Relations with clients

A solicitor must provide clear and timely advice to assist a client to understand relevant legal issues and to make informed choices about action to be taken during the course of a matter, consistent with the terms of the engagement.
A solicitor must inform the client or the instructing solicitor about the alternatives to fully contested adjudication of the case which are reasonably available to the client, unless the solicitor believes on reasonable grounds that the client already has such an understanding of those alternatives as to permit the client to make decisions about the client’s best interests in relation to the matter.

Commentary

7.1 Clear and timely advice

The solicitor’s duty is to assist the client to understand the relevant legal issues and to make informed choices about potential actions. In particular, the solicitor must provide clear and timely advice on the risks of the transaction and their consequences: Fox v Everingham (1983) 50 ALR 337; Henderson v Amadio Pty (No 1) (1995) 62 FCR 1. However, the advice required is limited to the legal risks and consequences, not commercial or personal ones. The rule is a specific application of the fundamental ethical duties in Rule 4.

The duty to advise may arise where advice is not specifically sought or information provided to suggest the need for such advice: Littler v Price [2005] 1 Qd R 275, [51]; Yates Property Corporation v Boland (1998) 85 FCR 84.

7.2 Alternative dispute resolution

To make an informed choice, a client needs to be aware of alternatives to litigation. Unless the solicitor has reasonable grounds to believe the client is aware of the alternatives, the solicitor must include them in their advice. Rule 7.2 mirrors legislation: especially, ss 43 and 44 Civil Proceedings Act 2011 (Qld); s 65(1) (SA); s 18J Civil Procedure Act 2005 (NSW), Civil Dispute Resolution Act 2001 (Cth). The rule shifts focus away from litigation by ensuring that an otherwise unaware client makes informed choices on alternatives to the fully contested adjudication of cases.

A solicitor must follow a client's lawful, proper and competent instructions.

Commentary

Lawful and proper

Solicitors have an ethical obligation to not engage in conduct that may diminish the public confidence in the admnistration of justice. This requires that solicitors promote a respect for the law and its administration.²²

Solicitors must not engage in dishonest, illegal or unprofessional behaviour which is likely to a material degree, to be prejudicial to or diminish public confidence in the administration of justice. A solicitor must therefore not seek to advance their client’s interests in an unfair or dishonest way.²³ Nor should solicitors knowingly assist a client, another lawyer, or a third party breach the law.

What are lawful and proper instructions will be informed by, amongst other professional obligations, those imposed by Rules 3, 9, 17, 19, 20 and 21.

Competent instructions

At common law, every adult person is presumed to be competent or capable to make decisions, including instructing solicitors, unless otherwise proven: Murphy v Doman (2003) 58 NSWLR 51. The onus of proof is on the person alleging incapacity or incompetence: Dalle-Molle v Manos (2004) 88 SASR 193; Pratt v Dickson [2000] QSC 314.

The tests for competency depend on the nature of the intended transaction. The Lexon Checklist on Capacity states those tests comprehensively. Age, mental capacity and restraints on the exercise of free will may be factors. The tests for litigation and contract and wills are discussed below.

For Queensland practitioners, refer to the Queensland Handbook for Practitioners on Legal Capacity.

Litigation and contract (capacity tests and comment)

The capacity required for a person to participate in legal proceedings is the same as that required for a person to enter into legal transactions. Each party 'shall have such soundness of mind as to be capable of understanding the general nature of what he is doing': Gibbons v Wright (1954) 91 CLR 423, 437. The question is whether the client can understand the nature of the legal consequences which will be brought about: at 437. This is a subjective test: it is designed to 'ensure that plaintiffs and defendants who would otherwise be at a disadvantage are properly protected': Masterman-Lister v Brutton (Nos 1 and 2) [2003] 1 WLR 1511, [31].

The relevant issues will vary from case to case, but will generally require that the litigant understand the "nature of the litigation, the purpose and its possible outcomes, including the risks in costs": Pistorino v Connell & Ors [2012] VSC 438 per Dixon J at [20].

When a client becomes incapacitated, their solicitor's authority ends: Yonge v Toynbee [1910] 1 KB 215 (a case of mental illness). Even though there is a presumption of the client's capacity to instruct, the solicitor must be satisfied of that capacity. Indeed, where 'circumstances place the lawyer on notice that the client's mental capacity is in issue, active consideration will be required': Goddard Elliott v Fritsch [2012] VSC 87, 418 ('Goddard'). If a solicitor is not satisfied that the client has the mental capacity to instruct in the litigation, the solicitor must raise the issue with the court: Goddard, [568]. Supreme Courts have inherent jurisdiction to order that a litigant be independently examined for mental capacity: Re Magavalis [1983] 1 Qd R 59, 63-4. In Till v Nominal Defendant [2010] QSC 121, the plaintiff's action was stayed until his capacity to provide instructions and make decisions about his legal rights was established.

Not only does the authority end, but the solicitor has a duty of care not to follow instructions when a client lacks the mental capacity to give them. In Goddard, Bell J found that, 'it is always to be expected of a lawyer exercising ordinary skill and competence that they are reasonably satisfied of their client's mental capacity to instruct' (at 418), 'the lawyer owed the client a duty of care not to take or act on instructions when it knew or should have known that he lacked the mental capacity to give instructions' (at 421). 'Where the client does not have that capacity the lawyer does not have the authority to represent them in the proceeding, except for certain limited purposes, most particularly perhaps for the purpose of an inquiry into that question. I say perhaps because they are not really representing the client in that process, but rather assisting the court as an officer of the court': at 549 (emphasis added).

Will instructions

In drawing a will, "the solicitor is simply under an obligation to act on any coherent instructions": WA Lee & AA Pearce, Lee's Manual of Queensland Succession Law para [3.90]²⁵. If however the instructions are not coherent, then the solicitor is on notice that the testator's capacity may be an issue, and has a duty to confirm that capacity. 'A lawyer who…is left in real doubt as to the testator's capacity to give instructions should not draw the will. A solicitor who draws a will in circumstances where the client is incapable of giving instructions may be exposed to civil liability or professional discipline.'²⁶

It is prudent practice for a solicitor to:

take instructions in person, rather than remotely or through third parties. This also helps ensure that the client is not subject to the influence of others;
ask questions to probe the client’s understanding;
make detailed file notes of the attendances, events and discussions which have taken place;²⁷ and
if the circumstances warrant it, seek specialised advice from a qualified health professional as to the capacity of the client to make a will.

In considering the client's capacity to make a will, the solicitor should have regard to the client's understanding as to what a will is, any irrational behaviour, disorientation, lack of understanding, and any defective recollection of assets, liabilities and the persons who would normally benefit.²⁸

For Queensland practitioners, refer to the Wills and EPA Risk Procedure Pack by Lexon Insurance.

22 Refer to Rule 5.1 ASCR.

23 See Dal Pont 'Lawyers' Professional Responsibility’ Thomson Reuters 5th ed. 2013 [19.05].

24 Omitted.

25 Thomson Reuters, 7th ed, 2012.

26 GE Dal Pont & KF Mackie, Law of Succession (LexisNexis Butterworths, 2013) 750.

27 Ibid.

28 Ibid.

A solicitor must not disclose any information which is confidential to a client and acquired by the solicitor during the client’s engagement to any person who is not:
1. a solicitor who is a partner, principal, director, or employee of the solicitor’s law practice; or
2. a barrister or an employee of, or person otherwise engaged by, the solicitor’s law practice or by an associated entity for the purposes of delivering or administering legal services in relation to the client,
  EXCEPT as permitted in Rule 9.2.
A solicitor may disclose confidential client information if:
1. the client expressly or impliedly authorises disclosure;
2. the solicitor is permitted or is compelled by law to disclose;
3. the solicitor discloses the information in a confidential setting, for the sole purpose of obtaining advice in connection with the solicitor’s legal or ethical obligations;
4. the solicitor discloses the information for the sole purpose of avoiding the probable commission of a serious criminal offence;
5. the solicitor discloses the information for the purpose of preventing imminent serious physical harm to the client or to another person; or
6. the information is disclosed to the insurer of the solicitor, law practice or associated entity.

Commentary

9.1 Duty to keep information confidential

The duty of confidentiality is both a fiduciary duty to the client and an implied term in the retainer contract: Parry-Jones v Law Society [1969] 1 Ch 1. It is absolute: a duty not to disclose, not simply to take reasonable steps to keep information confidential. The only exceptions are as set out in Rule 9.1.1, 9.1.2 and 9.2. A law practice may also have Privacy Act obligations.²⁹

Confidential information. The implied contractual term embraces 'all communications made by the client about his affairs, and all information learnt directly or indirectly about the client, in the course of the professional relationship': Re a Firm of Solicitors [1992] 1 QB 959, 970, cited in Unoil International Pty Ltd v Deloitte Touche Tohmatsu (1998) 17 WAR 97. 'Directly or indirectly' is well explained in Legal Practitioners Complaints Committee v Trowell [2009] WASAT 42 ('Trowell'). The Tribunal found that the duty of confidence extends to:

information about the client that a solicitor learns in the professional relationship;
information which the solicitor would not have had but for the relationship;
information of a confidential nature³⁰ acquired by the solicitor before the relationship of solicitor and client is established; and
opinions formed by the solicitor about the client’s affairs.

The two discipline cases in which the rule was breached during the representation of Ms Schapelle Corby (who was convicted of importing marijuana to Indonesia) are Legal Services Commissioner v Tampoe [2009] LPT 14 ('Tampoe') and Trowell. In Tampoe the solicitor:

disclosed information provided confidentially about past criminal convictions in the Corby family;
made statements to the effect that the Corby family were trash and that he had never seen a more ungrateful, nasty piece of work as his client and her family;
said that he had concocted the defence that drugs had been put in the client's baggage by airport baggage handlers.

As Atkinson J observed: “This is certainly likely to bring the legal profession into disrepute with the public. In fact, a person acting as a criminal defence legal practitioner cannot under any circumstances invent facts or invent a defence. To say such a thing is scandalous and is likely to cause the public to lose confidence in not only the legal profession but in the criminal justice system, because it suggests that in response to a criminal charge what one should do is find a legal practitioner who will make up a defence for the alleged offender. Secondly in Trowell, the practitioner was found guilty of unprofessional conduct and fined after disclosing confidential information in a number of statements to Australian media when Ms Corby was a client or prospective client without her informed consent. The Western Australian court speculated (at [384]) whether a lawyer’s disclosure of confidential information in relation to alleged illegal activity was justified:

"In our opinion, disclosure by a lawyer of such confidential information could only be justified if made to the appropriate authority or otherwise in accordance with the exceptions to r 6.3. It is difficult to see how it could ever justify publication to the press. The exceptions to the rule indicate how confined are the circumstances where disclosure is permitted and the appropriate authorities to whom disclosure may be made."

Public domain. Information that is in the public domain may still be confidential to the client. Repetition or confirmation of information by a solicitor may give that information a credible status that it might not otherwise have: Camp v Legal Practitioners Complaints Committee (2007) WASC 309. Solicitors should disclose that information with the greatest caution. In Tampoe, the solicitor contended that the information about the convictions was in the public domain and that he therefore committed no offence in disclosing it. However, it was held that the information had been communicated by the client on a confidential basis and that Tampoe was therefore in breach of his duty to the client in disclosing it on national television.

