|Citation||Non-Binding Ethics Ruling (2021) 6|
|Non-Binding Ethics Ruling of:||Ethics Committee, Queensland Law Society|
NON-BINDING RULING - QUEENSLAND LAW SOCIETY - ETHICS COMMISSION - CONFLICT - FORMER CLIENT - SOLICITOR'S OWN INTERESTS - SOLICITOR AS MATERIAL WITNESS - definition of former client – whether solicitor is in possession of confidential information detrimental to former client – whether an effective information barrier can be established – whether a conflict arises in circumstances where solicitor might be called as a material witness in client’s case and where former client might have a claim in negligence against solicitor
|Published date:||27 April 2021|
Australian Solicitors Conduct Rules 2012
- This is a non-binding ethics ruling (NBER) by the Ethics Committee (Committee) of the Queensland Law Society (QLS).
- The ruling relates to a dispute between Firm A and Firm B as to whether the principal of Firm A is in a position of conflict.
- A dispute has arisen between the parties of a trading trust. During the formation of the trading trust and the establishment of a business venture between Firm A's and Firm B's respective clients, the principal of Firm A (who at that time was the principal of another firm and advises did not have substantial carriage of the matter) provided advice to the parties. Firm B is concerned that as a result, Firm A's principal may have confidential information that could be used to the detriment of its clients and therefore Firm A's principal is in a position of conflict. Firm B also contends that the principal of Firm A is also in a position of conflict because there is a possibility that she will be a material witness in the dispute between the parties and its clients might have a claim in negligence against the principal of Firm A and her former firm.
- The principal of Firm A contends that she only provided limited advice on discrete issues, to assist the solicitor with carriage of the matter, and she is not in possession of any confidential information as a result of providing that advice.
- The QLS has received the following materials:
- Letter: Firm A to QLS dated 3 March 2021, attaching:
- Letter: Firm B to Firm A dated 26 February 2021;
- Letter: Firm A to Firm B dated 28 February 2021;
- Letter: Firm B to Firm A dated 1 March 2021;
- Letter: Firm A to Firm B dated 2 March 2021; and
- Letter: Firm B to Firm A dated 3 March 2021;
- Letter: Firm A to QLS dated 15 March 2021; and
- Letter: Firm B to QLS dated 25 March 2021, attaching:
- Email: Solicitor A to Company A dated 25 October 2018;
- Firm C Tax Invoice No. 7 issued to Client A and Client B dated 12 November 2018;
- Letter: Firm C to Client A and Client B dated 8 February 2019; and
- Email: Company A to Client B dated 24 March 2019.
- Letter: Firm A to QLS dated 3 March 2021, attaching:
- During the course of preparing this non-binding ethics ruling it became apparent to the Committee that the letters referred to at paragraphs 5(b) and 5(c) above were only delivered to the QLS and had not been exchanged between the parties. Accordingly, on 7 April 2021, the QLS provided copies of those letters to both parties and invited them to make any further submissions on the contents of those letters. In response, the following was received:
- Letter: Firm A to QLS dated 7 April 2021; and
- Letter: Firm B to QLS dated 25 March 2021 (although received by the QLS on 16 April 2021).
- It is a condition of the NBER process that any material submitted to the QLS for the Committee's consideration must also be provided to any other party involved in the matter.
- From the material referred to in paragraphs 5 and 6 above, the Committee understands the facts that are relevant to this NBER, are as set out in paragraphs 9 to 30 below.
- In 2018, Solicitor A, now the principal of Firm A, was an employee of Firm C. Solicitor C was a principal of Firm C at this time.
- In late 2018, Firm C took instructions and acted on behalf of Client A and Client B in relation to a new business venture. The solicitor primarily responsible for the matter was Solicitor C.
- In about October 2018, Solicitor C asked Solicitor A to review Client A's employment contract and to advise on the restraint of trade clause contained in the document and whether the restraint of trade might prevent Client A from commencing the business venture with Client B.
- Solicitor A advises that:
- she reviewed Client A's employment contract and provided advice via email;
- the email was settled by Solicitor C prior to being issued to Client A; and
- at this time she was not provided with any information about the business venture Client B and Client A were undertaking.
- Firm B has provided the Committee with a copy of an email dated 25 October 2018 from Solicitor A to Company A, which advises on Client A's employment contract with Employer X. The advice provided in that email refers to the new enterprise being established by Client A and Client B, and the opening paragraph of the email advises that Solicitor A's review of the employment contract was undertaken 'in light of your new enterprise with Client B'.
- On 12 November 2018, Tax Invoice No. 7 was issued by Firm C to both Client A and Client B. The professional fees itemised in Tax Invoice No. 7 included the review of the employment contact and 'draft email advice to the client re potential breach of contract', in addition to other work regarding the preparation of confidentiality deeds.
- Firm B contends that Client A did not share Solicitor A's advice with Client B until four months after it had been given. The Committee notes the email from Company A to Client B dated 24 March 2019 forwarding Solicitor A's advice.
- In early 2019,1 Solicitor A became a principal of Firm C and continued in this position until February 2020.
- In April 2019, Solicitor C left Firm C and commenced practice at Firm D. Client A and Client B followed Solicitor C (as clients) to Firm D.
- In mid-2019, Client A and Client B established AB Group. AB Group is operated by a trading trust, the AB Group Qld Unit Trust, of which Client A and Client B were each granted one unit (to be held for the benefit of their respective family trusts). A corporate trustee, AB Group QLD Pty Ltd, was registered. Client B is the sole director of AB Group QLD Pty Ltd.
