Conflicted solicitors - when should they stand down?

A recent case in which Holding Redlich was involved considered the issue of whether a solicitor for one of the other parties should continue to act in circumstances where he was also a witness in the proceeding.

The decision is a stark reminder to the legal profession and to parties involved in litigation of the potential perils of conflicts of interest. It is also an instance where the judge had to balance the risks to a fair trial against the considerable inconvenience to all the parties had there been an adjournment of a 10 year old case which was set down for a lengthy period.

The case of Bufalo Corporation Pty Ltd (Receiver and Manager Appointed) and Lendlease Primelife Ltd (Formerly Primelife Corporation Limited) involved the breakdown of a joint venture relationship and the subsequent receivership and liquidation of one of the joint venture partners. During the preliminary stages of the hearing, the plaintiff made an application for an injunction restraining the solicitor for the first and fourth defendants (the solicitor) from continuing to act in the proceeding.

The alleged conflict arose because, as well as being the instructing solicitor for the Primelife defendants, the solicitor was a central witness in the proceeding. The judge also noted there was a real likelihood that he would be subject to serious allegations about the propriety of his conduct and challenges to his credit in relation to his role in the appointment of the receiver and manager and the alleged pressure placed on the receiver and manager to act in a way so as to benefit the solicitor’s client.

After the trial commenced the plaintiff made an application to the court for an injunction restraining the solicitor from continuing to act on behalf of the Primelife defendants or alternatively, given that the solicitor was a central witness, that he not be excused from an order for witnesses out of court.

The decision

An issue for the court was whether the solicitor could properly fulfil his duties to the court, his client, the administration of justice, the profession and the public when he clearly had an interest in the outcome of his evidence. Could the solicitor remain impartial when he had a personal interest in defending the inevitable allegations regarding his conduct and challenges to his credit when they were likely to be raised by the plaintiff’s counsel?

Justice Judd concluded that there were strong grounds to support an injunction restraining the solicitor from continuing to act in the proceeding. His Honour said that the involvement of the solicitor in the events at the heart of the plaintiff’s case, his proposed evidence and the inevitable attacks to the propriety of his conduct and his credit meant that a fair minded, reasonably informed member of the public would conclude that the proper administration of justice was compromised: “It would be difficult, if not impossible, for the solicitor to bring to bear an objective and dispassionate mind in discharging his duties to his clients and to the court”.

His Honour also commented on the fact that the solicitor had not addressed the situation himself, stating:

“…In the circumstances, it is surprising that [the solicitor] did not himself conclude that he should not continue to act as a solicitor for Primelife. He must have known that his conduct would be the subject of a challenge by the plaintiff. The allegations against [the solicitor] are serious and, if made out, will reflect adversely upon his professional reputation.”

However, despite finding that the solicitor clearly had a conflict of interest that would compromise the fair running of the trial, Justice Judd ultimately decided not to issue the injunction. This was because, had the solicitor been restrained from acting, there would have been an unacceptable delay in the trial while the Primelife defendants obtained and instructed new solicitors. The proceeding had been running for over 10 years and a trial of some eight weeks was already underway.

In reaching his decision, Justice Judd noted that the administration of justice sometimes required a balancing of competing interests. In this case, the public interest in having the trial proceed to conclusion without interruption should prevail, he said. He therefore ‘regrettably’ found that he should not restrain the solicitor from acting nor order him out of court as to do so would inevitably halt the trial which would not be in the interests of justice.

Lessons from the decision

In our view, the decision of Justice Judd highlights the following points:

1. Parties to litigation must always be aware of any conflict or potential conflict that may arise as a result of the conduct of their solicitors or the solicitors acting for other parties.
2. Solicitors who act on commercial transactions may need to consider whether they can continue to act if the transaction goes bad and turns litigious.
3. Where a party believes that an opposing solicitor has a conflict of interest, that conflict should be raised with the other side as early as possible in the proceeding so that the trial process is not compromised.
4. Where a party’s own solicitor has a personal interest in or has been personally involved in an issue which is central to the case (and that “personal interest” may be the risk of an adverse finding), that party and their solicitor should carefully consider the issue of whether to continue to act.
5. If a fair-minded reasonably informed member of the public would reasonably conclude that the proper administration of justice required the solicitor to be restrained from acting, then the solicitor should advise the client to seek alternative counsel in the matter.

AUTHORS Alice Rolls & Nick Holland

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