Imputed knowledge within a legal practice. Solicitors may disclose confidential information to another lawyer in the law practice, or another lawyer representing the same client.³¹ Conversely, solicitors in the same legal practice are presumed to share confidential knowledge about a client, as there is a 'strong inference that lawyers who work together share confidences': MacDonald Estate v Martin [1990] 3 SCR 1235. However, in practice this presumption may not reflect the actual knowledge of solicitors in all law practices and so may be rebutted. Refer also to Rule 10 for commentary on Information Barriers.

Duration. Once established, the duty is permanent. It continues after the termination of the retainer and even beyond the client's death, upon which the duty is owed to the legal personal representatives of the deceased: Gartside v Sheffield, Young and Ellis [1983] NZLR 37.

9.2 Exceptions to duty of confidentiality

It is said confidentiality may be overridden by the duty 'to comply with the law of the land'. Parry-Jones v Law Society [1969] 1 Ch. 1, 9.

Rule 9.2 is therefore very helpful in setting out the circumstances in which the confidential information may be disclosed.

A solicitor who discloses confidential information should make a comprehensive note of their reasons for doing so. The note should include:

The circumstances of the disclosure: date, time, place, the confidential information, person to whom the disclosure made etc.
The grounds for the disclosure: for example, the details of the harm to be prevented under Rule 9.2.5.

9.2.1 Authorised by client

The client may expressly or impliedly authorise disclosure.³²Where a solicitor has joint clients, consent from each and every client is necessary to waive confidentiality: Singla v Stockler [2012] EWHC 1176.

9.2.2 Permitted or compelled by law

Solicitor compelled by law to disclose privileged information. If the information is merely confidential, then the general duty to maintain confidentiality can be overridden by a legally authorised direction to disclose the information. If the information is also privileged, then a solicitor must not disclose the information unless required to do so pursuant to a statute that clearly and unambiguously abrogates the privilege itself: Baker v Campbell (1983) 153 CLR 52.

A solicitor may disclose confidential information without the client’s authority in limited circumstances that are permitted by law. There is an important distinction between confidentiality and privilege. Many warrants, subpoenas or other process that over-ride confidentiality obligations do not displace privilege.

Privileged information. Privileged information – compelled by law to disclose. There are no specific rules on legal professional privilege in the ASCR. This privilege allows the client to challenge the disclosure of confidential information. For the definition of "client" refer to the Glossary of Terms. In Carey v Korda [2012] WASCA 228 ('Carey'), Murphy JA said the 'client' in this context is to be regarded as referring to a person who, in respect of some legal matter within the scope of professional services normally provided by solicitors, has, with the consent of the solicitor, come to stand in a relationship of trust or confidence to the solicitor entailing duties of the solicitor to promote the person’s interests, to protect their rights and to respect their confidences (at [60]). A client may assert privilege if confidential communications passing between themselves and their solicitor were made for the dominant purpose of obtaining legal advice or for actual or contemplated litigation: Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49. Privilege belongs to the client, not the lawyer. As such, privilege may only be waived by the client either expressly or impliedly. If the information is privileged and not merely confidential, then a solicitor must not disclose the information unless required to do so pursuant to a statute that clearly and unambiguously abrogates the privilege itself: Baker v Campbell (1983) 153 CLR 52. If the information is merely confidential, then the general duty to maintain confidentiality can be overridden by a legally authorised direction to disclose the information.

Client legal privilege protects the communications between solicitor and client. There are instances where the protection extends beyond a literal communication or a record of communication. For example, drafts of letters, agreements or statements of claim. The reason why such material is privileged is that disclosure will, or will tend to, reveal the privileged communication (Attorney General (NT) v Maurice (1986) 161 CLR 475,496 per Dawson J).

A client is entitled to resist the production of documents which would reveal communications between the client and the solicitor made for the dominant purpose of giving or obtaining legal advice or the provision of legal services (The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543, [9]).

The privilege is available where the document expressly reveals the privileged communication, or where the content or nature of the privileged communication may be inferred from the document (Commissioner of Australia Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501, 569 ('AFP')).

Privileged information – solicitor’s bill of costs. A solicitor's bill of costs may fall into this category: AFP, 569 per Gummow J; Chant v Brown (1852) 9 Hare 790; 68 ER 735. Whether and to what extent a bill of costs is privileged will depend upon a consideration of the circumstances in which the claim for privilege occurs, and the nature and details of the entries made in the bill in question: Carey, [64] per Murphy JA. In most cases the appropriate course is redaction of the notation in the bill rather than a refusal to produce the document.

Solicitor permitted by law to disclose confidential information. The two examples of disclosure contemplated by Rule 9.2.2 are:³³

A solicitor may disclose confidential information in order to establish or collect the solicitor’s professional fees and outlays, but this should be strictly limited to information that is required just for that purpose:
A solicitor facing a disciplinary charge or complaint from a client may disclose the client’s confidential information under LPA s 491(1).

Section 491 does not expressly refer to information that is also subject to privilege. However, it confirms that a solicitor may use the confidential information in a defence against an allegation of impropriety and incompetence brought through a disciplinary complaint. It is also available in a civil claim alleging negligence, or a former client’s alleged incompetence in a criminal appeal. By taking these actions, the client waives their legal professional privilege.³⁴ A solicitor should therefore warn their client that such actions will result in an implied waiver of confidentiality and privilege.

The implied waiver would extend only to information or representations that are relevant to the allegations being made: R v Paddon [1999] 2 Qd R 387 (an allegation of incompetence).³⁵ The waiver is also limited to the purpose of the disciplinary proceedings and for the particular persons who need to see documents for that purpose: Goldberg v Ng (1995) 185 CLR 83, 96. In that case, a complaint of professional misconduct, Goldberg relied on the implied waiver of his client's legal professional privilege to disclose documents to the Law Society of NSW on the proviso they would not be shown to anyone else. The Law Society then received a subpoena requesting those documents. The High Court decided the implied waiver of privilege was for a limited purpose (the disclosure by Goldberg to the Society) and the documents were not to be otherwise disclosed.

9.2.3 Disclosure to obtain ethical or legal advice

A solicitor may disclose confidential information in a confidential setting for the sole purpose of obtaining advice on their legal or ethical obligations. Examples of such disclosure include:

In a mediation of a personal injuries matter, the solicitor sought advice from senior counsel to determine whether he should disclose his client’s life expectancy following a cancer diagnosis: Legal Services Commissioner v Mullins [2006] LPT 012.
In McKaskell v Benseman [1989] 3 NZLR 75, the solicitor showed his client’s letter to a senior practitioner for advice on an ethical matter. It was not a breach of confidentiality as it was carried out during ‘a serious and earnest search for assistance in the interests of his clients’. Such a disclosure cannot amount to ‘frivolous or promiscuous revelation’ of the client’s personal information. In the same case, there were additional disclosures at a social occasion. However, Rule 9.2.3 requires ‘a confidential setting’ which would disallow disclosures at a social occasion.
In Australian Commercial Research and Development Ltd v Hampson [1991] 1 Qd R 508, the plaintiff sought opinions on the same matter from fourteen Queen's Counsel, including the defendant. Hampson believed the plaintiffs were attempting to 'corner the market' by disqualifying barristers from representing their opponent in the matter, the ANZ Bank. He consulted with the President of the Bar Association for advice. The disclosure of confidential information to the President was permitted, though the court confirmed that Hampson was disqualified from acting for the ANZ Bank in the matter.

9.2.4 Avoiding probable crimes

A solicitor may disclose confidential information for the sole purpose of avoiding the probable commission of a serious criminal offence. The exception exists at common law: R v Cox and Railton (1884) 14 QB 253.³⁶

9.2.5 Preventing physical harm

A solicitor must use common sense and 'sound judgment' before disclosing confidential information to prevent serious imminent physical harm to a client or another person.³⁷ The solicitor should consider:

the seriousness of the potential injury;
the imminence and likeliness of the harm occurring;
the absence of other feasible ways to prevent the harm.

In the case of risk of harm to children, s197A of the Child Protection Act 1999 (Qld) provides for a statutory disclosure regime which is likely to allow disclosure in a wider range of circumstances and s229BC of the Criminal Code imposes a mandatory reporting obligation on all adults if, without reasonable excuse, they believe that a child sexual offence is being or has been committed against a child by another adult.

29 Privacy Act 1988 (Cth). See also Australian Government, Office of the Australian Information Commissioner: Guide to Information Security, April 2013; Law Council of Australia "Australia’s New Privacy Laws – What lawyers need to know about their own practices"; Law Institute of Victoria – Privacy Act Compliance Guide.

30 In equity, the three elements upon which the equitable duty of confidence is based are:

the information must have a necessary quality of confidentiality;
the information given or received imports an obligation of confidence; and
there has been an unauthorised use of that information: Coco v A N Clark (Engineering) Ltd [1969] RPC 41 (‘Coco’). For a discussion as to what is confidential information in the context of successive representation see Rule 10.

31 See also the Legal Profession (Barristers) Rules 2011 (Qld), rr 111-12 also reflecting the practicalities of sharing confidential information between a client's legal representatives.

32 This is supported by case law: Marriage of Griffis (1991) 14 Fam LR 782, 786 (Mullane J); Mortgage Express Ltd v Bowerman & Partners [1999] 2 All ER 836, 844 (Millett LJ).

33 GE Dal Pont 'Lawyers' Professional Responsibility’ Thomson Reuters 5th ed. 2013 [10.85].

34 S Shepherd, 'Keeping secrets – or not: When and why client confidences may need to be shared' (2012) 32(7) Proctor 32, 32.
<https://qls.com.au/Content-Collections/Articles/Keeping-secrets-or-not>

35 Queensland Law Society, Keeping those confidences (2011)

36 See also: Bullivant v Attorney-General for Victoria [1901] AC 196.

37 N Watt, 'Breaching confidentiality – the illegality exception' (2008) 28(1) Proctor 35.

Commentary

Rule 10 deals with a conflict between a duty owed to a former client and a duty that is actually or potentially owed to a current or prospective client ('successive representation'). See Rule 11 for where a solicitor is simultaneously representing two clients. For the purposes of Rule 10, a "former client" extends well beyond someone who has previously retained the solicitor. It may include:

a person or entity that has previously instructed the solicitor, their current or former law practice, or the former practice of a partner, co-director or employee of the solicitor,(ASCR Glossary) and
any person who has provided confidential information to a solicitor, notwithstanding that the solicitor was not formally retained and did not render an account: ACSR Glossary.

10.1 Ongoing duty of confidentiality

A solicitor who has ceased to act for a client no longer has a fiduciary duty to that client, and may act against the interests of that client, including by acting as a solicitor for others. However, the solicitor cannot disclose any confidential information of the former client; the duty of confidentiality continues after the termination of the retainer and indeed beyond the death of the former client: see Rule 9. Rule 10 concerns the conflict between that duty of confidentiality, and a solicitor's duty to use all of their knowledge and skill for the benefit of a second client (the conflict recognised in Spector v Ageda [1973] Ch 30).

The source of the court's jurisdiction to grant an injunction is 'not based on any conflict of interest, real or perceived, for there is none': Prince Jefri Bolkiah v KPMG [1999] 2 AC 222, 235 ('Prince Jefri'). In Prince Jefri, Lord Millett held that a court may intervene if the solicitor possessed information confidential to the former client; and the information was or might be relevant to the matter on which he was instructed by the second client. The court may grant an injunction preventing the solicitor acting for the second client. The decision in Prince Jefri has been widely followed in Australia: Flanagan v Pioneer Permanent Building Society Ltd [2002] QSC 346; Pott v Jones Mitchell [2004] 2 Qd R 298; Belan v Casey (2002) NSWSC 58; Nasr v Vihervaara (2005) 91 SASR 222; British American Tobacco Australia Services Ltd v Blanch (2004) NSWSC 70; Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd (2005) NSWSC 550.

