Surfing Hardware International Holdings & Ors v William McCausland and Anor (No.3) [2007] NSWIRComm 64 (11 April 2007)

Last Updated: 20 June 2007

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Surfing Hardware International Holdings & Ors v William McCausland and Anor (No.3) [2007] NSWIRComm 64



FILE NUMBER(S): IRC 2876

HEARING DATE(S): 06/03/20007

DATE OF JUDGMENT: 11 April 2007
PARTIES:
APPELLANTS
Surfing International Holdings Pty Ltd
SHI Holdings Pty Limited
Surf Hardware International Pty Limited
Timonthy Bosher
Timonthy Ford

RESPONDENTS
William McCausland
Yvonne McCausland

CORAM: Walton J Vice-President Boland J Backman J


CATCHWORDS: Appeal - Application for leave to appeal and appeal - Appeal from decision and orders restraining firm of solicitors from representing parties in proceedings under s 106 of the Industrial Relations Act 1996 - Inherent jurisdiction to restrain - Solicitor/client relationship - Confidential information - Principles applicable to protection of confidential information - Whether confidential information precisely identified - Information barriers - Risk of disclosure - Choice of legal representative - Interests of justice - Undertakings - Appeal upheld

LEGAL REPRESENTATIVES

APPELLANTS
Mr H J Dixon SC with Mr P Moorhouse of counsel
Solicitor: Mr G Robertson
Harmers Workplace Lawyers
RESPONDENTS
Mr B Walker SC with Mr P Newall of counsel
Solicitor: Mr G Dunstan
Dunstan Legal


CASES CITED: A firm of Solicitors, Re [1997] Ch 1
Analytica Incorporated v NPD Research Inc 708 F 2d 1263
Asia Pacific Telecommunications Ltd v Optus Network Pty Ltd [2005] NSWSC 550
Belan v Casey [2002] NSWSC 58
Carindale Country Club Estate Pty Ltd v Astill and Others (1993) 115 ALR 112
D & J Constructions Pty Ltd v Head and Others trading as Clayton Utz (1987) 9 NSWLR 118
Durban Roodepoort Deep Limited v Mark David Reilly and Ors [2004] WASC 269
House v The King (1936) 55 CLR 499
Grimwade v Meagher and Others [1995] 1 VR 446
Kallinicos & Another v Hunt & Others (2005) 64 NSWLR 561
Lee, David & Co (Lincon) Ltd v Coward Chance (a firm) and Others [1991] Ch 259
Mancini v Mancini [1999] NSWSC 800
Newman v Phillips Fox (1999) 21 WAR 309
Prince Jefri Bolkiah v KPMG [1999] 2 AC 222
Sent and Prime Life Corporation Ltd v John Fairfax Publications Pty Ltd and Hills [2002] VSC 429
Surfing Hardware International Holdings & Ors v William McCausland and Anor [2006] NSWIRComm 276
Surfing Hardware International Holdings & Ors v William McCausland and Anor (No.2) [2006] NSWIRComm 344
Waiviata Pty Ltd v New Millennium Publications Pty Ltd [2002] FCA 98
William McCausland v Surfing International Holdings Pty Ltd & ors [2006] NSWIRComm 261

LEGISLATION CITED: Industrial Relations Act 1996



JUDGMENT:

INDUSTRIAL COURT OF NEW SOUTH WALES

FULL BENCH

CORAM: WALTON J, Vice-President
BOLAND J
BACKMAN J

Wednesday 11 April 2007

Matter No IRC 2876 of 2006

SURFING HARDWARE INTERNATIONAL HOLDINGS & ORS v WILLIAM MCCAUSLAND AND ANOR (No.3)

Application by Surfing Hardware International Holdings Pty Limited and Ors for leave to appeal and appeal against a judgment of Justice Marks given on 14 July 2006 in Matter Nos IRC 5174 of 2004 and IRC 4589 of 2005

JUDGMENT OF THE COURT
[2007] NSWIRComm 64

BACKGROUND


1 The appellants in this matter, being Surfing Hardware International Holdings Pty Limited, SHI Holdings Pty Limited, Surf Hardware International Pty Limited, Timothy Bosher and Timothy Ford (the "Surfing Interests"), seek leave to appeal and, if leave is granted, to appeal from a decision of Marks J (William McCausland v Surfing International Holdings Pty Ltd & ors [2006] NSWIRComm 261) given ex-tempore on 14 July 2006. In that decision his Honour ordered that a firm of solicitors acting for the appellants, Harmers Workplace Lawyers ("Harmers"), be restrained from continuing to represent the appellants in the proceedings.

2 As it was noted in an earlier - interlocutory - judgment in this matter (Surfing Hardware International Holdings & Ors v William McCausland and Anor [2006] NSWIRComm 276), the basis for his Honour's judgment in granting the restraining order was that the first respondent, William McCausland, had met with a partner and an employed solicitor of Harmers in February 2004 and provided them with certain information in connection with his pending litigation. Mr McCausland subsequently decided to engage another firm of solicitors, Dunstan Legal, and in the latter part of 2005 he and the second respondent, Yvonne McCausland, filed a summons for relief under s 106 of the Industrial Relations Act 1996. Until May 2006, Allens Arthur Robinson ("Allens") had acted for the Surfing Interests. On 23 May 2006, Harmers filed a notice of change of solicitors indicating that firm henceforth acted for the appellants. Mr McCausland contended that in light of the information he had provided to Harmers, that firm now had a conflict of interest. His Honour agreed.

3 The earlier interlocutory judgment by the Full Bench was concerned with an application by the appellants that the restraining orders made by Marks J be stayed, pending the outcome of the appeal in the proceedings, to the extent that they restrained Harmers from prosecuting the appeal. The Full Bench granted the stay application on terms as reflected in the orders made:

(1) That the Orders of the Honourable Justice Marks made on 14 July 2006 in Matter No. IRC 5174 of 2004 and Matter No. IRC 4589 of 2005 that Harmers Workplace Lawyers be restrained from continuing to represent the Respondents in those proceedings be stayed pending the outcome of the appeal in these proceedings (Matter No. IRC 2876 of 2006) to the extent that they restrain Harmers Workplace Lawyers from acting in these proceedings and prosecuting the appellants’ Application for Leave to Appeal and Appeal.

(2) That Order (1) hereof is conditional, and shall only take effect, upon the filing in the Industrial Registry of the signed undertakings in the form proffered by Harmers Workplace Lawyers in the attachments to the letter from Watson Mangioni Lawyers Pty Limited to the Acting President's Associate dated 17 August 2006.

(3) The signed undertakings in Order 2 shall be served upon the solicitors for the McCauslands within 24 hours of their filing in the Industrial Registry.

(4) Costs are reserved.

4 In a further interlocutory judgment (Surfing Hardware International Holdings & Ors v William McCausland and Anor (No.2) [2006] NSWIRComm 344) the Full Bench, after noting that the signed undertakings required by order (2) above had been proffered, made further orders as follows:

(1) Harmers Workplace Lawyers have the leave of the Court to have Mr Joydeep Hor as the solicitor on the record in this proceeding IRC No 2876 of 2006.

(2) The Court releases Mr Gregory Robertson and Mr Brad Buffoni from para­graphs 2 and 3 of their undertakings dated 5 September 2006, but only to the extent necessary to allow them to discuss this proceeding IRC No 2876 of 2006 with Mr Hor in his role as solicitor on the record.

(3) Notwithstanding Order (2) of the Orders made by the Court on 1 September 2006, Order (1) of those same Orders shall take effect from the date of these Orders.

(4) Orders (1), (2) and (3) hereof shall take effect on and from today.

(5) Costs are reserved.

