Australia: Waiving the right to object to a conflict of interest

Waiving the right to object to a conflict of interest

Solicitors are often faced with the dilemma of being approached by a potential new client, but because the solicitor or firm has acted for a previous client whose interest may be affected, the solicitor may be unable to act. There are, however, circumstances where a former client may waive, whether expressly or impliedly, their right to object to the solicitor acting. Dalton & Dalton [2017] Fam CAFC 78 exemplifies the circumstances.

In this case, the husband had previously instructed a solicitor to draft his Wills and to advise on assets he owned. Two years later, the husband separated from his wife and property proceedings began. The solicitor previously engaged by the husband had left the original firm and established his own practice. The wife secured a different solicitor, but one who had worked for the same firm that her husband's previous solicitor was originally employed with.

His Honour found that confidential information was conveyed to the husband's former solicitors at the wife's current firm, which could have been disclosed to her solicitor and used to her advantage in the proceedings. His Honour therefore found that there was a real chance of the wife's solicitors becoming informed of confidential information provided by the husband. However, despite that potential, the husband didn't immediately bring an application for the wife's solicitor to cease acting.

Furthermore, a mediation was arranged, and issues of financial disclosure were dealt with - issues which seemed to the Judge and the Court of Appeal, at first instance, to mean that the conflict matter wasn't in any way serious or urgent. Some seven months passed as a consequence of the matter being advanced, which also appeared to lessen the urgency and seriousness of the conflict.

By the time the husband did object, the wife had spent $45,000 in legal fees. His Honour was satisfied that this was prejudicial to the wife, if she had to engage new solicitors and counsel, given that the legal fees paid for up to that time would have been wasted. This was exacerbated by the fact that there was a substantial difference between the parties' wealth - in favour of the husband.

Examined in the context of the conflict was the timeliness of bringing the application for property settlement. Generally, where a party accepts a solicitor's continuing representation of the other party, it implies a waiver of the right to object to that legal representative appearing in the proceeding. In the present case however, while the new solicitor had informed the husband about the potential conflict early on, the husband didn't make any meaningful attempts to restrain the wife's solicitor from further acting until significantly later in the proceedings.

The husband indicated that the reason for the delay in his objection was a result of his shock and distress at the separation but His Honour wasn't persuaded. When the matter was appealed to the Full Court of the Family Court, the Full Court remarked that "in circumstances where the husband did not expressly waive his right to object to the solicitors continuing to act, it is apparent that the Primary Judge considered that he acted inconsistently with this right and ultimately impliedly waived that right."

The Full Court went on to say that "the point of implied waiver is that even though the holder of the privilege (or right) does not intend to give it up, intention to waive is imputed...the Trial Judge found that the particular solicitor's involvement in the matter was "transient and tangential".

The Full Court indicated that it was troubled by this finding, and that while the solicitor's involvement in the proceedings was limited, the nature of the correspondence between the parties was of critical importance. Evidently, the issue of the husband's delay raising the issue of conflict before the Court, and his actions in advancing the matter, led the Full Court to conclude that the husband had impliedly waived his right to object.

Prior to this case, there have been other cases which have considered the issue of conflict, and which have suggested that conflicts are more likely to arise in a family law context.

Thevenaz v Thevenaz [1986] FLC 91-78 and McMillan v McMillan (2010) 159 FLR 1, indicate that the test for conflicts in family law matters is as follows:

  1. That one of the parties to the matter believes that the solicitor received confidential information; and,
  2. That there is a theoretical risk of the information received being relevant and used against that party to the proceedings.

Conversely, there have also been cases which have suggested that family law matters should be seen as no different to conflicts which arise in other areas of law. Osferatu v Osferatu [2015] Fam CAFC 177 is the authority for the suggestion that a party seeking to restrain a solicitor (or firm) from acting in the circumstances of conflict, must satisfy the following test:

  1. That there is relevant confidential information held by the solicitor; and,
  2. There is a real risk of misuse of the confidential information, as opposed to one which is merely theoretical.

Evidently, the view taken in respect of those authorities, in the case of Dalton can be summarised by Justice Murphy's single judgment, at paragraph 83, as follows:

"The authorities (just) referred to establish in my view that an application to restrain a solicitor from acting must be founded on, relevantly, proof of confidential information that is particularised and shown to remain confidential and to be in need of protection from disclosure."
"While His Honour acknowledged the question has been 'open to doubt', I am unable to see it was open to His Honour on the evidence before him to conclude that the husband had satisfied his evidentiary burden."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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