RC Manubhai & Co Ltd v Herbert Construction Company (Fiji) Ltd [2009] FJHC 219; HBC75.2009L (7 October 2009)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No. HBC 75 of 2009L

BETWEEN:

R C MANUBHAI & CO LTD
Plaintiff

AND:

HERBERT CONSTRUCTION COMPANY (FIJI) LTD
Defendant

Civil Action No. HBC 76 of 2009L

BETWEEN:

A-TEAM ELECTRICAL ENGINEERINGS LIMITED
Plaintiff

AND:

HERBERT CONSTRUCTION COMPANY (FIJI) LTD
Defendant

Civil Action No. HBC 90 of 2009L

BETWEEN:

ELISHA ENGINEERING COMPANY LIMITED
Plaintiff

AND:

HERBERT CONSTRUCTION COMPANY (FIJI) LTD
Defendant

INTERLOCUTORY JUDGMENT

Of: Inoke J.

Counsel Appearing: Mr S Ram for the Plaintiff
Mr D O’Connor, Ms F Cleary and Mr F Koya for the Defendant
Solicitors: Samuel K Ram for the Plaintiff
Koyas for the Defendant

Date of Hearing: 30 September 2009
Date of Judgment: 7 October 2009

INTRODUCTION

[1] This application is about a lawyer’s right to choose his client and the client’s right to choose his or her lawyer.

[2] This action was commenced by Writ of Summons filed by the Barrister and Solicitor, Mr Samuel K Ram, representing the Plaintiff ("R C Manubhai") on 15 May 2009. It is a claim for the balance of moneys owing under a deed of settlement and interest. Service of the Writ was acknowledged on 20 May 2009 but the Defence is yet to be filed.

[3] The same application in this case has been made in the other two cases listed above so this judgment will be in respect of all three cases.

THE APPLICATION

[4] On 17 June 2009 Koyas, solicitors for the Defendant ("Herbert Construction"), filed a Motion for an order that Mr Ram disqualify himself from acting and/or he ceases to act against Herbert Construction in this action on the grounds of conflict of interest and breach of the Legal Practitioners Decree 2009. Similar Motions were filed in the other two actions.

[5] The application is supported by affidavits from two directors of Herbert Construction, Anthony Herbert and Malcolm Herbert filed on 17 June 2009 and 28 September 2009, respectively.

[6] Mr Ram opposes the application and filed an affidavit by the credit controller of R C Manubhai on 22 July 2009.

[7] The affidavits contain documents in respect of which solicitor client privilege has not been waived. As well there were other documents which were referred to in the affidavits but not annexed and these too were produced as evidence in this application. Privilege is still claimed in respect of these so I will make orders at the end of my judgment to preserve their confidentiality and privilege.

CASE HISTORY

[8] The applications were first called on 3 July 2009 and orders made for the filing of affidavits and submissions and hearing on 8 September 2009. On 7 September 2009 the Registry received a fax from Elvidge & Partners, Lawyers of Napier, New Zealand advising that Herbert Construction was not in a position to proceed with the application currently set down for 8 September 2009 and was in the process of instructing new counsel and were seeking an adjournment "to allow time for counsel to obtain the files and relevant documents from Koyas". Mr Ram had been advised of this on 4 September 2009 according to the fax. On 8 September 2009 Mr Gordon appeared for Herbert Construction and asked for a 2 months adjournment of the hearing as outlined in the fax. Mr Ram opposed the application submitting that Herbert Construction had delayed the hearing for two months, had not filed its documents as ordered by consent on 3 July 2007 and insisted on the hearing proceeding.

[9] I agreed with Mr Ram that Herbert Construction had sufficient time to obtain the files and documents and prepare for the hearing but felt that further time should be given because overseas Counsel were involved. However, I felt that 2 months was too long so I adjourned the application for two weeks to be heard on 30 September 2009 and gave Herbert Construction till 25 September 2009 to file and serve its affidavit in reply. I also ordered that Herbert Construction pay Mr Ram $600 costs of the hearing thrown away.

PRELIMINARY ISSUES

[10] The application came to be heard on 30 September 2009 and Mr Ram raised two preliminary issues which he wanted me to decide before proceeding with the hearing proper. The first was the non-payment of the $600 costs ordered on 8 September 2009 and the second was the affidavit which was to be filed on 25 September 2009 was filed 3 days late raised new issues, which should have been raised in the first affidavit of Anthony Herbert, so Mr Ram submitted that he should be allowed to respond to it.

[11] In respect of the costs issue before he finished his submissions on the Hadkinson v Hadkinson principles, on my asking him why a further order for costs would not suffice, Mr O’Connor, Counsel for Herbert Construction, advised the Court that he had the cash in his hands which he would hand over to Mr Ram so that disposed of that preliminary issue.

[12] In respect of the affidavit issue, Mr Ram said that he had prepared an affidavit in reply which he would seek to file if I gave leave. I gave him leave to file it and adjourned the hearing for an hour to allow Mr O’Connor to examine the new affidavit and for Counsels to consider and agree on the issues of confidentiality and privilege that had arisen.

CONSIDERATION OF THE APPLICATION

[13] There are two other civil actions in this Court, HBC 76 of 2009 and HBC 90 of 2009, in which Herbert Construction has made the same application as in this case so the judgment in this case will also affect Mr Ram’s right to act as a solicitor and to appear as Counsel in those actions.

[14] Both Counsels filed very helpful written submissions for which I am grateful.

HERBERT CONSTRUCTION’S ARGUMENTS

[15] Herbert Construction says that Mr Ram cannot act for three reasons:

a. He holds confidential information which he obtained when he was Herbert Construction’s lawyer.

b. He owes a fiduciary duty to Mrs Herbert under a power of attorney and, acting against Herbert Construction, is a breach of his fiduciary duty and conflict of interest.

c. He will be required to be a witness in this case.