DECISION AT FIRST INSTANCE

5 Marks J recorded the evidence in the proceedings in the following terms:

[7] Evidence given for the purpose only of these interlocutory proceedings indicates that Mr McClausand (sic) met with Mr Stewart and an employed solicitor, a Mr Richard Lewin, on 27 February 2005 (sic - 2004).

[8] The subject matter of that meeting is deposed to by Mr Dunstan, solicitor, on the basis of information and belief furnished to him by Mr McClausand (sic). No explanation has been given as to why the evidence before the Court has been adduced in this way, and I note the concerns expressed by Senior Counsel appearing for the respondents with respect to the presentation of the evidence in this way. In any event I proceed on the basis that because of certain corroborative evidence to which I shall shortly refer I accept that there was a general discussion between Mr McCausland and Messrs Stewart and Lewin concerning the circumstances which are relevant to s 106 proceedings which were ultimately commenced.

[9] It was asserted by Mr Dunstan, on information and belief, that the discussions covered matters such as remuneration and other matters pertaining to the litigation process and what would be involved in connection with the litigation process from the point of view of an applicant. There is more detailed information contained within Mr Dunstan’s affidavit but because of the grave concern expressed by Mr McCausland's counsel, which was not objected to by counsel for the respondents, concerning the confidential nature of what was discussed, I shall refrain from describing it in any further detail.

[10] There were produced for the purpose of the evidence in the proceedings on a strictly confidential basis the notes taken by Messrs Stewart and Lewin of the interview conducted on 27 February. Again, I shall not describe them in any particularity because of the confidential nature. However, they show extensive discussions over a period, which the Court has been informed would be in excess of one hour, during which a number of matters clearly related to the possibility of unfair contract proceedings being instituted were discussed.

[11] There is also evidence of further telephone conversations, one with Mr Lewin on 1 April 2004 and one with Mr Stewart on 3 May 2004, in each case with Mr McCausland. Included in the latter is a reference to the remuneration cap provided for by s108A. In that conversation, I accept that Mr McCausland told Mr Stewart that Harmers were not retained in the proceedings.

[12] There is also evidence that on 4 May 2004 Mr McCausland informed Mr Stewart that he was concerned that Harmers might be instructed by the respondents to represent them in these proceedings. Upon this being communicated Mr Stewart contacted Mr Gregory Keith Robertson, Harmers' general counsel, who quarantined Mr Stewart's notes after perusing them and then instituted the creation of information barriers in purported accordance with protocols established by the Law Society of New South Wales. Mr Robertson also ensured that personnel involved in the proceedings would be quarantined and that all solicitors and other staff involved in the proceedings on behalf of the respondents signed undertakings with respect to the disclosure of confidential information.

[13] I assume that the information barriers were established for the benefit of the respondents but nevertheless they would have had the effect of erecting a barrier against any confidential information that Mr McCausland gave to Mr Stewart and Mr Lewin.

[14] The applicant expressed concern, again through his solicitor, about the content of Harmers' web site. That appears to make reference to the firm's culture having at its heart “...principles of openness and consultation. Unlike many organisations, the primary decision-making body in the firm is the “Full Firm” which meets fortnightly and at which all members of staff actively participate. The decision-making ability of the Full Firm is enhanced by the firm’s commitment to openness and consultation. All staff members are permitted access to all information relevant to the management of the firm, including all accounts information.”

[15] Through his solicitor, Mr Dunstan, the applicant expressed concern that all of the confidential material that he had given to Messrs Stewart and Lewin was therefore open for discussion and dissemination throughout the firm. Mr Robertson in his affidavit was at pains to point out that in reality the openness and consultation was confined to management information and accounts information but would not involve the sharing of detailed information on every file open in the firm. Nevertheless it is a matter about which Mr McCausland expressed concern.

6 After dealing with the evidence and the contentions of the parties, Marks J referred to what he regarded as the relevant principles that should guide him in determining the respondents' application. In this respect, his Honour relied on the judgment of Brereton J in the Supreme Court of New South Wales in Kallinicos & Another v Hunt & Others (2005) 64 NSWLR 561 (especially at [76]). Marks J summarised the principles referred to by Brereton J thus:

· Once the retainer is at an end, however, the court's jurisdiction is not based on any conflict of duty or interest, but on the protection of the confidences of the former client (unless there is no real risk of disclosure).

· After termination of the retainer, there is no continuing (equitable or contractual) duty of loyalty to provide a basis for the court's intervention, such duty having come to an end with the retainer.

· However, the Court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over it's officers and to control its process in aid of the administration of justice.

· 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.

· The jurisdiction is to be regarded as exceptional and is to be exercised with caution.

· 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.

· 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.

7 Marks J said of these principles:

[21] All of these principles must however, in my opinion, be seen in the context of the nature of the solicitor/client relationship and the legal professional privilege which attaches. The solicitor/client relationship requires an obligation of confidence that is at the heart of principles by which legal professional privilege is established. It is the act of communication between solicitor and client as much as the nature of what is communicated that is important in this context...

8 At [23]-[24] Marks J referred to the need to balance the competing interests of the parties:

[23] In determining this matter it is necessary to balance the competing interests of the applicant and of the respondents who seek to retain the solicitors of their choice. In this latter regard the evidence is that the respondents were introduced to Harmers by the solicitor with the carriage of the matter after he left Allens and joined another firm. There is no evidence that Harmers had any special or unique features or practised any particular speciality that would dictate that they should be retained by the respondents. Indeed, I infer from the evidence that the respondents had never used the services of that firm previously. This is a matter that I take into account in determining these proceedings in addition to the fact that their involvement in the proceedings has only occurred recently and that involvement has always been over the objection of the applicant through his solicitor.

[24] There can be no doubt that confidential information was conveyed by Mr McCausland to Messrs Stewart and Lewin. I accept also that Harmers had put in place information barriers that seek to accord with the guidelines established by the Law Society.

9 In concluding that the McCausland's application should be granted, Marks J stated:

[28] I am persuaded, on balance, that the interests of justice dictate that the applicant's motion should succeed even allowing for the erection of the information barriers. I have reached this conclusion in conformity with the principles to which I have referred and in particular the inherent jurisdiction referred to by Brereton J in Kallinicos.

[29] Accordingly, I order that Messrs Harmers Workplace Lawyers be restrained from continuing to represent the respondents in these proceedings.

[30] Whilst I have not received detailed submissions with respect to parallel proceedings commenced by Mr McCausland's wife Yvonne McCausland, I shall proceed on the basis that it would be inappropriate to permit Harmers to continue to represent the respondents in her proceedings having determined that they should not do so in connection with the proceedings instituted by the applicant.

[31] The interlocutory applications with respect to both sets of proceedings were heard concurrently. On this basis, therefore, the order that I have made in connection with these proceedings will apply to the proceedings in which Yvonne McCausland is an applicant, being matter number IRC4589 of 2005.
[32] The respondents are to pay the applicant's costs in and about these interlocutory proceedings in an amount assessed under the Legal Profession Act in default of agreement.

CONSIDERATION


10 The issue here is whether the Full Bench should set aside the decision and orders of Marks J and allow Harmers to continue to represent the Surfing Interests in the unfair contract proceedings brought against them by the McCauslands. The issue arises in circumstances where Mr McCausland, in February 2004, in an initial consultation with Mr Stewart and Mr Lewin of Harmers and in subsequent telephone conversations, conveyed certain information to them in the context of seeking advice about the prospect of taking legal proceedings against certain parties. Harmers followed up the initial contact but, according to Mr Stewart, in May 2004 Mr McCausland confirmed that the firm was not being retained.