In Victoria, however, the alternative reasoning of Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501 ('Spincode') has been followed. In Spincode, Brooking JA found that the court could intervene to protect a solicitor's ongoing duty of loyalty to their former clients. If accepted, information barriers or 'Chinese walls' may protect against breaches of confidentiality, but may not protect an ongoing duty of loyalty. Spincode has been followed in Victoria, but not elsewhere: see the cases reviewed in Dale v Clayton Utz [2013] VSC 54.³⁸

Confidential information. The discussion of what constitutes confidential information under Rule 9 applies equally to Rule 10. Confidential information is information "which a) was originally communicated in confidence b) at the date of the later proposed retainer is still confidential and may reasonably be considered remembered or capable, on memory being triggered, of being recalled and c) relevant to the subject matter of the subsequent proposed retainer": In Re A Firm of Solicitors [1997] Ch 1, 9-10. Solicitors should note that their opinions of former clients may also be confidential. Relevant examples of former client information being held confidential include:

Magro v Magro (1989) FLC 92-005, in which a solicitor previously retained by the wife was prevented from representing the husband in contested property proceedings. The wife could not identify particular information that could be prejudicial; however the court accepted that "impressions of the wife's personality gained after many hours of confidence could be exploited by a skilful advocate".
'getting to know you' factors, from which a solicitor might know of a former client's strengths, weaknesses, honesty or lack thereof, reaction to crisis, pressure or tension, and attitude to litigation and settling cases: see D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118, 123 and Yunghams v Elfic Pty Ltd (Unreported Supreme Court of Victoria, Gillard J, 13 July 1998) BC 9803031. Even information that is not sourced from a client may be classified as confidential information.
Where there is a possibility of the action triggering memory of confidential information, that 'unconscious memory' is protected: Sent v John Fairfax Publications Pty Ltd [2002] VSC 429.³⁹

The testimony of the solicitor and the former client as to what confidential information was shared is subject to the normal rules of evidence. An old Queensland case (Mills v Day Dawn Block Gold Mining Co Ltd (1882) 1 QLJ 62 (‘Mills’)) suggested that a solicitor may be disqualified from acting where there is unsettled conflicting testimony, so long as the former client swears to imparting confidential information. However, this decision was not followed in D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118. Mills is authority for the proposition that the duty to avoid conflict is a reflection of the paramount duty (Rule 3).

10.2 Material and detrimental to the interests of the former client if disclosed

In Fordham v Legal Practitioners Complaints Committee (1997) 18 WAR 467, a case on cross-examining a former client, Malcolm CJ asked 'whether a reasonable observer, aware of the relevant facts, would consider that the confidential information given to the solicitor by the former client was being used by the solicitor to advance the interests of the new client to the detriment of the former client': at 488.

The former client must have an interest in the current matter if they are to prevent the solicitor acting on it. The former client must prove that the solicitor has confidential information, and that the information may be relevant to the new matter in which the interests of the new client may be adverse to those of the former client: Prince Jefri. Rule 10 however prevents the solicitor acting if the information, if disclosed, might be detrimental to the interests of the former client. It contemplates a situation where (i) information that is confidential to a former client is relevant to a current matter, and (ii) the disclosure of that information may be detrimental to the former client. The later matter need not be one in which the interests of the new client are adverse to those of the old one. The incidental disclosure of the confidential information may be detrimental enough.

The possible detriment to the former client arises from the possession of information in relation to which the solicitor owes the former client a duty of confidentiality. In Nasr v Viheryaara (2005) 91 SASR 222, the solicitor obtained no relevant confidential information in the course of acting for the former client in earlier matters which were factually unrelated to the later proceedings in which the solicitor acted for the former client's de facto partner.

10.2.1 Informed consent

Rule 10 recognises two alternative circumstances where the potential conflict arising from successive representation may be overcome: informed consent; or the use of an effective information barrier.

A former client must give informed consent for a solicitor to act where subsequent representation is adverse to a former client. By obtaining informed consent, a solicitor may rebut a potential breach of fiduciary obligation. The question of informed consent is a question of fact having regard to the circumstances of each case. Advising of the importance of obtaining independent and skilled advice from a third party may be one circumstance which negates a breach of fiduciary obligation: Maguire v Makaronis (1997) 188 CLR 449, 466, 496.

Consent in writing. Although Rule 10.2 does not stipulate that the informed consent be obtained in writing, solicitors are strongly urged as a matter of prudence to obtain the consent in writing.

10.2.2 Information barriers

Some practices may attempt to quarantine some sections of the practice from others. The measures taken to do this are called information barriers or 'Chinese walls'. If a successful information barrier is established, then confidential information about a former client is effectively quarantined, and other sections of the law practice may be able to act in circumstances where the disclosure of confidential information may be adverse to a former client. However, the tests for a successful information barrier are rigorous. A barrier must prevent both deliberate and inadvertent disclosure of confidential information: Asia Pacific Telecommunications Limited v Optus Networks Pty Ltd [2007] NSWSC 350.

Required strength of information barriers. The principles by which an effective information barrier can be raised in a law practice were set by Lord Millett in the House of Lords’ decision in Prince Jefri. Given that the risk of disclosing or using confidential information is an avoidable one (i.e. the law practice need not take on the later client) Lord Millett found it difficult to justify exposing the former client to any risk of disclosure or use of the information. He noted that there is an unqualified duty to preserve confidentiality, not merely to take reasonable steps to preserve it. 'No solicitor should, without the consent of his former client, accept instructions unless, viewed objectively, his doing so will not increase the risk that information which is confidential to the former client may come into the possession of a party with an adverse interest': at 227. Accordingly, an information barrier was not legally effective unless the different sections were, almost permanently, physically and operationally segregated.⁴⁰ Relevant undertakings by people who possess the information are essential, but insufficient by themselves: see below and the Queensland Law Society Guidelines for the practical measures required.

Civil matters. For the solicitor to rely on an information barrier and act for the later client in civil matters, there must be no real or sensible possibility of the practice misusing the confidential information: Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357. In Prince Jefri, Lord Millett concluded that although 'the risk must be a real one, and not merely fanciful or theoretical', it need not be substantial: at 236 – 237.

Family law matters. In family law matters, a risk 'more theoretical than practical' was enough to restrain a solicitor from acting for a subsequent client in In the Marriage of Thevenaz (1986) 84 FLR 10. In such matters, it is 'of the utmost importance that justice should not only be done but should appear to be done': Frederico J, 13, [34].⁴¹

Criminal matters. The similar higher standard, protecting against even theoretical risks, is expected in criminal proceedings, with Ipp J emphasising the importance 'not only that justice is done, but also that it is apparent that it is done': Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357, 374.

Guidelines for information barriers. The Guidelines for Information Barriers (see Appendix B) specify a number of measures that should be put in place if a law practice is to act against a former client without being in breach of Rule 10. The Guidelines have been adopted in Queensland, the Australian Capital Territory, New South Wales and Victoria, and should be followed in the strictest terms. In summary, they include:

The appointment of a compliance officer;
Obtaining the consent of the current client that confidential information held for the former client not be disclosed;
Identifying any people in the practice who possess information about which a duty of confidentiality is owed to the former client;
Undertakings by those people not to disclose information to others in the practice;
the physical segregation of people who acted for the former client and documents held in relation to that client;
a continuing education program in the practice in relation to these duties; and
careful segregation of IT resources available to the ‘screened’ team is also required. Precedent and knowledge management systems often promote efficient sharing of data ‘in house’. Screened material should be excluded from that process.

Undertakings. One of the measures that the Guidelines require for an effective information barrier is the giving of undertakings by anyone in the practice who has acted for the former client. The undertakings confirm that:

they understand they may possess (or come to possess) confidential information; and
they understand they must not discuss that information or the matter generally with any other person within the law practice; and
they have not previously had such discussions or done anything which would amount to a breach of the information barrier; and
they will inform the designated compliance officer immediately upon becoming aware of any possible breach of the information barrier; and
if they are required to produce documents for example in order to comply with a subpoena or a notice to produce they will forward the relevant material (including the former client's physical or electronic files) to the compliance officer.'

These undertakings are a necessary, but not sufficient, element of an acceptable information barrier: see Prince Jefri [1999] 2 AC 222, 530. They are not sufficient, because no matter how strong the integrity and standing of those making the undertakings are, inadvertent disclosures may still occur. In Mallesons Stephen Jacques v KPMG Peat Marwick (1990) 4 WAR 357, the court accepted that the solicitors giving the undertakings were of the highest integrity and standing. However, Ipp J held that the duty of a fiduciary to avoid a conflict of duties to different clients was absolute and inflexible and could not be cured by an undertaking. In Fruehauf Finance Corp Pty Ltd v Feez Ruthning (a firm) [1991] Qd R 558, Lee J accepted that an information barrier allowed a law practice to act against a former client because, amongst other things, the solicitors in the practice who had acted for that client had given undertakings not to disclose information about that client to others in the practice, and they had not actually communicated confidential information to others.

A breach of an undertaking may, however, show that the risk to the former client has become greater, and be grounds for an order that the solicitor not represent the second client. In Asia Pacific Telecommunications Limited v Optus Networks Pty Ltd [2007] NSWSC 350, former Client A was involved in litigation that a legal practice was conducting for client B. The practice had an information barrier that included sworn undertakings from any solicitors who had acted for client A that they would ‘not undertake in any capacity any work or other activity’ concerning A’s litigation with B. However, a partner who had given the undertaking signed short minutes of a consent order in the course of the A–B litigation, because there was a shortage of people in the office who had signing authority. This was regarded as a breach of his undertaking, although it was at 'the lower end of the spectrum of involvement' in the proceedings and inadvertent, and there was no disclosure of confidential information. However, the breach led Bergin J to conclude that the information barrier was not as strong as had been thought and that the risk of disclosure was now real and not fanciful, and as a consequence to restrain the practice from acting for B.

For Queensland practitioners, refer to Guidance Statement No. 1 – Undertakings.

The inherent jurisdiction to restrain a solicitor from acting for a client

The court has an inherent jurisdiction to supervise the conduct of solicitors, as officers of the court, and may in the interests of justice restrain a solicitor from acting for a particular client. The circumstances in which a court should exercise this jurisdiction were well described by Brereton J in Kallinicos v Hunt (2005) 64 NSWLR 561:⁴²

the test is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a solicitor should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice;
the jurisdiction is to be regarded as exceptional and to be exercised with caution, with weight given to the public interest in a litigant not being deprived of the solicitor of choice without due cause;
the timing of the application is relevant in that the cost, inconvenience or impracticality of requiring solicitors to cease to act may provide a reason to refusing to grant relief.

Examples of where the court has exercised the inherent jurisdiction are:

where a solicitor has a personal (whether financial, personal or reputational) stake in the outcome of the proceedings or in their conduct, beyond the recovery of proper fees: Mitchell v Burrell [2008] NSWSC 772;⁴³
a perception that the solicitor is changing sides: Cleveland Investments Global Ltd v Evans [201] NSWSC 567;
where a solicitor’s professional conduct comes under scrutiny: Bahonko v Nurses Board of Victoria (No 3) [2007] FCA 491.

