In Cleveland Investments Global Ltd v Evans  NSWSC 567, Justice Ward reviewed the authorities spinning off Spincode Pty Ltd v Look Software Pty Ltd  VSCA 248; (2001) 4 VR 501, in which Justice of Appeal Brooking set out his views in relation to the ‘duty of loyalty’ as a grounds for restraining solicitors from acting. Her Honour reviewed the authorities in considerable detail (so that the judgment is a useful repository of the state of the law up there in NSW), and concluded: Continue reading “NSW’s latest spin on Spincode’s duty of loyalty”
Relatively recently, I posted on the question of whether a Bureau de Spank desiring to rely on a practitioner’s dishonesty or other form of conscious wrongdoing must expressly allege it in the charge, and discussed Walter v Council of Queensland Law Society Incorporated (1988) 77 ALR 228 at 234;  HCA 8. Now, in Legal Services Commissioner v Madden (No 2)  QCA 301 the Queensland Court of Appeal has had a go, and reversed a decision of the Court’s Chief Justice sitting on the Legal Practice Tribunal. The solicitor had previously been disciplined in relation to his trust account. He was charged with gross delay in litigation which resulted in applications by the other side to compel the achievement of various interlocutory steps. He dealt with those applications without advising his client, agreed on his client’s behalf to pay costs, withdrew money to pay those costs from monies held in trust on account of fees and disbursements, and then charged the client fees for his work in fixing up his own mistake. He also acted for both husband and wife in the preparation of a pre-nup, apparently stuffing it up, and then later acted in a matrimonial dispute for the husband alone, described as a particularly obvious conflict of duties.
The Chief Justice made findings of dishonesty in the absence of any allegation of dishonesty in the charge. One might say, in fact, that he went out of his way to do so. First he sought comment in relation to whether on the agreed facts, the Tribunal was free to draw inferences that dishonesty actuated the solicitor’s conduct, and invited the Commissioner to amend the charge so as to allow exploration of that issue. His Honour adjourned the hearing to give the Commissioner time to think about that. On the return of the hearing, the Commissioner declined the invitation to amend. So the Tribunal put out a document specifying, as a matter of procedural fairness, the inferences it was considering drawing, and invited argument. The solicitor swore an affidavit responding to the Tribunal’s document. The Commissioner’s counsel cross-examined the solicitor, but did not put it to him that he had acted dishonestly. The Tribunal then concluded that the solicitor had acted dishonestly, and decided to strike him off rather than go with the fine and reprimand recommended by the Commissioner. Ooffa!
‘Wrong way. Go back!’ said the Court of Appeal. It started with a general proposition:
’54 It is … a well recognised rule of practice in civil proceedings that, although the word “dishonesty” is not necessarily required, any charge of dishonesty must be made in clear terms. In a well known passage in Belmont Finance Corporation Ltd v Williams Furniture Ltd & Ors  Ch 250 at 268 Buckley LJ said: Continue reading “Commissioner’s obligation to charge dishonesty if he intends to allege it”
In Legal Practice Board v Lashanky  WASC 294, the Supreme Court of Western Australia’s Justice Chambers said that applications to restrain solicitors from acting are not interlocutory applications, so that affidavit evidence may not be given from information and belief (i.e. the hearsay prohibition is not relaxed as it is for interlocutory applications):
’29 Under O 37 r 6(2) of the Rules of the Supreme Court 1971 (WA), an affidavit used for the purposes of interlocutory proceedings may contain statements of information and belief. However, an application to restrain a solicitor from acting is not an interlocutory proceeding. Continue reading “Conflict applications to restrain opposing solicitors from acting not interlocutory”
Bracewell & Southall  FamCA 687, a 13 August 2008 decision of Justice Bennett of the Family Court sitting in Melbourne is the latest on lawyers’ conflicts of duties in the context of family law — a whole relatively separate sphere of analysis of lawyers’ conflicts. It seems to me that injunctions restraining lawyers from acting on the third ‘administration of justice’ limb are becoming more common. This is an example of the trend. Solicitors who acted for the Department of Human Services in a child protection application against a woman were restrained from subsequently acting for her husband in matrimonial proceedings involving issues in relation to a different child borne not to the husband but to another man. The conclusion read: Continue reading “Latest Family Court lawyer’s conflict case”
I prepared an application to restrain a firm of solicitors from acting in a Corporations List matter in the Supreme Court recently, and so have been reading the latest cases about conflict injunctions. The very latest is TJ Board & Sons Pty Ltd v Castello  VSC 91, where the plaintiff applied unsuccessfully to restrain the defendants’ solicitors from acting, and the defendants applied to restrain the plaintiff’s solicitors from acting. Neither succeeded in convincing Justice Hollingworth. The first application is interesting in making some comment on:
- the materiality of the evidence which a solicitor must be likely to give; and
- the extent of a personal interest in the outcome of the litigation as a result of participation in the controversial events which a solicitor must have
before he or she will be enjoined from acting because of a conflict of duty and interest.
