Conflicts of interest are probably the most frequent ethical dilemmas faced by lawyers. They can cause an overlap with the lawyer’s fiduciary duties to their client, the lawyer’s duty of confidentiality and overall duty of loyalty to their client. While there are several ways in which conflict of interest can arise, in this article we will explore whether there is a conflict of interest when lawyers act against their former clients.
In New South Wales whether a lawyer can act against a former client has been codified in Rule 10 of the Solicitors’ Conduct Rules 2015 which reads as follows:
10. Conflicts concerning former clients 10.1 A solicitor and law practice must avoid conflicts between the duties owed to current and former clients, except as permitted by Rule 10.2. 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 written consent to the solicitor or law practice so acting, or 10.2.2 an effective information barrier has been established.
In general terms, Rule 10 exists so as to protect the public confidence in lawyers, and their fiduciary duty towards a client. In other words, the client must enjoy confidence that anything said to his or her lawyer throughout the course of the retainer cannot be used against them once the retainer comes to an end and they become a “former” client. This means that the fiduciary obligations must extend beyond the obligation towards a present client so as to reach former clients.
For the purposes of this article, let’s consider the following scenario: in 2019 Bill acted for Mary in a sale of a house she held in her sole name since 1989. Mary told Bill that she was single and did not disclose that she was married to Ashton since 1993. Mary also did not tell Bill that she is planning on leaving Ashton and travelling overseas for few months with her sale proceeds. Fast forward to 2020 and Ashton comes to Bill’s office to seek legal advice on a family law property settlement matter because Ashton’s wife Mary had left him. Ashton instructs Bill that apart from household contents and their respective super they don’t have any other assets held solely or jointly. Can Bill act for Ashton? Bill has a duty of confidentiality to Mary. But if Bill were to act for Ashton he will have a duty to act in Ashton’s best interests. For the purposes of his matter, Ashton should be made aware of Mary’s disposal of her property one year ago. He can obtain a forensic accountant or do any other searches. But if Bill tells Ashton, he will effectively breach his duty to Mary.
The principle of this type of conflict is centred in the following: if in the past a lawyer had a duty to act in the best interests of their client, this duty shifts in the future to protect confidentiality regardless of that the retainer has ended. This is even more so if the current client and the former client have competing interests in a matter that has a close proximity to each client.
What do Australian courts say about this?
While there doesn’t appear to be an established principle, most Australian decisions on the issue tend to reference English precedents such as Rakusen v Ellis, Munday and Clarke  1 Ch 831 and Prince Jefri Bolkiah v KPMG  1 All ER 517.
Perhaps a sign of its times, Rakusen was in favour of a more relaxed approach when determining whether lawyers can act for former clients. It held that a lawyer cannot act against a former client only if the Court was satisfied that it will result in “real mischief and real prejudice…in all human probability” .
In Australia, the case of Rakusen is oftentimes referenced but overall it appears to be rejected even if information barriers have been established as required under Rule 10.2.2. For example in D&J Constructions Pty Ltd v Head (1987) 9 NSWLR 118 while Bryson J did follow the reasoning of Rakusen, the idea of information barriers was rejected. Similarly in Mallesons v KPMG Peat Marwick (1990) 4 WAR 357 Ipp J rejected Rakusen and did not find that information barriers would be sufficient to protect the confidentiality of a former client. In both instances it was noted that there is a real possibility of confidential information of a former client being misused regardless of the existence of information barriers.
From the above cases it appears that Australian courts tend to favour a more narrow scope that has been established by another English case, that of Prince Jefri Bolkiah v KPMG  1 All ER 517. At  in the Prince case Lord Millet makes it very clear that the duty of confidentiality is a very strict one: “It is a duty to keep the information confidential, not merely to take all reasonable steps to do so. Moreover, it is not merely a duty to not communicate the information to a third party. It is a duty not to misuse it, that is to say, without the consent of the former client to make any use of it or to cause any use to be made of it by others otherwise than for his benefit.” Further, it was held that information barriers are ineffective and that the risk of disclosure remains most likely, due to the close proximity of lawyers working in the same firm, and the possibility of inadvertent exposure of confidential information. The exposure does not necessarily have to be deliberate for a lawyer to be seen as breaching a duty of confidentiality. In fact, former clients should not be at any risk of having their confidential information (that has been obtained by a past fiduciary relationship) to be used against them in any circumstances.
The reasoning used in the Prince decision was applied by Brereton J in Kallinicos and anor v Hunt and ors NSWSC 1181. At  His Honour held: “The test to be applied…is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner 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.” Evidently, the narrow approach has a lot to do with maintaining the public confidence in lawyers that they will uphold their duties to the client regardless of whether the client is a past, present or a future one.
But, with the growing trend of multi-tier law firms, the rise of globalisation and technology, and the move of lawyers to new employers in search of better career options – all characteristics of the modern law industry, is the narrow Prince decision viable in today’s day and age?
