Duty To The Client Duty Of Loyalty Notes

Duty to the Client - Duty of Loyalty: Conflict of Loyalty and Interest

• **Needs to be a solicitor-client relationship

• The Duty of Loyalty is a sub-set of a lawyer’s duty to the client: lawyers have a duty of undivided loyalty to act in the utmost good faith in the interests of their client and to carry out by all proper means their clients’ instructions. The duty includes using all relevant information in the practitioner’s possession to advance a client’s interests. Conflict of interest are a subset of this.

• In equity, the relationship between a lawyer and client automatically gives rise to a fiduciary duty.

  • The reposing of trust by a client in a lawyer is assumed, because of the lawyer’s ability to affect the legal status of the client, the lawyers’ status as officer of the court and the confidential knowledge that the client must give the lawyer.

  • Fiduciary duties are strictly applied by the courts because they are preventive not curative.

  • No defence for fiduciary to say he or she acted honestly or bona fide – or did not benefit from the breach.

  • The fiduciary duty of loyalty requires the practitioner not to breach the conflicts or profits rule

• It helps to preserve confidence in the administration of justice Grimwade v Meagher and Others [1995]

  • Here a lawyer was restrained from acting ‘to ensure the due administration of justice and to protect the integrity of the judicial process and in order not only that justice be done but manifestly and undoubtedly seen to be done’

• In addition to the protection of confidential information, a court may restrain a lawyer from acting against a former client on the basis of the lawyer’s fiduciary duty of loyalty (although more narrowly framed than in cases of present client conflict) and their status as officers of the court

• Different approaches from Conflicts of Duty: The Perennial Lawyers’ Tale – A Comparative Study of the Law in England and Australia – Sandro Goubran

  • In England, a court does not have jurisdiction to restrain a lawyer from acting

  • against a former client unless there is a risk of misuse of confidential information.

  • A lawyer’s duty of loyalty is not available in this kind of conflict. Similarly,

  • a court does not have jurisdiction to restrain a lawyer from acting against a

  • present client unless there is a breach of the lawyer’s duty of loyalty. Misuse of

  • confidential client information is not available in this kind of conflict.

  • In Australia, it has been observed that the law is less settled. Victorian courts

  • have adopted a multiple jurisdiction approach to questions of conflict (whether

  • present or former client conflict). In other words, any one of three jurisdictional

  • bases may be available in both forms of conflict. Contrast this with the approach

  • of other Australian courts, which have tended to exclude the duty of loyalty as a

  • jurisdictional basis in former client conflicts (as in the English approach).

• No-profit rule: O’Reilly v Law Society of NSW

  • Prohibition on profiting from a relationship giving rise to fiduciary duties. Second is a subset of the first

  • There is no absolute prohibition on a solicitor to enter into a transaction with a client for his or her own advantage, but where there is an apparent conflict

  • Breach of fiduciary duty when lawyer substantially changed costs agreement and did not advise client to seek independent advice Roache

• No conflict rule Law Society of NSW v Harvey

  • A person must not place herself or himself in a position where there is or may be a conflict between her or his duty as a fiduciary and her or his own interest or a duty to a third party, or between her or his duty as a fiduciary to two or more persons in the same transaction or matter.

  • Distinguish a conflict of interest and a conflict of loyalty:

    • A conflict of loyalty occurs where the lawyer’s duty of loyalty to their client, conflicts with his or her duties to external values and entities, including duties to obey the law, to uphold the integrity of the legal system, and to promote the public interest or particular social causes.

    • a conflict of loyalty is not generally considered a breach of conduct rules or fiduciary duty, although it may cause a lawyer to act negligently.

• Consequences of conflict

  • Test for injunction on basis of confidential information World Medical Manufacturing Corp v Philips, Ormond & Fitzpatrick Lawyers 2000

    • Is it confidential and there is no consent to disclose?

    • Is it relevant to the new matter and will disclosure adversely affect the interests of the first client?

    • If yes, is there a real risk there will be disclosure?

    • Can the lawyer show that there is no risk due to a Chinese Wall?

    • Will the fiduciary duty of loyalty and the duty of confidentiality be breached?

    • Should a permanent injunction be granted?

  • Solicitor can be restrained from acting if there is a real, as opposed to theoretical, possibility that confidential information given to the solicitor by the former client might be used by the solicitor to advance the interests of a new client to the detriment of the old client Bolkiah

  • Court can use inherent jurisdiction to restrain a solicitor from acting if they have a conflict etc Bosgard & Bosgard

    • They won’t do this lightly. Might look at whether the person can get legal representation elsewhere

• Types of conflict

  • Family members

    • In Guss v Law Institute of Victoria, a solicitor acting for his own wife failed intentionally to discover a relevant document. Guilty of misconduct. Duty to the court will override duty to the client.

    • Avoid where possible giving advice to family members as there can be a conflict of interest. Might also lead to issues as being a witness in a trial.

  • Sexual relations:

    • If there is a relationship between the lawyer and the client, and the relationship damages the client’s interests, then it will be a conflict LPCR v Morel

    • The High Court has held that sexual relations with a client prior to the completion of matrimonial proceedings, although...

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