Austin Engineering Pty Ltd v Bowdens [1993] QSC 267

\if State Reporting Bureau":'"'7.>iJl1.•• '!.'•• '.U.i.iJ ~ TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION KIEFEL J . No 54 7 of 1993 AUSTIN ENGINEERING PTY LTD ACN 010 385 761 Plaintiff arid · BOWDENS (a firm) Defendant BRISBANE .. DATE 23/07/93 .. JUDGMENT 1 .. -- 1 of 13 -- 230793 jjh/jlk (Kiefel J) HER HONOUR: The plaintiff seeks an injunction restraining the defendant, a firm of solicitors, from acting for D A Story Pty Ltd ( "Storys 11 ) in an action brought by the plaintiff ( "Austins 11 ) against that company. The issues before me are whether the defendant firm was retained as the plaintiff's 10 solicitors and whether in any event the plaintiff imparted confidential information to that firm. An issue in the proceedings between Austins and Storys concerns the relationship between them. Some time was 20 consequently taken in these proceedings in attempting to show that it was in the nature of a partnership or joint venture. If that was so it might not in any event be conclusive of the question as to whether the firm had in fact acted for both parties. The plaintiff's evidence and that of its witness, 30 Mr Hofmeister, then sought to take it further and show that the solicitors always appreciated that they were in fact acting for both parties. In mid-1990 Story Steel had offered to supply and erect structural steel on a building project undertaken by the Jennings Group Limited for Queensland Newspapers, and that offer had been accepted. Storys were to be named as the subcontractors in contractual documents. At or shortly prior 40 to this time storys and Austins had discussed working togetherso on the project by each contributing labour and materials and in some way sharing in profits. JUDGMENT 2 60 -- 2 of 13 -- 230793 jjh/jlk (Kiefel J) In about October 1990 delays were experienced on the project and the prospect of a claim against Jennings or the owners arose. Mr Austin had previously engaged the service of Hanover Holdings Ltd ( 11 Hanovers 11 ) and in particular Mr Hofmeister of that company. Mr Hofmeister was experienced in building disputes and negotiations. Mr Austin contacted Mr Hofmeister. Both Storys and Austins guaranteed payment of Hanover's fees. Subsequently there was perceived to be a need for a solicitor in relation to a prospective prolongation claim and Mr Hofmeister rang Mr Pennicott of Bowdens: In that first communication Mr Pennicott says Mr Hofmeister explained that he was acting for five or six subcontractors on the Jennings project and mentioned Storys by name. He asked Mr Pennicott if he would be interested in acting for Storys. He did not .·:-.. ~:-.:~·-:'·· . :-- :_:-~=,:--:.-·--~----- --~- -· . - _-·:_· .. ...::·: :: _.7:·:~-~;..-._,~- ___ .... :..~': .. ~ ... __ :·· ____ : ~..::-.:::-;:..~.; .. :-. - ·_..:. .. mention Austins. Mr Pennicott says he then met Mr Hofmeister on 5 Novemb~r 1990, alone, at which time Mr Eofmeister said that he anticipated he would receive instructions from other subcontractors such as James Watts and Boral. Again, no mention was made of Austins. Whilst Mr Hofmeister was at some pains to recount that Messrs Story and Austin described the relationship to him as 11 joint 11 , he did not in evidence deny Mr Pennicott's account of these conversations. It seems clear that on 6 November 1990 a meeting was held at Hanover's offices. Present were Mr Story and a Mr Stewart of storys, Mr Hofmeister and a Mr Hounslow of Hanover, Mr Austin and Mr Pennicott. It is easy to accept that the contractual relationship between Storys and Jennings was discussed on that JUDGMENT 3 10 20 30 40 50 60 -- 3 of 13 -- 230793 jjh/jlk (Kiefel J) day since those present were interested in the prolongation claim. Mr Hofmeister, however, in evidence said that during those discussions it was expressly stated that both Storys and Austins were Hanover's client and their relationship was of the nature of a joint venture. Mr Pennicott says that he does not recall any mention of the relationship and he made no note of it. Following a meeting on 8 November 1990 Mr Pennicott wrote to Mr Hofmeister's company. In that first letter the client is clearly identified as Storys. Mr Austin is spoken of in a different sense, as a person attendir.g the meeting and taking part ~n the discussions. A file was opened in the name of Storys that day. After early November 1990 further meetings were held between Mr Pennicott, Mr Story and representatives of Storys and Hanovers. Mr Austin did not attend these meetings. Correspondence and facsimile transmissions passed between Bowdens, Hanovers and Storys. The solicitors gave advice to Storys. In December 1990 Mr Pennicott was told by Mr Hofmeister to send their fees direct to Storys and this was done. On 11 April 1991 Mr Pennicott made a note to the effect, 11 Austin - contractual position••, as the last of a number of matters dealt with