- On two occasions, between mid to late 2019, Solicitor C again referred Client A to Solicitor A for advice:
- the first occasion was in relation to a letter Client A or the AB Group had received about certain defamatory comments. Solicitor A advises that she sent a brief letter or email following this conversation; and
- the second occasion (in late 2019) was in relation to a letter Client A received from Employer X (now his former employer) regarding a breach of restraint of trade and fiduciary obligations.
- In February 2020, Solicitor A left Firm C and commenced Firm A.2
- On 3 March 2020, Employer X commenced Federal Court Proceedings against Client A and five other respondents (Employer X Proceedings).
- Solicitor A acted on behalf of Client A in the Employer X Proceedings.
- Solicitor B of Firm B acted on behalf of the other respondents to the Employer X Proceedings, specifically:
- Client B;
- Client C;
- Client D;
- AB Group Pty Ltd; and
- AB Group Enterprises Pty Ltd.
- It appears the Employer X Proceedings involved an allegation that Client A diverted business away from Employer X to the AB Group in breach of his employment contract and fiduciary duties to Employer X.3
- The Employer X Proceedings were settled in February 2021 and the matter is listed as 'finalised' on the Federal Court Website.
- A dispute has now arisen between Client A and Client B. Client A alleges that Client B has breached the Unit Trust Deed.
- On 25 February 2021, Client A instructed Firm A to take urgent steps to preserve the assets of the trust and protect his interests as a unit holder. Firm A wrote to Firm B on the understanding that it was continuing to act for Client
- On 25 February 2021, Solicitor B raised concern that Solicitor A was in a position of conflict because she had previously acted for Client B and the AB Group QLD Pty Ltd. Solicitor B has requested that Solicitor A cease acting for Client A.
- On 3 March 2021, Firm A referred the dispute to the QLS Ethics and Practice Centre for an NBER,
- On 11 March 2021, Firm A advised that:
- after it was suggested that Solicitor A was in a position of conflict Firm A sought Client B’s consent to act for Client A, however, did not receive a response to this request;
- Client A has been referred to Firm E; and
- whether the referral to Firm E will be temporary or permanent will depend on the opinion of the Ethics Committee as outlined in this NBER.4
- On 25 March 2021, Firm B advised that its client might have a claim in negligence against Solicitor C, Solicitor A and Firm C regarding:
- the confidentiality deeds; and
- the advice provided by Solicitor A on 25 October 2018.
THE PARTIES' POSITIONS
Firm A’s Position
- Firm A contends that Solicitor A is not in a position of conflict because:
- Client B and AB Group QLD Pty Ltd were clients of Firm C (in particular Solicitor C’s clients) and not clients of Solicitor A;
- while at Firm C Solicitor A did not communicate with or take instructions from Client B or AB Group QLD Pty Ltd;
- Solicitor A does not have in her possession or control any confidential information relating to Client B or AB Group QLD Pty Ltd and any documentation from that period of time sits with files now held by either Firm D or Firm F;
- as a result of the discovery process in the Employer X Proceedings both Solicitor A and Solicitor B have a degree of knowledge and possess some confidential information regarding each other's clients; and
- Client A will incur additional legal fees if he is required to engage a new solicitor.5
Firm B's Position
- Firm B contends that Solicitor A is in a position of conflict because:
- she did not seek Client B's consent to act for Client A against the interests of his clients;6
- had Solicitor A sought Client B's consent to act on behalf of Client A, consent would not have been given;7
- Solicitor A is in possession of sensitive and confidential information8 including knowledge of Client B's business structures, financing, proposed leasing, personnel suppliers and workflow;9
- the advice provided by Solicitor A while at Firm C was billed to both Client A and Client B;10
- there is a possibility that Solicitor A may be called as a material witness in the dispute between Client A and Client B; 11 and
- Client B and the AB Group might have a claim in negligence against Solicitor C, Solicitor A and Firm C arising from the legal services provided to Client A and Client B.12
THE AUSTRALIAN SOLICITORS CONDUCT RULES 2012 AND THE LEGAL PRINCIPLES
Conflicts concerning former clients
- The starting point for a consideration of the present issues is Rule 10 of the Australian Solicitors Conduct Rules 2012 (ASCR), which provides:
- Conflicts concerning former clients
- A solicitor and law practice must avoid conflicts between the duties owed to current and former clients, except as permitted by Rule 10.2.
- A solicitor or law practice who or which is in possession of confidential information of a former client where that information might reasonably be concluded to be material to the matter of another client and detrimental to the interests of the former client if disclosed, must not act for the current client in that matter UNLESS:
- the former client has given informed written consent to the solicitor or law practice so acting; or
- an effective information barrier has been established.
Conflict concerning a solicitor's own interest
- Firm B's submission to the QLS makes reference to Rule 12 ASCR.
- Rule 12 ASCR provides as follows:
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.
Solicitor as material witness in client's case
Solicitor as material witness in client's case
- Firm B also contends the principal of Firm A may be called as a material witness within the meaning of Rule 27.2 ASCR.
- Rule 27 provides as follows:
27.1 In a case in which it is known, or becomes apparent, that a solicitor will be required to give evidence material to the determination of contested issues before the court, the solicitor may not appear as an advocate for the client in the hearing.
27.2 In a case which it is known, or becomes apparent, that a solicitor will be required to give evidence material to the determination of the contested issues before the court the solicitor, an associate of the solicitor or a law practice of which the solicitor is a member may act or continue to act for the client unless doing so would prejudice the administration of justice.