[16] Mr O’Connor attached a Chronology of events to his submissions and I quote from it:

Chronology of Events

29 October 2003 - Herbert Construction incorporated as a Fiji company and subsequently instructs Mr Ram as its lawyer.

11 April 2007 - Power of attorney registered by Mr Ram for Mrs Herbert (defendant’s majority shareholder) which includes the powers:

"3. To commence prosecute enforce defend answer or oppose all action and other legal proceedings and demands touching any matters in which I am or may hereafter be interested or concerned and also if thought fit to comprise refer to arbitration abandon submit to judgment or become non-suited in any such action or proceedings as aforesaid".

30 April 2007 Email from Mr Ram to defendant:

"Malcolm

Attached newspaper article says work has resumed. Rajesh Patel called me and also said that you had commenced work there. Could you please let me know what is happening? You may need to enter into an arrangement with Rajesh Patel for RCM debt. Elisha engineering are also my clients and they asked me to collect sums owed to them. I put them on hold saying you were my client and that we were doing our best to

I also note that there are a lot of outstanding matters regarding the structure of your company. You did not respond to my last letter so I assume you are waiting until the issues with Matapo are settled.

Could you let me know when you are back in Fiji so we can get together to discuss the above?

Sam"

10 June 2008 - Herbert Construction files application to appoint interim liquidator for Matapo. Mr Ram acts for Vuksich & Borich who oppose petition. Herbert Construction asks Mr. Ram to withdraw on basis that he is conflicted. Mr Ram refuses.

20 March 2009 - Elvidges writes to Mr Ram in response to requests for payment on RC Manubhai claim.

24 March 2009 - Mr Ram replies to letter from Elvidges.

3 April 2009 - Elvidges raises Mr Ram’s conflict of interest on RC Manubhai claim.

13 May 2009 - Mr Ram responds to letter from Elvidges on conflict.

"In your letter you allege that our firm has acted for your client. At no stage have we acted for Herbert Construction Company (Fiji)_ Limited in such a manner that it would conflict with our instructions from RC Manubhai Group of Companies Limited. Our firm is on a retainer from RC Manubhai Group of Companies Limited and we do not take instructions from any one that may be in conflict with them."

15 May 2009 - A-Team Electrical Engineers Limited files claim against defendant.

15 May 2009 - RC Manubhai & Co Limited files claim against defendant.

1 June 2009 - Elisha Engineering Company Limited files claim against defendant.

MR RAM’S ARGUMENTS

[17] Mr Ram opposes the application on four main points which I reproduce from his submissions:

(i) The defendants have failed to establish that Mr. Ram holds any confidential information which will adversely affect their interest. The plaintiff has claimed that it is owed money by the defendant pursuant to deed of settlement of debt dated 8th May 2008. There has been no defence filed by the defendant. They have also not established a basis on which they dispute the deed itself.

(ii) The Power of Attorney is given personally by Mrs. Herbert and has nothing to do with the affairs of the company. In fact it has to do with exercising powers for Mrs. Herbert in her personal capacity.

(iii) There is nothing presented to show that Mr. Ram would be a potential witness. All the annexed documents show is that money is owed by Matapo Limited to the defendant and lots of other people. It does not establish that Mr. Ram has any knowledge about what has happened to these monies.

(iv) The defendant complains that there are drawdowns wrongly paid by Matapo Limited to the plaintiff. There is no evidence whatsoever to establish this allegation. It is also a new allegation.

CONSIDERATION OF THE ARGUMENTS

[18] This application threw up two situations which a lawyer must avoid if at all possible. The first is the lawyer acting for himself or herself. The second is the lawyer acting against a former client. The first of these is not the main issue in this application and Mr O’Connor and other Counsels for Herbert Construction rightly, did not object to Mr Ram arguing the application, but it did arise in the course of the hearing and I expressed my concern about the situation. So I will express my views in this judgment.

LAWYER’S RIGHT TO REPRESENT HIMSELF

[19] Every litigant has the right to represent himself in these Courts. So does every lawyer. But there is a difference which must not be lost sight of. The lawyer is not just any other litigant. He is in a very special position with respect to the Court and the law. He is an officer of the Court by virtue of his profession. He has a positive duty to not only follow but a duty to ensure that the processes of the Court are followed. He also has a duty to uphold the law and not misrepresent the law or the facts. It has been said before in the Courts in Fiji that these duties override his duty to protect the interests of his client and even his own interests: see also rule 3.7 of the Rules of Professional Conduct and Practice, Schedule to the Legal Practitioners Decree 2009. The main reason for that is the potential conflict that can arise in the presentation of the lawyer’s case. When that arises the trial or the hearing may have to be stopped and aborted.

[20] Some will argue that the conflict may not even arise and one can determine this by a forensic and detailed analysis of the facts. With respect, such an argument is untenable. No one can predict with any certainty how a trial or a hearing will turn out. That is the false premise that such an argument is based. I think the special position that a lawyer holds automatically raises a presumption that a conflict between his duties to the Court and the law and his duty to his client, including himself, will arise. I would go as far as to say that it is an irrebuttable presumption both of fact and law. As I have said, there is no law stopping a lawyer arguing his own case but the risk of damage to his reputation and professional standing, in my respectful opinion, is too great for him to go down that road.

[21] Mr Ram appeared and argued against an application to stop him continuing to act against his former client, Herbert Construction. In the course of argument and because of the way he ran his argument I had to determine whether there was a connection between his former instructions and his current instructions. I was duty bound to ask him whether the connection did or did not in fact exist. He was immediately put in a position of potential conflict. His answer was at first appeared evasive. As an experienced Counsel he was able to explain and convince me why he answered my question in the way that he did. But that is not the point. Had he not been able to do that he would have not only put his own interests in jeopardy but that of R C Manubhai’s. I have no doubt that Mr Ram had forensically examined and analysed in detail this situation, as he did in the presentation of his arguments in this application, and had come to the conclusion that no conflict in his duties would arise, hence his appearance. And for that reason what I have said is not a criticism of him.