in a conversation with Mr Story and Mr Hofmeister. It is not clear what in fact was discussed about Austin that day. In May 1991, however, the issue of Mr Austin's position arose in connection with Austin's then JUDGMENT 4 10 20 30 40 50 60 -- 4 of 13 -- --- - - ----------------------------- 230793 jjh/jlk (Kiefel J) direct contact and negotiations with the owner, Queensland Newspapers. At that point Mr Austin's actions were regarded by Storys and Mr Hofmeister as capable of prejudicing Story's position in its settlement negotiations with Jennings and the owner. No action was, however, taken against Mr Austin to attempt to prevent him from conducting his own discussions. Some two days after Mr Hofmeister had phoned Mr Pennicott advising of Austin's actions, Mr Pennicott took a statement from Mr Story dealing with the relationship with Austins. Mr Pennicott says that no advice was then sought or given concerning Bowdens' position vis-a-vis Austins.- _-- Mr Hofmeister's evidence is to the contrary. It also appears that at an earlier time Mr Pennicott had received a copy of the guarantee that both Story and Austin had provided to Hanover for the latter's fees, but it is not clear how this . - ~ -... -- -. "" -. - .. ·. •"-·~::·;:: ···:-.:·..::~ ·: :· ' - :-. ': -· -:-. <:~:::::...:: arose and whether it was connected with the issue concerning negotiations with Queensland Newspapers. He says-he thought nothing of the matter. Further accounts were sent by the solicitors to Storys. In this connection also it appears that by dint of the arrangement between Austins and Storys, Mr Austin effectively paid part of a fee since it was drawn from 11 joint funds 11 , that is to say, a pool of funds that Austins and Storys had initially created. It was not, however, suggested that Bowdens' fees from time to time continued to be taken from this source. Further advices were given by Mr Pennicott to Storys. JUDGMENT 10 20 30 40 50 60 -- 5 of 13 -- ~---------~---~------ ----- 230793 jjh/jlk (Kiefel J) By late June 1991 Mr Austin had a solicitor acting for him. Mr Hofmeister had been in communication with that person, a Mr Gray. Mr Pennicott had his first contact with Mr Gray on 5 July 1991. At this point it appears that the dispute between Storys and Jennings was about to be resolved. Storys were then likely to receive a considerable sum. Mr Gray was intervening in Mr Austin's interests. Mr Gray, on behalf of Mr Austin, then wrote to Bowdens on 12 July 1991 concerning a proposed release. The terms of the letter referred to Bowdens' 11 client 11 as Storys and to Austins as the clients of Mr Gray. It expressed concern as to the manner in which Mr Austin had been treated generally by Mr Hofmeister and Storys. The following letter of 19 August continued to refer to Storys as Bowdens' client. On 20 August 1991 Bowdens wrote alleging a breach of contract on the part of Austins and foreshadowing a claim by Storys. Austin's solicitor advised that he was taking instructions with respect to the allegation. After a follow-up letter from Bowdens on 26 August, Mr Gray again informed Bowdens he was taking instructions, but notably before he did so he wished: 11 ••• to confirm the party or parties who have retained you to act in relation to this matter. Specifically I want you to confirm or deny whether or not it was my client in conjunction with Story Steel that retained your firm in the first instance. Indeed, I 10 20 30 40 put you on notice that I have evidence from my client so that it was a joint engagement and that my client has paid a proportion of your fees to date. 11 Mr Gray in that letter demanded that Bowdens withdraw and that their file be made available to his client. 60 JUDGMENT 6" -- 6 of 13 -- 230793 jjh/jlk (Kiefel J) On the same day, 27 August, Bowdens wrote denying that they had ever received instructions from Mr Austin. This was met by Mr Gray suggesting Bowdens were ••too close to the issues•• and suggesting another conference, no doubt in an endeavour to resolve the dispute that had arisen. Between 29 August and 10 October 1991 no further mention was made in the correspondence between the solicitors of any supposed conflict of interest on the part of Bowdens. The letters exchanged dealt with a further dispute which had arisen concerning roof trusses. On 10 October 1991 Austin himself wrote terminating the 11 partnership 11 • · On 12 November 1991 Mr Gray wrote to Bowdens requesting another conference. In that letter he asserted that Bowdens should not be acting. On this.occasion, however, the reason .".· :_.- :·· .. :.r::~::>.·>->-:-·:_·~~---· .:•:=.-:., . ..:..;~·~:.