Conflict of Interest and Lawyers’ Ethics

• Published date: 01 December 1993
• Citation: (1993) 5 SAcLJ 35
• Author: Richard H S Tur
• Date: 01 December 1993

A recent Queensland case evokes fond memories of J. B. Morton — “Beachcomber” of the [English] Daily Express — at his whimsical best:-

Mr Justice Cocklecarrot began the hearing of a very curious case yesterday. A Mrs Tasker is accused of continually ringing the doorbell of a Mrs Renton, and then, when the door is opened, pushing a dozen red-bearded dwarfs into the hall and leaving them there.

For some weeks Mrs Renton had protested by letter and by telephone to Mrs Tasker, but one day she waited in the hall and caught Mrs Tasker in the act of pushing the dwarfs into the hall. Mrs Renton questioned them, and their leader said, “We know nothing about it. It’s just that this Mrs Tasker pays us a shilling each every time she pushes us into your hall.”

“But why does she do it ?” asked Mrs Renton

“That’s what we don’t know,” said the spokesman of the little men1.

Australian Commercial Research and Development Ltd v Hampson 2 is also a very curious case. The plaintiff had briefed fifteen Queen’s Counsel to render an opinion on the same matter. In August, 1987 ACRD concluded a share placement agreement with the ANZ Banking Group and associates. ACRD was not satisfied with ANZ’s performance and in July, 1988, its then solicitors (Cleary & Hoare) sought the opinion of Mr Hampson QC. The brief included some quite substantial documents and the question for counsel was whether there was sufficient evidence to warrant instituting proceedings against ANZ for breach. In August, 1988 Mr Hampson submitted a twelve-page opinion to a effect that on the material available to him there appeared to be a basis for a claim but, that material being based on an interpretation of events by ACRD’s chairman, Mr Palmer, further detailed evidence was necessary to justify instituting proceedings.

Around that time Cleary & Hoare asked Mr Hampson if he would accept a brief to work full-time and every day on the case but this proposal apparently

lapsed. Proceedings between ACRD and ANZ did come on as Action 924 of 1989 in the Brisbane Registry and Mr Hampson was offered a brief by Morris, Fletcher & Cross on behalf of the defendants in that action. At the time of this offer, Mr Hampson had only recently become aware that “the plaintiff had briefed more than ten Queen’s Counsel to give an opinion on the same matter” and had only recently discovered from his records that he had given the plaintiff an opinion on the matter. Mr Hampson took the view that the plaintiff had sought multiple opinions with the intention of disqualifying those counsel from acting for the defendants in Action 924 by “cornering the market in Queen’s Counsel”.

Mr Hampson proposed to accept the brief offered by Morris, Fletcher & Cross subject to consultation with the President of the Bar Association, although he was sure that his “acceptance of the brief would not disadvantage the plaintiff”. Having thus consulted, Mr Hampson wrote to Cleary & Hoare reminding them of his “preliminary opinion” and of the suggestion that he would be retained and briefed in any proceedings that might be instituted. He observed that proceedings had now been instituted and that the plaintiff had briefed other counsel. He advised that the defendants in Action 924 had now asked to retain him and he expressed his feeling that, since he had not actually obtained any confidential information which would disqualify him from acting, there could be no legitimate objection to his accepting the defendant’s retainer. Accordingly, Mr Hampson sought confirmation that ACRD had no objection to his now acting for ANZ.

Perhaps unsurprisingly, this request was robustly knocked back by the new solicitors then acting for ACRD (Zaghini & Associates) who themselves objected “most strenuously” and advised that “our client is unable to agree to your acting in proceedings against it”. Notwithstanding this rebuff, Mr Hampson responded to the effect that he proposed to accept the brief on offer from Morris, Fletcher & Cross and invited ACRD to take legal action to restrain him if it wished to prevent him acting. In light of the probable outcome of such action, it is difficult to see why the case proceeded at all, given the time, trouble and expense of hostile litigation and the risk of having to meet ACRD’s costs. A fortiori, since it was sought to establish as a matter of law that Mr Hampsom be permitted to act contrary to normal and widely accepted ethical standards of the legal professions relating to confidentiality and conflict of interest.