The second application is a relatively unremarkable application of the law relating to confidential information based conflicts which allegedly arose out of a pre-retainer 20 minute ‘meet and greet’ which did not lead on to a retainer. Continue reading “Both sides apply to restrain the other’s lawyers from acting”
America’s Legal Profession Blog had posted yesterday on a conflicts case about what we in Australia would call “the getting to know you factors”. The case was Hurley v Hurley, decided on 22 May 2007 by a 5 judge bench of the Maine Supreme Judicial Court. The background is that a lawyer may be prevented from acting against a former client even in a matter unrelated to the earlier retainer and where no specific confidential information was obtained in the earlier retainer which could be put to use against the former client in the new retainer. A lawyer may be prevented from acting in those circumstances where the earlier retainer or retainers was or were of such an intimate character that the lawyer came to know so much about the former client in a general way that it would be unjust to let them loose on a former client’s opponent.
The seminal case is probably Yunghanns v Elfic Ltd, a 3 July 1998 decision of Victoria’s Supreme Court’s Justice Gillard. (The rule does not apply, in general, to barristers acting against institutional litigants such as insurance companies and banks for whom they have acted in the past: Mintel International Group Ltd v Mintel (Australia) Pty Ltd  FCA 1410 at  to ). In the American case, one personal injury retainer, in which the lawyer gained insights into the former client’s ‘ability to testify under oath, her reactions to her adversary, her patience with the protracted process, her ability to accept compromise, her ability to handle stress, and the way in which she relates to her attorney’ was sufficient to disentitle him from acting against her in a contested divorce. Now, that post in full: Continue reading “The US take on past client / current client duty conflicts based on the ‘getting to know you factors’”
In my post “Judge uses big word”, I commented on President Mason’s use of “tergiversation”. Now David Starkoff at Inchoate has noted another’s analysis of the odds of each of the High Court judges other than Justice Kirby being responsible for the appearance of “epexegetical” (which seems to mean “explanatory in a way supplementary to the principal or original explanation”) in a decision on migration. (10/1 odds: Justice Gummow.) Love how the judiciary tends to save up these little diamonds of language for those least likely to have the resources to look them up.
And, by way of update to my post “Finally, some scholarship on Australian lawyers’ conflict of duties”, here is a long article on conflicts of duties in America, “I’m All Verklempt!” by Kendall M. Gray et. al., including a long analysis of the Yanks’ position on Chinese walls. The relationship between establishing a conflict of duties and the entitlement to compensation of one of the people to whom the conflicting duties is owed is a bit complicated in Australia. It certainly does not follow that every breach of fiduciary duty gives rise to a right to money in the victim from the lawyer. But in Texas, there is a principle of fee forfeiture which applies in cases of clear and serious breaches of fiduciary duty, a remedy born in Burrow v. Arce 997 S.W.2d 229 (Tex. 1999). Where an attorney was found to have grossly overcharged, fee forfeiture was imposed so that the attorney lost all his fees rather than just those which exceeded a reasonable fee: In re Allied Physicians Group, P.A., No. 397-31267-BJH-11, Civ. A.3:04-CV-0765-G, 2004 WL 2965001, at *5 (N.D. Tex. Dec. 15, 2004) (unpublished), aff’d, 166 F. App’x 745 (5th Cir. 2006).
