A Federal Court judge has clarified the requirements for the court to exercise its power in restraining a legal practitioner from acting for a party.
In the Western Australian Registry last month, Justice Michael Feutrill dismissed an application from a developer and receivers (“Borrowers”) to restrain lawyers acting for the opposing party of finance companies (“Lenders”).
The Borrowers submitted that an interlocutory injunction was necessary to protect the proper administration of justice in the matter, which centred on the terms of a loan deed worth about $67 million.
They submitted the Lenders should be restrained from continuing to engage the firm ERA Legal, alleging that the terms of the firm’s costs agreement under the deed were neither fair nor reasonable, and the amount the firm charged for the work did not reflect the work performed.
The Borrowers also submitted that there was “a real possibility that a solicitor from ERA Legal will need to give evidence as a material witness in these proceedings”.
In his 26-page judgment, Justice Feutrill explained when the implied power of the court to restrain a practitioner from acting for a party could be exercised, and that the exercise of the power should be regarded as exceptional and used with caution.
He stated the test for applying the exercise of the power was “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”.
He discussed case law as to whether the applicable standard was “would conclude” or “might conclude”, ultimately agreeing with the Lenders’ submission that the “would conclude” standard applied.
“However, the guiding principle to be taken from the authorities is whether restraint of a legal practitioner is necessary, in the particular circumstances of any given proceeding, to prevent prejudice to the proper administration of justice,” he said.
“The formulation of a standard involving what a fair-minded member of the public ‘would conclude’ or ‘might conclude’ is a useful way of identifying whether particular circumstances warrant such a restraint, but such a test or standard (whatever formulation is adopted) should not be applied rigidly or inflexibly and ‘no narrow view should be taken of the circumstances in which the jurisdiction is enlivened’.”
Justice Feutrill said not every circumstance where a practitioner had a personal interest in the outcome, or a reason to depart from their duty to the court, warranted restraint.
“A degree of proportionality is required between the ‘personal interest’ and the feared corruption of independence and incentive to depart from the practitioner’s duty to the administration of justice,” he said.
“Further, in some circumstances, the spectre of disciplinary sanction for departure from professional standards may be sufficient to deter a legal practitioner from departing from the duty to the court and mitigate any risk of prejudice to the proper administration of justice.
“In short, not every allegation raised in a pleading that calls into question the advice or conduct of a legal practitioner, no matter how trivial or incidental to the principal issues in the proceeding, will provide a sufficient incentive to objectively undermine the practitioner’s independence and duty to the administration of justice so as to warrant restraining that practitioner from acting for a party in the proceeding.”
Justice Feutrill said it may be accepted that, in general, it was undesirable for a practitioner to be involved in a proceeding if they were likely to be called as a witness
“However, the mere circumstance that a legal practitioner will be a material witness, even on a controversial matter, will not of itself warrant restraining that practitioner from acting for a party in the proceeding,” he said.
“The ‘line is crossed only when the [practitioner] has a personal stake in the outcome of the proceeding or in their conduct’.
“The relevant stake may be reputational and need not be financial. It may include circumstances where the practitioner’s conduct and credit is likely to come under attack in cross-examination.”
Justice Feutrill said the court “need not accept uncritically the allegations said to found disqualification” of the Lenders’ legal representation.
He said the allegations about the actions of ERA Legal were not ones that the firm would be motivated to defend in any real sense, and it was not accepted that there was any real likelihood that an ERA Legal practitioner would be called as a witness.
“For the foregoing reasons, a fair-minded reasonably informed member of the public would not conclude, nor might such a member of the public conclude, that the proper administration of justice requires that ERA Legal should be prevented from acting for the Lenders in the interests of the protection of the integrity of the judicial process and the due administration of justice,” he said.
Read the case here.
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