A further significant aspect of the matter is a letter dated August 7, 1989 from the then President of the Bar Association to Zaghini & Associates. That letter duly reported Mr Hampson’s request to the Bar Association that he be relieved of compliance with the ethical rule of the Bar Association which would in ordinary circumstances have obliged him not to act for another party in proceedings where he had already given advice. Further, the letter stated that the Bar Association Committee considered the briefing of fourteen

other Queen’s Counsel was an abuse of the retainer rules of the Association and that, accordingly, Mr Hampson would be relieved of compliance with the ethical rules of the Association in this case. This is a spectacular non sequitur: two wrongs do not make a right and the waiving of the normal ethical duties of Counsel is all the more questionable given that the Bar Association Committee had not even sought to determine whether there was any real risk that some subconscious or residual memory of the confidential material might trigger a line of thought detrimental to ACRD on the basis that “this was a legal matter for the court”. Thus the Committee was willing to countenance and endorse a deliberate departure from a basic ethical requirement of practice even though this could well have turned out to be prejudicial to a fair trial of the issues between ACRD and ANZ.

It appears that in this instance the Bar Association favoured the interests of its own member over those associated with the administration of justice and it is self-serving conduct of this kind that excites legitimate criticism of self-regulation by the legal professions and fuels persistent demands for an independent and external system of ethics review and complaints handling such as is now under discussion in New South Wales3. The Law Reform Commission of New South Wales has proposed, among several options for consideration, a legal services commission independent of the legal professions in order that complaints be received and handled in a manner consistent with the public’s perception of fairness, taking as its model the manner in which grievances concerning the conduct of health care professionals are now handled in that state.

In the event, Mackenzie J concluded that ACRD had made out a case (on the probability of real mischief test) for relief and expressed himself willing “if it be necessary” to make the appropriate orders. In reaching this conclusion, Mackenzie J. stated a number of propositions to be extracted from earlier cases which may be summarised as follows:—

1. That a legal practitioner has acted previously for a client does not, of itself, preclude that practioner from acting for another person in the same proceedings; BUT

2. A legal practitioner will be restrained from acting for the new client where confidential information has been obtained from the former client, AND

3. It is probable that real prejudice and real mischief will result; THEREFORE

4. Courts should take a cautious approach to allowing a lawyer to act against a former client where

1. (a) confidential information was communicated;

2. (b) that information is relevant to present litigation; and

3. (c) the information is still available to the lawyer, NOT LEAST BECAUSE

5. A lawyer changing sides during a case is very subversive of the appearance of justice being done.

Some comment on these principles is in order. First, they are concerned to state the applicable law and not the ethics of the situation. “Legalism” (in one sense of the word) is the belief that acting in accordance with the requirements of the law fully discharges all one’s ethical obligations. Legalism is the minimalist position in lawyers’ ethics. On such a view the “Good Lawyer” is one who acts in accordance with the law — no less but no more. Accordingly for the legalist, so long as it is legally permissible, it is ethically acceptable to act against a former client. As against which, law may be understood as establishing only minimum standards whereas professional ethics impose demands further and beyond the call of legal duty. On this view, that the law will not necessarily intervene in order to restrain a lawyer from acting against a former client does not mean that such acting is ethical. It means only that there is no overriding harm calling for the law’s intervention. The morality of acting in such circumstances remains an open question, even where such acting is permitted by law. And on some strict interpretations of lawyers’ ethics, acting in such circumstances may be considered unethical even where any prejudice to the original client is more of a theoretical possibility than a real probability4.

Secondly, the requirement of confidential information as a basis for judicial intervention is neutral as to questions of proof. In some instances the courts have been willing to presume from the existence of the lawyer — client relationship that confidential information has necessarily passed5. In other cases the courts have required that evidence be adduced in order to establish whether any confidential information was transmitted6. Certainly it was part of the argument put on behalf of Mr Hampson that as a matter of fact no confidential information had passed to him from the original client. On that basis there could be no legal objection to his later acting against the original client. In the event...