Australian Courts

Australian courts have been reluctant to pierce the veil in corporate groups, even in cases of control and the presence of other veil piercing factors.[1] Piercing occurs less frequently with respect to parent companies than in cases of natural person shareholders.[2] Courts are most willing to pierce the veil with respect to ‘proprietary companies that are closely controlled with shareholders managing the company’,[3] rather than public companies.[4] The reluctance to do so in other cases coheres with the long-standing attitude of the High Court of Australia, which emphasises the need to observe the separate entity principle even within groups of companies.[5] In Industrial Equity Ltd v Blackburn,[6] Mason J stated that ‘in the absence of contract creating some additional right, the creditors of company A, a subsidiary company within a group, can look only to that company for payment of their debts. They cannot look to company B, the holding company, for payment’.[7]

[1] Eg, Premier Building and Consulting Pty Ltd (rec apptd) v Spotless Group Ltd (2007) 64 ACSR 114; Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254, 266-7 (Young J). See IM Ramsay and DB Noakes, ‘Piercing the Corporate Veil in Australia’ (2001) 19 C&SLJ 250, 257.

[2] IM Ramsay and D Noakes, ‘Piercing the Corporate Veil in Australia’ (2001) 19 C&SLJ 250, 263. See also P Oh, ‘Veil-Piercing’ (2010) 89 Tex LR 81, 110; R Thompson, ‘Piercing the Corporate Veil: An Empirical Study’ (1991) 76 Cornell LR 1036, 1038 and 1047; C Mitchell, ‘Lifting the Corporate Veil in the English Courts: An Empirical Study’ (1999) 3 CfiLR LR 15, 22.

[3] IM Ramsay and D Noakes, ‘Piercing the Corporate Veil in Australia’ (2001) 19 C&SLJ 250, 263; Mobile mechanic London

[4] Companies and Securities Advisory Committee, Corporate Groups Final Report (2000), 17; C Mitchell, ‘Lifting the Corporate Veil in the English Courts: An Empirical Study’ (1999) 3 CfiLR 15; PI Blumberg, The Multinational Challenge to Corporate Law: The Search for a New Corporate Personality (OUP, 1993), 123-4.

[5] Walker v Wimborne (1976) 137 CLR 1, 6-7 (Mason J). See also Equiticorp Finance Ltd (In Liq) v Bank of New Zealand (1993) 32 NSWLR 50, 97-9 (Kirby P); Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254, 266-7 (Young J).

[6] (1977) 136 CLR 567.

[7] (1977) 136 CLR 567, 577.

Rebuttal

I have some rebuttal for the points put forward by the speaker for the proposition. The opposing speaker stated that clients don’t know what they are consenting for. I disagree with this because in practice informed consent is highly spoken of in court and as previously discussed, rules are set out as to what constitutes informed consent. He recited the Lewis SSDT 2008 case in an incorrect reference where he made the fundamental error of stating the solicitor failed in his duty to represent both parties. However, this case failed specifically because what the lawyer did, did not constitute informed consent.

He also mentions that informed consent is a threat for the fiduciary duty. As previously stated however, the duty only arises from the instructions of the client which should be identified as this duty may be confused for a contractual obligation rather than a fiduciary duty. He uses the Wernham case by agreeing with my motion, stating lawyers can act in a double capacity. This was the case in Notary Public I therefore fail to see the strength in this argument.

Finally, he mentions that clients may not give the consent, thus the solicitor would be breaching his duties. If the client does not give the consent, the solicitor will cease to act for the client and advice them to seek independent legal advice.

 

 

the Council of Mortgage Lenders (CML

On to my final point, in Scotland, it is competent for solicitors to act for both the lender and the borrower in a conveyancing transaction.

Lenders are represented by a central body known as the Council of Mortgage Lenders (CML), the mortgage lenders’ representative body, which produces a Handbook detailing the practices of various lenders and issuing standard forms. Generally, lenders will permit solicitors acting for the borrower in the purchase of a house, to act for the lender as well.

This means a substantial saving on duplication of work and thus a saving of costs payable to the borrowers. It should always be borne in mind that if a conflict does arise, the solicitor must cease to act for them.

If solicitors are in possession of information that is clearly detrimental to one of the parties, they must reveal it to the other party as seen in Mortgage Express v Bowerman & Partners 1996 2 All ER 836. 

In Wernham v Mclean Bourd & Neilson 1925 S.C 407, Lord Anderson stated, “I am not prepared to hold that it is an act of professional negligence for a solicitor to act for both borrower and lender in a transaction of this nature. It is a matter of regular practice for solicitors to act for both parties in such a transaction. The duty of suggesting that independent legal advice should be sought, only arises… when there is a real conflict.” Thus, in potential conflicts, the nature must have a material and adverse effect on one of the clients. In regards to disclosure, the lawyer must disclose all facts that are material to the transaction and if the facts are confidential, the clients informed consent allows the lawyer to proceed, so confidentiality is compromised.

To conclude, solicitors such as abogados de accidentes may find themselves in a position whereby they have no choice but to act for both the purchaser and borrower in a conveyancing transaction. The rule of informed consent allows this transaction to happen saving on costs and time. I strongly oppose my friends motion that confidentiality may be breached, because informed consent gives the client the benefit of having the transaction completely quickly and efficiently at low costs, without a conflict actually arising. I therefore ask the house to reject my friend’s proposition and vote for today’s motion.

Point one – Law exam help

On to my first point, if we examine the words ‘informed consent’ it means ‘it is permission granted in full knowledge of the possible consequences’ according to the Oxford dictionary.

A conflict of interest is defined in the CCBE Code 2006 which is a code of conduct for lawyers in the EU which is adopted at National level in Scotland. Article 3.2.1 of the 2006 Code states “a lawyer may not advise, represent or act on behalf of two or more clients in the same manner if there is a conflict or a risk of conflict between the interests of the client.”

Furthermore, The Solicitors (Scotland) Practice Rules 1986 (the conflict of interest rules) states in rule 3 that ‘a solicitor shall not act for two or more parties whose interests conflict’. This does not explicitly state a potential conflict which may arise, just a conflict that has already happened.  In Scotland, a solicitor may act for clients with potentially conflicting interests if it is permitted by law, applicable rules of professional conduct or by informed consent.

As briefly stated, there are two types of conflict, potential and actual. Lawyers simply cannot act for two or more clients who interests conflict if the conflict is an actual conflict. Thus, set out in Frank’s argument that actual conflicts are personally barred is irrelevant as informed consent does not exist in this demeanour.

The said Rule 3 of the 1986 Rules has exceptions which are extensive and wide ranging. More specifically, exception 4 is the established clients exception which is where the clients know what expense they will receive and the competence of the lawyer.

A conflicts of interest

`This house believes that a rule of informed consent a better model than an absolute bar to regulate conflicts of interest.

I have three main points I would like to present to the house.

Firstly, a potential conflict could either be substantially risky conflicts or simple common representation which is remote and not likely to happen, so if the client knows of the expertise by the lawyer, and the conflict is remote, why would the lawyer personally bar acting for both thus putting the client at a disadvantage.

My second point is that a strong doctrine of loyalty would be difficult to operate in such a small jurisdiction, thus the doctrine of informed consent permits a solicitor to continue to act in a potential conflict under the law of fiduciary duty.

My final point is it is competent for solicitors to act for both the lender and the borrower in a conveyancing transaction, so informed consent further protects the lawyer.

http://www.lawscot.org.uk/rules-and-guidance/section-b/rule-b2-conflict-of-interest/guidance/b21-conflict-of-interest-generally/