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Ethics Committee rulings

Every Issue

Cite as: (2008) 82(6) LIJ, p. 87

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

Trust accounts

Release of funds; entitlement to money

(R4523 March 2008)

An award of legal costs by the Appeal Costs Board may raise issues of entitlement where the appellant is deceased and a third party initially provided funds for the appeal.

The legal costs for a criminal appeal were paid by the client’s former de facto partner. The appeal was successful and the Appeal Costs Board refunded an amount of money to the client’s firm which was retained in the firm’s trust account.

The client subsequently committed suicide. The executor of the client’s estate requested the firm release the funds held in trust, on the basis that it formed part of the estate.

The firm sought guidance from the Ethics Committee as to whether the funds held in trust should be released to the former de facto or to the executor.

Recommendation

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

1. The Ethics Committee cannot provide legal advice as to the interpretation of the Legal Profession Act 2004, s3.3.14.

2. The firm should form its own independent view, but to assist the firm in this matter, the view of the Ethics Committee is that funds in trust are held exclusively for the benefit of the person on whose behalf they were received, and should be released to the executor.

3. The firm should inform the former de facto’s legal representative of the release of monies from trust to the executor.

Bankruptcy

Joint instructions; release of information

(R4530 March 2008)

A firm must obtain instructions from both clients to release documents where they acted in joint matters, unless there is a legal obligation on a firm to produce client information to the trustee in bankruptcy.

A firm acted jointly for a brother and sister in opposition of a mortgagee’s auction of property and in the refinance of a second property.

The sister was declared bankrupt and the account for legal fees for the property matters was listed with the trustee in bankruptcy, naming the firm as a creditor.

The trustee served a notice under s77A of the Bankruptcy Act 1966 in relation to
the production of the sister’s records held by the firm.

The firm was unable to make contact with the brother or sister for instructions in this matter. An Ethics Committee ruling was requested as to whether documents could be produced without the consent or knowledge of the brother and sister.

Recommendation

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

1. The Ethics Committee is unable to provide legal advice as to the provisions of s77A of the Bankruptcy Act 1966.

2. In order to provide some assistance in this matter, the Committee is of the view that the firm should not provide documentation to the trustee in bankruptcy without joint client approval, or it being demonstrated that they are under a legal obligation to do so.

3. Original documents are held for both clients jointly, and the firm can only provide copies if required to produce its file.

4. In relation to the legal obligations to the trustee in bankruptcy, refer to Re Steele; Ex parte Official Trustee in Bankruptcy v Clayton Utz (a firm) (1994) 48 FCR 236 and Worrell (Trustee) v Woods [1999] FCA 242.

Family

Conflict of interest; firm merger

(R4537 March 2008)

The theoretical risk of disclosure or misuse of confidential information may require a practitioner/firm to cease acting against a former client in a family law or de facto matter.

Before becoming a partner at a firm in 2004, a solicitor had been a principal of a number of firms that employed several solicitors and clerks. The solicitor did not practise in the areas of family law or conveyancing as other employees undertook all client matters in these areas.

At the time of becoming a partner with the firm, only current files from one of the solicitor’s previous firms were transferred. All other files were systematically destroyed once the seven-year retention period expired.

The solicitor had acted for a friend over many years in various commercial matters. An application was then instituted against the friend by his former de facto, who was represented by another lawyer of the firm.

An allegation of conflict of interest was raised by counsel for the de facto on the basis that one of the solicitor’s former firms previously acted for the former de facto in a property settlement from her former husband in 1998.

The Ethics Committee was requested to advise on whether the solicitor could continue to act and/or the firm could continue to act.

Recommendation

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

The firm should not continue to act against the former client of the solicitor as there is a theoretical risk of the misuse of confidential information – see Thevenaz [1986] FLC 91-748.

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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