JurisdictionNew Zealand
Judgment Date14 December 2010
Neutral Citation[2010] NZLCRO 39
Date14 December 2010
Docket NumberLCRO 87/2010
CourtLegal Complaints Review Officer

Concerning An application for review pursuant to Section 193 of the Lawyers and Conveyancers Act 2006


Concerning a determination of the Auckland Standards Committee 3

AD of Auckland, Barrister
ZX of Auckland, Solicitor

[2010] NZLCRO 39

LCRO 87/2010

Application for review of a decision of the Auckland Standards Committee which held that the applicant had breached Rule 8 (confidential information) and Rule 8.7 (lawyer not to act against a former client) Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 — applicant represented employees of a firm in a personal grievance claim and had previously represented the company — whether the information provided by the employees was confidential or could have been sourced from public sources.

AD as the Applicant

Mr X QC as Counsel for the Applicant

ZX as the Respondent

The Auckland Standards Committee 3

The New Zealand Law Society


On 17 August 2009 the receivers of AAB (AAB) dismissed a number of employees.


The Applicant was engaged through an instructing solicitor by a number of employees with regard to the dismissal, and proceedings were filed on their behalf in the Employment Relations Authority.


AAB had been created as a result of a merger of AAC (AAC) and AAD (AAD).


The Applicant had previously acted for AAC, and he had also been consulted in respect of a distinct matter arising during the course of the merger.


The Respondent lodged a complaint with the Lawyers Complaints Service alleging breaches of Rule 8, and in particular Rule 8.7.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.

Standards Committee Decision

In its decision dated 22 April 2010 the Committee accepted the Respondent's submission “that when providing advice on a restructuring procedure, a lawyer will usually have some knowledge of the restructure itself. In any event, [the Applicant] has knowledge through previously acting for the AAD and AAC about redundancy procedures, which are the subject matter of the present claims.”


The Committee also acknowledged that AAB “is in a difficult position in terms of obtaining information (and potentially assistance on evidential issues) from [the Applicant] as the company's previous lawyer about such matters given he is acting on the present claims.”


The Committee found that there was a conflict of interest and determined that there had been conduct unbecoming on behalf of the Applicant pursuant to Section 152(2)(b) of the Lawyers and Conveyancers Act 2006 (the Act). Section 152(2)(b) provides for a finding of unsatisfactory conduct. Section 12 of the Act defines unsatisfactory conduct, and s 12(b)(i) includes conduct unbecoming as constituting unsatisfactory conduct. The finding presumably is therefore, one of unsatisfactory conduct by virtue of s 12(b)(i) of the Act.


The complaint by the Respondent alleged a breach of Rule 8.7, and in particular Rule 8.7.1. The consequence of a breach of the Rules is a finding of unsatisfactory conduct by reason of s 12(c) of the Act. The Committee's determination of conduct unbecoming is therefore confusing, but hopefully that is resolved by this decision.


An Order was made by the Committee that a conflict of interest existed so that it was inappropriate for AD to continue acting for the former employees of AAB. The authority under which such Order was made is not provided, and is not an Order which it is open to the Committee to make under s 156. However, the practical consequences of a finding of conflict of interest, is that the Applicant could not continue acting for the former employees.


In addition, the Applicant was ordered to pay costs to the New Zealand Law Society in the sum of $500.


The Applicant has applied for a review of the decision by the Standards Committee, on the grounds that the decision was based on errors of fact and law.


The Applicant submits that the error of fact is that the decision to make the Applicant's clients redundant was made by the receiver. The Applicant has never acted for the receivers, and therefore there could be no argument that the Applicant was able to avail himself of institutional knowledge in bringing the proceedings against AAB (in receivership).


The errors of law relate to the reference by the Committee to two decisions of the Court, one of which the Applicant submitted could be distinguished, and the other of which the Applicant submitted had been extended by a subsequent decision which refined the test as to what constitutes confidential information.


A review took place by way of a hearing on 8 December 2010.


Mr G, QC appeared on behalf of the Applicant who was also present. ZX appeared for himself.


As recorded above, this matter concerns an allegation by the Respondent that the Applicant was in breach of Rules 8.7 and 8.7.1 by accepting instructions from the previous employees of AAB, in circumstances where he had previously acted for AAC and had also given advice in respect of a distinct aspect relating to the merger.


Chapter 8 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 is headed “Confidential Information”. The Rules relating to conflicts of interest are contained in Chapter 6 and apply to conflicts when acting concurrently for more than one party.


It is appropriate to record the provisions of Rule 8.7 and 8.7.1 in full.

  • 8.7 A lawyer must not use information that is confidential to a client (including a former client) for the benefit of any other person or of the lawyer.

  • 8.7.1 A lawyer must not act for a client against a former client of the lawyer or of any other member of the lawyer's practice where –

    • (a) the practice or a lawyer in the practice holds information confidential to the former client; and

    • (b) disclosure of confidential information would be likely to affect the interests of the former client adversely; and

    • (c) there is a more than negligible risk of disclosure of the confidential information; and

    • (d) the fiduciary obligation owed to the former client would be undermined.


The Rules reflect the exercise by the Court of its inherent jurisdiction to control its own processes, one of the aspects of which is the power to determine which persons should be permitted to appear before it as advocates. Hana New Zealand Ltd v Stephens 1 NZLR 833 p.11.


Nevertheless, it must be noted at this point, that the complaint and this application rest on a breach of the Rules, rather than a consideration of whether the Applicant is in a conflict of interest situation as discussed by the Courts. The distinction may be subtle, but the outcomes are quite different.


The consequence of a breach of the Rules, is, as has happened in this instance, that the practitioner has a finding of conduct unbecoming recorded against his name.


The consequence of the Court determining that there is a conflict of interest, is that the lawyer is unable to represent one of the parties to the proceedings.


I am grateful to both counsel for providing the various authorities and articles in respect of this application.


Both Mr G and the Respondent focused on the relevant test to be applied when considering whether a conflict of interest exists. The Standards Committee determined that the test was that of a reasonable bystander. The Applicant, and Mr G on his behalf, submitted that that test had been refined by G B R v Seng Bou (Paul) Keung, unreported, High Court, Christchurch, 19 March 2010, Associate Judge Bell, (CIV – 2009 409–1486) in which the test was considered to be what “a reasonable observer who knows and is prepared to understand the facts” would think.


In considering this application, it is appropriate to focus closely on the various elements of Rule 8.7.1, as it is a breach of this Rule that the Applicant has been accused of.


Applying the four elements of the Rule to the current situation, the following questions arise:

  • (a) Did the Applicant hold confidential information?

  • (b) Would disclosure of that confidential information be likely to affect the interests of AAB (in Receivership) adversely?

  • (c) Was there more than a negligible risk of disclosure?

  • (d) What was the nature of the fiduciary obligation owed to the former client?


Paragraph (c) can be discounted immediately as it must be a given that there was more than a negligible risk of disclosure.


The question posed in paragraph (d) can also be disposed of readily. In this regard the address given by Justice...

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