The cloak of confidentiality, draped over a client and lawyer participating in a mediation, will clothe them well after the mediation is over. In what circumstances will the cloak of confidentiality prevent a lawyer from acting in a proceeding separate from the one that went to mediation? Say a lawyer acts for A against B in a proceeding that goes to mediation. The lawyer, in a separate proceeding, is engaged by C to act against B. In what circumstances can B prevent the lawyer from acting for C based on confidential information learnt by the lawyer in the A and B mediation?
Such circumstances are discussed in the following two decisions: in the first,1 the solicitor was restrained from acting; in the second,2 no restraint was imposed.
Worth Recycling Pty Ltd v Waste Recycling and Processing Pty Ltd
Veolia, WSN and Worth are competitors in the waste recycling and processing industry.
Holman Webb and Mr Maxwell (a partner of Holman Webb) acted for Veolia in an action against WSN for damages suffered by contraventions of part V of the Trade Practices Act 1974. The parties engaged in disclosure and served witness statements. The proceeding was settled, through mediation, prior to the trial commencing.
Veolia and WSN had signed a mediation agreement. That agreement contained the usual clauses requiring information and documents disclosed or anything said and done during the mediation to remain confidential. Mr Maxwell was present at the mediation and was familiar with the terms of the mediation agreement. A deed of release was signed by the parties. That deed required the parties not to disclose the contents of the deed or the terms of settlement.
Mr Maxwell, in the course of preparing for the trial, had obtained a witness statement from Mr Cooper from Worth. After the Veolia proceeding had settled, Mr Cooper spoke to Mr Maxwell by telephone. Mr Cooper said that Worth assumed that the result of the mediation had been favourable to Veolia and that Worth wished to pursue its own claim against WSN. Mr Maxwell said that the terms of the resolution between Veolia and WSN were confidential. Mr Cooper asked Mr Maxwell whether Veolia was happy with the resolution. Mr Maxwell said he believed it was. Shortly thereafter, Mr Maxwell conferred with Mr Cooper. Worth retained Holman Webb to act for it in its claim against WSN. It was agreed that Mr Maxwell would not do anything that might in any way breach the confidentiality in place through the mediation agreement and the deed of release.
Worth then, through Mr Maxwell and Holman Webb, commenced proceedings against WSN alleging the same contraventions of part V of the Trade Practices Act 1974 as Veolia alleged in its proceeding against WSN.
WSN sought an order restraining Mr Maxwell and Holman Webb from acting for Worth based on: a threat of breach of confidence relating to information disclosed during the mediation and the deed of release. The confidential information identified included: WSN’s opening statement; the parties’ discussions about relative strengths and weaknesses of their cases; settlement offers made; WSN’s attitude to any settlement offers; the negotiating positions adopted by WSN.
Einstein J, at first instance, found that at least Mr Maxwell had a duty of confidence in relation to the information disclosed by WSN during the mediation. His Honour was also satisfied that there was ‘a real and sensible possibility of misuse (albeit unconsciously) of the confidential information obtained by Mr Maxwell’.
On appeal, relevantly for my note, there were two issues:
- Did Mr Maxwell owe an obligation of confidence to WSN?
- Was there a threat of breach of that obligation sufficient to justify an injunction?
Hodgson JA found that the information sought to be quarantined did have the necessary quality of confidentiality about it when regard was had to the terms of the mediation agreement. The confidential information imparted to Mr Maxwell imposed on him an obligation of confidence not only to his own client (then Veolia) but also directly to WSN.
As to the threat of misuse of confidential information the New South Wales Court of Appeal said that the onus lay on the party seeking the injunction to show a threat of misuse sufficient to justify the injunction. Proof of ‘a real and sensible possibility of misuse’ may be sufficient to justify an injunction. Hodgson JA (Spigelman CJ and Campbell JA agreeing) found that misuse would be almost inevitable if Mr Maxwell should take part in settlement negotiations between Worth and WSN: ‘it is very difficult indeed to keep the settlement negotiations quarantined from the conduct of the proceeding generally’. The appeal was dismissed.
