N3037

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS. 706 OF 2005

BETWEEN:

JOHN BANGKOK
(Plaintiff)

AND:

RAY SENA
(Defendant)

LAE: Kirriwom, J
2005: 20th December
2006: 16th February

Civil – Claim for declaratory orders – interlocutory application – objection to former lawyer acting for opposing party – conflict of interest.

Practice and procedure – lawyer acting for both parties in conveyancing transaction – parties got into disagreement over the same subject property – lawyer accepts instructions to act for one against the other – conflict of interest situation arises – possible likelihood of the applicant being prejudiced in his defence due to lawyers prior knowledge and information given in confidence in earlier transaction.

Cases cited:
Re: NATIONAL MUTUAL HOLDINGS PTY. LIMITED; ACC HOLDINGS LIMITED; ACC FINANCIAL MANAGEMENT LIMITED; ACC LIFE LIMITED; ACC GENERAL INSURANCE LIMITED and AUSTRALIAN CASUALTY COMPANY LIMITED And: THE SENTRY CORPORATION and PEAT MARWICK MITCHELL & CO. and OTHER CROSS-PROCEEDINGS No. VG 173 of 1987 FED No. 274

Counsel:
Mr Anis for the Plaintiff
Defendant in person

16th February

RULING

KIRRIWOM, J:

1.	This is a motion by the Applicant, the Defendant in this proceeding, seeking an order from the Court to restrain or disqualify the law firm of Gamoga & Co. Lawyers from acting for the Plaintiff in this proceeding on the basis of conflict of interest. He also seeks two further orders which is an order for search warrant to issue for the against Maybank (PNG) Ltd for the search and inspection of the Mortgage Agreement between the Plaintiff and the Bank over the property that is the subject of this dispute and described herein and leave to file an amended defence.

2.	The Plaintiff in this matter is suing the Defendant over a property described as State Lease Volume 001 Folio 159 Lot 2 section 35 Parer Street Lae Morobe Province, over which, by law of indefeasibility of title, both have joint ownership as joint-tenants under the Title Deed in place. This action by the Plaintiff is seeking declaration from the Court that he alone has both legal and equitable interest over the said property to the exclusion of the Defendant and he is therefore entitled to deal with the property as he sees fit without consulting the Defendant. He is also asking for an order directing the Registrar of Titles to remove the Defendant as co-owner in joint tenancy.

3.	The Applicant contends that the subject matter in dispute between the parties is the property described above which the Plaintiff wants to sell but he is unable to do so without his consent and this consent he is not prepared to give unless he is assured of what his benefits are as far as that transaction is concerned because since the property was initially purchased and registered under their joint-names, he had very little or nothing to do with it. The Plaintiff solely developed it and dealt without his consultation and even obtained mortgage over the property for its development without his knowledge.

4.	Leaving aside the circumstances leading up to the purchase of the property and who provided the funds for the property, the Applicant argues that the Plaintiff’s current lawyers were the lawyers who acted for them in 1999 when the property was purchased. They were in fact acting for the Vendor but as he and the Plaintiff did not have a lawyer then, the firm also acted for them as the Purchaser and registered it under their joint-tenancy.

5.	This is the same subject property that has now become embroiled in this proceeding because the Plaintiff wants to have it all to himself and he wants the Defendant out. It has confidential information acquired during that period of retainer that could be prejudicial to him in the conduct of his defence against the Plaintiff’s claim. 

6.	Furthermore, the Applicant contends that Gamoga & Co. Lawyers were his lawyers in a District Court matter which they have now ceased to act for him since receiving instructions from the Plaintiff to act for him in this matter. In his Responding Affidavit sworn 14 September 2005, Mr Gamoga concedes to his firm acting for the Applicant in the District Court matter but ceased acting for him about a month before receiving instructions from the Plaintiff in this matter.

7.	However what Mr Gamoga has not answered in his Responding Affidavit is the Applicant’s assertion that his firm acted for both the Vendor and the Purchaser in the sale or transfer of the Property State Lease Volume 1 Folio 159 Section 35 Allotment 2 Lae, Morobe Province. If what is asserted here by the Applicant is true, he could be correct in raising the issue of a possible conflict.

8.	No doubt as lawyers acting for both the vendor and the Purchaser, Gamoga & Co. Lawyers have acquired a fairly, good background knowledge of the conveyancing transaction, the background of the parties, the source of funds, and legal and equitable interests accruing to the ultimate beneficiaries or new owners of the property.

9.	Since the completion of that transaction in early 1999 there have been substantial changes done to the property which now appears to be a bitter dispute or disagreement between two-joint tenants on the way the property was dealt with and managed without the knowledge of the other.

10.	Whatever the purpose and reason for the joint tenancy over the property by the Plaintiff and the Applicant are as explained in their respective affidavits, but as far as the law is concerned, as a joint tenant, the Applicant is a title-holder to the property with equal right as the Plaintiff.