Mr Gray’s style cannot be described as stuffy, and exemplifies what is good about Texas, namely plain talking: Continue reading “Updates: big words, Texan legal writing, conflicts of duties”
Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd  NSWSC 350 is a decision with wonderfully appalling facts. In the rush to agree consent orders before a directions hearing one morning, a megafirm sent a document to the other side which handed proof on a platter of a flagrant breach of a Chinese wall put in place less than 2 years earlier which had been unsuccessfully attacked by the other side at the time. Partners signing letters and court documents in large firms to the exclusion of all others is generally said to be a risk management exercise. In truth, a partner with no idea about a file will often be a worse choice of responsibility taker than a more junior lawyer who does know a lot about the file, as this sorry tale well illustrates. This was one of those moments when the file’s supervising partner was unavailable, and a solicitor cast around for another partner, any partner, to sign a document. One feels for the firm in this situation, between a rock and a hard place: it either says “Yes, the partner signed it but he didn’t really look at the document,” or “He gave it all appropriate attention despite the hurry, and inexplicably failed to notice the obvious fact that it was a document in the case he went to court about and promised to have nothing to do with.” The firm plumped, more or less, for the second alternative. Here, the Chinese wall had supposedly been operational for nearly 2 years between people in one location used to working with each other.
I hazard to guess that this particular megafirm would be keen to avoid further publicity for ethics violations after an unlucky run recently. So the announcement “I inadvertently signed orders on behalf of the new client in the matter which I swore the year before last in that conflict of interest hearing I would and could ensure I would have nothing to do with” would have been met at that week’s partners’ lunch with foul temper if not foul language. Continue reading “Chinese wall crumbles in big litigation and Optus loses its lawyers 2 years in”
Goubran shares my view that a solicitor can act for and against the one man at the same time. Just not in relation to the same thing. In fact, there is a degree of relation which makes it impermissible, and Goubran sets out the practically meaningless judicial utterances on the test for the requisite degree of relation. He does so by tackling the following passage from Bolkiah v KPMG  2 AC 222, 234 (Lord Millett) which I have always thought to be overarching: Continue reading “No absolute bar in England to representing and opposing same client in two different matters”
On the relationship of the conduct rules to injunctions to restrain lawyers acting in the face of a conflict of duties, Goubran cites some useful authorities. I have always been astonished by what I thought was the Australian courts’ universal and complete disregard in these kinds of applications to the professional conduct rules’ conflicts provisions. All the moreso since the introduction of the rule dealing with current-client and past-client confidential information conflicts was introduced into the Law Institute’s rules of conduct for solicitors. But Goubran’s diligence has turned up the following judicial comments on the use to be made of the rules: Continue reading “Role of professional conduct rules in conflict of duties injunctions”
Finally, someone has gone a long way towards synthesising the law relating to injunctions to restrain lawyers from acting in the face of a conflict of duties. The Melbourne University Law Review article is “Conflicts of Duty: the Perennial Lawyers’ Tale — A comparative Study of the Law in England and Australia”,  MULR 4. Sandro Goubran has done an extraordinary amount of reading and has distilled things well. The last such effort was Matt Connock’s ‘Restraining Lawyers from Acting in the Face of a Conflict: Discussion and Advice in Australia’ (1995) 12 Australian Bar Review 244. (There is a whole blog devoted to the subject in America.)
As an index to pin-point citations in relation to the various issues which arise, the work will be of immense practical value to counsel who have to argue these relatively common applications. I wonder whether Goubran thinks, having read all the cases, it was rewarding academically. I have also read most of them, and the abiding impression I have is that — certain judges aside — this area of the law is one in which judges making it up as they go along is more than usually rife. Further, no one reads and considers the same 10 of the 100 or so generally single judge decisions swimming around out there on the question before deciding these cases. The lines of authority are fractured. Goubran’s article might do something to remedy this, but that all depends on how many people read the MULR I suppose.
Goubran is with me in being mystified by the sometimes hysterical reaction adverse to Justice Brooking’s judgment in Spincode v Look Software (2001) 4 VR 501, and astute to point out that the duty of loyalty is only ever considered in the context of the taking up of the cudgels against a former client in the same or a closely related matter.
I have selected two matters raised by him in the two successive posts for special comment.
