUSTRALIA

Canberra Residential Developments Pty Ltd v Brendas [2009] FCA 1484

CANBERRA RESIDENTIAL DEVELOPMENTS PTY LTD v SPIROS BRENDAS, KENOSS PTY LTD and CANBERRA LAND DEVELOPMENTS PTY LTD

ACD 12 of 2009

STONE J

14 DECEMBER 2009

CANBERRA

THE COURT ORDERS THAT:

1.         The amended notice of motion filed on 3 August 2009 be dismissed with costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                     By an amended notice of motion filed on 3 August 2009, the third respondent (applicant on the amended notice of motion) in the appeal seeks orders restraining two firms of solicitors from acting for the appellant, Canberra Residential Developments, in the forthcoming appeal from a judgment of Graham J delivered on 30 January 2009; (2009) 69 ACSR 435.  His Honour dismissed claims made by Canberra Residential Developments Pty Ltd (CRD) against four respondents, including the present three respondents.  The firms that are the subject of the present notice of motion are Ben Aulich and Associates (“BA”) who presently represent the appellant and Meyer Vandenberg (“MV”) a firm which has never represented the appellant but which has close ties with Ben Aulich and Associates.  The notice of motion was supported by the affidavit of John Patrick Harris of JS O’Connor Harris & Co which has the carriage of the appeal for the third respondent, Canberra Land Developments Pty Ltd (CLD). 

2                     The facts deposed to by Mr Harris can be briefly summarised.  According to Mr Harris the appeal from Graham J is concerned with issues arising from or in connection with a sale of land that is the subject of proceedings in the ACT Supreme Court (Supreme Court proceedings).  CLD is a party to the Supreme Court Proceedings and is represented by Ms Kristine Scheul and Mr Mark McCormack of MV.

3                     In the course of preparing for the Supreme Court proceedings Mr McCormack was given access to “a significant amount of the material that is germane to the First, Second and Third Respondents’ position in this present matter”.  Apparently Mr McCormack obtained copies of 103 pages from the papers of CLD.

4                     In the original application in this matter, CRD was represented by Mr Mark Flint, a partner in the law firm, Bradley Allen Layers.  Mr Flint was assisted by Ms Alisa Taylor.  Mr Harris deposed that “some time” after judgment was given in the original application Mr Flint left Bradley Allen and joined MV.  In March 2009 Ms Taylor and some other persons (number not specified) also left Bradley Allen and joined MV.  By letter dated 26 March 2009, Bradley Allen advised that it was transferring its file in the present matter to MV.  On behalf of CLD in the Supreme Court proceeding, Mr Harris objected to the transfer because MV still held files and acted for CLD.  Apparently as a result of CLD’s objections, the file was transferred to BA rather than to MV.  In a letter dated 15 April 2009 addressed to Mr Ben Aulich expressing concerns about the transfer to BA, Mr Harris said:

It is my recollection that you formerly worked for Meyer Vandenberg and established your criminal practice in conjunction with that firm so that Meyer Vandenberg had a stand alone facility to deal with criminal matters.  I appreciate that this brief summation may or may not be true, but it is the common perception.

Before taking over the CRD file, would you be so kind as to advise whether your firm has any formal or informal ties with Meyer Vandenberg.  If the answer is no on both queries, would you then confirm that no member of the firm of Meyer Vandenberg, or any staff of Meyer Vandenberg, will have anything to do with the file whatsoever.

You would appreciate that in the normal [sic] circumstances my client would be somewhat alarmed about a legal firm with close ties to Myer Vandenberg taking over a matter which Meyer Vandenberg was disqualified from handling for good reason.  You may therefore imagine its alarm when the very letter which you faxed to us announcing your appearance came from a Meyer Vandenberg fax machine.  In answering the questions set out above you may care to explain this anomaly.

5                     Other documents annexed to Mr Harris’ affidavit attest to the close connection between MV and BA.  A copy of an internet search of the MV website annexed to Mr Harris’ affidavit states that BA is owned by Ben Aulich “in conjunction with the Meyer Vandenberg partnership”.  Mr Aulich was previously an associate in the employ of MV.  A title search shows that the premises occupied by BA are subleased from companies that the evidence establishes belong to MV.

