Litigation and Dispute Resolution

New changes to off-the-plan contracts

23 November, 2018

We all expect that lawyers will be loyal to their clients, act in their best interests, and protect their confidential information. Lawyers have duties to their clients to do so. When lawyers draw their swords to go into battle on behalf of their client against another party in litigation, it would be dubious to think that they could ever be allowed to face back at their former client.

This being said, last week the Supreme Court of NSW considered these duties and found that in certain circumstances a law firm can not only act against their former client but do so in a dispute that they have previously advised on. However, there is a raft of protections that need to be in place first.

The die is cast: the battle in question

The case in question is Técnicas Reunidas SA v Andrew [2018] NSWSC 645, which was concerned with a dispute between Técnicas Reunidas SA (TRSA), who had engaged Downer EDI Engineering Power Pty Ltd (Downer) to provide structural, mechanical, and electrical works with respect to an ammonium nitrate plant. A dispute arose between the parties as to performance and fee. Downer applied to have the dispute referred to arbitration.

At the time, Downer was legally represented by Norton Rose Fulbright (Norton Rose). TRSA engaged Pinsent Masons (Pinsent) to provide legal advice with respect to the dispute. From around June 2015, Pinsent provided advice to TRSA on the arbitration applications, bank guarantees provided by Downer, and a notice of termination of the contract issued by Downer. Nothing of significance happened after October 2015, and Pinsent did not provide any further advice to TRSA.

The dispute re-enlivened in March 2016, with Norton Rose, on behalf of Downer, issuing a further arbitration request to TRSA. TRSA engaged another law firm, White & Case, to act for it. TRSA informed Pinsent of this in May 2016. In January 2018, a number of lawyers from Norton Rose left to join Pinsent, and Downer followed them as a client. Pinsent’s retainer provided that Downer could not benefit from Pinsent’s former advice to TRSA.

Pinsent set up information barriers in the months prior to the new partners joining from Norton Rose. This included the IT lockdown of the electronic TRSA file to only two London based Compliance officers, and the transport of all hard copy files to London to archived in locked storage. All of the solicitors that worked on TRSA’s file, and all of the solicitors to work on Downer’s file, gave undertakings that they would not discuss their respective matters. Pinsent informed the tribunal and TRSA of this development. TRSA objected and commenced proceedings in the Supreme Court of NSW to retrain Pinsent from acting for Downer.

TRSA ran three arguments:

  1. Pinsent was in breach of its fiduciary duty of loyalty;
  2. there was a real risk that Pinsent would breach its duty of confidentiality; and
  3. the Court should use its inherit jurisdiction to restrain Pinsent from acting in order to protect the integrity of the judicial process and administration of justice.

Et tu, Brute? The duty of loyalty

The duty of loyalty can be simply described as a duty of a solicitor not to act in a manner contrary to the interest of their client without their informed consent. It is well established that this would include acting for one client against one of their partner’s clients. What is not established is whether this duty continues after the termination of a retainer.

In considering this question, Ball J of the NSW Supreme Court stated that it may be possible that this duty continues after termination if the solicitor terminated the retainer. However, his Honour stated that in these circumstances the actual breach of the duty of loyalty would be the termination of the retainer, and the injunction would flow to prevent the solicitor from benefiting from the breach.

His Honour found that this is not what occurred in the present matter. The retainer was terminated by TRSA, not Pinsent, and this was done well before Pinsent commenced acting for Downer.

Keep it secret, keep it safe: the duty of confidentiality

Courts will restrain a law firm from acting in circumstances where they have obtained confidential information from their former client, and there is a real risk that the duty to maintain the confidentiality of the information would be breached, intentionally or otherwise. Where a lawyer holds confidential information that would be relevant or adverse to the interests of a new client, they bear the onus to establish that there is no risk that confidentiality will be breached.

It was not at issue that Pinsent held confidential information of TRSA. The question was whether the information barriers set up were sufficient to prevent the disclosure, including inadvertently, of the confidential information. His Honour was satisfied that the steps taken by Pinsent were sufficient, noting:

  • hard copy documents were sent to London to be securely stored;
  • electronic documents had been restricted prior to Downer coming on as a client;
  • there was a geographic separation between the teams that had worked on the separate files (TRSA’s team being in London or Sydney, Downer’s team in Melbourne); and
  • the relevant solicitors had all signed personal undertakings.

Accordingly, Pinsent was not to be restrained on the basis that there was any risk of a breach of their duty of confidentiality.

The integrity of the judicial process: the discretion to ensure justice is done

Solicitors are officers of the court, and the court holds inherent jurisdiction over its officers in aid of the administration of justice. This includes restraining them from acting in a matter if a “fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting”.

Court’s will not exercise this jurisdiction lightly, and the court will consider the public interest in a litigant not being deprived of their lawyer of choice, as well as the costs, inconvenience, and impracticality of requiring a lawyer to cease acting.

Ball J found that the high bar for exercising this jurisdiction was not reached. The basis for this was that:

in many cases, such a conclusion might be reached where a firm of solicitors has, in effect, changed sides, as in this case. However, here there has been no breach of the duty of loyalty and no breach of the duty of confidence. [Pinsent] has put in place procedures to protect the confidential information of [TRSA]. It was [TRSA] that chose to use another firm to act for it in relation to the arbitration; and [Pinsent] came to act for Downer because the solicitors advising Downer changed firms midway through the arbitration, well after [Pinsent] had ceased to act for [TRSA]. Those solicitors had already done a large amount of work for Downer and it is apparent that it would have caused Downer considerable costs and inconvenience if it had not decided to continue to use the same solicitors following the move or if it were prevented from doing so now.

His Honour therefore concluded that a fair-minded member of the public would conclude that it is not necessary to restrain Pinsent from acting in order for the proper administration of justice to be served.

Take home points

The dispute between TRSA and Downer presents a novel set of circumstances where a firm can switch sides in a dispute. However, such a characterisation runs the risk of oversimplifying the matter and misleading us to having our sensibilities offended that a law firm can be allowed to do so. Each case will turn on its facts, and as we have seen that Court found that it would not be unjust to allow Pinsent to act for Downer. In fact, his Honour appears to just stop short of suggesting that it would be unjust to restrain Pinsent from acting for Downer.

It is an important reminder as the appropriate lengths that lawyers must go to ensure that their client’s (both former and present) rights are protected. Information barriers, both physical and electronic, geographic barriers, and solicitor’s undertakings were all provided by Pinsent. TRSA had terminated the retainer, not Pinsent. The situation only arose because the lawyers acting for Downer had moved from Norton Rose to Pinsent, and this was done well after Pinsent had ceased acting for TRSA.

All of this together created a perfect storm where Pinsent would be allowed to “switch sides”. But this case makes it clear that such action can not be done lightly. It is clear that the court can, and will, restrain a solicitor from acting against a former client, all that would be required would be the balance of the facts to tip the other way.

published by

Recent Insights

View all
Litigation and Dispute Resolution

Canadian Court elevates thumbs-up emoji to signature status

In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract.   Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and   The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter.   Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship.   Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan
29 August, 2023

Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane [2023] NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty.  The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.

Published by Leighton Hawkes
18 August, 2023
Litigation and Dispute Resolution

Expert evidence – The letter of instruction and involvement of lawyers

The recent decision in New Aim Pty Ltd v Leung [2023] FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.

Published by Justin Pennay
10 August, 2023