- The term 'associate' is defined in Rule 44.1 ASCR to mean, among other things, a partner, employee or agent of the solicitor or of the solicitor's law practice.
ISSUES FOR THE COMMITTEE
- Whilst the parties requested a NBER, neither party articulated a specific question for the Ethics Committee to consider.
- However, after reviewing the information originally provided to the Ethics Committee, the Ethics Committee determined that the key questions for consideration are:
- Are Client B and his associated entities former clients of Solicitor A?
- Is Firm A in possession of confidential information, where that information might reasonably be concluded to be material to the dispute between Client A and Client B and, if disclosed, might be detrimental to Client B's interests? and
- Has Firm A complied with Rule 10 of the ASCR?
- On 11 March 2021, the Ethics Committee wrote to the parties and invited them to make submissions on these questions.
- After receiving the submissions from Firm A and Firm B, the Ethics Committee also considers it should make comment as to whether the principal of Firm A is in a position of conflict because:
- she may be called as a material witness in the dispute that has now arisen between Client A and Client B; and
- Firm B contends that its client might have a claim in negligence against Solicitor A and her former law practice.
Question 1: Are Client B and the associated entities former clients of Solicitor A?
- The term 'former client' is broadly defined in Rule 44.22 ASCR and may include:
'[A] person or entity that has previously instructed:
- the solicitor;
- the solicitor's current law practice;
- the solicitor's former law practice, while the solicitor was at the former law practice;
- the former law practice of a partner, co-director or employee of the solicitor, while the partner, co-director or employee was at the former law practice,
or, has provided confidential information to a solicitor, notwithstanding that the solicitor was not formally retained and did not render an account.'
- For the purpose of Rule 10 therefore, a 'former client' extends well beyond a person who has previously retained the solicitor directly. It may include:
- a person or entity that has previously instructed the solicitor, his or her current or former law practice, or the former practice of a partner, co-director or employee of the solicitor; 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.
- Turning to the current matter, the Committee considers that Client B falls into the category of a former client' of Solicitor A for the following reasons:
- Client B instructed Solicitor A's former law practice, Firm C;
- the advice Solicitor A provided to Client A in October 2018 was provided to Client A:
- in circumstances where both Client A and Client B had engaged Firm C;
- in contemplation of Client A's establishment of a new business enterprise with Client B;
- concerned Client A possibly contacting clients and suppliers of Employer X with a view to engaging with them for the benefit of the new business enterprise;
- the invoice for the advice provided by Solicitor A to Client A was issued to both Client A and Client B (however, the Committee notes the fact that a person has been invoiced for legal services does not determine that a person is a client in all circumstance, for example in the case of a third-party payer); and
- the advice was ultimately shared by Client A with Client B.
- The Committee does not consider the fact that it was Solicitor C who was the solicitor primarily responsible for the conduct of Client A's and Client B's file removes or distances Client B as of 'former client' of Solicitor A's.
- Whether AB Group Pty Ltd and AB Group Enterprises Pty Ltd can be considered 'former clients' of Solicitor A is less certain. These corporations were not established until mid-2019, after:
- Solicitor A provided her initial advice in October 2018; and
- Solicitor C left Firm C and commenced practice at Firm D.
- However, as outlined above at paragraph 19 above, Solicitor C again referred Client A to Solicitor A in late 2019 to advise in relation to a letter Client A or the AB Group had received about certain defamatory comments (emphasis added). If the letter in question was sent to the AB Group, that would place the companies squarely in the category of 'former client'.
- Although there is some uncertainty regarding the status of the AB Group companies, given that Client B is the director of both companies, the Committee considers that a conservative approach be adopted and they also be viewed as 'former clients'.
Question 2: Is Firm A in possession of confidential information of where that information might reasonably be concluded to be material to the dispute between Client A and Client B and, if disclosed, might be detrimental to Client B's interests?
- Clause 10.2 ASCR is enlivened when a solicitor or law practice is in possession of confidential information belonging to a former client, that is now material to the matter of another client. A solicitor's primary obligation in relation to that confidential information is to ensure that it is not disclosed and misused to the former client's detriment.13
What is confidential information?
- What constitutes 'confidential information' has been considered in a number of cases:
- In Re A Firm of Solicitors14the court held that confidential information is that which is:
- originally communicated in confidence;
- still confidential at the time of the subsequent proposed retainer; and
- relevant to the subject matter of the subsequent proposed retainer.
- In LPCC v Trowell15the court found 'confidential information' includes:
- information learned in the professional relationship with the client, including information not had but for the relationship;16
- information of a confidential nature learned prior to the lawyer/client relationship (the lawyer's duty arising on the formation of the lawyer/client relationship);17 or
- information in the public domain, depending on the extent of publicity and authority of the source, as repetition of such information may give that information credibility.18
- In Quann v Wilson & Atkinson (a firm)19 the court considered that confidential information could also be defined as information that remains confidential and may reasonably be considered remembered or capable, on the memory being triggered, of being recalled.20
- In D & J Constructions Pty Ltd v Head (t/as Clayton Utz),21a lawyer had previously reviewed the terms of a draft agreement and the firm wished to act in litigation about that agreement. The court said:
- confidential information 'must be information additional to the terms of the document' the lawyer had previously reviewed;22
- the text of the agreement itself is not confidential information because it is now open to the parties;23 and
- 'The simple fact that [the solicitor] considered the terms of the document in 1981, and formed and expressed views on the meaning and effect of those terms does not disqualify the firm from acting now in litigation in which it will be called on to consider the document, form views about its operation and effect and give advice thereon to its now client.'24
- In Re A Firm of Solicitors14the court held that confidential information is that which is:
The onus of establishing the possession of confidential information
- The onus of proving that Solicitor A is in possession of confidential information, which may be misused to the former client's detriment, rests with the former client (in this case, Client B).