Lawyers Weekly‘s 2 February 2007 edition reported the following comments from John Fast, Chief Legal Counsel of BHP-Billiton:
‘“The area where I think the biggest difficulties arise is in … conflicts, and that is an area where increasingly firms that do not have a very clear conflicts of interest policy are at a disadvantage, and will lose business,” he said. Continue reading “Chief Legal Counsel at BHP-Billiton cans firms’ conflicts awareness”
I have never understood what it is about Justice Brooking’s extended obiter on the fiduciary duty of loyalty in Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501 which prompted such apoplexy. I would have thought that the second most obvious conflict of duties (after acting concurrently for two opposing parties) would be to swap sides in the one dispute. I think it is in fact this: people hear “duty of loyalty” and think “I can’t act against anyone I’ve ever acted for? No way!” But the only content of the duty of loyalty is not to “take up the cudgels against a former client in the same or a closely related matter”. What’s not to like about such a proposition? Nevertheless, it is a substantial departure from the House of Lords’s position and finds little favour in NSW. Continue reading “Law Institute Journal tallies the score on Spincode”
The Bar has produced a practice guide. It is a great achievement and stands as a beacon for the Law Institute’s future efforts at promulgating knowledge of the practice rules. The Bar actually has something called the Professional Standards Education Committee. Written by Roisin Annesley, it was launched by Victoria Marles, the Legal Services Commissioner on 18 October 2006, and distributed free to every member of the Bar. Annesley has done a lot of work as Counsel Assisting the Legal Profession Tribunal (and continues to do occasional work assisting the Legal Practice List at VCAT). A doyen of professional discipline, Paul Lacava SC, and a judge who has excoriated Professional Standards, Justice Gillard, are credited with substantial involvement. It has chapters on: Continue reading “Roisin Annesley’s Victorian Barristers’ practice guide”
Solicitors’ Practice (Conflict) Amendment Rule 2004
(a) This rule sets out provisions for dealing with conflicts of interest other than
those conflicts in relation to conveyancing, property selling or mortgage
related services which are dealt with in rule 6.
(b) This rule applies to a regulated individual and a regulated practice.
(c) Conflicts between the duty of confidence and duty of disclosure owed by an
individual or a practice to two or more clients are dealt with in rule 16E. Continue reading “Detailed new conflict rules commence in England”
The little guy in the centre is Lord Justice Mummery of the English Court of Appeal, an Oxford man shown here awarding some trophies at Oxford. He wrote the lead judgment in Gus Consulting GMBH v LeBoeuf Lamb Greeme & Macrae  EWCA 683 handed down in late May. The American law firm against which the injunction was sought wheeled out Lord Neill of Blanden QC, a former judge, Vice-Chancellor of Oxford, Chairman of the Bar Council, Chairman of the Senate of the Inns of Court, Chairman of the Press Council, director of The Times, legal adviser to the Synod of the Church of England, and Chairman of the Committee of Enquiry into Regulatory Arrangements at Lloyds. About as English as a pork pie, and a one-time member of the Committee on Standards in Public Life to boot. He got a difficult argument across the line.
A law firm discovered that it was acting in a dispute “which involve[d] a consideration of work they themselves did for those clients [7 to 8 years previously] and an attack on the honesty and integrity of their former clients in those very transactions”. Worse, the conflict had been missed when the lawyers who were mounting the attack on the former client joined the firm, bringing the new client with them. But until the conflict was noticed, the month after the lawyers’ move, the new members of the firm had been oblivious to the work previously done by it for the people they were now attacking, and steps were quickly put in place to prevent any access to the former client’s files. The Court refused an injunction sought by the former client enjoining the firm from acting against it, finding the Chinese wall to be efficacious. This is a case which falls squarely within what is governed by the Victorian Court of Appeal’s duty of loyalty to former clients: the taking up of cudgels against a former client in relation to the same or a related matter.
Having read many conflict cases, I strongly suspect cases involving mergers result in injunctions much more rarely than others. Furthermore, the fact that the injunction would have resulted in the loss to the new client of a legal team which had obviously been engaged for 3 years in a complicated dispute must have been a matter of great influence, though it is an entirely hidden factor in the reasons.
So the former client cannot enjoin its former lawyers from taking up the cudgels against it in a related matter. But what is to stop the new client of the firm from suing it for breach of the duty of disclosure (which is the duty which conflicts with the duty to keep the former client’s information confidential in these kinds of cases) when it fails to disclose that which it has undertaken to the Court not to disclose though it is relevant and “goes to the heart of” a key issue in the arbitration?