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Ethics committee rulings: Perception of conflict

Every Issue

Cite as: September 2014 88 (09) LIJ, p.72

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

Conflict of interest

Debt recovery

(R4817– October 2013)

Even though there may be uncertainty as to whether a person was formerly a practitioner’s client, conflict of interest principles may require that the practitioner cease acting against that person.

Firm A acted in relation to the purchase of a share in a company by a third party. The purchase was to be made by a director, who would hold the share on trust for the third party. Firm A prepared a trust deed and an agreement for the sale of shares and stated that it acted for the third party only. If correct, that would mean not only that the director was unrepresented, but that neither signatory to the agreement for the sale of shares was represented.

Firm A then acted for the company in pursuing a debt owed to it by the director, now represented by Firm B who alleged that Firm A faced a conflict of interest as it was acting against a former client.

Rule 4 of the Professional Conduct and Practice Rules 2005 (PCPR) provides that a practitioner must not act against the interests of a former client where the practitioner has thereby acquired information personally, confidential to the former client and material to the matter, and if the former client might reasonably conclude that there is a real possibility the information will be used to his detriment.

The LIV has published Conflict of Interest Guidelines. They identify the grounds on which a court may restrain a practitioner from acting for a party. These add to the matters mentioned in PCPR Rule 4, the grounds of a duty of loyalty and a perception of conflict. The latter may require a practitioner to cease to act if a reasonable and informed member of the public, who is aware of all the facts, would believe that the proper administration of justice would not be done if that practitioner were to continue to act.

Ruling

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

  1. The practitioner should cease acting for the company in recovery of an alleged debt owed by the director to the company, because:
    1. To the extent that the director can reasonably be regarded as a client of the practitioner;
      1. The practitioner holds tacit confidential information by previously acting for the director which can be used against him in the current matter;
      2. The practitioner has a duty of loyalty to the director by previously acting for him;
      And in any event;
    2. A reasonably informed member of the public would consider that the proper administration of justice would not be done if the practitioner were to continue to act.

Concurrent conflict

Bankruptcy

(R4818 – September 2013)

There may not be a conflict of interest, even where parties who require separate representation are seen together by the practitioner who represents only one of them.

The firm was approached by a bankrupt son to act for his mother in proceedings brought by her to stop a trustee in bankruptcy selling a property registered in her son’s name, in which he lived, and over which she claimed a constructive equitable trust based on the common intention of the parties. The mother also held one registered and one unregistered mortgage. Mother and son had previously been jointly represented by another firm, but counsel had warned that the mother needed to be advised separately, without influence from the son.

The son attended on the firm twice in person and once by telephone to seek advice, ostensibly for his mother. On the first occasion the firm interviewed mother and son separately and explained that the mother was the client. On the second occasion, as the mother had limited English, she insisted on the presence of her son.

The firm sought guidance from the Committee about conflict of interest issues in circumstances where two parties require separate representation, but one party continues to act as the other party’s spokesperson.

Section 17.3 of the Professional Conduct and Practice Rules 2005 provides that, unless there are special circumstances, a practitioner must not prepare a proof of evidence in the presence of more than one lay witness, including a party, about any contentious issue.

Ruling

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

  1. There is no conflict of interest, and the firm may continue acting for the mother in her present matter;
  2. A support person who is not a potential witness in the mother’s matter or an interpreter, may attend with the mother, rather than her son, given her son will be a key witness in the proceeding;
  3. The firm should use a qualified interpreter when obtaining instructions from their client.

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/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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