- This obligation was established in the decision of Prince Jefri Bolkiah v KPMG (a firm)25 which provided that:
[I]t is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own.26
- This issue was also discussed in the recent decision of the Full Court of the Family Court, Osferatu v Osferatu.27 In that matter, the court was of the view that a party seeking to restrain a solicitor from acting must discharge his or her burden of proof by adducing cogent and persuasive evidence and outlining the classes of information he or she feels to be at risk, including why it relates to the current matter and how misuse would be detrimental to them.28
- Once a client has discharged the onus of proving that the solicitor is in possession of confidential information, the next step involves a consideration of the risk that the relevant confidential information will be disclosed. The court concluded that:
The consideration should be whether there is a real risk of misuse as opposed to one which is merely fanciful.29
- The risk of disclosure is to be determined by considering the risk and of any protective measures taken or proposed by the solicitor or his or her new firm. The evidentiary burden regarding those protective measures falls squarely on the firm responsible for implementing them.30
- Before any determination can be made as to whether a lawyer should be restrained from acting, a court must balance:
- the nature of the information against a consideration of the person to whom the information was given;
- when the information was given;
- the relevance of that information to the current proceedings;
- the risk of disclosure; and
- any proposed protective measures.31
- In the decision of Osferatu, the Full Court came to the conclusion that the wife's application to restrain the husband's solicitors should be dismissed. In reaching this conclusion, the court found the following persuasive:
- the failure of the wife to point to any particular type of information disclosed to [the husband's solicitors] that would lead to a reasonable belief that information may be used against her or to her disadvantage in the current proceedings before the court; and
- the strong and appropriate measures (specifically an information barrier to prevent access to the electronic or physical files) undertaken at [the husband's firm] to quarantine [the solicitor in question] from having any advertent or inadvertent contact with the proceedings, including undertakings from the partners of that firm to maintain those measures.32
Consideration regarding confidential information in the current matter
- On the material currently before it, the Committee is presently unable to express a concluded opinion on whether Solicitor A or Firm A is in possession of confidential information, the nature of that confidential information or whether its disclosure might cause detriment to Client B and the AB Group of companies.
- The Committee considers that, at present, Client B and the AB Group of Companies has not demonstrated:
- that Solicitor A or Firm A is in possession of confidential information;
- how the alleged confidential information could be used to the determent of Client B; or
- the relevance of the alleged confidential information to the dispute between the parties.
- The only detail provided to the Committee by Firm B is the statement that Solicitor A is in possession of confidential information regarding 'Client B's business structures, financing, proposed leasing, personnel suppliers and workflow'.33 It is not clear whether Firm B contends this information was received by Solicitor A while providing her initial advice at Firm C or during the subsequent Employer X Proceedings. However, on the information provided to the Committee as to the manner and circumstances in which Solicitor A's advice of 25 October 2018 was provided it appears, objectively, most unlikely that the confidential information referred to in Firm B's letter was communicated to Solicitor A in the context of her providing this initial advice.
- If the information referred to in Firm B's letter was information knowingly disclosed by the parties during the Employer X Proceedings, the information is not 'confidential information' for the purpose of Rule 10 ASCR. Acknowledging, of course, that information disclosed during the course of the litigation, cannot without leave of the court, be used for any other purpose for which it is given, unless it has been received into evidence and read in open court.34
- The Committee also notes that no material has been put before it that suggests that Client B and Firm B raised any concern with Solicitor A acting for Client A during the Employer X Proceedings. The fact that Client A and Client B were represented by separate lawyers during the Employer X Proceedings suggests that even at that time there was some recognition by the parties that the interests of Client A and Client B might diverge.
- The Committee is of the view that, unless further information can be provided by Firm B on this issue, the best person to assess whether during the course of providing advice to Client A, Solicitor A received confidential information which could be used to the detriment of Client B, is Solicitor A. The Committee recommends that Solicitor A carefully considers the information in her possession and control against the various definitions of confidential information outlined in paragraph 52 above.
Question 3: If Firm A is in possession of confidential information, has it complied with Rule 10 of the ASCR?
- Rule 10 emphasises that a solicitor or law practice, in possession of confidential information that could be misused against the former client, must avoid conflicts between the duties owed to current and former clients and not act for the current client, unless:
- the former client has given informed written consent to the solicitor or law practice; or
- an effective information barrier has been established.
- No evidence has been put before the Committee which demonstrates that:
- that Client B (and the entities for which is responsible) has provided informed written consent to Firm A; or
- Firm A has established an information barrier between Solicitor A and the team advising Client A in relation to the current dispute with Client B.
- It appears that Solicitor A did not seek Client B's written informed consent until after the issue of a conflict was raised by Firm B in its letter of 26 February 2021 and only along the lines that, 'To avoid further costs for both of our clients and allow them to focus on the real issues in dispute, I propose that both of our clients consent to our practices continuing to act to the other party to this matter'.35 Firm A has advised that it has not received a response to its request but Firm B confirms that their client’s consent would not be given.36
- There is nothing in the material provided to the Ethics Committee which discusses whether it would be feasible for Firm A to establish an information barrier. A search conducted on the QLS Law Firm Directory shows that there are only two legal practitioners at Firm A, Solicitor A and an employed solicitor with a restricted practising certificate.