LAWYER ACTING AGAINST HIS FORMER CLIENT

[22] On the second and main issue raised in this application I do not think that the search for evidence of conflict of interest between Mr Ram and his former client should be as forensic and detailed as Mr Ram presented his case. I agree with Mr O’Connor that the better approach is that used in Bolkiah v KPMG [1998] UKHL 52; [1999] 1 All E R 517 and Aleem's Investment Limited v Danford [2006] FJHC 91; HBC 009.2006L (22 February 2006).

[23] The facts in Aleem’s case (supra) were that Counsel for the defendant had previously acted in an earlier case and transaction in which that Counsel was involved, namely, that the mortgage which led to Aleem’s case was entered into to facilitate payment by Aleem to Counsel for the defendant in that case. Connors J also found that the registered office of the plaintiff company was the same office as the office of the solicitor and counsel for the defendant. Connors J resolved the case as follows:

"[15] Clearly, the registered office of the company is the place at which the records of the company might be maintained and the place of which any documents for serv(ice) on that company are obliged to be served which leaves a situation where the registered office of the plaintiff in the above proceedings which the office of counsel for the defendant in the current proceedings up to at least some date in 2005.

[16] It has been said it would be a remarkable lawyer that could feel assured of holding the scales evenly between him and the client and it was said by Megarry J in Spector v Ageda [1973]1 Ch. 30 at 47:

"Not only must his duty be discharged, but it must manifestly and undoubtedly be seen to have been discharged."

His Lordship said that after earlier saying:

"That even in fact the lawyer can and does hold the scales evenly to demonstrate that fact will usually be impossible if the client ends up in fact being disadvantaged."

[17] In Bolkiah v KPMG [1999] 2 A.C. 227 at 237 Lord Millet said:

"In my view no solicitor should without the consent of his former client except (sic) instructions unless viewed objectively his doing so will not increase the risk the information which is confidential to the former client may come into the possession of a party with an adverse interest."

[18] The affairs of counsel for the defendant and the plaintiff company have on the material placed before the Court been so interwoven that it is in my opinion impossible to conclude that counsel for the defendant is not appraised of information obtained on a solicitor-client basis that may and I emphasis the test is may be detrimental to the plaintiff in these proceedings.

[19] I am therefore of the opinion that I have no choice but to uphold the objection that has been raised on behalf of the plaintiff that counsel for the defendant cease acting for the defendant in these proceedings."

[24] There are other passages from Spector v Ageda [1973]1 Ch. 30 which I think need repeating as a reminder (at p 47 per Megarry J):

"The courts have often pointed out the undesirability of a solicitor acting for both parties in a conveyancing transaction, as by acting for both the vendor and the purchaser; yet the practice remains wide spread, sustained it seems, by beliefs such as those of economy, efficiency and speed, and, no doubt, others. In such cases, the solicitor, of course has a double duty to perform: he must safeguard the adverse interests of each of his clients. In the absence of any personal interest to impel him to one side or the other, a solicitor can, and doubtless in the vast majority of cases does, stand indifferent, and at some risk, discharge his duty of acting impartially in the interests of each of his clients. Where however, one of the parties is the solicitor himself, then the matter seems to me to be entirely different: the solicitor must be remarkable indeed if he can feel assured of holding the scales evenly between himself and his client."

[25] The leading case is the House of Lords decision in Prince Jefri Bolkiah v KPMG [1999] 2 A.C. 227. The facts are as set out in the headnote:

"The defendants, a firm of chartered accountants, were the auditors for an investment agency established to hold and manage the general reserve fund and the external assets of the Government of Brunei. In 1996 the plaintiff, the then chairman of the agency, was involved in major litigation relating to his financial affairs and he retained the defendants to provide forensic accounting services and litigation support. In the course of that work the defendants performed many tasks usually undertaken by solicitors, and were given access to highly confidential information concerning the extent and location of the plaintiffs assets. The litigation was settled in March 1998 and thereafter the defendants undertook no further work for the plaintiff. Around the same time the plaintiff was removed from his position as chairman of the agency. In June 1998 the Government of Brunei appointed a finance task force to conduct an investigation into the activities of the agency. In June 1998 the Government of Brunei appointed a finance task force to conduct an investigation into the activities of the agency during the period when the plaintiff had been its chairman. The agency retained the defendants to investigate the whereabouts of certain assets which were suggested to have been used by the plaintiff for his own benefit. The defendants took steps to protect the plaintiffs confidentiality by ensuring that the personnel who had been on the team assisting with the plaintiffs litigation were not on the team working on the agency’s investigation, and by attempting to create an information barrier within its forensic accounting department so as to prevent the flow of information between the two teams. The plaintiff commenced an action for breach of confidence against the defendants and sought an interlocutory injunction restraining defendants and sought an interlocutory injunction restraining them from acting for the agency. The judge granted the injunction, holding that although the defendants had an honest intention not to disclose confidential information the barrier established by them was inadequate to deal with inadvertent disclosure. The Court of Appeal discharged the injunction on the grounds that there was no evidence that the plaintiff would suffer real prejudice unless there was an injunction and that a continuation of the injunction would set an unrealistic standard for the protection of confidential information.

On the plaintiffs appeal:-

Held, allowing the appeal, that where it was established that solicitors, or accountants providing litigation services such as those provided by the defendants, were in possession of information confidential to a former client which might be relevant to a matter in which they were instructed by a subsequent client the court should intervene to prevent the information from coming into the hands of anyone with an adverse interest unless it was satisfied that there was no real risk of disclosure; that since it had been established that the defendants were in possession of confidential information the burden was on them to show that there was no risk that the information would come into the possession of those acting for the other party; that although there was no rule of law that "Chinese walls" or other similar arrangements were insufficient to eliminate the risk, unless special measures were taken information moved within a firm and the court would restrain the defendants from acting for a new client unless it was satisfied on clear and convincing evidence that effective measures had been taken to ensure that no disclosure would occur; that in order to be effective arrangements had to be an established part of the organizational structure of the firm and the ad hoc arrangements made by the defendants were inadequate in the circumstances to prevent the risk of inadvertent disclosure; and that, accordingly, since the defendants had not discharged the burden of showing there was no real risk that information confidential to the plaintiff might unwittingly or inadvertently come into the possession of those working on the agency investigation, the injunction would be granted.

