The duty to avoid conflicts of interest between current and former clients is fundamental.
Most practitioners are familiar with the concept of a conflict of interest and how a conflict may arise in legal practice. However, when it comes to conflicts between former and current clients, what may not be widely understood is who constitutes the “former client”. The concept is broader than many practitioners think.
The duty to avoid conflicts of interest
The duty to avoid conflicts of interest between current and former clients is fundamental. As observed in Rosen v Legal Services Commissioner [2016] QCA 190 at [36]:
“Solicitors cannot properly discharge their duties to a client whose interests are in conflict with those of a former client…The conflict is between the continuing duty owed to the former client not to disclose or use to the former client’s prejudice confidential information, and the solicitor’s obligation to advance the case of his or her new client: Mallesons Stephen Jaques v KPMG Peat Marwick cited with approval in Fordham v Legal Practitioners’ Complaints Committee.”
The duty is reflected in r 10 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules (NSW) (Conduct Rules) which provides that:
10.2 A solicitor or law practice who or which is in possession of information which is confidential to a former client where that information might reasonably be concluded to be material to the matter of another client and detrimental to the interests of the former client if disclosed, must not act for the current client in that matter UNLESS—
10.2.1 the former client has given informed consent to the disclosure and use of that information, or
10.2.2 an effective information barrier has been established.
The obvious case: formal retainers
In most cases, the question of whether a person is a “former client” will be obvious. For example, a person who has previously instructed a solicitor to act for them in litigation. This was the case in Law Society of NSW v Nguyen [2009] NSWADT 199 where a solicitor acted for the mother of a child in parenting proceedings and subsequently acted for the child’s grandmother against the mother’s interests. In finding that the solicitor acted in a conflict of interest and engaged in professional misconduct, the Tribunal made the following comment:
“It is important that the public should be able to feel comfortable that if they engage a solicitor to act in a particular matter they will not later down the track, whether in the same or subsequent litigation over some or all of the same issues find that same solicitor appearing for their opponent…”[1]
The less obvious case: informal relationships
The less obvious scenario is when a solicitor-client relationship arises in the absence of a formal retainer.
Under the Glossary of Terms in the Conduct Rules, a “former client” includes a person who has provided confidential information to a solicitor, even where no formal retainer was established and no account was rendered.
Can a conversation create a solicitor/client relationship?
The short answer is yes – if the person has disclosed confidential information during that conversation.
A common example of this is where a prospective client consults with a lawyer to ascertain if that lawyer can act. If they disclose confidential information during that conversation, the person would be considered a “former client” for the purpose of r 10 of the Conduct Rules – even if the solicitor ultimately does not formally act for them.
If that solicitor subsequently acts against that prospective client in a related matter, a conflict may arise where the confidential information is material to the matter and detrimental to the former client if disclosed.
It is therefore critical that solicitors consider whether they have been provided with confidential information by prospective clients and keep accurate records of any information provided to them.
In this regard, it is important to note that “within the context of a relationship of legal practitioner and client, the concept is not to be construed narrowly.”[2]
Why this matters?
The definition of “former client” in the Conduct Rules makes it clear that, when considering conflicts of interest between former and current clients, solicitors need to be aware of brief, informal interactions they have with people who approach them for legal services, even if it was never intended that a formal retainer would be entered into.
Risk management tips
To minimise the risks of acting against a former client, solicitors and law practices should:
- Have a robust and consistently applied conflict of interest register which is not limited to formally opened files.
- Ensure that staff are trained on how to input information accurately into the register so that it is effective.
- Keep written records of discussions with prospective clients.
- Ensure that staff (including administrative staff) receive training on the duties of confidentiality and conflicts of interest.