6                     In his response to Mr Harris’ letter of 15 April Mr Aulich confirmed that his firm has ties with MV but added, “it is a stand alone firm and acts independently of Myer Vandenberg”.  Mr Aulich refused to give the undertaking requested by Mr Harris saying:

I am entitled to seek assistance from former members of Bradley Allen who acted for CRD in the substantive proceedings.  In the same way, if my client engaged Joe Bloggs Pty Ltd, that firm would be entitled to speak with Alisa Taylor or Mark Flint about certain aspects of the matter.  Therefore, it is neither appropriate nor necessary for me to give the confirmation which you seek.

7                     Mr Aulich averred that his firm had no conflict in the matter and that he was not in a position where he might have access to information that would give rise to a conflict.  Moreover, he asserted that the appeal from the judgement of Graham J was an appeal “on substantive issues of law and there are no factual matters on which there could potentially be any concern on your client’s part…”.  Mr Aulich added:

I will ensure that there is no conflict or prejudice to the position of Canberra Land Developments or any other party because of this firm’s relationship with Meyer Vandenberg or any of the particular practitioners in that firm. 

8                     Further insight into the relationship between MV and BA was given in the affidavits of Mr Aulich.  His evidence, which was not challenged, was that he is the sole director and secretary of a company, Ben Aulich & Associates Pty Ltd, which I shall also refer to as ‘BA’. BA pays Mr Aulich a salary and its profits are shared between him and equity partners of MV through the shareholdings of their respective companies, Gracie Gill Pty Ltd (30%) and MV Management Pty Ltd (70%).  A copy of BA’s constitution was annexed to Mr Aulich’s affidavit of 3 September 2009.

9                     Mr Aulich is solely responsible for the running of BA including advertising, marketing and staff.  MV provides administrative and financial services to BA for which it pays a monthly management fee.  The telephone systems of MV and BA are linked and they share certain facilities such as photocopiers, scanners and facsimile machines.  Importantly for present purposes, Mr Aulich gave evidence about the BA computer system and information storage as follows:

[BA] is equipped with a computer system called Affinity which is also linked with [MV].  Whilst I am linked with [MV’s] system, I am unable to access any file other than what has been opened under [BA].  This means that I am unable to access any file, including correspondence, account information or any other information held electronically in relation to any [MV] file.  Each individual computer at [BA] and [MV] are [sic] password protected. 

I understand and verily believe that all files at [MV] are also kept in hard copy form.  Those files are usually located in filing cabinets in partners’ and solicitor’s offices, who have carriage of, or are working on, the files.

10                  He stated that he did not know where any file relating to CLD was kept at MV and that, to the best of his knowledge, he had never seen any such file.  He deposed that during his employment at MV he did not ever complete any work on matters involving CLD and that to the best of his knowledge he had never spoken with any director of CLD.  Mr Aulich added that although he understood Kristine Scheul, and Mark McCormack of MV to have had the carriage of a matter involving CLD, he had never discussed any issue involving CLD with them and, until he had read the affidavit of Mark Flint, he did not know anything about the matter.

11                  Consistently with the position adopted in his letter to Mr Harris, Mr Aulich admitted in his affidavit that in the early stages of the present matter in which he is acting on behalf of CRD he had cause to contact Mr Flint and Ms Taylor, now of MV.   He said, however, that he did not believe that there was “a real or sensible possibility” for confidential information involving CLD to be misused.  

12                  Mr Flint’s evidence confirmed that he had never discussed any CLD matter with Mr Aulich or his staff, that access to his computer is password protected and that the hardcopy files concerning CLD are kept in his office.  Similar evidence was given by Ms Scheul and Mr McCormack.

13                  There was no challenge to the accuracy of any of the evidence given by either party.  I therefore accept that the connection between BA and MV is as described by Messrs Aulich, McCormack, Flint and Scheul.  On that basis the question whether BA should be precluded from representing CRD in the appeal from Graham J’s judgment depends on the extent of the connection between MV and BA, considered in the context of the obligations of loyalty and confidence that lawyers owe to their clients.  CLD’s objection to BA representing CRD in the appeal is premised on the proposition that this would be tantamount to permitting MV to act for CRD.  I do not accept that the connection between the two firms supports that proposition. 