[26] Lord Millett’s speech, with whom Lords Browne-Wilkinson, Hope of Craighead, Clyde and Hutton agreed, stated:

"The Law

The issues raised in these proceedings have not previously been considered by your Lordships’ House. The controlling authority in England hitherto has been the decision of the Court of Appeal in Rakusen v Ellis, Munday & Clarke [1912] UKLawRpCh 47; [1912] 1 Ch 831. The facts of that case were unusual. It concerned a small firm of solicitors with only two partners who carried on what amounted to separate practices, each with his own clients, without any knowledge of the other’s clients and with the exclusive services of some of the clerks. The plaintiff consulted one of the partners in relation to a contentious matter. After he had terminated his retainer, the other partner who had never met the plaintiff and was not aware that he had consulted his partner, was retained by the party opposite in the same matter. The judge granted an injunction to restrain the solicitor from acting. The Court of Appeal found that there was not risk of disclosure of confidential information and discharged the injunction.

The case is authority for two propositions: (i) that there is no absolute rule of law in England that a solicitor may not act in litigation against a former client; and (ii) that the solicitor may be restrained from acting is such a restriction is necessary to avoid a significant risk of the disclosure or misuse of confidential information belonging to the former client. Like most of the later authorities, the case was concerned with the duties of a solicitor. The duties of an accountant cannot be greater than those of a solicitor, and may be less, for information relating to his client’s affairs which is in the possession of a solicitor is usually privileged as well as confidential. In the present case, however, some of the information obtained by KPMG is likely to have attracted litigation privilege, though not solicitor-client privilege, and it is conceded by KPMG that an accountant who provides litigation support services of the kind which they provided to Prince Jefri must be treated for present purposes in the same way as a solicitor.

The basis of the jurisdiction

In Rakusen’s case the Court of Appeal founded the jurisdiction on the right of the former client to the protection of his confidential information. This was challenged by counsel for Prince Jefri, who contended for an absolute rule, such as that adopted in the United States, which precludes a solicitor or his firm altogether from acting for a client with an interest adverse to that of the former client in the same or a connected matter. In the course of argument, however, he modified his position, accepting that there was no ground on which the court could properly intervene unless there was no ground on which the court could properly intervene unless two conditions were satisfied: (i) that the solicitor was in possession of information which was confidential to the former client and (ii) that such information was or might be relevant to the matter on which he was instructed by the second client. This makes the possession of relevant confidential information the test of what is comprehended within the expression "the same or a connected matter." On this footing the court’s intervention is founded not on the avoidance of any perception of possible impropriety but on the protection of confidential information.

My Lords, I would affirm this as the basis of the court’s jurisdiction to intervene on behalf of a former client. It is otherwise where the court’s intervention is sought by an existing client, for a fiduciary cannot act at the same time both for and against the same client, and his firm is in no better position. A man cannot without the consent of both clients act for one client while his partner is acting for another in the opposite interest. His disqualification has nothing to do with the confidentiality of client information. It is based on the inescapable conflict of interest which is inherent in the situation.

This is not to say that such consent is not sometimes forthcoming, or that in some situations it may not be inferred. There is a clear distinction between the position of a solicitor and an auditor. The large accountancy firms commonly carry out the audit of clients is publicly acknowledged. Their clients are taken to consent to their auditors acting for competing clients, though they must of course keep confidential the information obtained from their respective clients. This was the basis on which the Privy Council decided Kelly v. Cooper [1993] A.C. 205 in relation to estate agents.

Where the court’s intervention is sought by a former client, however, the position is entirely different. The court’s jurisdiction cannot be based on any conflict of interest, real or perceived, for there is none. The fiduciary relationship which subsists between solicitor and client comes to an end with the termination of the retainer. Thereafter the solicitor has no obligation to defend and advance the interests of his former client. The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality of information imparted during its subsistence.

Accordingly, it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a manner for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious. I do not think that it is necessary to introduce any presumptions, rebuttable or otherwise, in relation to these two matters. But given the basis on which the jurisdiction is exercised, there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case. In this respect also we ought not in my opinion to follow the jurisprudence of the United States.

The extent of the solicitor’s duty

Whether founded on contract or equity, the duty to preserve confidentiality is unqualified. It is a duty to keep the information confidential, not merely to take all reasonable steps to do so. Moreover, it is not merely a duty not to communicate the information to a third party. It is a duty not to misuse it, that is to say, without the consent of the former client to make any use of it or to cause any use to be made of it by others otherwise than for his benefit. The former client cannot be protected completely from accidental or inadvertent disclosure. But he is entitled to prevent his former solicitor from exposing him to any avoidable risk; and this includes the increased risk of the use of the information to his prejudice arising from the acceptance of instructions to act for another client with an adverse interest in a matter to which the information is or may be relevant.

Degree of risk

It follows that in the case of a former client there is no basis for granting relief if there is no risk of the disclosure or misuse of confidential information. This was the ground on which the Court of Appeal discharged the injunction in Rakusen’s case [1912] UKLawRpCh 47; [1912] 1 Ch. 831. The test of disqualification was expressed in different terms by each of the three members of the court, but the case has been taken to indicate that the court will not intervene unless it is satisfied that there is a "reasonable probability of real mischief." This test has been the subject of criticism both in this country and overseas, particularly in relation to solicitors, and a more stringent test has frequently been advocated: see for example Professor Finn, "Conflicts of Interest and Professionals" published by the New Zealand Legal Research Foundation in Professional Responsibility, cited with evident approval by Gummow J. in National Mutual Holdings Pty. Ltd. v. Sentry Corporation (1989) 22 F.C.R. 209. It has been abandoned in Canada: see MacDonald Estate v. Martin (1990) 77 D.L.R. (4th) 249, where it has been replaced by two rebuttable presumptions: (i) that confidential information will have been communicated by the former client in the course of the retainer and (ii) that lawyers who work together share confidences. The clear trend of the authorities is towards a stricter approach.

