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Ethics Committee Rulings: Duty of loyalty

Every Issue

Cite as: July 2014 88 (07) LIJ, p.72

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

Family

Conflict of interest (R4809 – June 2013)

When a practitioner advises a husband and wife on financial matters and draws wills for them, there is a conflict of interest if he subsequently seeks to represent one party in family law proceedings. That is so even where the practitioner is no longer employed by the firm where the original instructions were taken and does not have access to the files. A higher standard applies in family law matters.

In 2006 a husband and wife attended the office of firm A for advice about protecting the wife’s assets from third parties. They were advised to enter a binding financial agreement (BFA) and firm A acted for the husband while the wife obtained independent legal advice. In 2007 firm A drew wills for the husband and the wife.

In 2013 the practitioner who had acted for the husband and wife at firm A commenced practice on his own account at firm B, taking all current family law files from firm A, which retained all old, closed files. However, the practitioner held the original BFA and reviewed it.

The practitioner then represented the husband against the wife in a family law matter which concerned the BFA. The wife alleged a conflict of interest.

Rule 4 of the Professional Conduct and Practice Rules 2005 states that a practitioner must not act against a former client for whom the practitioner, or the former firm of the practitioner, has acquired confidential information material to the matter and the former client might reasonably conclude that there is a real possibility the information will be used to the former client’s detriment.

In family law “a perception of conflict by a former client may prevent a practitioner from continuing to act”. Further, the duty of loyalty restrains a practitioner from preferring one client over another and may continue after the termination of the retainer.

The wife is a former client of the practitioner now working at firm B. As instructions were provided to the practitioner by both parties present at the same time, it may be unlikely that relevant confidential information was revealed. However, as a former client of the practitioner, the wife is owed a duty of loyalty, and a reasonable and informed member of the public, aware of all the facts, may believe that the proper administration of justice would not be done if the practitioner continued to act.

Ruling

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

The practitioner at Firm B should cease to act for the husband in his current family law matter.

Property

Just cause to terminate and claim a lien (R4814 – August 2013)

It may not be permissible for a practitioner to terminate the retainer even where the relationship with the client has deteriorated to the extent that the client wishes to control and vet all communications by the practitioner and the practitioner is subjected to a multitude of phone calls and emails and may feel hindered in his ability to act. Should he be permitted to terminate, then a lien for unpaid costs may attach.

The practitioner sought advice as to whether he could terminate a retainer where the relationship with the client had become “toxic” and where he believed the client had lost confidence in his abilities.

The practitioner was subjected to numerous daily phone calls and “offensive” emails, sometimes as many as 20 emails in a three-week period. The client’s instructions had become very tedious and controlling. Recently the client had attempted to prevent any communication with the other side’s practitioner that had not been vetted and approved by her.

Rule 6 of the Professional Conduct and Practice Rules 2005 (PCPR) provides a practitioner must complete the legal services required by the engagement unless, most relevantly, he terminates for just cause and on reasonable notice to the client.

There is no exhaustive list of what amounts to “just cause” to terminate. It has been said that the fact a client behaves offensively is not a “just cause” but there is “just cause” if his acts or omissions are inconsistent with continuing representation, preventing the practitioner from properly performing his duties. Accordingly, each case will turn on its facts.

If the practitioner is entitled to terminate the retainer, rule 7 of the PCPR regarding the ownership of client’s documents on the termination of a retainer applies. Once a bill is issued and the due date expires, a lien may attach.

Ruling

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

There is no just cause for the practitioner to terminate the retainer unilaterally, and the practitioner may seek to terminate by mutual agreement with the client but the client is not obliged to agree.




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, www.liv.asn.au/For-Lawyers/Ethics.aspx, 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. For further information, contact the ethics solicitor on 9607 9336.

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