11 In August 2004, Mr McCausland commenced unfair contract proceedings against the appellants. The solicitors representing Mr McCausland were Dunstan Legal. In September 2005, Mrs McCausland commenced her proceedings against the appellants, with Dunstan Legal being the solicitors. It would appear that at some point the appellants changed their solicitors from Allens to Harmers. Mr McCausland discovered this was about to occur and on 3 May 2006 phoned Mr Stewart of Harmers expressing concern at the prospect of this happening.

12 This concern apparently sprang from anxiousness on Mr McCausland's part from the outset to engage solicitors who did not have a conflict of interest. Mr Greg Dunstan of Dunstan Legal deposed in an affidavit filed in July 2006 that he had been informed by Mr McCausland and believed that Mr McCausland had said to Mr Stewart in late January or early February 2004 words to the effect:

I am being bullied by the big end of town who are all in bed together and I need someone who is not associated with any of them and who can give advice without any fear of repercussions and in whom I can have a strong trust.

13 Mr Stewart deposed that following the phone call from Mr McCausland in May 2006 he found his notes relating to the matter and handed them to Mr Robinson, the senior practitioner at Harmers and the firm's compliance officer as defined in the Law Society's "Information Barrier Guidelines". Mr Robertson then took steps to protect the confidentiality of the notes in accordance with the Guidelines, including obtaining appropriate confidentiality undertakings from solicitors and staff.

14 Harmers later sought advice from Ms Virginia Shirvington, a Legal Ethics Education Consultant, as to whether the structures put in place by Harmers were "sufficient steps to take in terms of conflict of interest, pursuant to the Law Society's Information Barrier Guidelines". Ms Shirvington's answer was "Probably yes."

Basis of decision at first instance

15 In deciding to restrain Harmers, Marks J did so, it would appear, on the following bases:

(1) The principles summarised by Brereton J in Kallinicos in the context of the nature of the solicitor/client relationship and the legal professional privilege that attaches ([20], [21] and [28]);

(2) Tangible matters concerning the communication of confidential information and intangible matters that attach to discussions between solicitors and persons who seek their advice with respect to the litigation process and the prospects of success in proceedings. This would cover matters such as a person's general attitude to litigation and whether he or she was enthusiastic about the process as well as matters concerning the financial and other resources that a person would be able to devote to litigation ([22]);

(3) Competing interests of the applicant and of the respondents who seek to retain the solicitors of their choice. However, there was no evidence that Harmers had any special or unique features or practised any particular speciality that would dictate that the respondents should retain them; that Harmers' involvement in the proceedings had only occurred recently and that involvement had always been over the objection of Mr McCausland through his solicitor ([23]);

(4) Confidential information was conveyed by Mr McCausland to Messrs Stewart and Lewin ([24]);

(5) Harmers had put in place information barriers that sought to accord with the guidelines established by the Law Society ([24]);

(6) The nature and extent of the confidential information as well as the sophistication and concerns of the applicant in these proceedings as opposed to the moving plaintiff in those proceedings ([26]);

(7) The interests of justice ([28]).

Solicitor/client relationship

16 As to the first of his Honour's reasons, there was no dispute between the parties that the summary of principles provided by Brereton J in Kallinicos was a correct summary (it may be noted that the summary in the judgment of Marks J is, an abbreviated version of what Brereton J actually stated in his decision). In particular, there was no dispute that the Industrial Court, as a superior court of record, 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."

17 Marks J's reference to the principles being viewed in the context of the solicitor/client relationship and the legal professional privilege that attaches to it, needs some qualification. The present case does not involve a solicitor/client relationship. Harmers was not retained by the McCauslands and they were never clients of Harmers. However, we consider the principles governing the protection of the confidences of a former client apply with equal force in this particular case where Mr McCausland was not a client but he was most certainly a prospective client who, we are satisfied, imparted confidential information to Harmers.

18 As we have already noted, Mr McCausland had a meeting with Mr Stewart and Mr Lewin in February 2004 and conveyed certain information to them in the context of seeking advice about the prospect of taking legal proceedings against certain parties. Mr McCausland was entitled to expect any confidential information he may have imparted would not be passed onto his opponents, particularly if they were to become clients of Harmers. As Steytler J observed in Newman v Phillips Fox (1999) 21 WAR 309 at [38] "any person should be entitled to seek and obtain legal advice in the conduct of his or her affairs without the apprehension of being prejudiced by any later breach of confidence". Harmers appear to have accepted this because after being contacted by Mr McCausland in May 2006 Mr Stewart immediately sought to have his notes quarantined and steps were taken to enforce confidentiality within the firm.

Prince Jefri

19 Prince Jefri Bolkiah v KPMG [1999] 2 AC 222, which was referred to extensively in Kallinicos, was a 'former client' case. It was accepted by Brereton J that Prince Jefri was authority in New South Wales for the proposition that in a case where the retainer is no longer active, the jurisdiction of the court to intervene at the suit of a former client to restrain a solicitor from acting is not and cannot be connected with some principle of conflict of interest but on the protection of the confidences of the former client unless there is no real risk of disclosure.

20 In Belan v Casey [2002] NSWSC 58 Young CJ in Eq observed at [17]-[18]:

[17] Prince Jefri decided two basic points: (a) the basis of the claim is the fiduciary duty to maintain information as confidential; and (b) that it is sufficient if the plaintiff demonstrates that there is a real and not fanciful risk of disclosure of confidential information, though it is not necessary to show that the risk is substantial.

[18] Prince Jefri has been followed on almost every occasion when the present situation has arisen, except in Victoria. It is true that it is proposition (b) that has met with approval, though it is hard to see how this can be truly divorced from proposition (a). The Court of Appeal followed it in Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1, 48 as did the Full Court of South Australia in Pradhan v Eastside Day Surgery Pty Ltd [1999] SASC 256 (Bleby J with whom Doyle CJ and Prior J agreed). It was followed in New Zealand in Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd [2001] 3 NZLR 343, and (though he slightly modified proposition (a)) by Steytler J in Newman v Phillips Fox (1999) 21 WAR 309, 315, by Conti J in Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2000) 178 ALR 322, by Rolfe J in Colonial Portfolio Services Ltd v Nissen (2000) 35 ACSR 673 and by Gillard J in World Medical Manufacturing Corp v Phillips Ormonde & Fitzpatrick Lawyers [2000] VSC 196.

21 In Prince Jefri, Lord Millett (with whom the other members of the House of Lords were in agreement) explained the basis of the court's jurisdiction to intervene on behalf of a former client in the following terms at 234:

In Rakusen's case the Court of Appeal founded the jurisdiction on the right of the former client to the protection of his confidential information. This was challenged by counsel for Prince Jefri, who contended for an absolute rule, such as that adopted in the United States, which precludes a solicitor or his firm altogether from acting for a client with an interest adverse to that of the former client in the same or a connected matter. In the course of argument, however, he modified his position, accepting that there was no ground on which the court could properly intervene unless two conditions were satisfied: (i) that the solicitor was in possession of information which was confidential to the former client and (ii) that such information was or might be relevant to the matter on which he was instructed by the second client. This makes the possession of relevant confidential information the test of what is comprehended within the expression "the same or a connected matter." On this footing the Court's intervention is founded not on the avoidance of any perception of possible impropriety but on the protection of confidential information.

My Lords, I would affirm this as the basis of the court's jurisdiction to intervene on behalf of a former client. It is otherwise where the court's intervention is sought by an existing client, for a fiduciary cannot act at the same time both for and against the same client, and his firm is in no better position. A man cannot without the consent of both clients act for one client while his partner is acting for another in the opposite interest. His disqualification has nothing to do with the confidentiality of client information. It is based on the inescapable conflict of interest which is inherent in the situation.