My Lords, I regard the criticisms which have been made of the test supposed to have been laid down in Rakusen’s case [1912] UKLawRpCh 47; [1912] 1 Ch. 831 as well founded. It imposes an unfair burden on the former client, exposes him to a potential and avoidable risk to which he has not consented, and fails to give him a sufficient assurance that his confidence will be respected. It also exposes the solicitor to a degree of uncertainty which could inhibit him in his dealings with the second client when he cannot be sure that he has correctly identified the source of his information.

It is in any case difficult to discern any justification in principle for a rule which exposes a former client without his consent to any avoidable risk, however slight, that information which he has imparted in confidence in the course of a fiduciary relationship may come into the possession of a third party and be used to his disadvantage. Where in addition the information in question is not only confidential but also privileged, the case for a strict approach is unanswerable. Anything less fails to give effect to the policy on which legal professional privilege is based. It is of overriding importance for the proper administration of justice that a client should be able to have complete confidence that what he tells his lawyer will remain secret. This is a matter of perception as well as substance. It is of the highest importance to the administration of justice that a solicitor or other person in possession of confidential and privileged information should not act in any way that might appear to put that information at risk of coming into the hands of someone with an adverse interest.

Many different tests have been proposed in the authorities. These include the avoidance of "an appreciable risk" or "an acceptable risk." I regard such expressions as unhelpful: the former because it is ambiguous, the latter because it is uninformative. I prefer simply to say that the court should intervene unless it is satisfied that there is no risk of disclosure. It goes without saying that the risk must be a real one, and not merely fanciful or theoretical. But it need not be substantial. This is in effect the test formulated by Lightman J. in In re A Firm of Solicitors [1997] Ch. 1, 9 (possibly derived from the judgment of Drummond J. in Carindale Country Club Estate Pty. Ltd. v. Astill [1993] FCA 218; (1993) 115 A.L.R 112) and adopted by Pumfrey J. in the present case.

I would also reject the approach taken by the New Zealand Court of Appeal in Russell McVeagh McKenzie Bartleet & Co. v. Tower Corporation, 25 August 1998 and adopted by the Court of Appeal in the present case. In my opinion the balancing exercise which was undertaken was inappropriate. This is not because the considerations which were thought to militate against the granting of injunctive relief were irrelevant: far from it. It is clearly relevant that Prince Jefri retained KPMG in the knowledge that they were the B.I.A.’s auditors, and that the B.I.A. would be put to inconvenience and expense if his retainer were to prevent it from employing KPMG’s services in future. But such considerations are relevant to a different question: whether in the circumstances Prince Jefri must be taken to have consented to KPMG’s undertaking the further assignment for the B.I.A. For the reasons I have given, he must be taken to have consented to the acceptance by KPMG of the instructions given to Mr. Harrison in June, for these were a natural extension of the audit. But Project Gemma was a very different matter. Absent such consent, the considerations which the Court of Appeal took into account cannot in my opinion affect the nature and extent of KPMG’s duty to protect confidentiality or convert it into a duty to do no more than take reasonable steps to protect it. This would run counter to the fundamental principle of equity that a fiduciary may not put his own interest or those of another client before those of his principal. In my view no solicitor should, without the consent of his former client, accept instructions unless, viewed objectively, his doing so will not increase the risk that information which is confidential to the former client may come into the possession of a party with an adverse interest. "

[27] I note that the House of Lords disapproved of the approach taken by the New Zealand Court of Appeal in Russell McVeagh McKenzie Bartleet & Co. v. Tower Corporation (supra) which is the main case authority relied upon by Mr Ram.

[28] There is no dispute that Mr Ram acted for Herbert Construction in other matters and was the former solicitor for Herbert Construction. That in itself is not sufficient for this Court to stop Mr Ram acting for RC Manubhai in this action. Herbert Construction must show (i) that Mr Ram is in possession of information which is confidential to the company and to the disclosure of which the company has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to Herbert Construction. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious.

WAS THERE CONFIDENTIAL/PRIVILEGED INFORMATION ACQUIRED BY MR RAM?

[29] Mr Anthony Herbert complains in his affidavit that not only conflicts of interest arise but solicitor client privilege as well. This case relates to work carried out at Momi Bay which has not been paid. Herbert Construction has not been paid by the developer Matapo Ltd. Mr Ram sought to distance the current claim from the Momi Bay project. I do not accept that the approach to this inquiry is by an analytical and clinical examination of every minute detail of the affidavit material. As the House of Lords said in Bolkiah the Court may readily infer that Mr Ram is in possession of information which is confidential to the company and to the disclosure of which the company has not consented.

[30] Taking that approach, I do not accept what Mr Ram said in his oral submissions that the affidavit material did not show "that one single hammer" was delivered to Momi Bay. Annexures SS3 and SS4 to his clerk’s affidavit filed on 2 October 2009 clearly states that Herbert Construction was entering into the purchase agreement with RC Manubhai exclusively for the Momi contract. I therefore find that the purchases the subject of the Deed of Settlement and the subject of this action were exclusively for the Momi Bay project.

IS THE INFORMATION RELEVANT AND ADVERSE TO HERBERT CONSTRUCTION?

[31] Mr Ram now knows of the developer’s ability to pay Herbert Construction by acting for Herbert Construction in that claim. That in turn impacts on Herbert Construction’s ability to pay RC Manubhai. And I can reasonably infer that he has other financial information confidential to Herbert Construction, irrespective of whether it relates to Momi Bay or not, which may be adverse to Herbert Construction in these proceedings. For example, that information could be used to put pressure on Herbert Construction to accept a settlement sum which it might not otherwise accept.

[32] Mr Malcolm Herbert also explains in his affidavit filed on 28 September 2009 that any moneys claimed by RC Manubhai and Elisha Engineering must be set off against any draw downs wrongly paid by the developer to them. He explains that payment recommendations for his company are significantly different from the drawdowns from the syndicated lender by the developer and the moneys actually paid to his company. Some of these payments were made to R C Manubhai and Elisha Engineering. He says that there needs to be a tracing exercise to reconcile these and Mr Ram would have to give evidence.

