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Ethics Committee rulings

Every Issue

Cite as: (2002) 76(11) LIJ, p.79

Ethical dilemmas are part of everyday practice for solicitors. The Ethics Committee of Victorian Lawyers RPA Ltd is available to help.

PAYMENT OF TRUST MONEY

Legal firm P acted for the purchasers of a property.

A pine plantation that formed part of the property was leased under a lease agreement. The lease agreement provided that an arbitrator be appointed to decide any disputes arising between the vendors as landlord and the tenant. The lease also provided that the tenant would provide a banker’s guarantee to ensure compliance by the tenant with the conditions of the agreement. The lease further provided that any payments pursuant to the banker’s guarantee would be made to the arbitrator.

The contract of sale contained a special condition that on or prior to settlement, the vendors would provide the purchasers with a new banker’s guarantee in favour of the purchasers. The tenants refused to do so, and so the vendors could not comply with the special condition.

It was agreed that the purchasers would withhold part of the settlement proceeds until a banker’s guarantee was provided. This money was retained in trust by legal firm P.

The lease agreement expired and the purchasers claimed the tenant was in substantial breach of the agreement in failing to clear the premises or rectify damage caused by the tenant. The purchasers assessed that the damage to the property was in excess of the amount of the guarantee.

The purchasers instructed legal firm P to release the money held in trust to them to cover part of the costs incurred in clearing the premises. Legal firm P sought the Ethics Committee’s guidance on whether the money could be released.

Resolution

Legal firm P should not release the funds held in trust pending the finalisation of the claim on the guarantee. In the event that the matter is not resolved, legal firm P should apply to the court for directions.

CONFLICT OF INTEREST (1)

Mr X and Mr Y were the sole directors and shareholders of company XY. Mr Y was Mr X’s father. Solicitor B of legal firm B had acted for company XY and for Mr Y in relation to family legal matters over a period of 30 years.

The directors were in dispute over a sale of land. Client Y retained legal firm B in relation to the sale. Mr X retained solicitor A of legal firm A. Legal firm A claimed that legal firm B had a conflict of interest because of its intimate knowledge of Company XY and of family legal dealings over an extensive period.

Mr Y died and Mr X requested that legal firm B withdraw from acting on behalf of the estate of Mr Y and for Company XY. Legal firm B refused. Legal firm B alleged that solicitor A also had a conflict of interest in acting for Mr X. It was claimed that solicitor A, as a former partner of legal firm B, acted generally for Mr X in matters of a personal nature and also attended on Mr Y.

The parties sought the Ethics Committee’s guidance.

Resolution

1. That legal firm B have a conflict of interest and should cease acting.

2. It is possible legal firm A have a conflict of interest.

3. If a party is aggrieved, that party could seek a court order.

CONFLICT OF INTEREST (2)

Legal firm A acted on behalf of Mr B (the father) in preparing a will. A later will was prepared, not involving legal firm A. The primary change made in the later will of the father was to remove Ms B (his daughter) as a beneficiary. Ms B wished to bring a Part IV application. Legal firm A sought advice from the Ethics Committee as to whether it could act for Ms B in relation to the application.

The executors of the estate claimed that legal firm A had a potential conflict of interest in acting for Ms B. The executors maintained that information given by Mr B to legal firm A concerning the prior will would be critical to the Part IV application. The executors also claimed that the legal practitioner who had prepared the earlier will could be called as a witness in the Part IV application.

Resolution

Legal firm A should not act for Ms B in any Part IV application in respect of the estate of Mr B.

NOTES

The Ethics Committee is drawn from experienced present and past members of the COUNCIL OF VICTORIAN LAWYERS RPA LTD. Committee members serve in an honorary capacity, meeting monthly to consider requests for rulings. Those seeking a ruling should write to the Secretary, Ethics Committee, Victorian Lawyers RPA Ltd, 470 Bourke Street, Melbourne 3000.

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