22 Lord Millett also addressed the extent of a solicitor's duty to keep the information confidential at 235-236:

Whether founded on contract or equity, the duty to preserve confidentiality is unqualified. It is a duty to keep the information confidential, not merely to take all reasonable steps to do so. Moreover, it is not merely a duty not to communicate the information to a third party. It is a duty not to misuse it, that is to say, without the consent of the former client to make any use of it or to cause any use to be made of it by others otherwise than for his benefit. The former client cannot be protected completely from accidental or inadvertent disclosure. But he is entitled to prevent his former solicitor from exposing him to any avoidable risk; and this includes the increased risk of the use of the information to his prejudice arising from the acceptance of instructions to act for another client with an adverse interest in a matter to which the information is or may be relevant.

23 As to the degree of risk, his Lordship stated at 236-237:

Many different tests have been proposed in the authorities. These include the avoidance of "an appreciable risk" or "an acceptable risk." I regard such expressions as unhelpful: the former because it is ambiguous, the latter because it is uninformative. I prefer simply to say that the court should intervene unless it is satisfied that there is no risk of disclosure. It goes without saying that the risk must be a real one, and not merely fanciful or theoretical. But it need not be substantial. This is in effect the test formulated by Lightman J. in Re a Firm of Solicitors [1997] Ch. 1, at p. 9 (possibly derived from the judgment of Drummond J. in Carindale Country Club Estate Pty. Ltd. v. Astill (1993) 115 A.L.R. 112) and adopted by Pumfrey J. in the present case.

24 It is instructive to look at what Lord Millett said in relation to the adequacy of the protective measures taken by the respondent firm of accountants, KPMG, at 237-238:

Once the former client has established that the defendant firm is in possession of information which was imparted in confidence and that the firm is proposing to act for another party with an interest adverse to his in a matter to which the information is or may be relevant, the evidential burden shifts to the defendant firm to show that even so there is no risk that the information will come into the possession of those now acting for the other party. There is no rule of law that Chinese Walls or other arrangements of a similar kind are insufficient to eliminate the risk. But the starting point must be that, unless special measures are taken, information moves within a firm. In MacDonald Estates v. Martin 77 D.L.R. (4th) 249, Sopinka J. said at p. 269 that the court should restrain the firm from acting for the second client "unless satisfied on the basis of clear and convincing evidence that all reasonable measures have been taken to ensure that no disclosure will occur." With the substitution of the word "effective" for the words "all reasonable" I would respectfully adopt that formulation.
Application to the facts of the present case

Chinese Walls are widely used by financial institutions in the City of London and elsewhere. They are the favoured technique for managing the conflicts of interest which arise when financial business is carried on by a conglomerate. The Core Conduct of Business Rules published by the Financial Services Authority recognise the effectiveness of Chinese Walls as a means of restricting the movement of information between different departments of the same organisation. They contemplate the existence of established organisational arrangements which preclude the passing of information in the possession of one part of the business to other parts of the business. In their Consultation Paper on Fiduciary Duties and Regulatory Rules the Law Commission (1992) (Law. Com. No. 124) describe Chinese Walls as normally involving some combination of the following organisational arrangements:

(i) the physical separation of the various departments in order to insulate them from each other - this often extends to such matters of detail as dining arrangements;

(ii) an educational programme, normally recurring, to emphasis the importance of not improperly or inadvertently divulging confidential information;

(iii) strict and carefully defined procedures for dealing with a situation where it is felt that the wall should be crossed and the maintaining of proper records where this occurs;

(iv) monitoring by compliance officers of the effectiveness of the wall;

(v) disciplinary sanctions where there has been a breach of the wall.

KPMG insist that, like other large firms of accountants, they are accustomed to maintaining client confidentiality not just within the firm but also within a particular team. They stress that it is common for a large firm of accountants to provide a comprehensive range of professional services including audit, corporate finance advice, corporate tax advice and management consultancy to clients with competing commercial interests. Such firms are very experienced in the erection and operation of information barriers to protect the confidential information of each client, and staff are constantly instructed in the importance of respecting client confidentiality. This is, KPMG assert, part of the professional culture in which staff work and becomes second nature to them. Forensic projects are treated as exceptionally confidential and are usually given code names. In the present case KPMG engaged different people, different servers, and ensured that the work was done in a secure office in a different building. KPMG maintain that these arrangements satisfy the most stringent test, and that there is no risk that information obtained by KPMG in the course of Project Lucy has or will become available to anyone engaged on Project Gemma.

I am not persuaded that this is so. Even in the financial services industry, good practice requires there to be established institutional arrangements designed to prevent the flow of information between separate departments. Where effective arrangements are in place, they produce a modern equivalent of the circumstances which prevailed in Rakusen's case [1912] 1 Ch. 831. The Chinese Walls which feature in the present case, however, were established ad hoc and were erected within a single department. When the number of personnel involved is taken into account, together with the fact that the teams engaged on Project Lucy and Project Gemma each had a rotating membership, involving far more personnel than were working on the project at any one time, so that individuals may have joined from and returned to other projects, the difficulty of enforcing confidentiality or preventing the unwitting disclosure of information is very great. It is one thing, for example, to separate the insolvency, audit, taxation and forensic departments from one another and erect Chinese Walls between them. Such departments often work from different offices and there may be relatively little movement of personnel between them. But it is quite another to attempt to place an information barrier between members all of whom are drawn from the same department and have been accustomed to work with each other. I would expect this to be particularly difficult where the department concerned is engaged in the provision of litigation support services, and there is evidence to confirm this. Forensic accountancy is said to be an area in which new and unusual problems frequently arise and partners and managers are accustomed to share information and expertise. Furthermore, there is evidence that physical segregation is not necessarily adequate, especially where it is erected within a single department.

In my opinion an effective Chinese Wall needs to be an established part of the organisational structure of the firm, not created ad hoc and dependent on the acceptance of evidence sworn for the purpose by members of staff engaged on the relevant work.

25 Relevantly, Prince Jefri is authority for the following propositions:

(1) In a case where the retainer is no longer active, the jurisdiction of the court to intervene at the suit of a former client to restrain a solicitor from acting is founded on the protection of the confidences of the former client.
(2) The duty to preserve confidentiality is unqualified. It is a duty to keep the information confidential, not merely to take all reasonable steps to do so.

(3) The court should intervene unless it is satisfied that there is no risk of disclosure. The risk must be a real one, and not merely fanciful or theoretical.

(4) Once the former client has established that the defendant firm is in possession of information which was imparted in confidence and that the firm is proposing to act for another party with an interest adverse to his in a matter to which the information is or may be relevant, the evidential burden shifts to the defendant firm to show that even so there is no risk that the information will come into the possession of those now acting for the other party.

(5) There is no rule of law that Chinese Walls or other arrangements of a similar kind are insufficient to eliminate the risk.

(6) The court should restrain the firm from acting for the second client unless satisfied on the basis of clear and convincing evidence that effective measures have been taken to ensure that no disclosure will occur.

We intend to adopt these principles in the disposition of this appeal.

Tangible and intangible matters

26 His Honour's second reason refers to the "tangible matters concerning the communication of confidential information and intangible matters". The intangible matters were said to include "financial and other resources that a person would be able to devote to litigation." The protection to be afforded to the former client or, in this case a person who consulted a firm of solicitors for the purpose of imparting information and receiving preliminary legal advice, is in relation to confidential information. It may well be imagined that a litigant's resources, financial or otherwise, that may be devoted to prosecuting a claim could be confidential information and highly prejudicial to the litigant if his or her opponent was to come into possession of that information.

27 In making a distinction between tangible and intangible matters we do not consider Marks J was suggesting the intangible matters were not confidential matters. His Honour was correct in having regard to both categories as falling within the scope of matters that may be confidential.