- The leading reference regarding information barriers is the Information Barrier Guidelines (IBG) prepared by the Law Society of New South Wales in consultation with the Law Institute of Victoria, and adopted by the Council of the Queensland Law Society. It is instructive to highlight a number of the relevant provisions of the IBG.
- Underlying the IBG is the fundamental principle that 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 relevant 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. That 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.37
- In considering whether an information barrier is effective, the Australian courts in commercial cases adopt the 'reasonable and sensible possibility' test: the 'tainted' individual must be effectively screened from the new matter so that there is no real and sensible possibility of misuse of the confidential information.38 Any risk warranting the intervention of the courts 'must be a real one, and not merely fanciful or theoretical. But it need not be substantial'.39
- The burden of establishing that there is no unacceptable risk is upon the law practice:
Once it appears that a solicitor is in receipt of information imparted in confidence, the burden shifts to the solicitor to satisfy the Court on the basis of clear and convincing evidence that all effective measures have been taken to ensure that no disclosures will occur …40
- While the courts may take into account commercial factors such as the inconvenience to a client who is forced to change solicitors mid-case, the ability to instruct a solicitor of choice, and the need for mobility of lawyers, those factors cannot alter the fact that a proposed information barrier is found otherwise to be ineffective.41
- It is also clear from the IBG that the guidelines are intended to apply to all law practices. That said, it is acknowledged that it may be extremely difficult for a small firm to demonstrate compliance with the IBG as a question of fact, particularly the requirement to keep staff and files physically separate. Any resulting hardship is but one factor, but does not outweigh the importance of confidentiality.42
- Guideline 1 provides that the law practice should have established, documented protocols for setting up and maintaining information barriers. Such protocols, which incorporate the IBG, should be part of the practice’s ongoing risk management and complaint prevention process.
- The law practice should nominate an experienced practitioner with appropriate knowledge of the rules relating to conflicts as its compliance officer. He or she is to oversee each information barrier, monitor compliance and deal with any possible breach of an information barrier.43
- Guideline 3 provides that the law practice should ensure that the client in the current matter acknowledges in writing that the law practice’s duty of disclosure to the client does not extend to any confidential information which may be held within the practice as a result of the earlier matter, and consents to the law practice acting on that basis. In other words, the new client would have to join in such an arrangement and give up his or her right to the information.44
- The screened person should be clearly identified, with the compliance officer keeping a record of all screened persons.45Guideline 5 sets out the matters which the screened person’s undertaking should address:
- that they will not have, during the existence of the current matter, any involvement with the client or personnel involved with the current matter for the purposes of that current matter;
- that they have not disclosed, and will not disclose, any confidential information about the earlier matter to any person other than to a person in accordance with the instructions or consent of the client in the earlier matter, a screened person, or the compliance officer; and
- that they will, immediately upon becoming aware of any breach, or possible breach, of the undertaking, report it to the compliance officer, who will take appropriate action.
- Personnel involved with the current matter should not discuss the earlier matter with, or seek any relevant confidential information about the matter from, any screened person. Such personnel should provide undertakings confirming that:
- no confidential information about the earlier matter has been disclosed to them;
- they will not have, during the existence of the current matter, any involvement with a screened person for the purposes of the current matter;
- they will not seek or receive any confidential information about the earlier matter from a screened person or in any other way; and
- they will, immediately upon becoming aware of any breach, or possible breach, of the undertaking, report it to the compliance officer who will take appropriate action.46
- Guideline 7 provides that contact between personnel involved in the current matter and screened persons should be appropriately limited to ensure that the passage of information or documents between those involved in the current matter and screened persons does not take place. The commentary on that guideline notes:
The simplest way of complying with this guideline is by physical separation of offices and staff, whether on separate floors, separate buildings, or even different States. It must always be combined with appropriate separation or restriction of access to electronic information.
In D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 11, Bryson J (at 123) pointed out that “wordless communication can take place inadvertently”. Without enforced physical separation, staff may communicate inadvertently “by attitudes, facial expression or even by avoiding people one is accustomed to see. In MacDonald Estate, Sopinka J at 269 referred to the likelihood of inadvertent disclosure at “partners’ meetings or committee meetings, at lunches or the office golf tournament, in the boardroom or the washroom”…
Where geographic separation is not possible, offices containing relevant files should be locked and/or signs should be placed on doors limiting access. In any event, all files should be clearly labeled (sic.) indicating restricted access.
The law practice should implement an appropriate system for the use of facsimile machines, photocopiers and printers. For example, the law practice may offer undertakings that separate machines will be used for the current matter; that documents relating to the current matter will not be left unattended on those machines; and that any unwanted copies of documents will be appropriately destroyed.
- Guideline 10 requires the law practice to have an ongoing education program in place. That should involve education for all personnel about the law practice’s protocol for protecting confidential information and for setting up and maintaining information barriers. Additional education should be provided for individuals involved in matters affected by an information barrier, especially as to the arrangements in place for the particular case and sanctions for non-compliance.
Question 4: Is Firm A in a position of conflict because Solicitor A might be called as a material witness in the dispute between Client A and Client B?
- Firm B has raised the possibility that Solicitor A might be called as a material witness in the dispute between Client A and Client B.
- While this has been raised as a possibility, the Committee is not in a position to comment on the likelihood of this eventuating or whether it can be said to be 'known or apparent', particularly in circumstances where it does not appear that pleadings have been filed by either party.