[33] I find that the facts and circumstances in the claim by Herbert Construction against the developer Matapo Ltd and the facts and circumstances in this claim by RC Manubhai against Herbert Construction are so interwoven that the claims cannot be treated as isolated and distinct claims. They are so interwoven, adopting the words of Connors J in Aleem’s, that it is in my opinion impossible to conclude that Mr Ram is not appraised of information obtained on a solicitor-client basis when he acted for Herbert Construction in another matter that may, and I emphasise the test is may, be detrimental to Herbert Construction in these proceedings. For example, Herbert Construction may decide to join Matapo in these proceedings. It is true that no defence has been filed but that is not the point. It is not a fanciful chance that this could happen. If that happens, then the information is not only confidential but also privileged. Having come to that conclusion therefore Mr Ram is under an absolute obligation not to disclose the information without Herbert Construction’s consent, which consent has not been given in this case. He cannot act as a solicitor or barrister for RC Manubhai.

IS THERE RISK OF DISCLOSURE

[34] Mr. Ram is duty bound to R C Manubhai to use and disclose whatever information he has to protect his client’s interests. He has no choice if he is to properly act as barrister and solicitor for R C Manubhai. He has put himself in this impossible position and should not be allowed to benefit from it personally.

MR RAM IS A LIKELY WITNESS

[35] It follows from the above that Mr Ram may be a witness in these proceedings.

WAS MR RAM ACTING FOR HERBERT CONSTRUCTION IN DRAFTING AND SETTLING THE AGREEMENT AND THE DEED OF SETTLEMENT?

[36] Mr Malcolm Herbert also complains that he attended meetings with Mr Ram and Mr Ram advised him on behalf of Herbert Construction in respect of the Elisha Engineering and RC Manubhai claims. He refers to an email from Mr Ram to him sent on 30 April 2007 as proof that Mr Ram was acting for them when he was advising Herbert Construction on their claims.

[37] On the other hand, Mr Ram denies that he ever acted for Herbert Construction on the Elisha Engineering and RC Manubhai claims. He says an email sent on 27 June 2007 from Herbert Construction’s New Zealand lawyers, Elvidge & Partners, showed that he was not Herbert Construction’s solicitor. Elvidge & Partners were the solicitors that were advising Herbert Construction on the Deed of Settlement. See also Annexure SS4 of affidavit of Mr Ram’s clerk’s filed on 2 October 2009.

[38] I accept that Mr Ram was not acting for Herbert Construction in the negotiations, drafting and settling of the Deed of Settlement. So in respect of this action, it is not a case where Mr Ram acted for both parties when the matter was not contentious but has now become contentious so he must withdraw.

FIDUCIARY DUTY UNDER THE POWER OF ATTORNEY

[39] I now move on to consider the applicant’s argument based on the fiduciary duty owed by Mr Ram to Mrs Herbert. The answer as to whether there is a fiduciary duty owed and its extent is to be found in the power of attorney itself.

[40] Clause 3 of the power of attorney empowers Mr Ram as the lawful attorney of Mrs Herbert:

"To commence prosecute enforce defend answer or oppose all action and other legal proceedings and demands touching any matters in which I am or may hereafter be interested or concerned and also if thought fit to compromise refer to arbitration abandon submit to judgment or become no-suited in any such action or proceedings as aforesaid."

Clause 11 requires Mr Ram:

"To appear for me in any court of justice or before any competent tribunal board or officer in any action or other proceedings which may be instituted against me or whereto I shall be a party and to defend the same or suffer any judgment order or award to be had or given against me in any such action or other proceeding by default or otherwise as my attorney shall think proper."

And Clause 17 requires Mr Ram:

"Generally to do execute and perform any other act deed matter or thing whatsoever which ought to be done executed or performed which in the opinion of my attorney ought to be done executed or performed in or about my property concerns engagements and business of every nature and kind whatsoever as fully and effectual to all intents and purposes as I myself could do if I were present and did the same in my proper person it being my intent and desire that all matters instruments and things respecting the same shall be under full management and direction of my attorney."

[41] I do not accept Mr Ram’s argument that the power of attorney was personal to Mrs Herbert and therefore did not make him the attorney of Herbert Construction or put him in a fiduciary relationship with the company. I find that the terms of the power of attorney are wide enough to prohibit Mr Ram from acting against Mrs Herbert’s interests in Herbert Construction whatever the extent of her interest in the company is. It matters not that Mrs Herbert’s interest is 51% or 1%. It is an absolute prohibition and remains so until the power of attorney is revoked. This action was commenced when the power of attorney was current and effective and even if it is revoked now or Mr Ram voluntarily surrenders it, the breach has already happened and cannot be undone.

[42] This is not a case where I need to lift the corporate veil. Neither is there a need to distinguish it from a power of attorney given under the Articles of Association of the company. The terms of the power of attorney are wide enough to include Mrs Herbert’s personal and business interests whatever they may be and whether they are as a shareholder or a director.

[43] In the course of the hearing Mr Ram said that the power of attorney had not been revoked. That surprised me and I suggested to him that perhaps he might take steps to withdraw from it. I also asked him to give me case authorities that prohibit me from lifting the corporate veil and gave him and Mr O’Connor time to file supplementary submissions on this point.

[44] He filed his submissions on 2 October 2009 in which he states at paragraph 5 that he renounced the power of attorney on 1 October 2009 and attaches a copy of his letter to Mrs Herbert written on the same date to that effect. In respect of the case authorities that Mr Ram submitted, having taken the view that the terms of the power of attorney prohibited him from acting against the interests of Herbert Construction, it is not necessary for me to consider them in detail other than to say this. He cites Prasad v Attorney General of Fiji [2008] FJCA 58; ABU0001.2008S; ABU0008.2008S (27 October 2008) and refers to one passage which seems to limit the application of the principle so I reproduce the rest of the passages in the Court of Appeal (Byrne, Hickie and Powell JJA) judgment on which the judgment is based and which I respectfully submit set out the law:

"[11] The trial judge found that the behaviour of both Peter Prasad and Navin Prasad in receiving the $33,000, dividing the proceeds and refusing to supply the generator knowing that Autodirect had no assets, was "a very, very sharp and devious practice". The trial judge lifted the corporate veil and gave judgment against Peter Prasad and Navin Prasad on restitutionary grounds.