Competing interests

28 The third matter relied upon by Marks J was the competing interests of Mr McCausland and of the respondents who seek to retain the solicitors of their choice. This was also a legitimate consideration for his Honour. As the Full Bench observed in the earlier interlocutory decision at [19]:

[T]here is a public interest in a litigant not being deprived of a choice of legal representative without good cause: Black v Taylor [1993] 3 NZLR 403; Grimwade v Meagher and Others [1995] 1 VR 446; Williamson & Anor v Nilant [2002] WASC 225; Bowen v Stott [2004] WASC 94. That public interest consideration is of even greater significance where a potential client has a discussion with a firm and subsequently decides not to retain that firm. There are, of course, countervailing considerations raised by the respondent, but authorities would suggest that a sound basis must exist to deprive another party of a choice in circumstances where effective steps have been taken to protect confidentiality.

Identification of confidential information

29 The fourth matter relied upon by his Honour was that confidential information was conveyed by Mr McCausland to Messrs Stewart and Lewin. The evidence suggested that, indeed, Mr McCausland did impart confidential information to the two solicitors at the meeting on 27 February 2004. Moreover, as Mr Walker SC for the McCauslands submitted, "It is impossible for somebody with a legal problem or possible grievance contemplating the possibility of litigation to talk for an hour to a solicitor without saying anything confidential." Further, the affidavit of Mr Dunstan filed on 13 July 2006 identifies the matters imparted to Mr Stewart and Mr Lewin that were said to be confidential and, in our opinion, at least some of them were of a confidential nature.

30 However, whilst we acknowledge the difficulty (albeit one that is not insurmountable) of publicly identifying information that is confidential, the problem we face on appeal is that there was no indication by Marks J in his decision that he satisfied himself that, whilst the information initially conveyed by Mr McCausland was confidential, the information did not subsequently lose that quality. For instance, there does not appear to have been any consideration by his Honour of affidavit material later filed by Mr McCausland in the proceedings and whether that negatived any confidentiality arising from the meeting on 27 February 2004 and subsequent telephone conversations.

31 At [17] of his decision Marks J noted the submission by the Surfing Interests that "any confidentiality that did apply to the information given to Messrs Stewart and Lewin will be lost when the applicant filed lengthy affidavit material." Whilst his Honour comes to the conclusion at [24] that "There can be no doubt that confidential information was conveyed by Mr McCausland to Messrs Stewart and Lewin", in the absence of any indication by his Honour that he, in fact, actively considered the "lengthy affidavit material" and what it disclosed, we are left in the position on appeal of being unsure of the existence of relevant confidential information that would warrant us intervening in order to protect such information.

32 It was contended by counsel for the McCauslands that it was enough that Marks J stated there was confidential information for us to be satisfied this was so. We do not know for certain, however, whether his Honour was confining his finding as to the existence of confidential information to information that was imparted in the meeting on 27 February 2004 and subsequent telephone conversations or that his finding was referring to residual confidential information after his Honour undertook a comparison of the notes taken by Mr Stewart and Mr Lewin following their conversations with Mr McCausland and the affidavit material later filed in the proceedings. We consider it was most likely the former because his Honour at [24] stated that the confidential information he was referring to was information "conveyed by Mr McCausland to Messrs Stewart and Lewin". No reference was made to a comparison having been undertaken by his Honour of the notes and the later affidavit material.

33 In Durban Roodepoort Deep Limited v Mark David Reilly and Ors [2004] WASC 269 Le Miere J, after referring to Mancini v Mancini [1999] NSWSC 800 at [7], Carindale Country Club Estate Pty Ltd v Astill and Others (1993) 115 ALR 112 at 120, In re a firm of Solicitors [1997] Ch 1 at 10 and Waiviata Pty Ltd v New Millennium Publications Pty Ltd [2002] FCA 98 at [6], stated:

[80] Before a court will grant an injunction to protect a client's confidential information by restraining his former solicitor from acting against him, the former client must establish that the solicitor possesses confidential information and must identify the confidential information with precision and not merely in global terms. The client must identify the confidential information with some particularity. The degree of particularity required must depend upon the facts of the particular case. The confidential information must be identified with sufficient particularity to enable the court to determine whether the information is truly confidential, whether the confidential information which once existed, if it did, continues to be confidential and whether the confidential information is relevant to any issue in the current proceedings and might be used in those proceedings.

34 The respondents have not, in these proceedings, identified the relevant confidential information with any precision. Whilst we have compared the notes made by Mr Stewart and Mr Lewin against the later affidavit material, and, as a consequence, have concluded that much of what was in the notes later became public, we have not been able to arrive at a definite conclusion whether or not there remains confidential information to be protected. Further, it was contended by the respondents that there was other information conveyed to Messrs Stewart and Lewin not recorded in the notes and not revealed in the later affidavit material.

35 We could take the view that the respondents, having failed to identify with any particularity the confidential information they wish to have protected, that there is no such information. However, we have a lingering doubt about whether relevant confidential information may be in Harmers' possession. This is so notwithstanding what may have been revealed since Mr McCausland's conversations with Mr Stewart and Mr Lewin in 2004 and what might be otherwise available in the public domain and which is capable of being used against the respondents in the unfair contract proceedings, if only for the purpose of gaining a tactical or strategic advantage.

36 In light of that doubt we are inclined to take a cautious approach and, therefore, we are prepared to assume that Harmers is in possession of relevant confidential information. The observations of Bryson J in D & J Constructions Pty Ltd v Head and Others trading as Clayton Utz (1987) 9 NSWLR 118 at 124-5 are apposite:

Where confidential information has been communicated by a client to a solicitor and is relevant to litigation in which the client is now engaged and still available to the solicitor, the court should take a cautious approach to any proposal that it should allow the solicitor to act against the client.

...

Cautious conduct by the court is appropriate because the spectacle or the appearance that a lawyer can readily change sides is very subversive of the appearance that justice is being done.

Information barriers and risk of disclosure

37 The fifth matter considered by Marks J was that Harmers had put in place information barriers that sought to accord with the guidelines established by the Law Society. Information barriers are an important consideration in the context of determining whether such barriers ensure that there is no real, as opposed to fanciful or theoretical, risk of disclosure of the confidential information.

38 Notwithstanding the central importance of the information barriers and the evidence relating to those barriers there was no express consideration by Marks J of whether those barriers were effective to the extent their existence meant there was no real risk of disclosure of confidential information. This was an error of law and constitutes a proper basis for appellate intervention.

39 The onus of proving that there is no risk of disclosure of confidential information in this case falls on the appellants: Prince Jefri at 237 per Millett LJ. The appellants referred to a number of matters that we consider are pertinent to the question of whether there is a real risk of disclosure:

(1) the number of persons within Harmers who had contact with Mr McCausland in 2004 was confined to two persons, namely, a partner and employed solicitor;

(2) Mr McCausland had a single conference on 27 February 2004 with a partner and employed solicitor of Harmers that went for a little over one hour; there were two follow up telephone calls, in April 2004 and May 2004;

(3) Mrs McCausland never met with Harmers or imparted any information to it;

(4) Upon being informed by Mr McCausland in early May 2006 that there was a possibility that Harmers would be instructed by the appellants, and prior to any such instructions being received, the firm took the following steps:

(a) the notes which had been retained by Mr Stewart of his and Mr Lewin’s meeting and telephone discussions with Mr McCausland were provided to Mr Robertson to be held securely by him;

(b) Mr Robertson informed the firm’s managing partner and opened a file to ensure that all steps taken in relation to any conflict of interest would be recorded;

(c) undertakings were given by Mr Robertson, Mr Stewart and Mr Lewin, the solicitors who had previously met and spoken with Mr McCausland and Mrs Schreier-Joffe, the partner of the firm who was then proposing to meet with the appellants and their then solicitor to the effect that:

(i) Mr Stewart and Mr Lewin have not, and will not, disclose any confidential information in relation to Mr McCausland to any person other than to Mr Robertson in his role as ‘Compliance Officer’;

(ii) Mr Stewart and Mr Lewin would not, during the existence of the current proceeding between Mr McCausland and the appellants, have any involvement with the clients or with the personnel involved in that matter for the purpose of that matter;

(iii) Mr Robertson will not disclose any information about the earlier meeting with Mr McCausland or the subsequent telephone conversations, including any documents relating to that meeting or those telephone conversations, to any person involved in the current proceeding between Mr McCausland and the appellants;

(iv) no confidential information about the earlier dealings between Mr McCausland and Harmers in relation to Surf Hardware International Pty Ltd has been disclosed to Mrs Schreier-Joffe;

(v) Mrs Schreier-Joffe will not have any involvement with Mr Stewart or Mr Lewin during the existence of the current proceeding between Mr McCausland and the appellants for the purposes of that proceeding;

(vi) Mrs Schreier-Joffe will not seek or receive any confidential information about the earlier dealings between Mr McCausland and Harmers from Mr Stewart or Mr Lewin or in any other way; and

(vii) any breach or possible breach of the undertakings would immediately be reported to Mr Robertson who will then take appropriate action.