38 See also: Sent v John Fairfax Publications Pty Ltd [2002] VSC 429, [98]-[104] (Nettle J); Disctronics Ltd v Edmonds [2002] VSC 454;
Village Roadshow Ltd v Blake Dawson Waldron [2003] VSC 505; McCann v McCann [2006] VSC 142; Pinnacle Living Pty Ltd v Elusive Image Pty Ltd [2006] VSC 202 (Whelan J); GT Corporation Pty Ltd v Amare Safety Pty Ltd [2007] VSC 123; Dennis Hangar Pty Ltd v Brown [2007] VSC 495; Kyriackou v Commonwealth Bank of Australia [2009] VSCA 241, [22]-[23].

39 See also: Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307, 313 (Drummond J).

40 It should be noted, though, that the essence of the problem with an information barrier is conflicting duties. Therefore, even if the issue is not one purely of a confidence owed to a former client, but a position of conflict arises, a firm might be able to be enjoined from acting for a new client with incompatible interests. It is certainly not necessary that the conflict arise in the one transaction. It could spring from different transactions: Marks and Spencer Group Plc v Freshfields Bruckhaus Deringer [2004] EWCA Civ 741.

41 See also: In the Marriage of Magro (1993) 93 FLR 365 and McGillivray v Mitchell (1998) 23 FamLR 238.

42 See also: Potts v Jones Mitchell & Anor [2004] 2 Qd R 298.

43 See also: R & P Gangemi Pty Ltd v D & G Luppino Pty Ltd & Anor [2012] VSC 168.

11.1 A solicitor and a law practice must avoid conflicts between the duties owed to two or more current clients.

Duty of loyalty

11.2. If a solicitor or a law practice seeks to act for two or more clients in the same or related matters where the clients’ interests are adverse and there is a conflict or potential conflict of the duties to act in the best interests of each client, the solicitor or law practice must not act, except where permitted by Rules 11.3, and 11.4.

11.3. Where a solicitor or law practice seeks to act in the circumstances specified in Rule 11.2, the solicitor may, subject always to each solicitor discharging their duty to act in the best interests of their client, only act if each client:

11.3.1. is aware that the solicitor or law practice is also acting for another client; and

11.3.2. has given informed consent to the solicitor or law practice so acting.

Duty of confidentiality

11.4. In addition to Rule 11.3, where a solicitor or a law practice acts for two or more clients in the same or related matters and the solicitor or law practice is in, or comes into, possession of information which is confidential to one client (the first client) which might reasonably be concluded to be material to the other client’s or clients’ matter and detrimental to the interests of the first client if disclosed, the solicitor and the solicitor's law practice may not act or continue to act for the other client or clients unless each client’s informed consent:

11.4.1 permits the disclosure and use of that information for the benefit of the other client or clients; or

11.4.2. requires the establishment and maintenance at all times of an effective information barrier to protect the confidential information of each client.

Actual conflict arising between current clients in the course of a matter

11.5. If a solicitor or a law practice acts for more than one client in a matter and, during the course of the conduct of that matter, an actual conflict arises between the duties owed to two or more of those clients, the solicitor or law practice may only continue to act for one of those clients (or for two or more of those clients between whom there is no conflict) in the following exceptional circumstances:

11.5.1. any client for whom the solicitor or law practice ceases to act has given informed consent to the solicitor or law practice continuing to act for the remaining clients; and

11.5.2. the duty of confidentiality owed to all of the clients, both those for whom the solicitor or law practice ceases to act and those for whom the solicitor or law practice continues to act, is not put at risk.

Commentary

In summary, solicitors may only act for two clients in the same or related matters if they have the fully informed consent of all clients. If a conflict arises in the course of those matters, then the consent from all clients is required before continuing to act for any client (though even with consent the conflict may be too clear-cut to continue). Similarly, if a solicitor is acting for two clients in unrelated matters, and confidential information arises in one matter relevant to another client’s matter, then the consent from all clients is needed.

11.1 Avoid conflicts between current clients

Rule 11.1 envisages that conflicts may occur but should be prevented. Solicitors should employ practice management skills to manage actual or perceived conflicts of interest before they arise – for example, identifying areas of risk, educating staff about conflicts, and developing policies to avoid and respond to conflict situations.

In most cases, the conflicting duties will be the duty to maintain the confidences held for one client against the duty to use all of the solicitor's knowledge and skill for the benefit of a second client (the conflict recognised in Spector v Ageda [1973] Ch 30). The risk of conflict is heightened where the solicitor acts for separate clients in the one matter, the 'same matter conflicts' that are 'the very heartland of fiduciary law': Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1, 47-8. Allowing the mere possibility of a conflict is itself a breach of the common law duty: Hilton v Barker Booth and Eastwood (a firm) [2005] 1 WLR 567 ('Hilton'). In that case, the solicitors did more than allow the possibility of conflict in acting for both vendor and purchaser in a conveyance. They knew that the purchaser had been a bankrupt and a convicted fraudster, and took active steps to hide that financial risk from the vendor. After the transaction collapsed, the vendor successfully sued for breach of the solicitor's duty.

As with Rule 10, Rule 11 parallels the common law obligation to avoid conflicts that may be more subtle than that in Hilton. A breach of the obligation to avoid conflicting duties between two existing clients can result in a claim for civil compensation or an injunction. They may also be subject to disciplinary proceedings: see e.g. Re X, SC/388, 3 June 1997, Queensland Statutory Committee. In some circumstances acting for two or more parties in a transaction will result in a deterrent excess being applied by the professional indemnity insurer should a claim arise from that transaction.

The court also has an inherent supervisory jurisdiction over solicitors to ensure the due administration of justice, and may restrain a solicitor from acting even where there is no risk of the misuse of confidential information or a breach of a fiduciary duty of loyalty: UTi (Australia) Pty Ltd v Partners of Piper Alderman [2008] NSWSC 219, [46]-[52]. The test is whether a 'fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a solicitor should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice'. Even so, this jurisdiction is regarded as 'exceptional' and should be 'exercised with caution': Kallinicos v Hunt (2005) 64 NSWLR 561, [76].

11.2 Withdraw from one or both clients

Rule 11.2 states that the solicitor 'must not act' (except where permitted by Rule 11.3). This means that the solicitor should not act for either client, except as permitted by the rules. At common law, where a significant possibility of a conflict between the duties owed to both clients arises, the proper course for the solicitor to take is to withdraw from acting for both. It is not acceptable to withdraw from acting for only one of the clients, as in doing so the solicitor is likely to be acting in breach of duties that were owed to the other: Maguire v Makaronis (1997) 188 CLR 449, 465.

11.3A Informed consent

Rule 11.3 acknowledges that solicitors may act for two or more existing clients so long as both of the clients, being aware of the situation, have given informed consent. The rule mirrors the common law, as expressed in Farrington v Rowe McBride & Partners [1985] 1 NZLR 83:

"A solicitor’s loyalty to his client must be undivided. He cannot properly discharge his duties to one whose interests are in opposition to those of another client. If there is a conflict in his responsibilities to one or both he must ensure that he fully discloses the material facts to both clients and obtains their informed consent to his so acting … And there will be some circumstances in which it is impossible, notwithstanding such disclosure for any solicitor to act fairly and adequately for both": Richardson J at 90.

Accordingly, there will be cases in which acting for more than one client in the same or related transactions will create irreconcilable duties and it will be improper to act, regardless of the consent obtained. Though the clients may be willing to permit multiple representation, it is the profession’s "integrity and common sense" that will answer whether or not to proceed: Lie Hendri Rusli v Wong Tan and Molly Lim (a firm) [2004] 4 SLR (R) 594, [47].

The existence of an informed consent negates what would otherwise be a breach of fiduciary obligations: Maguire v Makaronis (1997) 188 CLR 449, 467 ('Maguire').

11.3A.1 Informed consent

Informed consent requires transparency, full disclosure of all material issues and frankness to all the parties in any proposed multiple representations. What is fully informed consent is a question of fact in all the circumstances of each case; there is no precise formula to determine if fully informed consent has been given: Maguire at 466.

In ‘same matter conflicts’, the following test was set by Clark Boyce v Mouat [1994] 1 AC 428:

"consent given in the knowledge that there is a conflict between the parties and that as a result the solicitor may be disabled from disclosing to each party the full knowledge which he possesses as to the transaction or may be disabled from giving advice to one party which conflicts with the interests of the other. If the parties are content to proceed upon this basis the solicitor may properly act": Lord Jauncey at 435.

Solicitors should do the following when obtaining informed consent:

explain (in writing) in language the clients will understand, and with consideration of their experience of legal matters:
the actual or potential conflict in the duties owed;
the risks and consequences of the multiple representation;
the advantages and disadvantages of the multiple representation;
how issues of confidentiality will be dealt with;
available alternatives to the multiple representation; and
where the circumstances of the case require it, recommend that the clients obtain independent and skilled advice from a third party: Maguire, 466-7; Commonwealth Bank of Australia v Smith (1991) 42 FLR 390.

Preliminary consent to disclosing information that is confidential may be needed. There is no implied right to disclose information because it is required to secure consent. Neither would it be an answer to failing to make full disclosure that you were unable to obtain the necessary consent to do so. If there is information that should be disclosed that cannot be, informed consent will be impossible to achieve.

11.3A.2 Consent in writing

Although Rule 11.3 does not stipulate that the informed consent be obtained in writing, solicitors are strongly urged as a matter of prudence to obtain the consent of both parties in writing. The consent should also be documented with the explanations, information and disclosures made.

In Legal Services Commissioner v Taylor [2011] LPC 003, the solicitor acted for both vendor and purchaser in a conveyance. In disciplinary proceedings, the solicitor admitted that it ought to have been apparent to himself and his conveyancing clerks that the clients' interests were in conflict, and that he failed to properly supervise his clerks to ensure that he ceased to act for both parties immediately upon the conflict arising. Although he had later told his clients of the conflict, he failed to provide them with information in writing and failed to obtain written acknowledgement from the parties that he was acting on behalf of both. The solicitor was found guilty of unsatisfactory professional conduct for the breach of duties to his clients.

11.3B Multiple representations by type of matter

Cases and other guidelines assist in removing the risk of conflict in conveyancing, contentious and criminal matters.

11.3B.1 Conveyancing cases

Solicitors should avoid acting for both parties in conveyancing transactions unless the informed consent of each party to the transaction is obtained before retainers are accepted.

In Clark Boyce v Mouat [1994] 1 AC 428, a solicitor acted for both a mother as mortgagor and a son as guarantor. He advised the mother to obtain independent legal advice; as if her son failed to meet the mortgage payments she would lose her own property. The solicitor was held to have made adequate disclosure and have secured fully informed consent to the transaction.
In Re Yarwood, SCT/91, 6 May 2003, and in Re Evans, SCT/93, 6 May 2003, the Queensland Solicitors Complaints Tribunal dismissed disciplinary charges against two solicitors, but observed that it is undesirable for solicitors to act on behalf of both the vendor and the purchaser in the one transaction. Although technically permissible to act for both, informed written consent should be obtained from both parties.

The Queensland Law Society, in the guideline on the predecessor of Rule 11.3, suggests that a solicitor should not act where the real estate agent had paid or intended to pay the solicitor's fees, unless the solicitor obtained the fully informed consent of their client.

