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Ethics Committee rulings

Every Issue

Cite as: (2004) 78(7) LIJ, p. 84

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

Conflict of interest
(R4064 March 2004)

A firm generally should not act for and against the same party in related proceedings
In a personal injury matter, a firm was acting both for the injured party against the defendant company and for the company against its insurer in separate proceedings.

The injured party was a co-director of the company. He had instructed the firm to issue a writ against the company seeking damages in negligence (the First Proceeding). The company was not represented and had not yet filed a defence.

The company’s insurance claim was refused on the disputed basis that the injured party was injured in the course of his employment and should claim against the statutory insurer.

Two months later the firm issued a second writ, this time on behalf of the company against the insurer, seeking a declaration that the company was entitled to indemnity (the Second Proceeding).

The insurer’s lawyers alleged that the firm could not act against the company in the First Proceeding and for the company in the Second Proceeding when the two proceedings were so closely related. The firm believed it had no conflict because the interests of its two clients were identical, since both wanted the insurer to grant indemnity.

Ruling:
On the material provided there appears to be a real possibility of a conflict of interest in acting for the two parties. On that basis the firm should cease to act for one of the parties.


Trust accounts
(R4071 March 2004)

A firm may not be prevented from representing a client in one matter despite being a potential witness in a separate matter
A firm received trust funds from an incarcerated client whom they represented in his personal injury matter. The money came from another prisoner who owed funds to the client. This appeared to be confirmed by letters signed by the second inmate.

The second inmate subsequently advised the firm by telephone that the client had obtained the funds from him by deception. The second inmate had expected the firm to provide the funds to his mother overseas.

Funds remained in the trust account pending separate professional standards investigations. A warrant over the file was exercised and the firm was asked to provide a statement to police. The firm asked the Ethics Committee to advise (1) whether it could continue to act in the personal injury matter and, if so, (2) whether that position changed if criminal charges were laid and the firm was called to give evidence against their client.

Ruling:

(a)

he Ethics Committee does not consider there is a conflict of interest in these circumstances and accordingly has no issue with the firm continuing to act for the client in his personal injury matter.

(b)

The Ethics Committee does not anticipate that this position would necessarily change in the event of criminal charges being laid against the client and the firm’s being required to give evidence, but the issue should be revisited in the light of the circumstances at such time.


Selling of precedent forms
(R4060 March 2004)

Unqualified practice is expressly prohibited
Two practitioners intended to set up a business, operating as a private company, offering “legal agreements, documents and other publications for sale in a plain English format”.

Kits would be retailed in a range of hard and soft formats, targeting both legal practitioners and non-legal individuals.

“Legal practice” is not defined in the Act. The Committee considered case law including ACCC v Murray [2002] FCA 1252 and the advice of counsel, and queried whether a “service” would be provided. Selecting the appropriate form, explaining terminology and/or documents, or assisting in the completion of the forms where there is skill in selecting words, may each amount to provision of legal services.

Ruling:

(a)

The Ethics Committee cannot give advice to practitioners regarding general liability or sanctions under law, or approval and clearance of business proposals, which would require an extensive review of the practitioner’s proposed marketing and product documentation. The Committee’s role is to provide guidance and assistance on ethical issues.

(b)

To assist in determining the issue, the Committee recommends that the practitioner not only look at unqualified practice issues (s314 of the Legal Practice Act 1996) but also issues of income sharing (s317) and assisting an unqualified person to engage in legal practice (s324), Cornel v Nagle [1995] 2 VR 188 and the Law Council of Australia Policy Statement on the Reservation of Work For Lawyers.

(c)

A business which is in the business solely of selling forms/legal documents and other legal memoranda and which does not prepare them, give advice or provide any further services such as assisting the purchaser to select or complete the relevant document would not, in the Committee’s opinion, be engaging in legal practice.

(d)

For questions regarding the law the practitioner could seek independent legal advice and/or advice from the Legal Practice Board and the Legal Practitioners Liability Committee.

(e)

The Ethics Committee and Council of the Law Institute are in the process of finalising Income Sharing Guidelines, which may be of further assistance. They will be published in the LIJ when available.


The Ethics Committee is drawn from experienced past and present members of the Council of the Law Institute of Victoria Limited with involvement in a wide range of practice areas. Members serve in an honorary capacity and meet monthly to consider requests by solicitors for rulings on ethical issues in legal practice.

Ethics Committee rulings are non-binding and do not have the force of law. However, as the considered view of a respected group of experienced practitioners, the rulings carry substantial weight. It is considered prudent to follow them.

For further information, contact the Legal Ethics Manager on 9607 9383.

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