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Ethics committee rulings

Every Issue

Cite as: (2009) 83(02) LIJ, p.77

Ethical dilemmas are part of everyday practice for solicitors. The LIV Ethics Committee is available to help.

Workplace relations

Conflict of interest; successive
(R4571 August 2008)

A conflict of interest will arise where a firm acts against a former client and holds relevant confidential information. The conflict is not cured with a counter-conflict from the other side.

The employment of a company’s CEO was terminated by the company and an employment dispute ensued.

The CEO then retained Firm A (the same firm that had previously been used by the company) to act for her in the employment dispute.

The company retained Firm B which alleged that Firm A had a conflict of interest as the company was Firm A’s former client. Firm A had previously acted for the company:

  • in unrelated litigation and internal corporate affairs matters;
  • in drafting the precedent employment contract between the company and the CEO, on behalf of the company; and
  • had taken instructions from the CEO that were provided on behalf of the company during that retainer.

Firm A claimed that no confidential information was in its possession and that the precedent contract was irrelevant as it was not ultimately accepted by the company.

Firm A admitted a conflict might exist, but stated that it counter-acted the conflict that Firm B had.

Firm B had acted for the CEO eight years before and had represented her in a wrongful dismissal claim against her then former employer.

Firm B argued that it held no confidential information about the CEO, that an archive search in its office did not disclose the type of matter that it had advised the CEO about previously, that a different solicitor had handled the CEO’s matter at that time and that no further inquiry was made.

Recommendation

In the opinion of the Ethics Committee and on the information presented, it would appear prudent for both firms to cease acting for their respective clients.

Property

Conflict of interest; acting against former client
(R4574 September 2008)

A conflict of interest will arise where a firm has had an initial consultation and provided advice to a person [the former client] and then seeks to act against the former client in the same or related matter.

In 2002, the firm had an initial consultation with A (the former client) regarding a possible cause of action against a body corporate and for general advice regarding the procedure to excise two lots from the plan of subdivision affected by the body corporate. Advice was provided to A, but ultimately not followed by A.

In 2007 the body corporate provided the firm with instructions to commence debt recovery action against A for arrears of contributions, fees and charges. A letter of demand was sent, and the former client A responded by way of reference to the original matter of the excision from 2002.

The firm sought a ruling from the Ethics Committee as to whether it was able to continue acting for the current client (the body corporate) against A.

Recommendation

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

  • By reference to r4 of the Professional Conduct and Practice Rules 2005, and by reference to the duty of loyalty to the former client, the committee is satisfied that the firm may have a conflict and should not represent the body corporate in this matter.

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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