Lawyers stand a fiduciary relationship with his or her client. Therefore breach of lawyers’ fiduciary duty to a client may end up in civil proceedings against the lawyer. Depending on the nature of the breach, action may be brought up for compensation or damages; an order setting aside the transaction; or account of profits. Lawyer-client relationship dictates that lawyers must give undivided loyalty to their clients, “without being distracted by other interests including personal interest”.[1] The purpose of this is to prohibit lawyers engaging with their clients in circumstances involving a conflict of interest and duty. More importantly, what would constitute a breach of a lawyer’s fiduciary duty to the client is where the lawyer gains at the expense of the client or where the lawyer fails to disclose the lawyer’s personal interest in the transaction, in all, likelihood be professional misconduct.

In Law Society of NSW v Harvey (1976), confirmed that the basic elements of fiduciary duty that a lawyer owes to a client is to act in good faith. In this judgement, Street CJ summaries the following elements of what constitutes duty of good faith:

1. Full disclosure of lawyer’s interest;

2. Duty of a lawyer to the client is paramount when conflict situations arise, lawyer should advise client to receive independent advice or to withdraw the case. Such conflict of interest should be avoidable or ought to be avoided.

Such meaning extends to avoiding the appearance of conflict. In the case of Spector v Ageda[2], Megarry J’s Ratio decidendi are as follows:

"The solicitor must be remarkable indeed if he can feel assured of holding the scales evenly between himself and his client. Even if in fact he can and does, to demonstrate to conviction that he has done so  will usually be beyond possibility in a case where anything to the client’s detriment has occurred. Not only must his duty be discharged, but it must manifestly and undoubtedly be seen to have been discharged.”

This is especially the case where lawyers must not accept instructions to act for a person in any transaction or proceedings affecting or related to any legal or equitable right or interest in property or entitlement, or to act for a person engaged in such transaction or proceedings when lawyers consciously aware that the person’s interest in the transaction or proceedings is, or would be, in conflict with lawyer’s own interest or the interest of an associate.

The Australian Solicitors’ Conduct Rules extend the proscription to “associates” of the conflicted lawyer, the term “associate” are being defined in broad terms as follows:[3]

  • a partnership or corporation for which the lawyer has a material beneficial interest;
  • employee, agent, or partner of the lawyer or of the lawyer’s firm;
  • member of the lawyer’s immediate family, this include spouse, child, grandchild, sibling, parent or grandparent of a lawyer;
  • Director of the incorporated legal practice or a subsidiary of that practice.

Nevertheless, in some circumstances, clients may relax such conflict of interest to secure loyal service from their lawyers as long the client has given informed consent or authority to the lawyer acting, or continuing to act, in such matter involving a duty-interest conflict.

Street CJ in Law Society of New South Wales v Harvey:[4]

[The disclosure] must be a conscientious disclosure of all material circumstances, and everything known to him relating to the proposed transaction which might influence the conduct of the client or anybody from whom he might seek advice. To disclose less than all that is material may positively mislead. Thus for a solicitor to merely disclosure that he has an interest, without identifying the interest, may serve only to mislead the client into an enhanced confidence that the solicitor will be in a position to better protect the client’s interest.”

In conclusion, there are many potential conflicts that may arise working as a lawyer. The purpose for such responsibility is to prohibit lawyers engaging with their clients in circumstances involving a conflict of interest, for that lawyer’s own interest aren’t coincident with those of the client.

 

[1] R v Neil [2003] 3 SCR 631 at [24] per Binnie J.

[2] Spector v Ageda [1973] Ch 30 at 47.

[3] ASCR Glossary (applies in Qld and SA).

[4] Law Society of New South Wales v Harvey [1976] 2 NSWLR 154 at 170.

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