How narrow is too narrow?
Consider the Western Australian case of Fordham v Legal Practitioners Complaints Committee (1997) WAR 467. This was a case that involved a barrister who found herself in a situation where she had to cross-examine a former client. While it was held that there was no breach of confidentiality, the cross-examination of the former client contained facts that were common to the barrister from the barrister’s past retainer with that particular client. As such it was found that the barrister’s conduct amounted to a breach of loyalty to her client regardless of any breach of confidentiality. This then caused a subsequent breach of duty not to adopt a hostile position against a former client in the same or related matter. It was then argued that the circumstances of the case were such that it was evident to a reasonable observer that the barrister used her own knowledge and confidential information of the former client to the detriment of the former client. But how can a lawyer breach confidentiality without actually breaching it?
While confidential information in essence is anything you have raised with your solicitor regarding your matter case law suggests that even impressions a lawyer has gained about a client can in some circumstances be considered a type of confidential information especially in family law and criminal law matters. For example In the Marriage of Magro (1988) 93 FLR 365 it was found that a lawyer’s impressions of a client’s character, weaknesses, strengths, habits, attitudes can all considered “information” for the purposes of confidentiality as they might be prejudicial towards a former client.
A step in a more balanced direction is perhaps one that is closer to home although one made before the Prince decision came out. In Carindale Country Club Estate Pty Ltd v Astill (1993) 115 ALR 112 Drummond J at  held that a solicitor should be restrained from acting against a former client “if a reasonable observer, aware of the relevant facts would think that there was a real, as opposed to a theoretical possibility that confidential information given to the solicitor by the former client might be used by the solicitor to advance the interests of a new client to the detriment of the old client.” Modern case law seems to adopt this approach and this is mostly evident in family law proceedings which up until recently was the jurisdiction that maintained the strictest approach when determining if a lawyer should act against a former client.
Conflicts in the family law jurisdiction
In general family law proceedings are sensitive in nature and established case law in this jurisdiction makes a note of this when dealing with matters that arise in conflict of interest matters when lawyers act against former clients. The initial test was established by Thevenaz and Thevenaz (1986) FLC 91-748 and then approved by the Full Court of the Family Court of Australia in McMillan & McMillan  FLC 93-048. It required an examination as to whether there is a theoretical (rather than actual) risk to justice. Interestingly, it was irrelevant to establish whether confidential information has been provided or not; misuse of justice was the only concern. To give you a sense of just how narrow the Thevanez/McMillan test was consider the following scenario. Mary is employed as a criminal lawyer in ABC Lawyers in Gosford. Tom who is also employed by ABC Lawyers as a family lawyer acts for Danny in his parenting proceedings against Danny’s former partner Katie. Mary has never heard or read or been involved in Danny’s matter in any capacity. Mary has since quit her job in ABC Lawyers and is moving to another firm in Newcastle called XYZ Lawyers who act for Katie. XYZ Lawyers now have a problem with continuing to act for Katie because Danny is claiming that his confidentiality may have been breached because of Mary who used to work for the firm representing Danny but now works for the firm representing Katie.
In more recent years, notably in 2015 the threshold was relaxed by the Full Court of the Family Court of Australia with the matter of Osferatu & Osferatu  FamCAFC 177 that re-examined the test. At  it referenced another family law matter namely Photocure ASA v Queen’s University at Kingston  FCA 905 that uses a three step process in determining whether lawyers should be prevented from acting against a former client namely:
Does the firm hold confidential information about the former client?
Is it relevant to the current matter to the point where it can adversely affect the former client?
Is there a risk that the information will come into the hands of those working for the other party?
This then brings the new test established in Osferatu closer to what is commonly becoming the accepted approach in other areas of law.
While the rule itself does not necessarily mean that you cannot act against a former client ever; rather the rule exists to ensure that lawyers will not use confidential information gained throughout acting for a client against that client.
If a lawyer reading this is thinking of taking on a matter against a former client, before deciding whether to do it consider the following:
Do you hold any confidential information about the client? Is it relevant to the current matter?
Consider the facts and circumstances of the new matter. Are they the same as the initial matter in which you represented your former client? If yes, then consider the issues that arose in Fordham when you come across a situation where you have to cross-examine your former client. You will be effectively at risk in breaching your duty to your former client as well as to your current client.
When was the last time you acted for your former client and in what type of a matter did you act? Ethical barriers might be eased up if you acted for your former client some 10, 15 years ago in a completely unrelated matter.
How long did you act for your former client? You need to consider what type of a relationship you have with your former client. Is he/she considering you as their go to lawyer? Consider the impressions you might have build up over time and whether they may preclude you from cross-examining a former client even if the matters are unrelated.
Can your former client reasonably believe that you have information that you could use to his/her detriment?
If you answered yes to any of the above then you probably should not act.