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Cite as: Jan/Feb 2010 84(1/2) LIJ, p.54


Restraining solicitors from acting in litigation

Kyriackou v Commonwealth Bank of Australia [2009] VSCA 241 (unreported, 23 October 2009, No 2835/2008, Neave and Mandie JJA and Byrne AJA)

The respondent/plaintiff had sought recovery of a debt pursuant to a loan agreement and mortgage. The appellant/defendant filed and served a counterclaim seeking damages in respect of an allegedly improper or negligent mortgagee’s sale. The counterclaim was struck out by reason of the failure of the defendant to comply with an order for the payment of costs and default judgment was signed by the plaintiff. The defendant applied to set aside this judgment.

A former employee of a firm of solicitors who had had some involvement with the defendant while employed by a firm of solicitors then acting for him (the solicitor had had no involvement with the proceeding before the court) became an employee of the plaintiff’s solicitors. That occurred after entry of the default judgment. The solicitor swore an affidavit in opposition to the application to set aside judgment. The defendant objected to the plaintiff’s solicitors acting for the plaintiff against him. He sought an injunction restraining the plaintiff’s solicitors from continuing to act for the plaintiff.

Several affidavits were filed by the parties in relation to the injunction application with reference to the degree of involvement of the employee solicitor in the proceeding and more generally in relation to dealings with the defendant.

The defendant’s application for an injunction was dismissed. The judge at first instance set out the relevant principles as follows:

“The grounds upon which a solicitor may be restrained from acting for a party were helpfully summarised by Whelan J in Pinnacle Living Pty Ltd v Elusive Image Pty Ltd [2006] VSC 202. In that case Whelan J accepted the correctness of the tests laid down by Brooking JA in Spincode Pty Ltd v Look Software Pty Ltd & Ors [2001] VSCA 248; (2001) 4 VR 501, as discussed and applied by Nettle J in Sent and Anor v John Fairfax Publications Pty Ltd and Anor [2002] VSC 429. The grounds are summarised by Whelan J in the following terms:

‘(1) The Court will restrain a legal practitioner from continuing to act for a party to litigation if a reasonable person informed of the facts might reasonably anticipate danger of misuse of confidential information of a former client, and that there is a real and sensible possibility that the interest of the practitioner in advancing the case in litigation might conflict with the practitioner’s duty to keep the information confidential and to refrain from using that information to the detriment of the former client.

‘(2) The danger of misuse of confidential information is not the sole touchstone for curial intervention where a solicitor acts against a former client. There is also an independent equitable obligation of loyalty which forbids a solicitor acting against a former client in the same or a closely related matter. Intervention may also be justified on this ground in the exercise of a Court’s supervisory jurisdiction over its own officers.

‘(3) There is an overriding jurisdiction to intervene so as to protect the due administration of justice arising where a reasonable informed member of the public would conclude that solicitors should be prevented from acting’”. [22]

The defendant had failed to satisfy the court that any of these principles applied so as to entitle him to an injunction. In particular, he concluded that “a fair-minded, reasonably informed member of the public would not consider the continuing involvement of [the plaintiff’s solicitors] as solicitors acting on behalf of the Bank to be offensive to common notions of fairness and justice or that the administration of justice required the firm to be prevented from acting or that by continuing to act it would bring the legal profession into disrepute”. [30]

The Court of Appeal in a careful review of the trial judge’s application of the relevant principles to the facts as revealed in the affidavits was of the view that the appeal against the refusal to grant an injunction should be dismissed. In particular, the Court concluded that:

“As the judge found that [the employee solicitor] had no confidential information of any significance or relevance (as he was entitled to find), there was no risk of any misuse thereof; but even if it is unnecessary that there be a risk of misuse of confidential information in order to invoke this principle, we are of the view that the judge was justified in his conclusion, in the circumstances as found by him, that a fair-minded, reasonably informed member of the public would not consider the continuing involvement of [the plaintiff’s solicitors] as solicitors for the Bank to be offensive to common notions of fairness and justice or that the administration of justice required them to be restrained from so acting”. [51]

The appeal was dismissed.

PROFESSOR GREG REINHARDT is executive director of the Australasian Institute of Judicial Administration and a member of the Faculty of Law at Monash University, ph 9600 1311, email Gregory.Reinhardt@law.monash.edu.au. The numbers in square brackets in the text refer to the paragraph numbers in the judgment. The full version of this judgment can be found at www.austlii.edu.au/databases.html.

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