(d) Harmers acted promptly to put this “information barrier” regime in place; and,

(e) the respondents’ solicitor was informed promptly about the regime put in place and to be put in place.

(5) At the time of receiving instructions from the appellants, and subsequently, Harmers took the following further steps consistent with the ‘information barriers’ by then already in place:

(a) Harmers obtained written instructions from the First appellant (on behalf of the appellants generally) that it approves of the information barriers established by the firm in relation to any confidential information disclosed to the firm by Mr McCausland, and acknowledges that the firm’s duty of disclosure to it does not extend to that information;

(b) all other Harmers’ staff, including lawyers, paralegals, administrative and support staff, who have been asked to work on the substantive matter have given undertakings in a similar form to that given by Mrs Schreier-Joffe; steps were taken to ensure that only those persons worked on the matter; and

(c) any further staff asked to work on the substantive matter would be required to give a similar undertaking.

40 We also note the affidavit evidence of Mr Robertson, who acts as Compliance Officer as defined in the Law Society's 'Information Barrier Guidelines'. Mr Robertson deposed:

The Firm [Harmers] is aware of its ethical obligations and takes those obligations seriously. It regularly runs training sessions for all legal staff on ethical issues, and usually invites representatives of the Law Society to present at those sessions. It has a system for checking conflicts of interest and has in the past put in place protocols for dealing with potential conflicts where they have arisen in the course of practice.

...

I took immediate steps to retain the papers [notes taken by Mr Stewart and Mr Lewin of their conversations with Mr McCausland] in my room and to call for earlier protocols developed for dealing with conflict of interest. As I was aware, from a recent Law Society training session at the Firm, that there were new Law Society guidelines, I also obtained a copy of those guidelines.

41 Notwithstanding the steps taken by Harmers to protect confidentiality, Mr McCausland had identified, as a basis of his concern regarding disclosure, a phrase taken from the firm’s website being, “the Firm provides for full information sharing”. Mr Robertson in his affidavit referred to this concern and stated:

However, this statement on the Harmers website needs to be read in context. While the statement quoted appears on the Firm’s website, it is a summary of a more detailed statement that appears on an earlier page of that website, that statement reading:

“The Firm’s culture has at its heart principles of openness and consultation. Unlike many organisations, the primary decision making body in the Firm is the ‘Full Firm’ which meets fortnightly and at which all members of staff actively participate. The decision making ability of the Full Firm is enhanced by the Firm’s commitment to openness and consultation. All staff members are permitted access to all information relevant to the management of the Firm, including all accounts information.”

The reference to full information sharing is thus a reference to management information and in particular accounts information, not the sharing of detailed information on every file that is opened in the Firm. The Firm works on many sensitive matters and such files are kept securely in individual practitioners’ offices where necessary. In this case, there was no file opened and no electronic records for anyone to access. The notes were held securely by Mr Stewart until they were handed to me and have been held by me securely since that time. All persons involved have given relevant undertakings that no information has been shared or will be shared.

42 Reference has been made to the opinion of Ms Shirvington that it was "probably" the case that the structures put in place by Harmers were "sufficient steps to take in terms of conflict of interest, pursuant to the Law Society's Information Barrier Guidelines." Ms Shirvington's independence and expertise was not put in issue. However, the respondents rely on the equivocation in Ms Shirvington's answer to the question put to her as evidence that the information barriers put into place by Harmers may not have been sufficient and that, therefore, a risk of disclosure existed.

43 Ms Shirvington's qualified opinion is a matter to be taken into account in the balance of considerations but it is not determinative one way or the other as to whether there was risk of disclosure. We do note, however, it is an opinion tending in favour of the efficacy of the information barriers.

Matters said to be indicative of risk of disclosure

44 Thus, we have a position where Harmers acted quickly and appropriately to quarantine the information imparted by Mr McCausland and to obtain undertakings from solicitors and others not to disclose any confidential information. The appellants contended, however, that a real risk of disclosure existed or exists when one considered the following matters:

(1) The file of material handed to Mr Robertson by Mr Stewart on 4 May 2006 had been provided to persons within the firm for the purpose of copying it in order to make it available to certain legal representatives and to the Court at first instance and to the members of the Full Bench on appeal. Thus, there has been no absolute embargo and there is a risk, given human nature, that confidential information in the file has been disclosed;

(2) Harmers’ first apparent step (foreshadowed by Ms Schreier-Joffe on 8 June 2006) in acting in the proceedings was to file a motion seeking to have the summonses for relief filed by the respondents dismissed on jurisdictional grounds, including the particular ground, against the first respondent, that his remuneration exceeded the limit prescribed in s 108A of the Act. That was not a step that the appellants’ previous solicitors, who were not in the possession of the confidential information, had taken. The evidence was that the remuneration issue was a particular matter on which the first respondent consulted Harmers, and in doing so disclosed relevant confidential information, in 2004;

(3) Ms Schreier-Joffe was the first from Harmers to be involved in the substantive matter, having been briefed by Deacons, the firm of solicitors to whom the appellants first turned when they left Allens, and who were obliged to withdraw out of conflict of interest. It is not known what Ms Schreier-Joffe was told by Deacons. Further, Ms Schreier-Joffe attended the hearing of the McCauslands' motion before Marks J on 14 July 2006 and conversed with the appellant’s legal representatives. Ms Schreier-Joffe was seemingly, therefore, able to have involvement in the substantive proceedings and the interlocutory proceeding, despite having given a written undertaking to operate within a Chinese wall on 5 May that was said to conform to protocols and to provide security.

45 What the respondents have sought to demonstrate by referring to the three matters in the preceding paragraph is that the risk here is more than fanciful or theoretical and that there is a real or actual risk that the confidential information conveyed by Mr McCausland to Harmers in 2004 may be disclosed.

46 Taking the first of these matters, the submission was that because there has not been a complete embargo on the file, it having been photocopied for the purpose of providing a copy to the respondents' legal representatives and to the Court, the Court should accept there is a real risk of disclosure. It may be noted that only persons bound by undertakings as to strict confidentiality made only the necessary number of copies.

47 The example of photocopying confidential material highlights the difficulty of cases such as the present. In Newman v Phillips Fox, Steytler J referred to Analytica Incorporated v NPD Research Inc 708 F 2d 1263, at 1277 (1983) where it was stated:

If prior representation of a particular client will irrebuttably disqualify an entire firm from handling certain cases, the result could easily be whole law firms of 'Typhoid Marys.' [sic] This would have a drastic impact on the careers of attorneys in entire firms, would impede clients rights to be represented by attorneys of their choice and would discourage attorneys with expertise in a particular field of law from handling cases in their respective specialties.