[12] On appeal counsel for Peter Prasad acknowledged that his client was guilty of sharp practice but submitted that, following Salomon v Salomon & Company Ltd [1897] AC 22, the Courts could only ignore the separate personality of a company in very limited circumstances and that "unfairness", which the trial judge made some reference to, was not such a circumstance. The only circumstances, it was submitted, where the corporate veil can be lifted is:

(i) where the company structure is used to perpetrate a fraud;

(ii) where a company structure is used with the sole or dominant purpose of enabling another person to avoid an existing legal obligation; &

(iii) where under-resourced companies were found to be agents of their controllers or to be shams or devices.

[13] Mr Shivam submitted that because Autodirect was in existence and conducting a bona fide business before its directors decided to take the plaintiffs money and run, this did not constitute fraud of the type necessary to see the corporate veil lifted.

[14] Mr Shivam’s candour as to Peter Prasad’s intentions when the plaintiff paid the $33,000 is admirable and his concern for the maintenance of corporations law was touching, but the Court finds that this was a case where the company structure was used to perpetrate a fraud on the plaintiff and further finds that the intention to perpetrate such a fraud using the company structure does not have to pre-date the formation of the company or to be the only activity of the company.

[15] It is not possible to set down hard and fast rules but in this case, where all of the shareholders and all of the directors of the company were involved in the fraudulent enterprise or had knowledge of it, and where the company was left with no assets at all, the Court will lift the corporate veil and the trial judge was right to do so. This is a case where "in the particular context and circumstances (the corporate veil’s) presence would create a substantial injustice which the Court simply cannot countenance": Chen v Butterfield [1996] 7 NZCLC 261,086"

[45] The underlying principle is that the corporate veil cannot be used to hide an illegality or create a substantial injustice. It would be a great injustice in my view if Mr Ram is allowed to use the corporate veil to avoid his obligations under the wide terms of the power of attorney, which I might add was drawn up by him, to protect Mrs Herbert’s interests. He is in a way using the veil as a "sword" rather than a "shield".

[46] Just before I finalised the draft of this judgment I received Mr O’Connor’s submission on this point which is very helpful and I quote them here:

2. In Ratiu and Ors v Conway [2006] WTLR 101 the English Court of Appeal set out the following principles in respect of the solicitor’s fiduciary duty and lifting the corporate veil:

"A solicitor’s fiduciary duty to his client is normally engendered by the retainer, it is distinct from the contractual obligations created by the retainer and arises out of the relationship of trust and confidence which comes into being as a result. It is therefore not necessarily confined to the terms of the contractual retainer" (para 72) (Aud LJ).

"There is, it seems to me, a powerful argument of principle, in this intensely personal context of considerations of trust, confidence and loyalty, for lifting the corporate veil where the facts require it to include those in or behind the company who are in reality the persons whose trust in and reliance upon the fiduciary may be confounded" (para 78) (Aud LJ).

3. Ratiu and Ors v Conway [2006] WTLR 101 was subsequently followed by the English Courts in Diamentides v JP Morgan Chase Bank and Ors [2005] EWCA Civ 1612 (Court of Appeal, Civil Division) and JD Wetherspoon plc v Van de Berg & Co Ltd and others (Chancery Division, 31 March 2009) and by the Australian Courts in UTI (Aust) Pty Ltd v The Partners of Piper Alderman [2008] NSWSC 219 and Watson Ors v Ebsworth Ebsworth (a firm) Anor [2008] VSC 510 (25 November 2008).

4. One legal commentator provides the following conclusion on the Conway case (see A Hargovan in Breach of Solicitor’s Fiduciary Duty and the Lifting of the Corporate Veil (2007) 25 C&SLJ 128 at page 132):

"The refusal of leave by the House of Lords means that Conway sends a strong message that, in appropriate circumstances, a solicitor acting for one company in a group cannot act contrary to the interest of another company in that group or to the personal interests of directors or shareholders of the client company. The technicalities of company law with its emphasis on the separate legal status of companies, as counseled by Auid LJ and Law LJ in Conway, offer no protection to solicitors transacting in such circumstances with a conflict of interest" (emphasis added).

"Conway ... is a powerful demonstration of the courts’ readiness in England to draw back the corporate veil when common sense and reality so demand. These cases provide a clear warning to solicitors that the courts will not hesitate to uphold the paramount duty of solicitors to observe fiduciary obligations, especially in their dealings with corporate clients and their nominee companies".

THE LEGAL PRACTITIONER’S DECREE 2009

[47] Mr Ram argues that Herbert Construction has not pointed out which of the provisions of the Decree have been breached. It is an argument that is often raised in these Courts that seems to be based on a misconception that that failure means that the law does not exist so the applicant has proven his case. Such an argument, as Megarry J said in Spector (supra), has only to be stated to be rejected. It ignores s 51 of the Decree which deems every person practising as a practitioner and being the holder of a current practising certificate an officer of the Court and by virtue of that office must assist the Court and not mislead it on the law.

[48] The relevant provisions of the Decree are:

"Unsatisfactory Professional Conduct

81. For the purposes of this Decree, 'unsatisfactory professional conduct' includes conduct of a legal practitioner or a law firm or an employee or agent of a legal practitioner or a law firm, occurring in connection with the practice of law that falls short of the standards of competence and diligence that a member of the public is entitled to expect of a reasonably competent or professional legal practitioner or law firm.

Professional Misconduct

82.—(1) For the purposes of this Decree, 'professional misconduct' includes –

(a) unsatisfactory professional conduct of a legal practitioner, a law firm or an employee or agent of a legal practitioner or law firm, if the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence; or

(b) conduct of a legal practitioner, a law firm or an employee or agent of a legal practitioner or law firm, whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law, that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice, or that the law firm is not fit and proper to operate as a law firm.

