Ethics Ruling Number
R4999
Area of Law
Category
Conflict of Interest
Ethics Ruling Date
22/07/2021
Ethics Pub Date
1/10/2021
Ethics Background
A law firm owes a duty of loyalty to its former clients, and must not act against a former client in the same or in a matter related to the one in which it previously acted. A law firm (‘Firm A’) was engaged to act for a vendor in the sale of property, and prepared draft special conditions on the vendor’s behalf. Firm A ceased acting for the vendor, and the vendor instructed another law firm (‘Firm B’) to prepare a contract of sale which was executed. Approximately two years after the execution of the contract, the purchaser engaged Firm A to act in connection with proceedings relating to the development of the property. Subsequently there was a dispute between the parties concerning the construction and interpretation of special conditions in the contract of sale. Firm A continued to represent the purchaser, and the vendor was represented by Firm C. Firm C contended that Firm A had a conflict of interest on the basis that it had been initially retained by the vendor regarding the proposed sale of the property. Firm C further asserted that as Firm A was involved in drafting the special conditions that were the subject of the dispute, one of the principals of the firm might become n a material witness.
Ruling
In the opinion of the Ethics Committee and on the information presented: 1. Firm A is conflicted from acting against its former client in this case on the basis of the duty of loyalty as the current dispute relates directly to the same subject matter that was the basis of its original involvement. 2. Although there was some delay, it is insufficient to constitute implied consent particularly given the direct relationship with the original subject matter. 3. The possibility that someone from Firm A may be called to give evidence does not currently trigger the material witness prohibition against acting in the case. If Firm A was not conflicted it would need to advise its client of the possibility of subsequently being prevented from acting.

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