Ethics Ruling Number
R4972
Area of Law
Commercial
Category
Communication of Advice
Ethics Ruling Date
1/12/2019
Ethics Pub Date
1/03/2020
Ethics Background

A firm interacting with a single director of a company who purports to represent all directors, is not prevented from providing its advice to all directors in a company. However, it is necessary to advise the individual director of the firm’s intention to communicate the advice, prior to the communication taking place.

A director of a Trustee company for an SMSF sought legal advice from a firm ostensibly with implied authority to do so. The advice related to issues of entitlement and distribution following the death of an individual with a significant interest in the SMSF. The director was the deceased’s accountant and had management of the SMSF for many years. The director had also been appointed as an executor under the deceased’s Will, so had a number of potentially conflicting interests in the affairs of the deceased. The firm acted on instructions from the Trustee company through the individual director and identified a number of problems with the SMSF. The Firm then provided draft advice to the director but was instructed to “sit tight” to enable others to consider any questions that may need further consideration. No further questions were forthcoming from any of the other directors over a period of some months, and it appeared that the director may not have passed the advice onto the other directors as requested. The retainer with the firm was terminated, but the firm sought a ruling on its responsibility to provide the advice to all the directors of the Trustee company.

Ruling

In the opinion of the Ethics Committee and on the information provided:

  1. There is no ethical constraint to a solicitor providing its advice to a company to the company’s current individual directors;
  2. It would be prudent for the firm to write to the individual director advising of its intention to take such a course after 7 days.

Law Institute of Victoria
Ethics Committee of Law Institute of Victoria Ltd
Legal Ethics Manager
Phone: 03 9607 9336
Email: ethics@liv.asn.au

Back to Search