Misconduct ruling to be challenged

By ANGELA GREGORY

An Auckland law firm will fight a ruling that one of its Auckland partners is guilty of professional misconduct in a test case relating to conflict of interest.

A suppression order against naming the firm ran out yesterday, but Russell McVeagh McKenzie Bartleet & Co said it would appeal to the High Court to overturn the tribunal finding against one of its partners. The partner has permanent name suppression.

The NZ Law Practitioners Disciplinary Tribunal recently found that the partner breached the rules of professional conduct for barristers and solicitors. In 1996 he accepted instructions relating to a proposal involving a possible acquisition and demutualisation of Tower Corporation.

At the same time, a Wellington partner was acting for Tower on a substantial tax matter.

The proposal eventually matured into a takeover bid for Tower by the Guinness Peat Group in September 1997.

The tribunal said the partner's conduct failed to meet professional standards as he did not advise the clients of the potential conflict of interest, recommend they take independent advice, or stop acting for the Guinness Peat Group.

Whether the lawyer acted in good faith and with the best of intentions was irrelevant except in terms of penalty, the tribunal said.

It noted that he did not consult his firm's in-house ethics committee, although the tax matter involved a potential liability of $40 million or more.

The confidential information relating to the tax dispute could have been used in a way adverse to Tower Corporation in context of the takeover or merger proposals.

The tribunal said there was the potential or likelihood of conflict of interest, and it was not for the firm to make such a significant decision without reference to the client.

In 1997 Tower Corporation successfully applied to the High Court to have Russell McVeagh disqualified from acting for Guinness Peat Group, but the Court of Appeal overturned the decision.

In May 1998 Tower complained to the Auckland District Law Society, which laid the charge of professional misconduct against the partner.

Tribunal chairman John Upton, QC, said in his decision that Tower Corporation had not sought censure of the partner, and the tribunal noted his high standing and integrity.

The tribunal also regarded the complaint as a test case and did not see any censure was required.

The chairman of Russell McVeagh's ethics committee, Gerard Curry, said the tribunal's ruling on conflicts was flawed.

"It has serious ramifications for the legal profession, not just large law firms like ours, but every legal practitioner in New Zealand."

Because it was an important test case, the firm would appeal to the High Court.