-· ::.:.: --~ -.... he advanced was that Mr Pennicott was to be a witness in the proceedings. It was never explained to me how this might realistically arise. Bowdens reiterated their position and advised that they intended to continue to act and that they had received counsel's advice on the matter. On 20 November 1991 Mr Gray advised that there was no question of impropriety on the part of Mr Pennicott. On the same day a conversation took place between Mr Hofmeister and Mr Pennicott. Mr Pennicott advised Mr Hofmeister of Austin's allegation of a joint retainer. Mr Hofmeister, Mr Pennicott says, advised him that Austin had introduced Story in the first instance, but that Storys did nothing for a few weeks but returned themselves later to Mr Hofmeister. Mr Pennicott made a note that Mr Hofmeister then advised him, 11 As far as I JUDGMENT 10 20 30 ·-· .- .•• !:"' .... 40 50 60 -- 7 of 13 -- 230793 jjh/jlk (Kiefel J) am concerned, Story was always the client". Mr Pennicott was not challenged about this in cross-examination and this conversation was not directly denied by Mr Hofmeister. An action had been commenced by Austins against Storys and a defence and counterclaim was delivered by Bowdens on behalf of Storeys in January 1992. The issue as to whether Bowdens could continue to act lay dormant until 19 June 1992 when Mr Gray wrote advising Austins maintained its objection to their acting. Bowdens refused to withdraw. They delivered an amended defence and counterclaim on 21 September 1992 and Austins delivered a reply in the same month. 10 2C 3( Then on 17 December 1992 Mr Gray wrote to Bowdens referring to a meeting in November 1990 which Mr Austin hnd attended and at which "issues relevant to the current litigation" were discussed. Mr Gray asserted that there was a conflict of interest and that he had been instructed to call Mr Pennicott as a witness in the action " ... should your client continue to deny the existence of a partnership". The letter asserted that there was a "record of advice" given by Mr Pennicott to Hanovers to the effect that whilst Doug Story should on the one hand confirm the existence of a partnership with Ron Austin to keep him quiet during the negotiations for the 4 prolongation claim, if Austin failed to conform then Storys were argue that Austin Engineering was a subcontractor. No such ''record of advice" was ever produced in evidence. Further, the letter gave as a basis for the assertion of a position of JUDGMENT -- 8 of 13 -- 230793 jjh/jlk (Kiefel J) conflict that Hanovers had been retained by both parties. In March 1993 Austins referred the matter to the Law Society. That letter confirmed, in terms similar to that of the letter of 17 December 1992, that Bowdens were the solicitors of the joint venture since Hanovers had been retained by both of them. I consider that at no time did a relationship of solicitor and client exist between the plaintiff and the defendant. Further, I do not accept that anyone, including Mr Austin or Mr Hofmeister, believed that it did. There is no direct evidence of retainer of the defendant by Mr Hofmeister or Mr Austin. The evidence of Mr Pennicott is 10 20 30 to the contrary and is consistent with his initial letters and ·:::..·-•_,- __ ~-·-:.:::.'":-, .·.;;..:::- ·;-:-:~-=·--~~----~: ··-·._.:.:.·~:.:.--~'="....:-~· ·:.-- ._:- ~ . the opening of the file. Mr Hofmeister, unable to dispute those first conversations, sought to suggest that in any event Mr Pennicott well knew of the relationship between Story and Austin and therefore the basis of his firm's retainer. I 40 refer particularly to his evidence that when the dispute arose between Storys and Austins Mr Pennicott said he was uneasy about his relationship with Mr Austin. I do not consider this 'evidence to be reliable. It is not consistent with the course of conduct by Bowdens where Storys were clearly dealt with as 50 the sole client and it is inconsistent with the view of Hofmeister that Storys was the client (a note of which conversation was kept by Mr Pennicott and which was unchallenged by Mr Hofmeister). Further, on a review of Bowdens' correspondence and the dealings with the parties it 60 JUDGMENT -- 9 of 13 -- 230793 jjh/jlk (Kiefel J) is difficult to see what might have prompted such a concern. I add that Mr Hofmeister w~s an unimpressive witness and that there are matters which might influence his evidence, but I have not found it necessary to weigh the evidence only upon issues of credit. The fact that Bowdens' only client was Storys is confirmed by Austin's lack of involvement. His involvement in the first few conferences is consistent with a person interested in seeing the prolongation claim made and offering assistance. The fact that as a consequence of Storys' assertion of its contractual rights against. Jennings or the owner benefits might· result to Austins does not alter the nature of the retainer. The indirect payment of fees by Austins arising out of whatever relationship existed between it and Storys does not take the matter any further. Not only was Mr Austin no longer in communication with Bowdens after those initial meetings, he received no advices from them. No copies of letters were sent to him. Fees