By Gianna Huesch
Your ex engages your former firm of solicitors, to whom you have previously given sensitive information. The court finds there is a conflict of interest. That should put an end to that firm’s involvement in your property settlement litigation, shouldn’t it? Unfortunately not, as we see in the case of Dalton v Dalton heard recently in the Family Court.
In this case a husband discussed matters involving wills and assets with his solicitor, then two years later became separated and commenced property settlement litigation with his ex-wife. The solicitor he engaged broke away from the original firm and formed his own practice. The wife then retained a solicitor at the original firm, though not the same individual as the husband had previously engaged.
In the judge’s ex tempore reasons for judgment, it was described how the courts deal with a conflict of interest issue. It’s an objective test which gives consideration to the following factors.
1. Do the solicitors have the confidential information?
You have to prove your spouse’s solicitor has the relevant sensitive information. In this case, the judge found the husband did impart confidential information to his former solicitor at the wife’s firm that could be divulged to the wife’s solicitor at that firm and might be used to the husband’s disadvantage.
2. How much of a risk of misuse is there?
The degree of risk of the information being disclosed or misused is evaluated. It has to be a real risk, “not fanciful or theoretical”. In this case, the court found there was a “real chance” the wife’s solicitor “will become seized of the confidential information”.
3. Is there any way to lessen the risk?
Here consideration is given by a court as to how, if at all, that risk can be attenuated. In this case, the risk could be reduced because the wife’s solicitor gave an undertaking “not to speak to the wife or any other person with (the wife’s firm of lawyers) about the husband’s affairs, and further, not to participate in this ligitiaton” which effectively formed a satisfactory “information barrier”.
4. Has the application been brought in a timely way?
Timeliness is usually a factor in legal proceedings. In a conflict of interest case, “acquiescence to the solicitors’ continuing representation of the other litigant may amount to waiver of the right to prosecute the injunction application” and this proved to be a problem for the husband in this case. Although his new solicitor had drawn attention to the possible conflict of interest early on, the husband did not seriously attempt to pursue an application to restrain the wife’s solicitors from further involvement until much further down the track, when litigation had already progressed through several hearings. As such, this demonstrated that if there was a risk of misuse of information, “it was a risk the husband was prepared to run by his decision to desist from pressing his application until it suited him to do so”. The reason the husband gave to the court for that delay in pressing the conflict of interest issue was that “at this time, I felt that I was struggling emotionally with the shock and distress as a result of (the separation)”. However, this did not sway the judge.
The court also looked into how much it would now prejudice the wife to have to retain new solicitors. She had already spent $45,000 in legal fees and the judge found this would be “wasted if she is now compelled to engage new solicitors in the litigation”. This was particularly prejudicial to the wife because of the difference in the parties’ circumstances, the husband having substantially greater wealth.
Key takeaways from this case are:
- If you feel there may be a conflict of interest in a situation where you may have once discussed sensitive information with a solicitor who your spouse is now engaging in litigation against you, it is very important this is tackled immediately and certainly before lengthy proceedings have already taken place.
- You can’t argue that simply because you were married, your ex-spouse is in possession of information regarding your personal ‘strengths, weaknesses, honesty (or lack thereof), reaction to crisis, pressure or tension, attitude to litigation or tactics”, as the husband in this case attempted to argue. It may seem to be common sense that your former spouse’s solicitor will have access to such information, but unless you have direct evidence that those things were discussed, your argument is doomed to fail. Stick to information you can prove was discussed—in this case, the husband could demonstrate discussions regarding assets and his will took place between himself and his former firm of solicitors.
- Even if there is an established conflict of interest, that in itself is not enough for you to succeed in restraining your ex from hiring their chosen firm. You’ll need to prove that nothing can be done to attenuate (or lessen) the risk of misuse of the confidential information.
- Disparity in your financial circumstances will affect how the court views any prejudice to your spouse that would occur if they were forced to instruct new solicitors – put simply, if you are clearly the wealthier party, the court may find it is going to be less fair if your spouse has effectively wasted money engaging her solicitors, particularly if they have been acting for her for some time.
Do you need assistance with a property settlement or advice in relation to a potential conflict of issue? Please contact Cristina Huesch or one of our solicitors at Alliance Family Law on (02) 6223 2400 for a no-obligation first conference.
(You can read the court’s judgment here: http://www.austlii.edu.au/au/cases/cth/FamCA/2016/174.html)