The deterrent excess in the Lexon Master Policy applies in circumstances where a claim arises from a transaction in which a practitioner acted for:

both vendor and purchaser;
both lender and borrower; or
both lessor and lessee

In Yarwood and in Evans above, the tribunal recommended that 'under no circumstances should real estate agents directly or indirectly act as a source of referrals to legal practitioners. We are not saying that real estate firms should not be allowed to advise of the practitioners who are in the general locality, but it should be confined to that information and no other information.' It also recommended that the Queensland Law Society give a clear direction that 'no practitioner is to knowingly allow any of his firm's advertising material, retainers, business cards or letterheads or other relevant material be sourced and located at the real estate agent's office.'

11.3B.2 Contentious litigation

In litigation, the duty to avoid conflicting duties to two or more clients is more onerous. Parties to litigation who have potentially adverse interests must be separately represented. A solicitor may act for two or more parties in litigation only if the parties are on the same side in the proceedings, and their interests otherwise coincide. If either of these conditions are not met, the leave of the court must be obtained to represent more than one of the parties. Rule 8.03 of the Family Law Rules 2004 (Cth) explicitly demands this.

11.3B.3 Criminal matters

The representation of multiple criminal defendants produces an inherent conflict of duties, as each co-accused may attempt to incriminate another. Moreover a solicitor may be obliged to inform a client of the benefits of informing on a co-defendant and the benefits of entering an early plea of guilty. When an actual or foreseeable conflict of interest arises, it cannot be cured by information barriers or by briefing of separate counsel to represent each co-accused client. The Law Institute of Victoria’s Guidelines in the Representation of the Co-Accused recommends that the solicitor should:

advise the clients as soon as is reasonably practicable in relation to the risks and consequences that may flow if a conflict subsequently arises in the course of the proceedings;
record the fact of such advice in writing; and
provide the co-accused clients with a copy of the notice 'Information for persons jointly charged', which states:

… You may all be represented in court by the one solicitor or firm of solicitors only if there is no current or likely future conflict of interest between you and any other person who has been charged with you.

… If there is likely to be an argument between you and any other person charged with you about your role in the crime, then you should be represented in court from the start of your case by a different solicitor or firm of solicitors to any other person charged with you.

11.4 Confidentiality to be protected by information barriers

Rule 11.4 allows a legal practice to represent clients in conditions that would otherwise amount to a conflict where both the informed consent of both clients is obtained, and an effective information barrier is in place. Although paragraphs 11.4.1 and 11.4.2 are not explicitly connected by the conjunction 'and', the Law Council of Australia and the Queensland Law Society believe that that both must be met for a law practice to represent multiple clients. This is also the only position that appears to be compatible with the common law, although it is stricter than the common law by requiring both informed consent and an Information Barrier. The Information Barrier Guidelines (see commentary on Rule 10.2) only apply to conditions of successive representation, as do the permissible information barriers as set out in Prince Jefri. In equity, information barriers alone do not allow a practice to represent multiple clients with adverse interests simultaneously. The barriers are only a factor in securing what the firm must have: the fully informed consent of the clients concerned. As a result, reading Rule 11.4.1 and Rule 11.4.2 as cumulative requirements is the only position that allows Rule 11.4 to be read consistently with the common law.

11.5 Conflict arising during course of matter

In summary, Rule 11.5 provides that if a legal practice is representing two or more clients in a matter and a new conflict arises between duties owed to them, then the practice may only continue to act (at all) if no duty of confidentiality is put at risk. As always, all parties must give their informed consent, but even with that consent the legal practice must be satisfied that confidential information will not be disclosed. The rule should only be relied on in the rarest circumstances. Mostly, solicitors finding themselves in positions of actual conflict should withdraw from acting for both clients: see commentary under Rule 11.2 above.

11A.1. If a solicitor providing short-term legal assistance services forms a reasonable belief that the solicitor cannot screen for conflicts of interest due to circumstances where it is not reasonably practicable, the solicitor must ensure, to the extent reasonably practicable, that —

11A.1.1 the solicitor has disclosed the nature of the services to the client, and

11A.1.2 there is no actual or potential conflict between the duties owed to the client and one or more other clients, and

11A.1.3. the client has given informed consent to the provision of the services.

11A.2. A solicitor must not provide, or continue to provide, short-term legal assistance services to a client if the solicitor:

11A.2.1. is or becomes aware that the interests of the client are adverse to the interests of a current client of the solicitor or the solicitor’s law practice, or

11A.2.2. is aware that the solicitor has, or while providing the short-term legal assistance services obtains, confidential information of a current or former client that might reasonably be concluded to be:

11A.2.2.1. material to the client’s matter, and

11A.2.2.2. detrimental to the current or former client, if disclosed.

11A.3. A solicitor who is a partner, associate, employee, officer or employer in a law practice through which another solicitor is providing short-term legal assistance services, may act for another client of the law practice whose interests are adverse to the interests of the client receiving the services if:

11A.3.1. each client has given informed consent, and

11A.3.2. measures are in place to ensure confidential information will not be disclosed.

11A.4. In this Rule:

short-term legal assistance services means services offered by a solicitor to a client, whether through a legal assistance service provider or on a pro bono basis, with the expectation by the solicitor and the client that the solicitor will not provide continuing legal advice or representation in the matter.

Commentary

This is a new rule and came into force in 2024 and is untested.

12.1. A solicitor must not act for a client where there is a conflict between the duty to serve the best interests of a client and the interests of the solicitor or an associate of the solicitor, except as permitted by this Rule.

12.2. A solicitor must not do anything:

calculated to dispose a client or a third party to confer on the solicitor, either directly or indirectly, any benefit in excess of the solicitor’s fair and reasonable remuneration for legal services provided to the client, or
that the solicitor knows, or ought reasonably to anticipate, is likely to induce the client or third party to confer such a benefit and is not reasonably incidental to the performance of the retainer.

12.3. A solicitor must not borrow any money, nor assist an associate to borrow money, from:

12.3.1. a client of the solicitor or of the solicitor’s law practice; or

12.3.2. a former client of the solicitor or of the solicitor’s law practice who has indicated a continuing reliance upon the advice of the solicitor or of the solicitor’s law practice in relation to the investment of money,

UNLESS the client is:

an Authorised Deposit-taking Institution;
a trustee company;
the responsible entity of a managed investment scheme registered under Chapter 5C of the Corporations Act 2001 (Cth) or a custodian for such a scheme;
an associate of the solicitor and the solicitor is able to discharge the onus of proving that a full written disclosure was made to the client and that the client’s interests are protected in the circumstances, whether by legal representation or otherwise; or
the employer of the solicitor.

12.4. A solicitor will not have breached this Rule merely by:

12.4.1. drawing a Will appointing the solicitor or an associate of the solicitor as executor, provided the solicitor informs the client in writing before the Will is signed:

of any entitlement of the solicitor, or the solicitor’s law practice or associate, to claim executor’s commission;
of the inclusion in the Will of any provision entitling the solicitor, or the solicitor’s law practice or associate, to charge legal costs in relation to the administration of the estate; and
if the solicitor or the solicitor’s law practice or associate has an entitlement to claim commission, that the client could appoint as executor a person who might make no claim for executor’s commission.

12.4.2. drawing a Will or other instrument under which the solicitor (or the solicitor’s law practice or associate) will or may receive a substantial benefit other than any proper entitlement to executor’s commission and proper fees, provided the person instructing the solicitor is either:

a member of the solicitor’s immediate family;
a member of the immediate family of the solicitor’s spouse, or
a solicitor, or a member of the immediate family of a solicitor, who is a partner, employer, or employee, of the solicitor.

12.4.3. receiving a financial benefit from a third party in relation to any dealing where the solicitor represents a client, or from another service provider to whom a client has been referred by the solicitor, provided the solicitor advises the client:

that a commission or benefit is or may be payable to the solicitor in respect of the dealing or referral and the nature of that commission or benefit;
that the client may refuse any referral, and

the client has given informed consent to the commission or benefit received or which may be received.

12.4.4. acting for a client in any dealing in which a financial benefit may be payable to a third party for referring the client, provided the solicitor has first disclosed the payment or financial benefit to the client.

Commentary

12.1 Conflict with solicitor's own interests

Solicitors must be vigilant in their dealings to avoid actual and potential conflicts between their own interests and their duty of 'undivided loyalty' to their client. "'[W]henever a solicitor, either personally or through his company, seeks to deal with his own client, then the potential for conflict is so great that it will only be in rare cases that such a dealing could be acceptable': Reilly v Law Society of New South Wales (1988) 24 NSWLR 204, 219. Rule 12.1 supports Rule 4.1.1 in reflecting the solicitor's fundamental duty: to act in the best interests of a client in any matter in which the solicitor represents the client. A solicitor cannot misuse their influence over a client, actively or passively.⁴⁴ A solicitor must promote the best interests of the client, even where that will be to a personal disadvantage. If there is a conflict with the solicitor’s personal interests or those of their associates, then the solicitor cannot act except as permitted by Rule 12. The associates may be professional, financial or family: see Glossary. Nor can the solicitor act where in doing so there is the possibility of a conflict with the solicitor's personal interest.

The circumstances in which a conflict between duty and interest might arise are varied, and include transactions involving:

the charging of excessive fees or disbursements (see Rule 12.2);
lending to or borrowing from a client (see Rule 12.3);
a will or other instrument benefiting the solicitor (see Rule 12.4);
receiving or paying a referral fee or commission (see Rule 12.4);
inter vivos gifts and benefits to the solicitor: Re a Solicitor [1975] QB 475;
conducting a managed investment scheme: Reilly v Law Society of New South Wales (1988) 24 NSWLR 204;
buying from or selling to a client;
investment in a client’s business;
the exercise of a power of attorney; and
the representation of friends and family members.

Accepting gifts. This will depend on the answer to two questions. Firstly, the nature of the gift and secondly, whether a solicitor is continuing to represent the client. If the solicitor's retainer has ended then a modest gift given in gratitude by the client is acceptable.

12.2 Benefits in excess of fair and reasonable remuneration

Other than as expressly permitted by Rule 12, a solicitor must not gain benefit in excess of fair and reasonable remuneration for legal services or where the solicitor knows or ought reasonably to anticipate that they will induce the client or third party to confer such a benefit that is not reasonably incidental to the performance of the retainer; any excess benefit is presumed to be an exercise of undue influence over the client. Rule 12.2 reflects the civil law prohibition against a fiduciary deriving a financial advantage through undue influence, and extends to any financial dealings with their clients beyond charging a fair and reasonable fee. If a breach is found, the transaction may be set aside in equity with damages and an account of profits, in addition to any disciplinary charges: Law Society of New South Wales v Harvey [1976] 2 NSWLR 154.

Presumption of undue influence. The nature of the solicitor and client relationship is one of trust and confidence. As with all fiduciary relationships, there is a presumption of undue influence that stems from the imbalance in power and knowledge: Wright v Carter [1903] 1 Ch 27, 50. Any excessive gain by the solicitor is presumed to be a result of the undue influence. That presumption can only be rebutted by the client receiving full disclosure and independent advice. Any apparent common intention on the part of the solicitor and the client is irrelevant.

Fair remuneration. The negotiation of legal costs is the transaction in which the solicitor's superiority of knowledge and experience, and therefore influence, is most apparent. The client's interests are therefore protected in equity, UCT and by the LPA, as well as by the Rules. The twin objectives of consumer protection and professional standards are met by the costs disclosure and assessment regime of LPA Part 3.4. The non-exclusive grounds set out in LPA s 328(2) for the setting aside of costs agreements are instructive as to what are 'fair and reasonable' costs.