were rendered to Storys alone. Given the clear references in Bowdens' letters to Storys as the client, it is extraordinary that neither Mr Hofmeister (who is relatively well versed in matters contractual) nor Mr Austin (since presumably Mr Hofmeister, consistent with his view that Austin was his client, referred these letters to him) raised any question about it. If Mr Austin had been acting in concert with Storys and receiving advices from Bowdens as to the prolongation claim, JUDGMENT 10 10 20 30 40 50 60 -- 10 of 13 -- 230793 jjh/jlk (Kiefel J) one might have expected Storys to require Austin to desist from his direct dealing with Queensland Newspapers. They did not and he retained his own solicitor. The later and somewhat erratic assertions by Austin's solicitors as to Bowdens positions are quite unconvincing. The first reference was a mere inquiry. Some three months later the assertion was as to Mr Pennicott's potential status as a witness. Several months passed before it was raised again. Bowdens continued to act. Another five months passed before it was raised, this time asserting the receipt of adv ices but which advices were never produ:ced. The earlier references, of course, occurred at a time when the parties were negotiating. The inquiries about or assertions as to Bowdens position were coupled with demand for their withdrawal and demand for the file. Absen~ ~-proper basis for the ~ . ;_ -. -·- . - :. ~-~ -.I,.. . -~ .. ..:.. .. . assertions, an inference that they were tactically motivated and not seriously entertained is open. 10 20 30 In the end result it seems to me that someone came to the view 40 that if Hanovers could be said to be jointly retained, it might be argued the solicitors were also. That does not necessarily· follow and the conclusion is contrary to the facts. The plaintiff also argued that, putting aside any question of a formal relationship between it and the defendant, it had, by Mr Austin, given confidential information (at least in the sense that it was unknown to Storys) to Mr Pennicott. This 50 information was described by Mr Austin in evidence as being in 60 JUDGMENT 11 -- 11 of 13 -- 230793 jjh/jlk (Kiefel J) general terms about the size of the plaintiff company, its turnover and "stages of cash flOW 11 • Mr Pennicott denied that conversation, and if this issue were reduced to a simple contest as to whose evidence was to be accepted, I would prefer that of Mr Pennicott, particularly in light of the fact an application for security for costs has been brought and dealt with and that in those proceedings the defendant firm acted and then apparently sought on behalf of Storys details as to the plaintiff's solvency. But, in any event, it seems to me that there is nothing that could be described as truly 10 20 confidential in what was conveyed, least of all in the context of the litigation now on foot between the plaintiff and Storys. In view of the generality of the description of the information said to have been imparted, counsel for the plaintiff relied upon the decision of the Full Court in Mills v. Daydawn Block Goldmining Co Ltd (1882) 1 QLJ 62 at 63 where the Court held it was not necessary for Mr Mills to prove the existence or substance of the confidence. But there the Court was dealing with a proven relationship of solicitor and client, that relationship being such that the imparting of a confidence was likely or might be readily inferred. On that basis alone the case is distinguishable. I have difficulty with the proposition that the case stands, or could stand, for 30 40 50 the proposition that upon proof of a pre-existing relationship of solicitor and client that there will not ever be a need for the client to descend to some particularity of the confidence and its relationship to the circumstances in which it might be communicated (as was done in Australian Centre for Research JUDGMENT 1 2 60 -- 12 of 13 -- 230793 and Development Ltd v. Hampson (1991) QdR 508 at 517). In any event I find that there was not at any time the relationship of solicitor and client between the plaintiff and the defendant. That relationship is not of course the only basis upon which an injunction might be granted. If, for example, a confidence was imparted by a company or person having a close connection with the solicitor's client (as in Re A Firm of Solicitors (1992) 1 QB 959) or where a party otherwise showed a duty of confidence arose. But here no such duty has been shown to arise, either from any relationsh~p with the solic~tor or from what is said to have been conveyed. I propose tJ order that the motion and the action be dismissed and that the plaintiff pay the defendant's costs of and incidental to the act~on, including any reserved costs, to be taxed. It seems to me that the motion being the ohly part of the action it would follow that the action itself ought to be dismissed. l3 JUDGHENT 10 20 30 40 50 60 -- 13 of 13 --