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Ethics Committee rulings

Every Issue

Cite as: (2007) 81(3) LIJ, p. 79

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

Legal practice management – duty to other practitioner

(R4355 August 2006)

A breach of terms of settlement by a client changing firms could result in files being returned to the former firm, despite the proximity of the hearing date.

Firm B took over the conduct of various Supreme Court matters from Firm A for a client. Terms of settlement regarding outstanding costs owed to Firm A were negotiated with the client. The agreement also stipulated that the files would be returned to Firm A if the client defaulted. Default occurred after the first payment and a demand for the return of files was made by Firm A shortly before the court hearing date. Firm B requested a ruling to provide guidance as to its position.


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

1. The terms of settlement enabling the former practitioners to recover files in the event of a default by the plaintiff required the surrender of files on demand.

2. While the interpretation of the terms of settlement is a legal issue, the Ethics Committee notes that parties must comply with the payment schedules and requirements of the agreement.

3. The Committee notes that Firm B is not a party to the agreement and must act subject to instructions from its client.

Commercial law – conflict of interest

(R4379 August 2006)

A firm acting for a company with two directors may in certain circumstances act for one director against the other.

Firm X acted for Ms B in her personal affairs and as a director (with Mr C) of a company (Company) in relation to a number of business enterprises.

Instructions for the purchase of a New Zealand-based services training company were provided to Firm X by Ms B who indi-cated that Mr C was also aware that Firm X was acting for the Company in respect of the purchase.

The Company’s accountant provided advice regarding corporate structuring requirements. Firm X did not provide advice to Mr C on company structures or whether it would be appropriate or not for Mr C to be a director of all corporate entities as a consequence of the purchase of the New Zealand business.

A subsequent dispute arose between the co-directors.

Firm X continued to act for Ms B and Mr C’s new lawyer alleged that Firm X had a conflict of interest.


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

1. Firm X does not have a conflict of interest in acting for Ms B as relevant confidential information has not been identified.

2. Firm X, as Ms B’s practitioner of choice, should not be excluded from acting as public policy grounds have not been identified that would require the practitioner to withdraw.

Litigation – conflict of interest/ material witness

(R4388 September 2006)

The involvement of practitioners in clients’ transactions may render them potential “material witnesses” in respect of contested matters and prevent them continuing to act for their clients in subsequent litigation.

The Australian Tax Office commenced litigation against a defendant who joined third parties to the proceeding. The defendant relied on a written agreement for the sale of shares to the third parties which was prepared by the firm representing the defendant and also involved the firm representing the third parties.

The firm representing the third parties was of the view that the lawyers who were involved in the preparation of the agreement would be material witnesses in the proceeding and sought confirmation of its view that neither could continue acting.


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

1. Having regard to r13.4 Professional Conduct and Practice Rules 2005 if either or both of the firms’ involvement in drafting the agreement becomes material to the current proceedings, and required [the giving of] material evidence to the determination of contested issues, that firm will have a conflict of interest and should cease acting for their client.

2. The Committee notes that in the event that a conflict arises, any inconvenience to the clients does not outweigh the conflict in this matter.

Family law – conflict of interest

(R4384 September 2006)

There must be clear evidence of a solicitor-client relationship to support a claim of conflict of interest.

A husband and wife were each legally represented.

The husband believed he had previously instructed the wife’s firm, but could not recall the name of the solicitor he instructed and did not appear to have any correspondence from that firm confirming the retainer or providing advice. The wife’s firm said that it had no records to indicate that it had ever acted for the husband.

An Ethics Committee ruling was requested in relation to whether a conflict of interest existed.


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

1. There is nothing in the information provided to the Committee that establishes that a solicitor-client relationship exists between the wife’s firm and the husband.

2. In the absence of clear evidence of a solicitor-client relationship, there is no conflict of interest.

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 ph 9607 9383 or visit regulation/ethics/rulings


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