The charging of excessive legal costs is capable of constituting unsatisfactory professional conduct or professional misconduct: LPA s 420((1)(b).⁴⁵ The court also has an inherent jurisdiction to supervise the conduct of solicitors in relation to costs and address any breach Re Morris Fletcher and Cross’s Bill of Costs [1997] 2 Qd R 228.⁴⁶

12.3 Borrowing from clients

Subject to exceptions, Rule 12.3 prohibits a solicitor from borrowing from a client, or from a former client who continues to rely on the law practice for advice relating to investments. The prohibition operates regardless of any consent from the client. The client’s prior written consent may, however, prevent a civil claim for breach of fiduciary duty.

12.3.1 Meeting the fiduciary duty. The fiduciary obligation to a client in respect of borrowing is particularly onerous. The solicitor must show that all steps have been taken to protect the client’s interests. The duty is discharged if the solicitor has given full and frank disclosure of the their personal interest; has advised the client to obtain independent advice; and has secured the client’s fully informed consent to the terms of the loan: Law Society of New South Wales v Harvey [1976] 2 NSWLR 154, where the solicitor was removed from practice.⁴⁷ These actions should avoid solicitors taking advantage of clients by providing inadequate security or poor terms of interest, or by exposing the client to excessive risk.

Even if there is technical compliance with Rule 12, it is still possible that a discipline application could be brought for breach of the fiduciary duty and, in particular, the solicitor preferring his own interests over those of the client: e.g. Legal Services Commissioner v Hoolihan [2006] LPT 003, 9.

12.3.2 Rule 12.3 prohibition. Nonetheless, the prohibition in Rule 12.3 is significantly stricter than the solicitor's fiduciary duty. Borrowings are prohibited unless allowed by the exceptions in the Rule. No amount of client consent can cure the breach of professional standards.

A solicitor who advised the client to obtain independent advice, and whose client refused to do so, was still found to be in breach of the former Rule 86, and fined $2,500: Re X, SCT/13, 27 July 1999.
In Queensland Law Society v Wakeling [2004] QCA 42, a solicitor received instructions to act for clients A, B and C in a sale of land. He was paid $10,000 by the purchaser as a deposit, which the solicitor held in his trust account. However, before completion of the contract, client A authorised the solicitor to transfer the $10,000 to his office account as an unsecured loan for 'general use'. Neither B nor C nor the purchaser gave permission for this transfer, so the transfer was not properly authorised. Even if it was authorised, the court noted (at [18]) that such a borrowing contravened the rule.
The prohibition on borrowing is violated when a solicitor makes an unauthorised withdrawal of trust money that is subsequently reimbursed. If the solicitor secured some use of the money in the period before reimbursement, there has effectively been a borrowing from the client.

A breach of the predecessor Rule⁴⁸ has led to solicitors being removed from practice: Re Barry, SC/372, 30 October 1996; Re Andersen, SCT/74, 13 August 2002.

Exceptions to prohibitions. The exception categories are listed in Rule 12.3. The solicitor may avoid disciplinary action where the client is:

the solicitor's employer, authorised to take deposits under the Banking Act 1959 (Cth), a trustee company, or the responsible entity or custodian of a managed investment scheme, or
the solicitor's associate, and all fiduciary duties are discharged.

In all these cases, the solicitor still owes the fiduciary obligations noted above to obtain the client's fully informed consent to the terms of the loan.

12.4.1 Solicitor as executor. A solicitor should exercise caution before agreeing to accept appointment as an executor. If agreeable to appointment, the solicitor must make the disclosures required by Rule 12.4.1 and satisfy their fiduciary duty to their client. The law that restricts a gift to a solicitor under a will (see Rule 12.4.2) may also apply to an executor’s commission.

Avoid acting as executor. As there is a real potential for conflict, solicitors when approached should preferably decline to act as executors. In Re Will and Estate of Mary Irene McClung [2006] VSC 209, [34] ('McClung"), the court stated that:

"The occasion on which a solicitor receives instructions for the preparation of a will for a client by a solicitor can place the solicitor on the horns of a dilemma if the solicitor is asked to act as executor under the will. It is not a position which the solicitor should seek."

Other cases concerned with the conflict inherent in acting as a solicitor and executor are: Walker v D’Alessandro [2010] VSC 15; Re Will and Estate of Foster [2012] VSC 315.

Informed consent of client. Rule 12.4.1 sets out the disclosures that must be made in writing prior to the client signing the will:

any entitlement to a commission for acting as executor, and that client may appoint another person with no entitlement to commission, and
any entitlement to claim legal costs.

The intention is to ensure that the client understands the entitlement of the solicitor and the consequences of the appointment of the solicitor as executor. With respect to costs, Master Evans in McClung noted at [34]:

"It is reasonable for the solicitor to preface acceptance [of the position as executor] with a requirement that the will contain a charging clause in relation to any legal services performed for the estate. To request inclusion of a charging clause so wide as to enable the solicitor to charge for all executorial functions is not reasonable unless the solicitor ensures that the will provides that such charges may be made in lieu of any entitlement to commission and the full import of the clause is explained to the client."⁴⁹

The solicitor should also inform the client the maximum rate of commission which would be charged, and the possible burden such commission may impose both on the corpus and income of the estate: McClung at [35]. A solicitor-executor who charges a commission beyond that entitled may be guilty of professional misconduct. In Legal Services Commissioner v Bone [2013] QCAT 550 a practitioner was charged with a number of offences but only two were proceeded with. The subject of those two charges were:

a failure to provide written notice to testators before signing their respective wills in contravention of Rule 10 under the then current Legal Profession (Solicitors) Rule 2007 (which is now Rule 12.4.1); and
the charging of fees for 'care and consideration' for which no provision was made in the costs agreement.

In relation to the failure to provide the required notice the Tribunal found that:

the urgency with which the wills were drawn;
the verbal advice provided by the articled clerk to the wife; and
the prominence of the charging clause in the will was so as to make it highly improbable that either testator did not see it, or overlooked it,

was evidence enough that the relevant matters were brought to the attention of the testators and that the technical breach of the rule (the failure to provide written notice prior to the execution of the wills) in these circumstance was not enough to bring the conduct of the practitioner within the meaning of 'unsatisfactory professional conduct'. A number of lessons can be drawn from this decision:

the failure to strictly comply with the rule will not necessarily lead to a finding of 'unsatisfactory professional conduct' in circumstances where a disciplinary tribunal is satisfied that there are exceptional circumstances and where the objectives of the conduct rules have been met;
where a client requests a solicitor to act as their executor:

ensure that you comply with the requirement of the rule;
ensure that the charging clauses feature prominently in the will;
if exceptional circumstances arise and it is not possible to technically comply with the rule then it is recommended that the solicitor –

orally explain to the client the requirements set out in the rule; and
record such explanation in an appropriate note (preferably signed by the client).

(c) an agreement entered into by a solicitor executor of a will and the solicitor in their role as a legal practitioner where both parties are the same, will be void and unenforceable. While this is a problem for sole practitioners it would not be a problem for a partnership (or possibly an incorporated legal practice) pursuant to s. 50 Property Law Act 1974 (Qld);

(d) one of the appropriate courses for a sole practitioner to take, where the practitioner is the solicitor executor, is not to enter into a costs agreement with him or herself, but rather to charge the estate for legal services rendered and calculated by reference to schedule 1 of the Scale of Costs under the Uniform Civil Procedure Rule 1999 (Qld) (UCPR).

For disciplinary action against a solicitor see: Legal Services Commissioner v Hession (Legal Practice) [2010] VCAT 1328.12.4.2

12.4.2 Solicitor as beneficiary

A solicitor receiving a substantial gift under a will or other instrument is a special case of the general rule against benefits: see Rule 12.2. Both the professional conduct standards and the common law restrict such gifts. The rule is not concerned with gifts of a trifling nature. A solicitor may only receive a substantial benefit under a will if the testator is in their immediate family, or the family of a partner, employer or employee of the solicitor. In those cases, the presumption of undue influence must be rebutted by adequate disclosures. In other cases, the solicitor cannot advise on the will, or will face disciplinary penalties in addition to civil law remedies.

Prohibition against acting if a beneficiary. The common law strongly suggests that, as a professional conduct standard, the solicitor who was to receive a benefit under a will or other instrument should not act. In Re a Solicitor [1975] QB 475, solicitors who failed to do so were struck from the Roll. The standard of conduct applied was that solicitors in such a situation should not only suggest but should ensure that independent advice is taken and should forgo any benefit where such advice is not taken. Rules 12.1 and 12.4.2 make this prohibition explicit. They prohibit the solicitor from acting for the client even if the client is exercising a free judgment in leaving the gift to the solicitor. The civil standard allows the solicitor to act for a client in drawing a will (or other instrument) even if the solicitor is to receive a material benefit although the gift may eventually be regarded as invalid: Dore v Billinghurst [2006] QCA 494.

Rule 12.4.2 does, however, allow the solicitor to obtain a material benefit under a will drafted for their own or their spouse's immediate family. It is the only exception to the prohibition: where the client is 'a member of the solicitor's immediate family; or their spouse's immediate family; or a solicitor, or a member of the immediate family of a solicitor, who is a partner, employer, or employee, of the solicitor'. Nevertheless, the presumption of undue influence will still apply in these cases, and some of those listed may be people who are even more vulnerable to undue pressure. Accordingly, the solicitor must rebut the civil law presumption of undue influence. If not, there may still be disciplinary proceedings for breach of the civil standard: Legal Practitioners Complaints Committee v Clark [2006] WASAT 119.

The presumption of undue influence. The relationship between solicitor and client has long been presumed by courts of equity to be one of undue influence. As a result, a solicitor who receives a benefit (such as a gift or a legacy) under the will or instrument of a client is presumed to have exercised undue influence. Without proving anything more, other beneficiaries of the client may have the gift or legacy set aside: see Dowsett v Reid (1912) 15 CLR 695, 707.⁵⁰

Importantly, it is not necessary that the solicitor who received the gift or legacy is actually the solicitor who drew the will or instrument. The presumption may arise where the solicitor has been instructed in other matters, for the mainspring of equity is the habitual reliance and confidence arising from the relationship. Nevertheless, it would normally be the case that the relationship between solicitor and client be one that has been close and maintained for some longer period. Therefore, the presumption would not necessarily arise where the solicitor who has been instructed in one isolated matter (other than the drawing of the will in question), or if the client has simultaneously retained a number of different solicitors for different matters.⁵¹

Rebutting the presumption. If the presumption exists, the onus is on the solicitor wishing to keep the gift to show that:

'the gift was the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee', and
that the transaction cannot be attributed to the relationship of inequality between solicitor and client: Johnson v Buttress (1936) 56 CLR 113, 134-5, considered in Weiss v Barker Gosling (1993) 16 Fam LR 728, 761.

