Shark Alert: Solicitor/Client Conflict

Jing Li v Jin Lian Group Pty Ltd [2018] NSWSC 479 (Gleeson JA)

In this decision, Mills Oakley Lawyers, a law firm, successfully defended an application to restrain them from acting as lawyers in the proceedings.  The case is a helpful reminder of the important principles that apply in an alleged solicitor and client conflict. 

Solicitor Rule 10

Rule 10 of the Solicitors’ Conduct Rules requires solicitors to avoid conflicts between the duties owed to current and former clients.[1]

Facts

The Defendant, a company, sought to restrain the law firm from acting for the Plaintiff in the present proceedings; a winding up application of the company on the grounds of alleged insolvency following its failure to comply with a statutory demand in late 2017.

There were several grounds supporting the restraint application (albeit unsuccessful).  First, there was a risk that confidential client information might be misused.  Second, there was a potential for the solicitors to be called as witnesses in the present proceedings. They had previously acted in related proceedings (including drafting a defence and affidavit) which was potentially in issue in these proceedings.  The restraint was said to be required because of the Court’s inherent jurisdiction to restrain a solicitor from acting 'in the interests of protecting the integrity of the judicial process'.  It was alleged that the solicitors’ personal integrity might be put in issue which might be a personal interest inconsistent with the duty to the court and their client in these proceedings. 

None of the grounds were accepted. The application to restrain the solicitors was refused. But the decision helpfully articulates the principles that apply to a solicitor and client conflict.[2]

Relevant principles: Solicitor/Client Conflict

1. During a client retainer, there is an inescapable conflict of duty in the situation of acting for clients with competing interests. The Court will intervene in such a situation to restrain the solicitor from acting for another client and to protect the fiduciary situation.
2. At the conclusion of the client retainer, a restraint might be justified to protect confidences of the former client. This is distinct from a conflict of duty or interest.
3. After termination of the client retainer, the duty ends with the retainer. There is no continuing (equitable or contractual) duty of loyalty to provide a basis for the court’s intervention.
4. Despite this, the court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers (such as solicitors) and to control its process in aid of the administration of justice
5. The test to be applied in this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a lawyer 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.
6. The jurisdiction is exceptional and should be exercised with caution.
7. Weight should be given to the public interest in a litigant not being deprived of the lawyer of their choice without proper basis.
8. The timing of the application may be relevant because the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief.

[1] Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW), r 10.

[2] Many are summarised by Brereton J in Kallinicos v Hunt (2005) 64 NSWLR 561 at [76].