11.	Conflict of interest can arise in may different situations. In client-solicitor relationship, where there is likelihood of bias or of a solicitor not acting impartially between two disputing parties because of his prior dealings with one or both of them in the same matter that is the subject of the proceeding he is instructed to act or in another matter, he must avoid placing himself in that situation not only for the sake of fairness and of doing justice to either party especially the one who is aggrieved, but also for the sake of his own professional standing and the integrity of the legal profession.

12.	Conflict of interest allegations or complaints by former clients against solicitors in subsequent or continuing proceedings have been subject of many court rulings since the early centuries. One case that addressed this issue is Re: NATIONAL MUTUAL HOLDINGS PTY. LIMITED; ACC HOLDINGS LIMITED; ACC FINANCIAL MANAGEMENT LIMITED; ACC LIFE LIMITED; ACC GENERAL INSURANCE LIMITED and AUSTRALIAN CASUALTY COMPANY LIMITED And: THE SENTRY CORPORATION and PEAT MARWICK MITCHELL & CO. and OTHER CROSS-PROCEEDINGS No. VG 173 of 1987 FED No. 274 Equity - Legal Profession - Evidence - Practice and Procedure 22 FCR 209. In that case the Federal Court of Australia presided by Gummow, J while dealing with a similar application observed the position is the USA to be as follows:

"Whilst the disciplinary rules prohibit misuse by an attorney of confidences or secrets of a former client, the courts have applied a gloss upon the rules, proceeding from a rationale which has been essentially prophylactic in character. In a number of cases where a former client has sought to disqualify an attorney from representing an opponent in a pending action, the courts have applied a presumption that confidential information was revealed by the former client to his attorney during the earlier representation. If the previous representation was in a substantially related matter, a further presumption arises that the information will be used by that attorney contrary to the interests of his former client. Some courts have held the presumptions irrebuttable under the circumstances. Again, it has been held that when a single attorney must be disqualified because of the acts or presumed holding of confidences and secrets of a former client, knowledge of the facts that lead to the disqualification must be imputed to other members of the law firm with which he or she is associated. Thus, the entire firm must be disqualified. The rationale behind this approach is concerned with a danger of inadvertent disclosure of confidences inherent in the everyday interchange of ideas and discussion of problems amongst law partners. Some courts have found that the avoidance of even the appearance of impropriety is important, and support disqualification upon that ground."

13.	The position in Australia has been essentially the same as in England although different States over time began to adopt different views on the issue for different reasons. But the traditional view alluded to by Gummow J is noted where His Honour said:

"Reliance has been placed in Australia upon the decision of the English Court of Appeal in Rakusen v Ellis Munday & Clarke (1912) 1 Ch 831, for the proposition that a solicitor is precluded and will be restrained from acting for an opponent of a former client where the solicitor, as the result of having previously acted for the client, obtained confidential information and it reasonably can be anticipated that in the course of acting for the opponent of the former client, the solicitor may consciously or inadvertently make use of that information in breach of his duty to the former client: Vatousios, "Solicitors Acting Against Former Clients", (1983) Victoria Law Institute Journal 976."

14.	For a small law firm like Gamoga & Co. Lawyers, it could be quite difficult for a lawyer to remain oblivious to the firm’s prior knowledge and information acquired while acting for the parties in the earlier transaction over the same subject property in the current dispute between them by acting for one of them. The Applicant’s perception that the solicitor will most likely use his knowledge of their earlier retainer to the prejudice of the Applicant looks real, not just a figment of imagination.

15.	I am of the view that the Applicant’s complaint is valid and genuine. It will be tantamount to abuse of the process of this Court, for the continuation of the proceeding with the Defendant’s feeling of bias and unfairness not corrected quickly. I shall order Gamoga & Co. Lawyers to forthwith discontinue providing legal services to the Plaintiff in this matter because of their previous involvement in the same mater involving the Plaintiff and the Defendant one side and another party (the Vendor) in the other.

16.	Because I have already found, based on the evidence before me, that the Applicant has a legitimate claim to the property under dispute as a joint-tenant, whatever their shareholdings maybe, I am of the view that any dealings on the property must be jointly undertaken under the laws governing such relationship. This relationship was created by their deliberate choice and deed. If there must be severance of such relationship, they must do so in the same cordial manner and in the same way it was entered into.

17.	In the circumstances, I also grant the relief he seeks in both paragraphs 2 and 3 of the Notice of Motion vis-à-vis:

a)	That a search warrant be issued against Maybank (PNG) Ltd Lae Branch for the production of the Mortgage Agreement between the Plaintiff and the Bank where the Plaintiff mortgaged to the Bank the subject property, namely State Lease Volume 001 Folio 159, Lot 2 Section 35, Parer Street, Lae Morobe Province

b)	That leave be granted to the Defendant to file an amended defence within 14 days.

18.	The only short answer to the parties’ dispute is to settle this matter amicably between them. There is no easy solution on the shelf for picking by going to court. If they were friends then to have committed themselves to this relationship, what is wrong with not amicably severing that relationship?

19.	I order Plaintiff to pay the Defendant’s costs for this application.

Lawyer for the Plaintiff:	Gamoga & Co Lawyers
Defendant (Applicant) in Person