How that 'free judgment' is shown will depend on the circumstances. Advising the client to obtain independent advice is 'an important factor in determining whether the gift is the pure voluntary and well-understood act of the donor'. The more valuable the gift, the more important independent legal advice will be: Union Fidelity Trustee Company of Australia Ltd v Gibson [1971] VR 573, 577. Where a presumption is raised, the court will set aside the gift unless the solicitor can establish it was the spontaneous act of the donor acting in circumstances which enabled [the donor] to exercise an independent will. If the evidence establishes the fact it should not be disregarded solely because the donor did not receive independent legal advice. On the other hand the receipt of independent legal advice may rebut the presumption although it is not acted upon. But to have that effect it must be given with a knowledge of all the relevant circumstances, and be such as a competent and honest adviser would give if acting solely in the interest of the donor: Inche Noriah v Shaik Allie Bin Omar [1929] AC 127, 135. Whether the client is generally 'sophisticated and well-informed' will be a factor.⁵²

12.4.3 Referral fees from third parties

A solicitor may contemplate receiving a benefit or commission from a third person in two circumstances:

where the solicitor receives a client as a result of a referral; or
where the solicitor refers the client to a third person who offers a commission ('a referral fee').

For Queensland practitioners, refer to Guidance Statement No. 4 – Receiving Referral fees and Rule 12.4.3 ASCR.

Secret payments or commissions. Serious criminal responsibility can arise in any case where a solicitor secretly receives a commission from a third party in relation to a client's business, or that would in any way influence the solicitor's representation of the client: ss 442A-442M Criminal Code (Qld). These penalties are in addition to disciplinary rules.

Payments or commissions with informed consent. A solicitor who refers a client to a third person is not to accept a benefit or commission from the third person⁵³ unless the conditions of statute law and Rule 12.4.3 are both satisfied. In personal injury cases in Queensland and conveyancing in South Australia, such referrals are prohibited and criminal penalties apply. For further commentary refer to Statutory prohibitions on referrals below.

Under Rule 12.4.3, the solicitor must receive the client’s informed consent to the benefit, having disclosed:

that a commission or benefit is or may be payable;
the nature of the commission or benefit; and
that the client may refuse any referral.

Note that the rule applies whether or not the solicitor is to represent the person they are referring.

Nature and quantity of benefit. Though the rule requires only 'the nature of the commission or benefit' to be disclosed, it is strongly advised that the actual amount or formula should also be disclosed. The nature of the benefit may be a payment of money, cross-referral of other business to the solicitor from the third person, discounted payments or rebates for services provided to the solicitor from the third party, a success fee or even a shareholding or financial interest in the third person: see Law Society of the ACT v Lardner [1998] ACTSC 187 ('Lardner'). The rule does not explicitly require disclosure of a quantification of the commission or benefit. However, the rule requires that the client give 'informed consent to the commission or benefit received' and, if the solicitor is capable of identifying the amount or formula involved, it is unlikely that consent will be ‘informed’ if that is withheld from the client. Secondly, the common law standard of disclosure in cases involving referral fees and benefits has been 'full and frank disclosure to the client of all information known to the solicitor which the client should know': Lardner at [22]; Maher v Millennium Markets Pty Ltd [2004] VSC 174, [72]-[72]. If the solicitor knows the amount of or formula for calculating the benefit, this should be scrupulously disclosed: Maher at [69]-[83]. The full and frank disclosure of the commission or benefit is also the best course to take to avoid criminal responsibility for accepting secret commissions.

Informed consent. In addition to the required disclosures, the client must give 'informed consent to the commission or benefit received'. In cases involving referral fees and commissions, the common law requires 'fully informed consent' (Maher at [76]). What amounts to consent that is 'informed' is 'a question of fact in all the circumstances of each case and there is no precise formula which will determine in all cases if fully informed consent has been given'. It is not always necessary to advise that independent and skilled advice should be sought from another adviser (including another solicitor), but this may often be necessary if the consent is to be informed: Maguire v Makaronis (1997) 188 CLR 449, 466; Maher at [76]. The more care that is taken to ensure the client is in an informed position to give consent, the more likely the conditions of Rule 12.4.3 will have been met. It is therefore recommended that solicitors advise clients that they should seek independent and suitably skilled advice before consenting to the commission or benefit.

Form of disclosure and consent. Rule 12.4.3 does not require the disclosures to be in writing. However, it is strongly recommended that a solicitor makes the disclosures, advises of the need for independent advice, and obtains consent in writing. Similarly, in circumstances where the solicitor has made the referral, the solicitor should send to the client he is referring to another, a standard letter of non-engagement.⁵⁴

Statutory prohibitions on referrals. In Queensland, no person can reward or receive a reward from another for soliciting or inducing a 'potential claimant' to make a claim for compensation or damages for personal injury: Personal Injuries Proceedings Act 2002 (Qld) s 68(1). A solicitor who pays a referral fee may be soliciting a potential claimant to make a claim, and the solicitor who receives a referral fee may be involved in that inducement.

In South Australia, a solicitor may not pay or reward a person for referring business involving the preparation of any 'conveyancing instrument': Land and Business (Sale and Conveyancing) Act 1992 (SA) s 29. A 'conveyancing instrument' is any document for which an entry in the Register Book is directed, required or permitted by the Real Property Acts. A solicitor who benefits from referring conveyancing business to another solicitor may also be criminally liable as a party to an offence. The section effectively bans the payment and receipt of referral fees for conveyancing in South Australia.

12.4.4 Referral fees to third parties

Apart from the statutory prohibitions noted under Rule 12.4.3, a solicitor may pay a third party a benefit for referring the client, provided that benefit is disclosed to the client.⁵⁵

For Queensland practitioners, refer to Guidance Statement No. 3 – Paying Referral Fees and Rule 12.4.4 ASCR.

44 See for example Professor PD Finn, Fiduciary Obligations, The Law Book Company Ltd, 1977, p 161-168.

45 Council of the Queensland Law Society v Roche [2004] 2 Qd R 574 and Legal Services Commissioner v Duffield [2007] LPC 05/07.

46 See also: Law Society of New South Wales v Foreman [1994] 34 NSWLR 408.

47 Law Society of New South Wales v Moulton [1981] 2 NSWLR 736.

48 Rule 86 Queensland Law Society Rule 1987 (Qld).

49 Emphasis added.

50 See also: Oldham v Hand (1751) 2 Ves Sen 259; 28 ER 167; Welles v Middleton (1784) 1 Cox 112, 125; 29 ER 1086, 1091-2; Haywood v Roadknight [1927] VLR 512 at 520.

51 R Meagher, D Heydon and M Leeming, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (LexisNexis, 4th ed, 2002) 509-10.

52 For a recent decision concerning a discipline application, see Law Society of Singapore v Wan Hui James [2013] SGHC 85.

53 Rule 12.4.3 applies to the solicitor who receives a benefit or commission; the former rule 32 of the Legal Profession (Solicitors) Rules 2007 (Qld) applied to the solicitor who paid the benefit or commission.

54 See also Guidance Note for Members: 'Referral Fees – Solicitors obtaining work by paying a financial benefit to a third party' on the Ethics Centre website.

55 See 'Referral Fees Caution' on the Ethics Centre website.

13.1 A solicitor with designated responsibility for a client's matter must ensure completion of the legal services for that matter UNLESS:

13.1.1. the client has otherwise agreed;

13.1.2. the law practice is discharged from the engagement by the client;

13.1.3. the law practice terminates the engagement for just cause and on reasonable notice; or

13.1.4. the engagement comes to an end by operation of law.

13.2. Where a client is required to stand trial for a serious criminal offence, the client's failure to make satisfactory arrangements for the payment of costs will not normally justify termination of the engagement UNLESS the solicitor or law practice has:

13.2.1. served written notice on the client of the solicitor's intention, a reasonable time before the date appointed for commencement of the trial or the commencement of the sittings of the court in which the trial is listed, providing the client at least seven (7) days to make satisfactory arrangements for payment of the solicitor's cost; and

13.2.2. given appropriate notice to the registrar of the court in which the trial is listed to commence.

13.3. Where a client is legally assisted and the grant of aid is withdrawn or otherwise terminated, a solicitor or law practice may terminate the engagement by giving reasonable notice in writing to the client, such that the client has a reasonable opportunity to make other satisfactory arrangements for payment of costs which would be incurred if the engagement continued.

Commentary

13.1 Completion of legal services

Subject to Rule 13.1, a solicitor must complete the work for which they were retained before any liability for costs arises with the client (subject to the express terms of any retainer). Solicitors' retainers are in this way viewed as entire contracts: Cutter v Powell (1795) 101 ER 573. This presumption is not unqualified. For example, a solicitor has a right to recover their professional costs on a restitutionary basis for work done before termination of the engagement. Planché v Colburn [1831] ER 856; Legal Services Commissioner v Baker [2006] QCA 145, [3]. The solicitor and client can agree that the solicitor is entitled to charge on an interim basis for professional services and disbursements.⁵⁶ The engagement can only be terminated as provided by Rule 13.1:

By prior agreement of the client⁵⁷
By the client discharging the solicitor
By the solicitor terminating the engagement for just cause and on reasonable notice, or
By operation of law.

Even if found negligent, a solicitor may recover costs from the client 'which are severable, untainted by negligence and which relate to matters distinct from those upon which the solicitor has been found negligent': Cachia v Isaacs (1985) 3 NSWLR 366, 371.

13.1.2 Discharge by client

There is an implied term in a retainer enabling the client to terminate it at any time, without providing a reason: Court v Berlin [1897] 2 QB 396. A solicitor should only consider the retainer terminated by a client when a client gives a clear indication of their intention to do so: Re Wingfield & Blew (Solicitors) [1904] 2 Ch 665, 684. It is not enough for the client to express dissatisfaction with the solicitor; the solicitor must 'bring matters to a head' so that the client’s intention to terminate is clear and unequivocal: Stark v Dennett [2008] QCA 50, in which Keane JA at [45] commented that:

"One can readily understand that the respondent [solicitor] may have regarded the appellant [client] as a demanding and, even an ungrateful, client. It may well be that the appellant’s expressions of a want of confidence in the respondent’s advice were such that the respondent would have been justified in calling upon the appellant at some earlier stage to state clearly, once and for all, whether the appellant wished to continue to retain the respondent in his action, making it clear in this regard that a continuation of the appellant’s expressions of discontent would be treated as manifesting a breakdown of the trust and confidence essential to the continuation of the retainer. But the respondent did not bring matters to a head in such a clear and unequivocal way before denying the appellant access to his own papers."

13.1.3 Termination for just cause

A solicitor cannot unilaterally terminate the retainer without 'just cause' and on 'reasonable notice': Underwood Son & Piper v Lewis [1894] 2 QB 306, 314.⁵⁸ 'Just cause' can arise where there is 'breach or repudiation of the retainer by the client': Legal Services Commissioner v Baker [2006] QCA 145, [3]. 'Just cause' to terminate is a question of fact, and Dal Pont provides a non-exhaustive list⁵⁹:

The client's behaviour is 'inconsistent with continuing representation, preventing the lawyer from properly performing their duties', for example if the client:

breaches the costs agreement regarding fees or expenses;
delays or refuses to pay the lawyer’s costs in breach of the costs agreement;
misrepresents the facts of the matter to the lawyer (see Kavia Holdings v Werncog [1999] NSWSC 839 discussed under Rule 19.2 below);
insists that the lawyer breach the law or professional rules;
casts insulting imputations upon the lawyer’s character or conduct; or
clearly indicates that they have retained or intends to retain another solicitor to carry out the same subject matter covered by the retainer (see Stark v Dennett discussed under Rule 13.1.2 above).

The continuation of the retainer would result in the lawyer breaching their duty of confidentiality, fiduciary or professional obligations: see Rules 9 to 12.
The retainer is likely to have a seriously adverse effect upon the lawyer’s health: Forney v Bushe (1954) 104 LJ 604.
The client or the lawyer has died or become insane^.⁶⁰

What is 'reasonable notice' is a question of fact.

