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Chinese walls just got harder to build

Ask anyone building or renovating a house and they’ll tell you construction costs are through the roof at the moment.

And now a recent decision of the Federal Circuit and Family Court might well mean the same for walls in the legal sphere.

The use of an effective information barrier coupled with an undertaking has been the go-to option for solicitors seeking to act against former clients, but practitioners may need to revisit their processes given the recent decision in Gavan & Mickell.1

In short compass the mother sought to restrain the father’s solicitors from continuing to act because a solicitor previously instructed by the mother in these proceedings had taken a position at the firm used by the father.

It was not in dispute that the solicitor in question had confidential information about the mother that was useful in the proceedings, having worked directly on the mother’s case, taking instructions from the mother and preparing affidavit materials.

The father’s solicitors maintained that there was no real risk of confidential information being disclosed, because:

  • the mother’s former solicitor worked in the firm’s Sydney office, and the solicitor with the conduct of the father’s matter worked from the Parramatta office
  • each of the solicitors had different supervisors
  • an electronic information barrier had been put in place which prevented the former solicitor from accessing the file, and
  • the solicitor offered an undertaking not to disclose information about the case.

The court noted that the material before it did not cover the extent of the likely dealings (both formal and informal) between the relevant solicitors, and found that the mere tyranny of distance between the offices was not enough to eliminate the risk. Curiously, the court made no real reference to the undertaking.

That omission is deeply concerning for practitioners seeking to establish information barriers, as an undertaking not to discuss the case with anyone from the firm is clearly designed to cover the interactions of the solicitors. If that was a mere oversight then the implications are limited; if it was because the court placed no weight on the solicitor’s offered undertaking, it creates a significant problem, given how essential undertakings are for many legal processes.

It should be noted that the court ultimately decided that the interests of justice also merited recusal, on the basis that it is possible that a lawyer ‘changing sides’ may subvert the appearance of justice being done.2

However, the fact that the court considered there was a real risk of disclosure,3 in spite of the undertaking, cannot be ignored.

In any event, there are practical implications for solicitors when seeking to establish an information barrier. It is clear that affidavit material filed in opposition to any recusal application needs to be comprehensive, and explain fully how the steps taken will prevent information transfer.

Specific issues which must be covered include, at a minimum, the level of interaction, formal and informal, ordinarily expected between the parties the subject of the barrier and how the barrier will address that interaction.

Most importantly, the scope of any undertaking given, how that undertaking will work in preventing information transfer and the solemnity of the undertaking must be emphasised. Practitioners opposing a recusal application must ensure the court considers the undertaking and, if unpersuaded by it, specifies why it is considered inadequate.

Shane Budden is a Special Counsel, Ethics, with the Queensland Law Society Ethics and Practice Centre.

Footnotes
1 [2021] FedCFamC1F 280.
2 Ibid, 39, 40.
3 Ibid, 48.

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One Response

  1. Thanks for posting this decision Shane. You’re right about the decision being absent real discussion about the undertaking and its value. According to the judgment, Zahr Partners (former employers of the transitioned employee) and their client were offered the undertaking pre-application and didn’t accept it. The reason wasn’t stated. The judgment doesn’t refer to antipathy between a parting employee/employers as present.

    His Honour appeared to be worried about inadvertent or accidental disclosure notwithstanding the offer of the undertaking. He remained alive to the undertaking in his reasoning, because at para 45 when he was weighing the competing factors, it was specifically referred to.

    I think a major differentiating factor for lawyers looking at this case though, is that the situation was one where Coleman Grieg were freshly instructed on 29 July knowing the Wife’s previous lawyer was at their firm, and could have declined the instructions then and there from the outset, as opposed to the Husband having been a Coleman Grieg client for much of his matter and the change of employment being later in the course of the proceedings capable of Chinese Wall planning.

    With that key difference, I think the undertaking and value of same probably remains intact and the message is don’t take the job in a similar fact scenario.

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