Ian West Indoor and Outdoor Services Pty Ltd v Australian Posters Pty Ltd
Mr Griffiths, a solicitor, and his firm, acted for Wham Outdoor Advertising Pty Ltd (‘Wham’) against Australian Posters in the Victorian Civil and Administrative Tribunal (the ‘Wham proceeding’). Wham had provided services to Australian Posters installing advertising posters. Its claim was for damages pursuant to the Victorian Fair Trading Act.
The Wham proceeding settled following two compulsory conferences under the Victorian Civil and Administrative Tribunal Act (‘VCAT Act’) and an exchange of correspondence between the solicitors for the parties. The parties agreed that the terms of settlement were to remain confidential.
West also installed advertising posters for Australian Posters. West claimed damages against Australian Posters based on the Victorian Fair Trading Act. West retained Mr Griffiths to act for it (the ‘West proceeding’).
The Tribunal ordered that Mr Griffiths be restrained from acting for West in its proceeding against Australian Posters. Mr Griffiths appealed against that order to the Victorian Supreme Court (Emerton J).
The representations relied on in each proceeding were similar as was the contract for services. The documents relevant in the Wham proceeding would also be relevant in the West proceeding.
The Tribunal, in restraining Mr Griffith from acting for West, relied upon the above decision of Worth Recycling. The Tribunal found that Mr Griffith was aware of the offers made at the compulsory conferences and of the correspondence in the Wham proceeding. Thus, he was aware not just of the settlement amount, but of the steps by which it was reached and the movements in negotiations. The Tribunal considered Mr Griffiths would not be able to expunge from his mind his knowledge of the way Australian Posters behaved in the Wham proceeding. That knowledge, the Tribunal found, was gained as part of confidential negotiations.
Mr Griffiths appealed on two grounds: first, that the information possessed by Mr Griffiths was not confidential; secondly, there had been no finding of risk of misuse of that information (possession of the confidential information was not enough).
Emerton J, after examining the VCAT Act, found that the information disclosed in the compulsory conferences was confidential.
As to the second issue, her Honour found the Tribunal erred in its finding that there was a risk of misuse of confidential information. The Tribunal had given no express consideration as to how Mr Griffiths knowledge of the negotiations in the Wham proceeding could be misused by him. In this respect, Emerton J thought the decision in Worth Recycling was distinguishable. Her Honour said that facts in Worth Recycling showed a deliberate act on the part of Worth to retain Mr Maxwell in order to replicate the outcome Mr Maxwell had achieved for Veolia. The existence of common facts in both the proceedings was only a factor to take into account. The Tribunal had not properly turned its mind to whether there was a real and sensible risk of misuse by Mr Griffiths of confidential information concerning the settlement amount, the steps by which settlement was reached and the movements in negotiations in the Wham proceeding. The possession of confidential information was not enough. Her Honour examined Australian Posters’ material and found it did not persuade her that knowledge of offers and negotiations in the Wham proceeding would give rise to a real and sensible possibility of misuse of that information in the West proceeding.
Conclusion
Situations such as the above will usually arise where there is a cross-over of parties and subject matter in each of the proceedings. The confidential information learnt may extend to information external to the dispute itself e.g. the financial status of a party; their declared strategy in how and when to resolve a matter; and the way they go about investigating certain matters. The starting point must always be to examine why it is said that confidentiality exists e.g. the mediation agreement; the inherent confidential nature of mediations;3 or statutory provisions.4 Next, examine the extent of the confidentiality i.e. what is the information said to be confidential. Then ask whether there is a real possibility that the lawyer will use the identified confidential information if that lawyer continues to act.
Anand Shah
Footnotes
1. Worth Recycling Pty Ltd v Waste Recycling and Processing Pty Ltd [2009] NSWCA 354.
2. Ian West Indoor and Outdoor Services Pty Ltd v Australian Posters Pty Ltd [2011] VSC 287 (Emerton J).
3. Cf. Ian West Indoor and Outdoor Services Pty Ltd v Australian Posters Pty Ltd [2011] VSC 287 at [26].
4. Cf. section 114 of the Supreme Court of Queensland Act 1991. This section deals only with admissibility of evidence arising out of a mediation but see s 94(d)(i) of the Supreme Court of Queensland Act 1991 and Williamson v Schmidt [1998] 2 Qd R 317, 336.