- Rule 27 of the ASCR was considered at some length in Hempseed v Ward & Anor,47 where McMeekin J analysed the relevant case law and succinctly summarised the relevant principles. It is both instructive and convenient to refer to that decision in detail.
- McMeekin J observed that (as distinct from the previous rule 13.4 of the Legal Profession (Solicitors) Rule 2007 (Qld)) the presumption is now in favour of the solicitor continuing to act. The onus is on the person seeking to restrain them to show that, if the solicitor does so, their continued acting would prejudice the administration of justice.48 His Honour then went on to say:
The rule picks up the test that is usually applied in these cases, that is "whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process in the due administration of justice, including the appearance of justice": Kallinicos v Hunt.49
- His Honour was referred to the comments of Campbell CJ in Chapman v Rogers; ex parte Chapman,50 that it is 'generally unwise' for a solicitor, who is not appearing as advocate or an instructing solicitor in court, but who is aware that it is likely that he or she will be called as a material witness (other than in relation to formal or non-contentious issues), to continue, whether personally or through his or her firm, to represent the client if that can be reasonably avoided. Invited to accept that statement as a universal principle, McMeekin J declined, saying that it 'is not and probably was never meant as such. It certainly does not accurately represent the law in Queensland'.51 In support of that conclusion, his Honour relied on the observations of Muir JA (with whom Fraser JA and White J agreed) in Watkins v Christian,52 that Campbell CJ was not purporting to propound a universal principle and that in fact there was ’no such principle’; rather, what is not proper or permissible will depend in each case on a careful analysis of the relevant facts.53 Indeed, in Watkins v Christian, the Court emphasised the 'folly' of attempting to decide such a question before the relevant facts can be ascertained:
[I]t is unnecessarily speculative to attempt to predict before a defence has been filed, what witnesses will be called and the materiality of their evidence.54
- Having established that there is no universal principle, McMeekin J cited with approval the following remarks of Brereton J in Mitchell v Burrell55 as accurately identifying the approach he should adopt:
 That said, I do not accept that the mere circumstance that a solicitor will be a material witness, even on a controversial matter, of itself justifies restraining the solicitor from continuing to act. As Windeyer J pointed out in Scallan v Scallan  NSWSC 1078, it is, for example, not unusual for instructing solicitors in contested probate proceedings to give evidence of facts relevant to instructions for and execution of a Will. Similarly, in contested conveyancing proceedings, it is not unusual for solicitors who have acted on the conveyance to continue to act in the proceedings for specific performance or rescission and to give evidence in those proceedings. Accordingly, despite Rule 19 of The Law Society of New South Wales Professional Conduct and Practice Rules, which imposes a professional obligation (as distinct from a private right), I do not accept that in every case where a solicitor acting for a party is a material witness even on a controversial matter, the Court will restrain the solicitor from continuing to act. Although some observations of Campbell CJ in Chapman v Rogers; ex parte Chapman  1 Qd R 542, 545, may go somewhat further, the cases indicate - as Campbell CJ did in that case itself – that the line is crossed only when the solicitor has a personal stake in the outcome of the proceedings or in their conduct, beyond the recovery of proper fees for acting, albeit that the relevant stake may not necessarily be financial, but involves the personal or reputational interest of the solicitor, as will be the case if his or her conduct and integrity come under attack and review in the proceedings. The presence of such circumstances will be a strong indication that the interests of justice – which in this field involve clients being represented by independent and objective lawyers unfettered by concerns about their own interests – require the lawyer to be restrained from continuing to act.
 The point is illustrated, in Windeyer J’s judgment in Scallan (at ), by his Honour’s reference to the difference between the case where the (mere) interest of a solicitor is one that arises simply in supporting the success of his or her client (for example, in connection with advice about discovery or the commencement or continuation or abandonment of proceedings), and the case where the solicitor has an interest in the result of an action ‘additional to his interest in doing his best for a client to have success in an action’. Similarly, in Kooky Garments Ltd v Charlton  1 NZLR 587, Thomas J recognised the distinction between the situation where solicitors were, in effect, called on to defend their own actions or advice on the one hand – in which case it was inappropriate that they act –and other cases (at 589-590):
'What I have said, of course, does not apply where the advice given is unrelated to liability or the question in dispute. Advising a client to prosecute or defend a claim does not attract these observations. They are restricted to the situation where the acts or omissions of the solicitors are an integral part of the other party’s complaint or the client has been sued in circumstances where he or she was acting on the advice of their solicitors and it is effectively that advice which is in issue. In such cases, apart altogether from the position of the client, the Court is not receiving the assistance of counsel who are observably independent. Independence is a function of counsel. The Court is entitled to assume that solicitors and counsel appearing before it possess that independence.'56
- In his work, Lawyers'Professional Responsibility, Professor G.E. Dal Pont expresses the view that a lawyer must not accept a retainer if there is reason to believe that he or she will be required to give evidence material to the determination of contested issues before the Court; if that becomes apparent during the course of the proceedings, the lawyer should withdraw and arrange for an independent lawyer to take over the matter.57
- Professor Dal Pont identifies several reasons for reaching that conclusion:58
- For the lawyer to appear as a witness confuses the lawyer's role. The lawyer's role is to present the case and test the evidence and arguments. Conversely, a witness' role is to provide sworn testimony of facts within his or her personal knowledge or expertise. There is also a risk that appearing as a witness, the lawyer may be placed in a position where his or her duty to the Court or his or her own interests, conflict with the duty to the client.
- By appearing as a witness, the lawyer may have his or her objectivity and independence queried. That may have a deleterious effect on public opinion of trials and the profession more broadly.