14                  In my view the evidence shows the following to be the case:

·                    Mr Ben Aulich is the sole director and secretary of the company that trades as the law firm of Ben Aulich and Associates, of which Mr Aulich is the principal lawyer;

·                    The profits of BA are shared between the indirect owners, Mr Aulich and MV as to 30% and 70% respectively;

·                    As the only director, and the principal lawyer, Mr Aulich is solely responsible for the operation of BA in accordance with its constitution.

15                  These facts, which cannot be disregarded, show that legally and operationally the two firms are quite separate.  There is, in my view, no basis for CLD’s assertion that BA is merely a creature of MV or that it is a subsidiary of that firm.  The appearance of these firms being separate firms is not a sham; it is a matter of substance.  Moreover, the evidence shows that although BA shares certain facilities with MV,  the files of each, both electronic and hard copy, are kept entirely separate and secure. 

16                  In Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404 at [24]-[35], Young J considered in some detail the authorities establishing the principles to be applied when considering whether a legal practitioner should be restrained from acting for a particular party in litigation.  Based on the principles Young J identified, the grounds on which a court might restrain a practitioner from acting were conveniently summarised by Middleton J in Bahonko v Nurses Board of Victoria (No 3) [2007] FCA 491 at [4].  They are:

(a)               the danger of misuse of confidential information …

(b)               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 …

(c)               the inherent jurisdiction of the court to control the conduct of legal practitioners as officers of the court…

17                  Submissions made on behalf of CRD suggested that the evidence in support of the notice of motion does not establish that there is any confidential information relating to CLD that requires protection.  In this regard it is pertinent to refer to Middleton J’s comment in Bahonko at [8]:

The authorities are clear that the confidential information must be identified to such an extent that the claim of confidentiality can be assessed by the Court.

18                  For present purposes I am prepared to assume that in the context of litigation, even after the trial when, as CRD asserts, there was full production of relevant documents, information held by a solicitor may be confidential.  I do not have to decide the point, however, as in my view the evidence does not indicate that there is a danger that the information would be misused.  The evidence of Mr Aulich, Ms Scheul, Mr McCormack and Mr Flint all supported the view that the information is secure.  For reasons given above, I have determined that BA is a separate and independent firm.  The fact that it shares services and facilities with MV does not in itself suggest that information that is electronically and physically protected is vulnerable to misuse and breach of confidence.  There is simply no evidence that would permit me to come to that conclusion.

19                  Once it is accepted that BA is separate from and independent of MV, any basis on which it might be suggested that there would be a breach of a fiduciary duty of loyalty in BA acting for CRD disappears.  BA has never acted for CLD; indeed the evidence does not indicate that any employee of BA has ever acted for CLD.  Applying the reasoning of Middleton J in Bahonko, whatever may be the ambit of the concept of the fiduciary duty of loyalty, there is no relationship between BA and CLD that might give rise to the duty. 

20                  Finally, the inherent jurisdiction of the Court to control its processes in aid of the administration of justice would only be evoked to restrain a legal practitioner from acting for its client if “a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice” warrants such restraint; Geelong School Supplies at [35].  It is a jurisdiction that “is to be regarded as exceptional and is to be exercised with caution”; Kallinicos v Hunt (2005) 64 NSWLR 561 at 582.  In this case the emphasis must be on “reasonably informed”.  It may be that at first sight some would think that the relationship between BA and MV is sufficiently close to warrant restraint however, once the actual relationship is understood, first impressions give way to a more informed view.  The impression that might be created by the sharing of facilities and services would not survive consideration that traditionally barristers have shared facilities and services without giving rise to disquiet concerning their independence.  Sharing between truly separate firms of solicitors should similarly be accepted.

21                  For all the above reasons I have concluded that the application in the notice of motion should be dismissed with costs. 

Associate:

Dated:         14 December 2009