48 On the respondents' submissions, a real risk of disclosure arises if confidential documents have to run the photocopying gauntlet. If that be so and restraining orders are made on that basis, the potential effect on law firms and solictors is that described in Analytica.

49 On the other hand, again as Steytler J shows in his helpful judgment in Newman v Phillips Fox, there are significant reservations about information barriers or 'Chinese walls'. Reference is made to what Bryson J stated in this respect in D & J Constructions at 122-123:

I would think that the court would not usually undertake attempts to build walls around information in the office of a partnership, even a very large partnership, by accepting undertakings or imposing injunctions as to who should be concerned in the conduct of litigation or as to whether communication should be made among partners or their employees. The new client would have to join in such an arrangement and give up his right to the information held by such parties and staff as held it. Enforcement by the court will be extremely difficult and it is not realistic to place reliance on such arrangements in relation to people with opportunities for daily contact over long periods, as wordless communication can take place inadvertently and without explicit expression, by attitudes, facial expression or even by avoiding people one is accustomed to see, even by people who sincerely intend to conform to control.

And further in Lee (David) & Co Ltd v Coward Chance [1991] Ch 259 at 268, where Sir Nicolas Browne-Wilkinson VC said:

When one has sensitive information in a firm or in any other group of people, there is the element of seepage of that information through casual chatter and discussion, the letting slip of some information which is not thought to be relevant but may make the link in a chain of causation or reasoning.

50 Millett LJ stated in Prince Jefri there is no rule of law that Chinese walls or other arrangements of a similar kind are insufficient to eliminate the risk of disclosure of confidential information but that the starting point must be, unless special measures are taken, information will move within a firm. His Lordship said at 239:

[A]n effective Chinese wall needs to be an established part of the organisational structure of the firm, not created and dependent on the acceptance of evidence sworn for the purpose by members of staff engaged on the relevant work.

51 It is apparent from Mr Robertson's evidence, as the compliance officer within the firm, that a system and protocols were in place to deal with circumstances that might involve a conflict of interest. Mr Robertson deposed that the firm regularly conducted training sessions for all legal staff on ethical issues, and usually invited representatives of the Law Society to present at those sessions. The arrangements put in place by Harmers in relation to the McCausland information were not ad hoc but in conformity with the firm's established practice.

52 In Asia Pacific Telecommunications Ltd v Optus Network Pty Ltd [2005] NSWSC 550the law firm, Clayton Utz, had in place a system and protocols not dissimilar to that employed by Harmers, and its lawyers and staff involved in the particular matter provided undertakings relating to confidentiality, including a willingness to give undertakings to the Court. At [35]-[36] Bergin J found:

[35] The plaintiffs submitted that the evidence discloses that the solicitors who provided services during the Retainer and the solicitors on the New Team work on the same floor and in the same department. There was also evidence that from time to time the solicitors “bounce” matters off each other in a professional sense and attend litigation seminars together. There was also evidence that suggested that when the conflict search was done at the time Clayton Utz accepted instructions for the defendant in these proceedings, the file the subject of the Retainer did not come up on the search. It was not until Gadens wrote to Clayton Utz that Ms Still became aware of the alleged conflict. The plaintiff relies on that evidence to suggest that I could not be confident that the information will not be disclosed to the New Team, in other words, there is a real risk that this will happen. I disagree entirely.

[36] The evidence of the Probity Partner, the partners, solicitors and staff of Clayton Utz satisfies me that there is no real risk of the information being disclosed to the New Team. I am satisfied that a sensible and safe system is in place to ensure that will not happen. There are also confidentiality undertakings in place and a willingness to give undertakings to the Court. Undertakings to the Court would be expected to heighten the consciousness for sensitivity and diligence in ensuring that the information remains confidential. The court will assess the need for undertakings on the particular circumstances of the case. I am not satisfied that this case calls for such undertakings. Nor am I satisfied that Clayton Utz should be restrained from acting for the defendant in these proceedings.

53 Harmers is not a large firm, relatively speaking, and could not be compared to KPMG, which was the subject of proceedings in Prince Jefri. In Prince Jefri some 168 KPMG personnel had worked on the assignment including 12 partners and 81 assistant managers or above. Here, a comparatively small number of personnel had access to the confidential information. Given the system and protocols in place within the firm and the steps taken to protect the information imparted by Mr McCausland we consider the arrangements in place were "sensible and safe". The fact that staff (who had provided confidentiality undertakings) may have had access to the confidential information for photocopying purposes does not, without more, lead to an inevitable conclusion that there was a real risk of disclosure.

54 To hold otherwise would mean that no arrangement to protect confidential information could be regarded as avoiding a real risk of disclosure because any person within a firm who had access could be accused of being a real risk of disclosure. The risk of someone leaking, inadvertently or intentionally, confidential information because they were charged with the task of photocopying the information under an appropriate regime designed to protect confidentiality and under the obligation of a confidentiality undertaking may be regarded as a theoretical risk but in the absence of some other evidence that supports the likelihood of either inadvertent or intentional disclosure, it is not, in our opinion, a real risk.

55 The respondent's second illustration of a real risk of disclosure concerned the motion by Harmers to have the summons for relief dismissed on the ground that Mr McCausland's remuneration exceeded the limit prescribed in s 108A of the Act. It was said that this was not a step that the appellants’ previous solicitors, who were not in the possession of the confidential information, had taken but that Harmers were in possession of such information as a consequence of that firm's discussions with Mr McCausland in 2004.

56 The evidence indicates that the previous solicitors, Allens, did in fact file a notice of motion on 10 January 2005 seeking dismissal of the respondents' amended summons for relief on the ground that Mr McCausland was paid and received a remuneration package that exceeded the remuneration cap prescribed by s 108A of the Industrial Relations Act. Mr McCausland responded with his own motion, contending that the issue of his remuneration was bound up with other matters of fact and law and it should not be dealt with on a preliminary basis. For some reason it was not.

57 There is nothing to suggest that the information regarding Mr McCausland's remuneration, and which constituted the basis for the motion filed by Harmers on behalf of the appellants, had as its source the consultation between Mr McCausland and Harmers in 2004. Obviously, the appellants had previously instructed Allens to file the motion and it is unsurprising, given they would have access to information regarding Mr McCausland's remuneration, that they might provide the same instruction to Harmers. We do not consider the fact that Harmers filed a notice of motion seeking to have the summonses for relief dismissed on the ground that Mr McCausland's remuneration exceeded the limit prescribed in s 108A of the Act supports a conclusion that there was a real risk of disclosure of confidential information.

58 The respondents' third illustration concerned the role of Ms Schreier-Joffe. First, Ms Schreier-Joffe undertook that:

(a) No confidential information about the earlier dealings between Mr McCausland and Harmers in relation to Surf Hardware International Pty Ltd has been disclosed to her;

(b) She would not have any involvement with Mr Stewart or Mr Lewin during the existence of the current proceeding between Mr McCausland and the appellants for the purposes of that proceeding;

(c) She would not seek or receive any confidential information about the earlier dealings between Mr McCausland and Harmers from Mr Stewart or Mr Lewin or in any other way.

59 As to her appearance in Court on 14 July 2006, it was Mr Robertson's evidence that:

I was present in court that day. I say that Mrs Schreier-Joffe was very briefly in court. She spoke to me, but did not speak to counsel. Mrs Schreier-Joffe was not in court when the matter started and I did not know she was in court until she spoke to me. Even though it was an open court, I asked her to leave and she did so.

I subsequently asked Mrs Schreier-Joffe when she arrived. She told me, and I verily believe, that she arrived only shortly before she spoke to me, heard only Mr Kite [senior counsel for the appellants] speaking, and left when asked.