- The lawyer's effectiveness as an advocate could be impaired if his or her credibility as a witness is impeached.
- The finder of fact may place undue weight on the testimony of an officer of the Court.
- Perhaps not relevant to civil proceedings, in a criminal matter the lawyer acting as a witness could produce a miscarriage of justice sufficient to substantiate an appeal against a conviction.
- Professor Dal Pont goes on to say that these reasons also justify extending the application of his statement to solicitors who instruct counsel.59
- Relying on the observations of Pagone J in Premier Capital (China) Ltd v Sandhurst Trustees Ltd,60 McMeekin J also set out the various considerations that can impact on the court's exercise of jurisdiction to restrain a solicitor from acting in a particular case. They can be summarised as follows:61
- The exercise of the Court’s jurisdiction to restrain a solicitor from acting is exceptional and must be exercised with caution.
- The jurisdiction to restrain a practitioner from acting for a client in judicial proceedings is an incident of the Court’s inherent jurisdiction over its officers to control its process in aid of the administration of justice.
- An important consideration against the exercise of the jurisdiction is that a litigant should not be deprived of his or her choice of lawyer without good cause.
- Applications by opposing parties for the removal of their opponent’s lawyers should not be made lightly and need scrutiny.
- A party seeking the removal of an opponent’s legal practitioner is not seeking to exercise a right, but moving the Court to exercise its power over its own officers.
- An applicant may have obligations to the Court when making such applications to satisfy the Court that the application is necessary and not made for collateral advantage.
- It is therefore essential that an injunction to restrain a practitioner from acting on behalf of a client must be firmly based on the need for that to occur in the administration of justice.
- The test to be applied in the exercise of this jurisdiction was: the objective test to be applied is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice required that the lawyer be prevented from acting, at all times giving due weight to the public interest that a litigant should not be deprived of his or her choice of lawyer without good cause.
- In application of the test, sight should not be lost of the severity of the consequence of such an order for the client. The conclusion to be reached is that justice "requires" a client to be deprived of his or her choice of lawyer. That has been said by Professor Dal Pont to require the Court’s inquiry into 'whether a fair-minded, reasonably informed person would find it subversive to the administration of justice to allow the representation to continue'.62
- Whether a court would decide to exercise its jurisdiction to restrain Firm A from acting for Client A if litigation were to be commenced is a matter for it. As outlined above, that jurisdiction is to be regarded as an exception and is to be exercised with caution, after all of the relevant facts have been ascertained.
- Without the benefit of pleadings, statements from the relevant witnesses or a detailed articulation of the material issues in dispute, the Ethics Committee cannot express a final and conclusive view on whether Firm A continuing to act for Client A would prejudice the administration of justice, as contemplated in Rule 27 ASCR.
- On the material currently before it, the Committee does not consider that the mere possibility that Solicitor A might be called as a witness on some element of the dispute between the parties, is a sufficient ground to recommend that Solicitor A cease acting for Client A and thereby depriving him of his choice of solicitor.
Question 5: Is Firm A in a position of conflict because Firm B has alleged its client might have a claim in negligence against Solicitor A and her former law practice?
- Firm B has also raised the possibility that his client might have a claim in negligence against Solicitor C, Solicitor A and Firm C regarding:
- the confidentiality deeds; and
- the advice provided by Solicitor A on 25 October 2018.
- Again, this has been raised as a possibility and in circumstances where the Ethics Committee has not been provided with pleadings, witness statements or a detailed articulation of the material issues in dispute, the Ethics Committee cannot express a final and conclusive view as to whether Firm A is in a position of conflict because of this threatened claim.
- Turning again to Professor Dal Pont, he expresses the view that where it becomes apparent that a lawyer might have civil exposure on a matter in which he or she represents a client, the need for independence requires the lawyer to withdraw.63 The reason for this is that a conflict inevitably arises between the interests of the client and the solicitor's personal interest arising out of questions regarding their professional conduct.64 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, then the solicitor cannot act except as permitted by Rule 12 of the ASCR.65 The exceptions outlined in Rule 12 do not extend to the scenario where a solicitor is being sued in negligence or for breach of contract by a client or former client.
- Although the Committee is not in a position to recommend that Solicitor A cease acting for Client A only on the basis that:
- she possibly could be called as a witness; or
- Client B might have claim in negligence against Solicitor A, Solicitor C or Firm C,
the fact that these issues have been raised puts Solicitor A on notice and she must remain vigilant to the possibility of her personal interest conflicting with her duty to her client should either of the 'possibilities' to which Firm B has referred become a reality and in that event taking such steps as are necessary to appropriately address any such conflict.
CONCLUSION & RECOMMENDATION
- Summarising the analysis and discussion conducted above, the Committee's view on the material currently before it is that:
- Client B and the AB Group companies are former clients of Solicitor A's;
- the Committee cannot express a concluded opinion on whether Solicitor A or Firm A:
- is in possession of confidential information;
- the nature of that confidential information; or
- whether its disclosure might cause detriment to Client B and the AB Group of companies,
although the information presently provided to the Committee does not demonstrate that Solicitor A or Firm A to be in possession of confidential information;
- in the event that Firm A is in possession of confidential information Firm A has not demonstrated that it has complied with Rule 10 ASCR in that:
- it does not have Client B's informed written consent to act on behalf of Client A, nor did it seek this consent until after the possibility of a conflict had been raised by Firm B; and
- it does not appear feasible for an information barrier to be put in place at Firm A;
- although the suggestion has been made that:
- Solicitor A might be called as a witness in the dispute against the parties; and
- Client B might have claim in negligence against Solicitor A Solicitor C or Firm C,
in the absence of pleadings, witness statements or a detailed articulation of the material issues in dispute, the Ethics Committee cannot express a final and conclusive view as to whether Firm A may be in a position of conflict because of these issues. However, the possibility Solicitor A may be a witness or a defendant to a claim does not, without more, place Solicitor A in a present position of conflict.
