Federal Court contemplates solicitors acting against a former client

In Sacca v El Saafin [2021] FCA 383, the Federal Court of Australia considered three potential bases which might justify the exercise of its jurisdiction to restrain a solicitor from acting against a former client.

The first plaintiff, Mr Sacca, was represented by Mr E. The first defendant, Mr El-Saafin sought an order restraining Mr E from acting for Mr Sacca. One of the grounds relied upon was that Mr E owed a duty of loyalty to the first defendant as his former client, because between 2011 and 2018, the first defendant, his brothers, and his family company Saafin Constructions, engaged Mr E and Mr E’s firm to act in discrete matters, including a draft joint venture deed and a debt recovery matter.

In May 2018, Saafin Constructions commenced proceedings in the Supreme Court in which Mr Sacca was a defendant. Mr E’s firm were originally retained to act in the matter on behalf of Mr Sacca in the Supreme Court proceeding. However the first defendant made a complaint to the Legal Services Commissioner (LSC) regarding Mr E’s involvement in those proceedings.

Subsequently it was agreed that Mr E would cease acting on the basis that the complaint would be withdrawn. An interim injunction was granted by consent to restrain Mr E, with a hearing adjourned until late 2020. Importantly, Mr E did not make any admission of wrongdoing, nor did he provide any undertaking to the LSC.

The Federal Court proceeding was filed in November 2018, where Mr Sacca engaged Mr E to act for him. By interlocutory application, the First Defendant again sought to restrain Mr E from acting for Mr Sacca. The application to restrain Mr E was filed just days before the trial scheduled for March 2021.

Issue

The issue before the court was whether to allow the application to restrain Mr E from acting for Mr Sacca in the Federal Court proceeding.

Issue considered

The court considered three potential bases which might justify the exercise of its jurisdiction to restrain a solicitor from acting against a former client.

1. Misuse of confidential information

The first and usual basis is that there is a “real and sensible possibility of the misuse of confidential information”.1 The court found that the first defendant did not identify specific confidential information in the possession of Mr E that might be misused. Moreover, the first defendant did not submit, and indeed there was no evidence that Mr E was privy to information about the first defendant’s “personality, character, or strategic interests, which might constitute confidential information capable of being misused”.2

Mr E deposed that he had never received any confidential information from either the first defendant or the company during the course of his limited engagements, and maintained that he did not have any relevant knowledge about their financial position or strategic interests.

2. Duty of loyalty

Counsel for the first defendant relied upon the duty of loyalty owed by a solicitor to their clients in support of the application. However, in respect of whether this duty is owed to former clients after the solicitor’s retainer has been terminated, the authorities have not been unanimous.3

The court declined to offer an opinion on the correctness of the duty of loyalty as a distinct ground to restrain a solicitor, however noted that if this ground is accepted, the duty only arises where the solicitor is sought to be restrained ‘in the same or a closely related matter’.4

The court held that in the absence of a “commonality of facts” between the matters agitated in the Supreme Court proceeding and the Federal Court proceeding, the two could not be closely related.5

3. Proper administration of justice

The third basis to restrain a solicitor arises from the court’s “inherent jurisdiction to protect the integrity of the judicial process”.6

Applying an objective test, the court did not accept that a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice required Mr E to be restrained. To the contrary, it would be an “unfair burden on the Plaintiffs if they were unduly put to the expense, inconvenience and possible tactical disadvantage of retaining new solicitors”.7

The court gave weight to the public interest principle that “a litigant should not be deprived of his or her choice of solicitor without good cause”.8

The first defendant submitted that the proper administration of justice required Mr E to comply with an “undertaking” he purportedly proffered to the LSC regarding his agreement to cease acting in the Supreme Court proceeding. However, the court held that Mr E did not breach his professional ethical obligations, and his agreement to cease acting against the first defendant and Saafin Constructions was limited to the matters which were the subject of the complaint.

With respect to the first defendant’s delay in bringing an application to restrain Mr E, the court referred to various authorities that emphasise that timeliness, although not necessarily fatal on its own, is a “highly relevant factor” in determining whether such an order should be made.9

From the first case management hearing in November 2018, the first defendant had multiple opportunities to bring an application to restrain Mr E from acting in the proceeding. However, he failed to do so until February 2021, just days before the trial. Furthermore, the court found that the “late timing of the application, the lack of notice and the request for an adjournment only days before the application was brought” raised a reasonable inference that the application to restrain Mr E was “not bona fide”.10

Ultimately, the court concluded that the first defendant’s delay in bringing the application, and the prejudice caused to the plaintiffs by the delay in hearing the proceeding if Mr E was to be restrained from acting, were significant matters which informed the decision to dismiss the application. The court noted that Mr Sacca was an elderly man, and the “delay had the potential to cause financial loss and stress” to him.11

Conclusion

Although the application to restrain the solicitor in this case was unsuccessful, the Federal Court’s decision highlights circumstances in which solicitors should not act against a former client. These can include situations where:

  • A solicitor holds confidential information about their former client and there is a real and sensible possibility for this information to be misused.
  • A solicitor owes a duty of loyalty to their former client (although this is a contentious ground). Or
  • where the proper administration of justice requires the solicitor to be restrained from acting.

Meagan Liu is a Law Graduate in the QLS Ethics and Practice Centre. This article has been approved by Grace van Baarle, Manager, and Stafford Shepherd, Principal Ethics and Practice Counsel.

Footnotes
1 Sacca v El Saafin [2021] FCA 383 [26] citing Farrow Mortgage Services Pty Ltd (in liquidation) v Mendall Properties Pty Ltd [1995] 1 VR 1, 5 (Hayne J) and Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222, 235 (Lord Millett).
2 Sacca v El Saafin (n1) [26]-[27].
3 Ibid [28] discussing Spincode Pty Ltd v Look Software Pty Ltd [2001] VSCA 248, [59]-[60], [63] (Spincode) cf Dealer Support Services Pty Ltd v Motor Trades Association Australia Limited [2014] 228 FCR 252, [40]-[91] (Beach J).
4 Sacca v El Saafin (n1) [28] citing Spincode (n3) [52].
5 Sacca v El Saafin (n1) [9].
6 Ibid [32].
7 Ibid [35].
8 Ibid [32] citing Grimwade v Meagher [1995] 1 VR 446, 452 (Mandie J).
9 Sacca v El Saafin (n1) [33]-[34] citing Re IPM Group Pty [2015] NSWSC 240 at [51] (Black J), Colonial Portfolio Services Ltd v Nissen [2000] NSWSC 1047; 35 ACSR 673, [174] (Rolfe J), Re IPM Group at [63]-[66] (Black J), Turner v Turner [2018] NSWSC 1140, [91] (Sackar J), H Stanke & Sons Pty Ltd v Von Stanke [2006] SASC 308; 95 SASR 425, [81] (White J), Frigger v Kitay (No.10) [2016] WASC 63, [31] (Le Miere J).
10 Sacca v El Saafin (n1) [38].
11 Ibid [23]-[24].

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