Legal practitioners acting against previous clients

Posted on October 23rd, 2017

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In what circumstances is a lawyer permitted to act against a previous client? The Supreme Court of New South Wales recently addressed this matter in Gujarat NRE India Pty Ltd v Wollongong Coal Limited [2017] NSWSC 209

The proceedings were conducted by way of a compressed urgent hearing which was held shortly before the main proceedings. The main proceedings were between Gujarat NRE India Pty Ltd (“NRE“) and Wollongong Coal Limited (“Wollongong Coal“). NRE was suing Wollongong Coal for damages suffered by NRE as a result of a default by Wollongong Coal under a commercial agreement for which NRE had guaranteed the obligations of Wollongong Coal.

The commercial agreement was called the Override Deed and enter into July 2013. The Override Deed required Wollongong Coal to pay $20,411,033.00 to a third party, UIL (Singapore) Pty Ltd. Wollongong Coal defaulted under the Override Deed and NRE was required to pay the balance in full to UIL. 

Mr Brian James Gillard (solicitor) acted in relation to the Override Deed for both NRE and Wollongong Coal at the time. Both NRE and Wollongong Coal were in common ownership and shared the same board members and executives in July 2013.

In October 2013 NRE lost its controlling shareholding in Wollongong Coal and the common board membership and management of the companies ceased at this time. Mr Gillard ceased acting for Wollongong Coal and continue to act for NRE.

Wollongong Coal was of the view that Mr Gillard should be prevented from acting on behalf of NRE against Wollongong Coal in the circumstances where he had acted for both parties in relation to the Override Deed in question in the main proceedings.

This position does not appear on the face of it to be unreasonable, does it?

Wollongong Coal sought the Courts inherent jurisdiction over its officers and to control processes in the proper administration of justice to prevent Gillard from acting on NRE’s behalf in relation to the main proceedings.

Wollongong Coal issued a subpoena to Mr Gillard to hand over any documents in Mr Gillard’s possession that had been generated during his negotiation of the Override Deed.

The Court found that where a solicitor’s retainer is no longer active, the Court’s jurisdiction to intervene at the suit of a former client to restrain a solicitor from acting is founded on obligations of confidence and is not connected with the principles of conflict of interest. The Court confirmed that there is no continuing equitable or contractual duty of loyalty to provide the basis of the Court’s intervention. In order for a former client to restrain a former Solicitor from acting against it, the former client must ordinarily show that:

  • The former solicitor has the client’s confidential information, the disclosure of which the former client has not consented, and
  • The information may be relevant to the new matter in which the interests of the solicitor’s new client may be adverse to those of the former client.

The Court found that as Mr Gillard was not giving evidence in the main proceedings and no attempt was likely to field him as a witness on behalf of NRE, Mr Gillard would not be likely, in the eyes of a fair-minded and reasonably informed observer, to be able to make use of the benefit of information given to NRE by Wollongong Coal.

This case illustrates the difference between duties owed to current clients to which a conflict may arise and former clients where it appears the determining factor is the use of confidential information only.

 

Lachlan Page, Solicitor at Mullane & Lindsay Solicitors, NewcastleLachlan Page is a Solicitor at Mullane & Lindsay Solicitors and practices extensively in commercial, business and property transactions and adviceIf you require any assistance in this area please contact Lachlan Page to arrange a consultation or contact our Newcastle office.

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