(2) For the purpose of finding that a legal practitioner is not a fit and proper person to engage in legal practice as mentioned in subsection (1), regard may be had to the matters that would be considered if the practitioner were an application for admission or for the grant or renewal of practising certificate, including those matters contained in section 44 (a) to (j) of this Decree.

[49] Section 83 does not specifically list the conduct that is alleged in this case as "unsatisfactory professional conduct" or "professional misconduct" but the general words in ss 81 and 82, namely, conduct falling short of what the public and the profession expect from a competent lawyer or that the practitioner is not a fit and proper person, clearly cover this situation.

[50] However, the Rules of Professional Conduct and Practice contained in the Schedule to the Decree clearly cover the situation at hand:

CHAPTER 1—RELATIONS WITH CLIENTS

1.1 A practitioner shall not abuse the relationship of confidence and trust with a client.

1.2 A party shall not act for more than one party in the same matter without the prior consent of all parties.

1.3 On becoming aware of a conflict of interest between clients a practitioner shall forthwith

(a) advise all clients involved in the matter of the situation;

(b) continue acting for all clients only with the consent of all clients and only if no actual conflict has occurred;

(c) decline to act further for any party where so acting would disadvantage any one or more of the clients.

1.4 Information received by a practitioner from or on behalf of a client is confidential and shall not be communicated to others save with the client's consent or where so required by law.

1.5 Where a practitioner has received information from or on behalf of a client, a practitioner shall not thereafter act for another client in circumstances where the practitioner's receipt of such information may result in detriment to the first mentioned client

CHAPTER 3—RELATIONSHIP WITH THE COURT

3.1 A practitioner shall not knowingly deceive or mislead the Court.

3.2 A practitioner shall at all times:—

(i) act with due courtesy to the Court;

(ii) take all reasonable steps to avoid unnecessary expense or waste of the Court's time.

3.3 A practitioner shall inform the Court of any relevant decision or legislative provision of which the practitioner is aware relating to the matter in issue, whether or not these support the practitioner's contention.

3.4 A practitioner shall not, save in exceptional circumstances, continue to act for a client in a matter in which the practitioner is likely to be a witness unless:—

(i) the practitioner's evidence relates solely to an uncontested matter;

(ii) the practitioner's evidence relates solely to formal matters;

(iii) the practitioner's evidence will relate solely to the nature and value of legal services rendered;

(iv) refusal to act or withdrawal from the matter will jeopardise the client's interest.

3.5 A practitioner shall not on behalf of a client attack a person's reputation without good cause.

3.6 A practitioner shall not maintain any issue, compromise any matter, or consent to any order, save on the client's instructions.

3.7 Subject to the foregoing and the overriding obligation of a practitioner to the Court, a practitioner shall conduct each case in such manner as the practitioner considers will be most advantageous to his client.

NO PREJUDICE TO RC MANUBHAI

[51] Finally, I agree with Counsel for Herbert Construction that RC Manubhai will not suffer any prejudice by Mr Ram not acting for them. This is not a complicated matter requiring expert legal advice and there are other equally competent and experienced lawyers that can take on RC Manubhai’s and his other clients’ instructions.

THE ELISA ENGINEERING CLAIM

The position with Elisha Engineering is exactly the same as for RC Manubhai so the same considerations and outcome follows.

THE A - TEAM CLAIM

[53] The A-Team claim relates to work done by the company at the Sheraton Resort under contract to Herbert Construction. Mr Malcolm Herbert says in his affidavit filed on 25 September 2009 that the two projects are related in that Matapo Ltd has alleged that Herbert Construction had removed material from Momi and used it in the Sheraton project and has filed a counter-claim against the company.

[54] I do no think that it is necessary to establish such a connection. I think it sufficient that confidential and probably privileged financial information, for example on Hebert Construction’s ability to pay, which Mr Ram may have acquired in the course of him acting as solicitor for the company may be used by him adversely against Herbert Construction in the A-Team claim.

OTHER MATTERS

[55] The Plaintiffs in all three actions have filed for Judgment in default of Defence. At the end of the hearing I stayed all further steps in all three actions pending delivery of my judgment. The stay must remain until the Plaintiffs engage new solicitors and counsels.

[56] There were documents tendered in the hearing of this application in respect of which privilege has not been waived so they should be returned to their respective owners. I will therefore order that all copies of affidavits served in this application and extra copies thereof must be returned to the persons from whom they originated after the expiration of the appeal period if no appeal is filed.

COSTS

[57] The hearing took about 5 hours, about 4 of those were taken up by Mr Ram’s submissions. He has lost in all three applications so he should pay the applicant’s costs. I take no account of overseas counsels being engaged in this application. Substantial affidavits and submissions were filed by the parties and complex legal issues were involved. I think costs of $2500 is justified and order accordingly for all three actions (not for each).

ORDERS

[58] The Orders are therefore as follows:

1. Mr Samuel K Ram is disqualified and restrained from acting and continuing to act as a solicitor and barrister for the Plaintiffs in civil actions HBC 75 of 2009, HBC 76 of 2009 and HBC 90 of 2009.

2. Mr Samuel K Ram shall not divulge or disclose to any person without the consent of Herbert Construction Company (Fiji) Limited any confidential or privileged information acquired by him during any time that he acted as solicitor and barrister for the company.

3. All further steps in civil actions HBC 75 of 2009, HBC 76 of 2009 and HBC 90 of 2009, except for the purposes of an appeal against this judgment, are stayed until the Notices of Change of Solicitors for the Plaintiffs have been filed.

4. All default judgments issued in these actions, if any, are set aside and the Defendant shall file and serve its Defences within 28 days after service of the Notices of Change of Solicitors on the Defendant’s Fiji solicitors. The matter would then take its normal course.

5. After the expiration of the appeal period the parties shall return to the other all affidavits, submissions and other documents which were served or otherwise came into their possession for the purposes of this application.

6. Mr Samuel K Ram shall pay the Defendant’s total costs of $2500 for all three actions within 28 days.

Sosefo Inoke
Judge