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Ethics Committee Rulings

Every Issue

Cite as: October 2012 86 (10) LIJ, p.67.

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

Bankruptcy

Conflict of interest

(R4749 – April 2012)

A trustee in bankruptcy and the trustee’s solicitors are officers of the Court and must be, and be seen to be, independent in all of their dealings with the bankrupt estate. A reasonable perception of conflict of interest is sufficient to warrant a trustee’s solicitors withdrawing from legal proceedings involving a bankrupt’s estate.

Firm A acted for a client against whom a bankruptcy sequestration order was made by the Federal Court of Australia.

Firm B had acted for several members of the client’s family in relation to debts owed to them in respect of which they obtained judgment in the Supreme Court of Victoria against him, leading to the making of the sequestration order.

The client’s trustee in bankruptcy instructed Firm B to act on his behalf in proceedings in the Federal Magistrates Court issued by the client in which a declaration was sought that all files held by the client’s former solicitors were the subject of client legal privilege. The trustee had sought possession of the files as part of his investigations into the affairs of the client. Firm A acted for the client in these proceedings.

Firm A asserted that Firm B was conflicted in acting for the trustee in the proceedings on the basis that Firm B had previously acted for several of the client’s family in proceedings regarding his indebtedness to them.

Also, Firm A raised the issue of the independence of the trustee and, by extension, that of Firm B in acting for the trustee.

Firm A asserted that the trustee and Firm B were both officers of the court and must be, and be seen to be, independent. Firm A asserted that Firm B was not independent and was open to the criticism that it was still doing the bidding of its original clients, the judgment creditors.

Ruling

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

1. There is a reasonable perception that Firm B has a conflict of interest in acting for the trustee in bankruptcy of the client in Federal Magistrates Court proceedings in which the client is claiming client legal privilege in respect of his former solicitors’ files and should cease to act.

Commercial

Conflict of interest

(R4750 – April 2012)

A practitioner should not continue to act if called to give evidence (or it becomes apparent that the practitioner will be called to give evidence) about issues material to contested issues in the case.

Firm A acted for a developer. The developer had been joined to a family law proceeding in the Federal Magistrates Court. The wife was represented by Firm B and claimed that Firm A had a conflict of interest in acting for the developer. Firm A had drafted the “development agreement” between the wife and the husband and the developer which the wife was now claiming was unenforceable against her.

The agreement was drafted by Firm A in 2009 in relation to the development of land owned by the husband and wife upon which the developer was to build four units. The development stalled for some time, with the developer alleging that this was due to breaches of the agreement on the part of the wife. These alleged breaches meant that the developer could not pre-sell two units to obtain finance for completion of the development.

The wife filed an application in the Federal Magistrates Court for a final property settlement and sought an order that the development property be sold and the proceeds be divided between the husband and herself. The developer ultimately terminated the development agreement and demanded damages from the husband and the wife.

The developer asserted that the wife was claiming a conflict of interest as a litigation tactic. Firm A had invited the developer to seek independent legal advice as to whether it should continue to engage Firm A in the proceedings.

Ruling

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

1. If Firm A is called to give evidence in the proceeding (or if it becomes apparent that they will be called to give evidence) about issues that are material to the contested issues in the case, including the drafting of the development agreement, then Firm A should not continue to act in the proceedings.



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/Practising-in-Victoria/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. For further information, contact the ethics solicitor on 9607 9336.

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