As outlined above, whether a solicitor should be prevented from acting for a client is to be determined by reference to whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a solicitor not act, in order to ensure that the integrity of the judicial process and the due administration of justice is maintained. Preventing a solicitor from acting for a client is a jurisdiction that a court will exercise with caution and only in exceptional circumstances, after giving weight to the public interest in a litigant not being deprived of the solicitor of choice without due cause.
The Committee is not in the same position as a court. It does not have the benefit of receiving sworn evidence or the ability to test evidence and the issues between the parties have not been fulsomely articulated. At present, there is not enough material before the Committee for it to conclude that the proper administration of justice outweighs Client A's right to use the solicitor of his choice. Central to this issue is the question of confidential information and it is not clear to the Committee that Solicitor A is in possession of confidential information which could be used to the detriment of Client B. The onus to prove this rests with Client B and the Committee is not satisfied that this has been demonstrated.
However, taking into account all of the material that has been placed before the Committee, if Firm A continues to act on behalf of Client A, the Committee recommends that it proceeds with the utmost caution. Firm A must remain vigilant and act to protect its clients' and former clients' interests before conflicts arise and not after. This appears to be a matter in which conflicts could arise and the lawyers acting for both parties must remain alive to this possibility.
The Committee notes that Client A has already been referred to another law firm. Independently of the ethical considerations addressed in this NBER, the Committee notes that it is desirable that disputes over representation, such as the present, be resolved as expeditiously and cheaply as possible so that attention can be directed towards the substantive matters in dispute between the respective clients, including by referring the potentially affected client to alternative representation.
1 Letter from Firm A to Queensland Law Society, 7 April 2021.
2 Letter from Firm A to Queensland Law Society, 15 March 2021.
3 Letter from Firm B to Queensland Law Society, 25 March 2021.
4 Letter from Firm A to Queensland Law Society, 11 March 2021.
5 Letter from Firm A to Queensland Law Society, 3 March 2021.
6 Letter from Firm B to Firm A, 26 February 2021.
9 Letter from Firm B to Firm A, 1 March 2021.
11 Letter from Firm B to Firm A, 26 February 2021.
12 Letter from Firm B to Queensland Law Society, 25 March 2021.
13 Flanagan v Pioneer Permanent Building Society Ltd  QSC 346,  (Dutney J.).
14 In Re A Firm of Solicitors  Ch 1, 9-10.
15 LPCC v Trowell (2009) 62 SR (WAS) 11.
16 Ibid .
17 Ibid .
18 Ibid .
19 Quann v Wilson & Atkinson (a firm)  WASC 229.
20 Ibid  (Le Miere J.).
21 D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118 ('D & J Constructions').
22 Ibid 120.
25 Prince Jefri Bolkiah v KPMG (a firm)  2 AC 222 ('Prince Jefri Bolkiah').
26 Ibid  (Lord Millett).
27 Osferatu v Osferatu  FamCAFC 177.
28 Ibid –.
29 Ibid .
30 Ibid .
31 Ibid .
32 Ibid .
33 Letter from Firm B to Firm A, 1 March 2021.
34 Hearne v Street  HCA 36, ,  (Hayne, Heydon and Crennan JJ).
35 Letter from Firm A to Firm B, 2 March 2021.
36 Letter from Firm B to Firm A, 26 February 2021.
37 Kallinicos v Hunt (2005) 64 NSWLR 561 (Brereton J) ('Kallinicos').
38 See The Law Society of New South Wales, Information Barrier Guidelines (2015), Common Questions 2.5 ('IBG').
39 Prince Jefri Bolkiah (n 26) 236-237 (Lord Millett).
40 See ibid; Village Roadshow Ltd v Blake Dawson Waldron  VSC 505 (Bryne J) (emphasis added).
41 See IBG (n 39) Common Questions 2.8.
42 See ibid Common Questions 2.10.
43 See ibid Guideline 2.
44 See ibid Guideline 3; D & J Constructions (n 22), 122 (Bryson J).
45 See IBG (n 39) Guideline 4.
46 See ibid Guideline 6.
47 Hempseed v Ward  QSC 348 (‘Hempseed’).
48 Ibid .
49 Ibid ; Kallinicos (n 38) (Brereton J).
50 Chapman v Rogers; ex parte Chapman  1 Qd R 542, 545.
51 Hempseed (n 48) .
52  QCA 101 ('Watkins').
53 Ibid .
54 Watkins (n 53) ,  (Muir JA, Fraser JA and White J agreeing)
55 Mitchell v Burrell  NSWSC 772.
56 Ibid  (emphasis in original).
57 Gino E Dal Pont, Lawyers' Professional Responsibility (Thomson Reuters, 7th ed, 2020) [17.45].
60 Premier Capital (China) Ltd v Sandhurst Trustees Ltd  VSC 611.
61 Hempseed (n 48)  (citations omitted).
62 Dal Pont (n 58) [17.20].
63 Ibid [17.60].
65 Queensland Law Society, The Australian Solicitors Conduct Rules 2012 in Practice: A Commentary for Australian Legal Practitioners (2014) 49.