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Ethics Committee rulings

Every Issue

Cite as: (2007) 81(12) LIJ, p. 89


Ethical dilemmas are part of everyday practice for solicitors. The Ethics Committee of the Law Institute of Victoria Ltd is available to help.

Family – conflict of interest; conducting another business

(R4477 August 2007)

An employee solicitor with clients from an unrelated business can create a conflict of interest when the law firm is acting for the other party.

In maintenance proceedings in the Federal Magistrates Court, the wife’s firm alleged that a conflict of interest existed at the husband’s firm as:

  • the husband’s firm had previously acted in proceedings following a motor vehicle accident involving the parties’ son; and
  • an employee solicitor of the husband’s firm (not involved in the matter) is the former chiropractor of the wife.

In relation to the motor vehicle accident, the husband’s firm indicated that they had received instructions from the son and not the husband and have records of only minimal dealings with the wife.

An employee solicitor of the husband’s firm was a chiropractor before completing legal training and undertakes a part-time chiropractic practice as well as practising law.

The Ethics Committee was requested to provide a ruling in relation to whether:

  • 1. A conflict of interest exists in the husband’s firm representing the husband in relation to family law matters, when the firm previously acted for the son; and
  • 2. A conflict of interest exists through the employee solicitor, as he has treated the wife in his capacity as a chiropractor.

Ruling

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

  • 1. The husband’s firm does not appear to have a conflict of interest in acting for the husband in family law proceedings, as it has not previously acted for the wife.
  • 2. The husband’s firm appears to have a conflict of interest representing the husband against the wife, through the obligations of confidentiality that arise under the chiropractor-patient relationship that exists between their employee solicitor and the wife.

Trust accounts – payment of fees from trust

(R4472 September 2007)

Funds held in trust by a firm for payment of counsel’s fees and received from the client for that purpose can be paid to counsel with notice to the client.

A firm acted for a client in relation to the defence of an intervention order matter in June 2007. The client was advised by the firm that the matter would involve barrister’s fees, estimated to be $1100. The client provided this amount to the firm’s trust account by direct deposit for the payment of counsel’s fees.

The matter did not proceed as expected, but counsel was instructed and spent considerable time on the matter. Counsel then agreed to restrict his fees to $1100 in total for the brief fee and conferences undertaken.

The client stated that he did not wish the funds in trust to be paid to counsel, and a ruling was requested as to the firm’s ability to disburse the funds held in trust to counsel. A draft letter outlining the firm’s proposed course of action was enclosed.

Ruling

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

  • 1. In the circumstances provided, it appears that the contract is between the solicitor and the barrister. Therefore the solicitor is responsible for the fees.
  • 2. The firm should act on the agreement with their client to pay counsel’s fees and provide their client notification pursuant to the draft letter that the tax invoice from counsel will be paid within seven days of notification being given to the client.

Commercial – trust money; release of funds from trust

(R4476 October 2007)

Undertakings need to be clearly drafted to facilitate the release of funds held in trust.

Different firms acted for the vendor and purchaser in a residential conveyancing matter. Before settlement, the purchaser’s firm detailed a number of defective works to be repaired in a letter to the vendor’s firm. A total of $2000 was retained in the trust account of the purchaser’s firm pursuant to an undertaking.

Settlement then occurred in accordance with the contract. The undertaking was not clearly drafted and did not provide specific details as to the completion of works or release of the funds.

Eighteen months later the purchaser’s firm advised the vendor’s firm of another defect at the property. The purchaser then refused to authorise the release of money in trust as a consequence of the new defect. It was claimed that the fault was apparent at settlement; however, the matter was not documented before settlement. It appears that the purchaser did not provide clear instructions in relation to whether the original defects were satisfactorily rectified.

An Ethics Committee ruling was requested from the purchaser’s firm in relation to who should receive the $2000 held in their trust account for over three years.

Ruling

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

  • 1. On the understanding that the defects detailed in the letter from the purchaser’s firm have been rectified, the $2000 held in their trust account should be released to the vendor.
  • 2. The purchaser’s firm should advise their client that the $2000 will be released to the vendor within seven days.

The ETHICS COMMITTEE is drawn from experienced past and present LIV Council members, who serve in an honorary capacity. Ethics Committee rulings are non-binding, however, as the considered view of a respected group of experienced practitioners, the rulings carry substantial weight. It is considered prudent to follow them.

The LIV Ethics website, http://www.liv.asn.au/regulation/ethics, is regularly updated and, among other services, offers a searchable database of the rulings, a “common ethical dilemmas” section and information about the Ethics Committee and Ethics Liaison Group.

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