LAW 2505 Lecture 11: Duties of corporate lawyers
23 May 2018
School
Department
Course
Professor
DUTIES OF CORPORATE LAWYERS
Lawyers liable for breaches of DDs where
1. Lawyer is also an employee (secretary) of the Co, who goes beyond proffering advise at request of Co to undertake active role in Co’s activities
• ASIC v Shafron- lawyer/ Secretary owes DDs no matter what capacity they proport to act in, roles are indivisible must be viewed as a composite whole. Scope of
responsibilities as officer are SUBJECTIVE- that officer in that company.
2. Accessorial liability Subsection (2) to each of sections 181-183 - "A person who is involved in a contravention of subsection (1) contravenes this subsection."- s 79 CA
• Eg- Lawyer advising Co to engage in PHEONIXING ACTIVITIES by stripping assets. ASIC v Somerville
▪ Facts: Co nearing insolvency; Lawyer (Somerville) advised they transfer assets of existing Co to new Co- arranged rego of new co, prepared necessary returns and
resolutions for new Co and sale arrangements to effect transaction. Held: Ds breached their DDs- s 181; 182; 183. As Lawyer advised stripping, liable under s 79
At common law, corporate lawyers are under
Duty to obey the law
- obey law; not to counsel, assist or induce breach of
law by others- counsel against breaking law, avoid
personal involvement (ASCR, 2011)
- may advise a client to engage in conduct the
lawfulness of which is uncertain provided:
o Advice given in good faith to test the validity or
scope of the law
o client is informed before advice is given of the
likelihood and consequences of the conduct
being found to be illegal & has freedom of
choice in what action to take
o Practitioner must not advise a client of ways in
which an unlawful purpose may be achieved, or
suggest methods of breaking the law (Barrister's
Rule 6.6)
Duty to act
in the
interests of
the
corporation
as a whole
Obligation to
be alert to
and advise
about the
wider
ramifications
of corporate
activity
Obligation not to break
the law or encourage or
assist clients breaking
the law
Law Society of NSW v
Dennis (1981) Solicitor
disbarred for, inter alia,
participating in a scheme
where a building society
was deceived as to the
purchase price of
properties to assist the
vendor client who was in
financial difficulties
Obligation not to misuse
legal mechanisms to assist
client
White Industries - solicitor had
initiated proceedings with no
substantial prospects of
success.
- HELD- It is irrelevant that
there is an arguable case if
proceedings are instituted
for an improper purpose
and not for the purpose of
vindicating a legal right
Duty of confidentiality
to corporation vs duty
to report 'up' or 'out'
illegal behaviour
- Report up- to
management; then,
although it breaks
confidentiality
between client and
lawyer, report out to
the regulator-
lawyer enjoys
whistle-blower
protections in the
CA Pt 9.4 AAA
Failure to fulfil common law duty also likely to breach ss 68/69 LPA Legal Practitioners Act 1981 (SA) s 5
1. unsatisfactory professional conduct includes
(a) conduct of a legal practitioner occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is
entitled to expect of a reasonably competent legal practitioner [incompetence ground]
2. professional misconduct includes
(a) substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence; [serious incompetence ground] and
(b) conduct in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the
practitioner is not a fit and proper person to practise the profession of the law [character- unfitness ground]
- 'unfitness' – conduct within and outside legal practice: easier to make case if directly connected to legal practice
- Unclear line between personal misconduct and professional misconduct: A Solicitor v CoLS NSW
- Fitness decided at the time of the hearing (A Solicitor 268)
- Requires consideration of detailed subjective and objective circumstances of offending behaviour (A solicitor 268)
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