Ethics Ruling Number
R5052
Area of Law
Litigation
Category
Conflict with personal interest
Ethics Ruling Date
3/19/2026
Ethics Pub Date
9/28/2026
Ethics Background
A law practice acts for a foreign entity and its wholly owned Australian subsidiary. An action has been brought in a Federal Australian Court against two former officers of the Australian subsidiary. The first respondent has a cross-claim against the foreign entity relating to their employment contract with that foreign entity. The solicitor was instructed by the first respondent not to accept service of the cross-claim and the barrister for the first respondent contended that a failure to accept service would give rise to a non-party costs order against the solicitor.
Ruling
In the opinion of the Ethics Committee and on the information presented: 1. The law practice has received a threat of a non-party costs order during mediation prior to the determination of the matter. 2. The threat creates an imminent conflict of interest for the law practice if the law practice thinks in good faith that there is more than a trivial risk of both an application being made by the other party and that application being successful. The clarity of the threat and the mediation context in which it was made can be taken into account by the law practice in forming their view. 3. If the law practice holds such a view in good faith, then the law practice should cease to act for the Australian subsidiary and the Foreign entity unless the threat is withdrawn or the client provides informed consent for the law practice to continue to act. 4. The threat of a non-party costs order against the law practice at this stage of the proceedings may be prejudicial to the paramount duty to the court and the administration of justice.

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

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