13.1.4 Termination by operation of law

Rule 13.1.4 includes situations in which the solicitor is struck off in the course of the retainer: Ireland v Trilby Misso Lawyers [2011] QSC 127.

For Queensland practitioners, refer to Guidance Statement No. 8 – Termination of a retainer.

13.2 Costs in a serious criminal trial

Where a client has not made satisfactory arrangements to pay legal costs in a serious criminal trial, the solicitor may only terminate the engagement with the required written notice, being:

served a reasonable time before the date appointed for commencement of the trial and providing the client at least seven days to make satisfactory arrangements for the payment of costs (ASCR Rule 13.2), and
prescribed notice to the court.

A solicitor may be obliged, depending on the jurisdiction to comply with Rule 18 and 19 of the Criminal Practice Rules 1999 which requires a solicitor seeking leave to withdraw from representing an accused person to give a prescribed notice to the court and prosecution at least 21 days prior to the accused’s next appearance in court.

Considered together, the two rules require the solicitor to give the Rule 13.2 notice at least 28 days before the accused’s next appearance in court.

56 For further consideration of these issues, refer to Queensland Law Society Costs Guide 2014 edition.

57 The costs agreement can further delineate the terms on which a solicitor can terminate a retainer with the client.

58 See also: Legal Services Commissioner v Baker [2006] QCA 145, [3] (McPherson JA).

59 GE Dal Pont, Lawyers’ Professional Responsibility (Lawbook Co, 5th ed, 2013) 97.

60 Ibid 97-8.

A solicitor with designated responsibility for a client’s matter, must ensure that, upon completion or termination of the law practice’s engagement:
1. the client or former client; or
2. another person authorised by the client or former client, is given any client documents, (or if they are electronic documents copies of those documents), as soon as reasonably possible when requested to do so by the client, unless there is an effective lien.
A solicitor or law practice may destroy client documents after a period of 7 years has elapsed since the completion or termination of the engagement, except where there are client instructions or legal obligations to the contrary.

Commentary

14.1 Introduction

The common law and Rule 14.2 may differ, which means that it may be best not to follow Rule 14.2 without also meeting the standards of the common law (see Rule 2).

Ownership of client documents. The operation of Rule 14 will depend on whether the documents in question are the client's or the solicitor's. The ASCR glossary defines "client documents" to mean "documents to which a client is entitled", examples of which are set out in Appendix C.

Documents created before the start of the retainer and delivered or sent to a solicitor by the client or third parties during the retainer are held by the solicitor as agent for the client or third party. Documents that are brought into existence during the retainer are well classified by Hope JA in Wentworth v de Montford (1988) 15 NSWLR 348, 355-6. Belonging to the client are documents:

prepared by the solicitor for the benefit of the client and which may be said to have been paid for by the client; and
prepared by a third party and sent to the solicitor (other than at the solicitor's expense) with the intention that they belong to the client.

Documents belonging to the solicitor are those:

prepared by the solicitor for their own benefit or protection, and not regarded as an item chargeable against the client, and
sent by the client and intended by the client to belong to solicitor.

Handing over client documents on request. Rule 14.1 applies when the client’s matter is completed or the retainer terminated. Unless there is an effective lien (see Rule 15), when a client or former client, or a person authorised by them, requests client documents, then the solicitor with designated responsibility is to deliver any client documents as soon as reasonably possible. 'Reasonable time' is a question of fact that will depend on the circumstances.

Once the solicitor has delivered the client documents to the client, there is no obligation to hand over further copies. If the client loses them and/or asks for another set, the solicitor is under no duty to provide a further complete set or a copy of selected documents.

Means of delivery. The means by which the solicitor delivers client documents will also depend on the circumstances. Where the solicitor and client have explicitly or implicitly agreed that client documents are to be held in a specific format (for example electronically or in hard copy), then delivery in that format would be appropriate.

For Queensland practitioners, refer to Guidance Statement No. 6 – Form of Delivery for Client Documents.

14.2 Destruction of client documents

Rule 14.2 on its' face allows a solicitor to destroy client documents seven years after the engagement ends, subject to client instructions or legislation. However, client consent is best secured for the destruction, as the rule does not authorise destruction of documents that are the client’s property. It is strongly recommended that solicitors have a file destruction clause in the costs agreement from the outset, and remind the client of this clause at the end of the retainer.⁶¹

Documents to be kept for seven years or as legal obligations demand. As claims arising from the retainer can take time to mature, it may be necessary to keep client documents beyond the period suggested in Rule 14.2. Section 60 of the Legal Profession Regulation 2007 (Qld) requires the retention of trust records for a period of seven years, notwithstanding clients' instructions or consent to destroy it earlier. The specific limitation periods of the matter also need to be taken into account before destroying client documents, for relevant times see section 713 A Legal Profession Act 2007, Limitations of Actions Act 1974 (Qld), the Personal Injuries and Proceedings Act 2002 (Qld) or other relevant legislation. In many cases it may be prudent to retain relevant material for up to twenty-five years, or if the file relates to the creation of a document with long term operation, for the entire lifespan of that document plus seven years. For Queensland practitioners, refer to QLS Client Document Retention Guidance.

61 Howard Moses, 'Destroying Client Files? Not without client instructions!' (2008) Proctor 14.

Notwithstanding Rule 14, when a solicitor claims to exercise a lien for unpaid legal costs over client documents which are essential to the client's defence or prosecution of current proceedings:
1. if another solicitor is acting for the client, the first solicitor must deliver up the documents to the second solicitor:
  1. if the second solicitor undertakes to hold the documents subject to the lien and maintains reasonable security for the unpaid costs; or
  2. if the first solicitor agrees to the second solicitor agreeing to pay, or entering into an agreement with the client to procure payment of, the first solicitor's costs upon completion of the relevant proceedings; or
2. alternatively, the solicitor, upon receiving reasonable security for the unpaid costs, must deliver the documents to the client.

Commentary

15.1 Lien over client’s documents

Where the documents are essential to the former client’s continuing proceedings, a solicitor who is exercising a lien must still deliver the documents if there is reasonable security for the unpaid costs. Delivery is to a second solicitor who is offering that security (Rule 15.1.1), or otherwise to the client (Rule 15.1.2). For Queensland solicitors refer to Lexon’s insurance checklist on the transfer of a client file.

A retaining lien enables a solicitor to ‘withhold possession of the documents or other personal property of his client or former client’ until their costs are paid: Barratt v Gough-Thomas [1951] Ch 242, 250. The lien exists no matter whether the client discharged the solicitor or the solicitor discharged the client (provided that the solicitor's termination was for 'just cause'). If a solicitor terminates the retainer the solicitor's rights to exercise the lien are qualified. The lien is qualified in the sense that the court can require the solicitor to deliver up the client documents to the new solicitor, who holds subject to the former solicitor’s lien. It prevents a client from "in effect getting solicitors’ work done for nothing by the simple expedient of changing his solicitor as often as he chose, leaving a trail of unpaid costs in his wake and demanding the papers without payment when he had no just cause to complain of the conduct of the solicitors instructed and discarded": Hughes v Hughes [1958] 3 All ER 179, 180-181.

The retaining lien may be exercised over:

a client’s passport: Xu v Council of the Law Society of NSW [2009] NSWCA 430; and
monies in a trust account: LPA s 258(1)(a); cf s 31(1) LPA (SA) and the Legal Practitioners (Miscellaneous) Amendment Bill 2013 (SA).

However, a solicitor cannot claim a lien over a will: Hawkins v Clayton (1988) 164 CLR 539, 550.

Reasonable security for essential documents. At common law, the court has discretion to order a solicitor to hand over a file to new solicitors, and will do so to 'save the client's litigation from catastrophe', as contemplated by Rule 15. This is subject to the new solicitor's undertaking 'to preserve the original solicitor's lien and to return the papers to the original solicitor, for what they are worth, after the end of the litigation': Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1980] 1 WLR 614, 624-5.

"Reasonable security" is "the provision, in lieu of payment, of something of monetary value which would ensure the satisfaction of the possessory lien": Bechara t/as Bechara & Co v Atie [2005] NSWCA 268, [64]. Apart from undertakings, tripartite deeds may be regarded as reasonable security, and have been approved for the purpose by the Law Society of New South Wales. However, where the solicitor has terminated the retainer without good cause, the court can require the solicitor to deliver up the file to the new solicitor, but "the court will not … be overly fastidious to ensure the adequacy of the former solicitor's security for his fees": Stark v Dennett (2008) 2 Qd R 72, [49] per Keane JA.

A solicitor must not charge:
1. for the storage (either physical, electronic or otherwise) of documents, files or other property on behalf of clients or former clients of the solicitor or law practice (or predecessors in practice); or
2. for retrieval from storage of those documents, files or other property,
  UNLESS the client or former client has consented to such charge being made.

Commentary

In Legal Services Commissioner v Rose (No 2) (Legal Practice) [2007] VCAT 2465, the Commissioner sought an order that the solicitor refrain from charging retrieval fees without the client's written consent. The tribunal found the solicitor guilty of unsatisfactory professional conduct for breaching Rule 37 of the Professional Conduct and Practice Rules 2003 (Vic), which is in similar terms to Rule 16. However, in the circumstances the public interest was served by having the solicitor pay the Commissioner's costs, without any other sanction being imposed.

Where a solicitor makes a copy of a client's documents prior to the client collecting them, such copies must be made at the solicitor's cost as they are being retained for the solicitor's benefit, not the client's. Where the solicitor proposes to charge for imaging documents for electronic archiving, the client should be informed – and specifically acknowledge – that they are entitled to collect the file without charge.

Membership

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Practising Law in QLD

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Australian Solicitors' Conduct Rules

Relations with clients

Commentary

7.1 Clear and timely advice

7.2 Alternative dispute resolution

Commentary

Lawful and proper

Competent instructions

Litigation and contract (capacity tests and comment)

Will instructions

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Commentary

9.1 Duty to keep information confidential

9.2 Exceptions to duty of confidentiality

9.2.1 Authorised by client

9.2.2 Permitted or compelled by law

9.2.3 Disclosure to obtain ethical or legal advice

9.2.4 Avoiding probable crimes

9.2.5 Preventing physical harm

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Commentary

10.1 Ongoing duty of confidentiality

10.2 Material and detrimental to the interests of the former client if disclosed

10.2.1 Informed consent

10.2.2 Information barriers

The inherent jurisdiction to restrain a solicitor from acting for a client

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Commentary

11.1 Avoid conflicts between current clients

11.2 Withdraw from one or both clients

11.3A Informed consent

11.3A.1 Informed consent

11.3A.2 Consent in writing

11.3B Multiple representations by type of matter

11.3B.1 Conveyancing cases

11.3B.2 Contentious litigation

11.3B.3 Criminal matters

11.4 Confidentiality to be protected by information barriers

11.5 Conflict arising during course of matter

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Commentary

12.1 Conflict with solicitor's own interests

12.2 Benefits in excess of fair and reasonable remuneration

12.3 Borrowing from clients

12.4.2 Solicitor as beneficiary

12.4.3 Referral fees from third parties

12.4.4 Referral fees to third parties

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13.1 Completion of legal services

13.1.2 Discharge by client

13.1.3 Termination for just cause

13.1.4 Termination by operation of law

13.2 Costs in a serious criminal trial

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14.1 Introduction

14.2 Destruction of client documents

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15.1 Lien over client’s documents

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Commentary

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