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Ethics Committee rulings: Client legal privilege

Every Issue

Cite as: Jan/Feb 2016 90 (1/2) LIJ, p.69

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

Confidentiality
R4879: July 2015 — s77A Bankruptcy Act Notice Should you release legal advice which you previously gave to a former client to the Australian Financial Security Authority (AFSA) pursuant to s77A of the Bankruptcy Act?

A law firm sought guidance as to whether it was obliged to comply with a s77A Bankruptcy Act notice issued to them by the AFSA. The firm had previously acted for a wife in her family law matter. On advice from the firm the wife sought to protect her equitable claim in the residence shared by her and her husband by way of a registered caveat over the property. At some time later, the wife was declared a bankrupt and AFSA sought copies of any advice the firm may have provided to her in relation to her claim of a constructive trust over the property. This request was made via a notice issued pursuant to s77A of the Bankruptcy Act 1966, although there was a reasonable chance that this notice was defective for certain administrative reasons. The client had not replied to the firm’s requests for instructions.

Ruling

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

The Ethics Committee cannot give legal advice and strongly recommends that the law firm seek independent legal/counsel’s advice;

To assist the firm, the Ethics Committee is of the view that confidential or privileged documents should not be released to the trustee without prior client instructions;

If the defective s77A notice is replaced by a regular one, and the law firm does not have client instructions to release the documents, and if the firm determines that the documents are subject to client legal privilege, then it would be appropriate for it to claim client legal privilege on behalf of the former client, prepare a list of the documents and proceed to make arrangements to secure those documents in a sealed container to be lodged with an agreed third party.

Property law
R4884: October 2015 — Conflict of interest No conflict of interest was found where a law firm acted against the company of a former client.

Between April and July 2005 a law firm had acted for a client in a dispute regarding the failed purchase of a property which was settled without litigation. In May 2009 the client incorporated a sole shareholder/director company. In April 2015 that company commenced legal proceedings in the County Court against two other companies in an entirely unrelated matter for the recovery of commissions in a different property dispute. The law firm accepted instructions to act for the two defendant companies in the legal proceedings as against the former client’s company. Through her new solicitors, the former client asserted that the law firm was conflicted in acting against her company’s interests in the legal proceedings since it held confidential information obtained from her during the earlier retainer in the form of “getting to know you factors”.

Ruling

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

The law firm may continue to act for the two defendant companies in County Court proceedings on the basis that:

there is no real and sensible risk of the misuse of confidential information by the law firm in the legal proceedings;

there is no breach of the duty of loyalty owed by the law firm to its former client since the legal proceedings are entirely unrelated to the earlier property dispute in which the firm acted for the former client; and

a properly informed reasonable observer would not conclude that it would be contrary to the administration of justice for the law firm to continue acting for the defendants in the legal 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/For-Lawyers/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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