We do not consider Ms Schreier-Joffe constituted a real risk of disclosure.

Newman v Phillips Fox distinguished

60 We referred earlier to the significant reservations that exist regarding the effectiveness of information barriers or Chinese walls in protecting confidential information. In Newman v Phillips Fox, Steytler J restrained the firm of solicitors from acting. This was a case where lawyers in possession of confidential information relating to a former client became employed by a law firm acting against that former client. Central to his Honour's decision was that:

[78] The "wall" which has been proposed by the respondent in this case falls, in my opinion, short of what is required. Like that in Bolkiah it is proposed only to be established ad hoc. It will be unaccompanied by any educational programme or procedures of the kind discussed in Bolkiah. Nothing has been proposed with respect to monitoring and record keeping and nor is there any proposal with respect to the imposition of disciplinary sanctions.

And further:

[79] The position is exacerbated by the fact that no adequate safeguards appear to have been considered as regards the administrative staff formerly employed by Hely Edgar who are now in the employ of Phillips Fox and who may themselves have been the recipients of confidential information. There is no reason to assume that they will not come into contact with a range of different people at Phillips Fox.

[80] There is, in my opinion, consequently a risk of inadvertent disclosure of the kind considered in the cases to which I have referred notwithstanding the best intentions of the lawyers concerned and the impeccable standing of both firms.

[81] In any event, it seems to me, the proposals which have been made have come too late. The Edgar Hely personnel have been employed by Phillips Fox since May of this year. While I would not for one moment question the integrity or professionalism of any of those concerned the reality is that it might now be difficult to satisfy the plaintiff or, for that matter, Mr and Mrs Littlejohn, that there has not already been some inadvertent disclosure. The affidavits are eloquent as regards the shock, outrage and loss of confidence which Mr Littlejohn, at least, has expressed as regards the events which have occurred. While these are subjective matters, concerns as to the existence of some inadvertent disclosure might well be held by a more objective observer. It should be borne in mind in this respect that the need to safeguard the proper administration of justice by ensuring that each client should know that confidential disclosures to his or her lawyer will be kept secret is, as Lord Millett has said (in Bolkiah, above at 226), a matter of perception as well as of substance.

61 Newman v Phillips Fox, however, may be distinguished. In the present case:

(1) The information barrier was not ad hoc;

(2) Harmers conducted educational programs of the kind discussed in Prince Jefri;

(3) Harmers remain willing to give the undertakings proffered to Marks J, and provided to the Full Bench in relation to the stay application. Any breach of the undertakings could attract proceedings for contempt;

(4) There was no evidence to suggest that between 2004 and 2006 when information barriers were erected within the firm regarding the McCauslands' confidential information that the information was disseminated in any way, the file remaining within Mr Stewart's office during that period and with no electronic copy having been created.

62 We note that Marks J did not indicate whether he had regard to the undertakings proffered by Harmers to the Court. This was a relevant matter to be taken into account in the exercise of his Honour's discretion and again represents an error of law in the judgment at first instance.

Relative sophistication and concerns of the parties

63 The sixth matter influencing Marks J was the nature and extent of the confidential information as well as the sophistication and concerns of the Surfing Interests as opposed to the McCauslands. We have already discussed the confidential information, which we consider was dealt with inadequately at first instance. As to the relative "sophistication and concerns" of the respective parties, his Honour did not explain what he meant but it may have been Marks J was referring to Mr McCausland's concern that he was "being bullied by the big end of town" and that his Honour considered Mr McCausland to be relatively unsophisticated in the context of the conduct of litigation. In any event, we cannot see the relevance of such a consideration given the tests formulated by Millett LJ in Prince Jefri and which we have adopted in these proceedings. This represents an error by his Honour in the sense contemplated in House v The King (1936) 55 CLR 499.

Interests of justice

64 That leads us to the seventh matter relied upon by Marks J - the interests of justice. Again, his Honour did not elaborate on what he meant by the "interests of justice". Perhaps it was linked to the sixth matter discussed in the preceding paragraph and his Honour was anxious to address Mr McCausland's concerns about having to enter into a litigation contest with the "big end of town" in circumstances where Mr McCausland felt he would be prejudiced by Harmers being in possession of confidential information.

65 We are conscious of the serious concern held by Mr McCausland that information he conveyed to Harmers might be used to his disadvantage or prejudice in the unfair contract proceedings. But that subjective concern is not the test for determining whether Harmers should be restrained from acting for the appellants.

66 What the Court is required to ask itself is whether a fair minded, reasonably informed member of the public would conclude that the proper administration of justice required that a legal practitioner be prevented from so acting, and that in this process, due weight is given to the public interest that litigants should not be deprived of their choice of legal practitioner without good cause: Grimwade v Meagher and Others [1995] 1 VR 446; Sent and Prime Life Corporation Ltd v John Fairfax Publications Pty Ltd and Hills [2002] VSC 429; Asia Pacific Telecommunications at [57]-[59].

67 We find that the fair minded member of the public, aware of the relevant facts including the steps taken by Harmers to quarantine the confidential information, the confidentiality undertakings provided by lawyers and members of the staff, the absence of any indication that there had been an inadvertent or intentional disclosure of the confidential information and the undertakings to the Court that have been proffered, would not consider there was a real risk that any confidential information imparted to Harmers by Mr McCausland might be used by Harmers to the detriment of the McCauslands.

68 We conclude that Marks J erred in granting the respondents' motion to restrain Harmers from acting for the Surfing Interests. In particular, his Honour erred in failing to apply the relevant law regarding risk of disclosure to the facts in this case, his Honour did not have regard to relevant matters in the exercise of his discretion and we consider his Honour had regard to irrelevant matters.

LEAVE TO APPEAL

69 On the question of leave to appeal, we have decided to grant leave not only because we consider the appeal raises matters of general importance to the jurisprudence of the Court but also because it is in the public interest that the errors at first instance be corrected for the proper administration of justice.

UNDERTAKINGS

70 We intend to make orders granting leave to appeal and setting aside the decision and orders of Marks J subject to undertakings being proffered in relation to the proceedings in Matter Nos IRC 5174 of 2004 and 4589 of 2005 in the style of those accepted by the Full Bench in the interlocutory proceedings relating to the stay. We recognise that the earlier undertakings provided by Harmers and its solicitors and staff may be sufficient in relation to the proceedings at first instance but we consider it is appropriate that fresh undertakings be provided that relate only to those proceedings.

ORDERS AND DIRECTIONS

71 We make the following orders and directions:

(1) Leave to appeal is granted.

(2) Subject to the undertakings in Order (3) being acceptable to the Full Bench, the Decision and Orders of Marks J made on 14 July 2006 in Matter No. IRC 5174 of 2004 and Matter No. IRC 4589 of 2005 that Harmers Workplace Lawyers be restrained from continuing to represent the respondents in those proceedings, are set aside.

(3) Signed undertakings in the style of those proffered to the Full Bench in the stay proceedings but which relate only to the proceedings in Matter Nos IRC 5174 of 2004 and 4589 of 2005 shall be filed in the Industrial Registry. The Full Bench in Chambers shall consider such undertakings as to their acceptability. The parties shall be advised of the Full Bench's decision in this regard.

(4) In the event the signed undertakings are acceptable they shall be served upon the solicitors for the McCauslands within 24 hours of the parties being advised in accordance with Order (3).

(5) The stay granted by the Full Bench in its decision of 1 September 2006 is dissolved upon the Full Bench being advised that the directions in Order (4) have been complied with.

72 On the question of costs at first instance and on appeal, the appellants are directed to provide short written submissions within 14 days of this decision being handed down. The respondents shall have a further 14 days to reply. Unless contended otherwise by either or both parties, the question of costs shall be dealt with on the papers.

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LAST UPDATED: 4 November 2007