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Looks Dubious – The Third Ground to Restrain a Lawyer from Acting

The following piece was contributed by Valerie Blacker, commercial litigator focusing on funded litigation, and Amelia Atkinson, litigation and dispute resolution lawyer at Piper Alderman.

Strata Voting Pty Ltd (In Liq) v Axios IT Pty Ltd and Anor[1] is a funded single plaintiff action. It involved a recent examination of the Court’s power to prevent a lawyer from acting in proceedings for a conflict of interest. The authors represented Strata Voting in its successful defense of the restraint application.

The Third Ground

Less frequently invoked than the first and second grounds (misuse of confidential information and breach of fiduciary duty), the third category upon which to restrain a lawyer in a position of conflict from acting in a matter is known as the “inherent jurisdiction” ground. The Court can restrain lawyers from acting in a particular case as an incident of its inherent jurisdiction over its officers and control of its processes.[2]

The jurisdiction is enlivened where there is an objective perception that a lawyer lacks independence such that the Court is compelled to interfere and remove the lawyer from acting in the matter. In other words, the position of the lawyer makes the Court uneasy.

The test for intervention is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice, including the appearance of justice, requires that a legal practitioner should be prevented from acting.[3]

Axios’ failed application

The jurisdiction to enjoin a solicitor from acting is to be regarded as exceptional, and to be exercised by the court with caution. That was the basis on which his Honour Judge Dart of the South Australian Supreme Court dismissed the application brought to restrain Piper Alderman from acting for the liquidators.

Here, Piper Alderman is acting for the company in relation to a dispute which was in existence before the winding up commenced.  The liquidator retained Piper Alderman to continue acting for the company for the purpose of the litigation, the subject of the existing dispute.

The supposed conflict was said to have arisen from a proof of debt which Piper Alderman lodged for about $47,000 in fees incurred prior to the administration. The argument was that Piper Alderman’s impartiality was impaired by the fact that unless the litigation is successful, Piper Alderman will not be paid its outstanding fees because there will be no funds in the winding up to do so. Axios contended that “the conduct of the solicitor was so offensive to common notions of fairness and justice that they should, as officers of the Court, be restrained from acting”.

However, his Honour considered the firm’s status as creditor to be unremarkable. Even in a case where a substantial sum (over $830,000) was owed to lawyers by their insolvent client,[4] there was no risk to the proper administration of justice.

As everyone knows, solicitors routinely act in matters where they are owed money including conditional costs agreements, risk share arrangements, contingency fee arrangements and agreements that include uplift fees, to name a few.

The restraint application in Strata Voting was unsurprisingly and swiftly[5] dismissed with costs.

Conclusion

If an opposing party asserts that a lawyer should be restrained from acting for the opponent, it is necessary for a clear case to be made that the lawyer is in a position where he is fixed with an interest of such a nature that he may fail in his overriding duty to the court. It requires proof of facts, and not mere speculation as to motive.

The risk to the due administration of justice has to be a real one. Otherwise, a litigant ought not to be deprived of the lawyer of his choice.

About the Authors:

Valerie Blacker is a commercial litigator focusing on funded litigation. Valerie has been with Piper Alderman for over 12 years. With a background in class actions, Valerie also prosecutes funded commercial litigation claims.

Amelia Atkinson is a litigation and dispute resolution lawyer at Piper Alderman with a primary focus on corporate and commercial disputes. Amelia is involved in a number of large, complex matters in jurisdictions across Australia.

For queries or comments in relation to this article please contact Amelia Atkinson | T: +61 7 3220 7767 | E:  aatkinson@piperalderman.com.au

[1] Unreported, Supreme Court of South Australia, Dart J, 23 January 2023 (Strata Voting).

[2] Kallinicos & Anor v Hunt [2005] NSWSC 118 at [76] (Kallinicos).

[3] Ibid.

[4] Naczek & Dowler [2011] FamCAFC 179, [84].

[5] In a 5-page judgment.

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Sony and Apple Challenge Enforceability of Litigation Funding Models

By John Freund |

A pivotal UK court case could reshape the future of litigation finance agreements, as Sony and Apple reignite legal challenges to widely used third-party funding models in large-scale commercial disputes.

An article in Law360 reports that the two tech giants are questioning the validity of litigation funding arrangements tied to multibillion-pound cartel claims brought against them. Their core argument: that certain litigation funding agreements may run afoul of UK laws governing damages-based agreements (DBAs), which restrict the share of damages a representative may take as remuneration. A previous Court of Appeal decision in PACCAR Inc. v. Competition Appeal Tribunal held that some funding models might qualify as DBAs, rendering them unenforceable if they fail to comply with statutory rules.

This resurrected dispute centers on claims brought by class representatives against Apple and Sony over alleged anti-competitive behavior. The companies argue that if the funding arrangements breach DBA regulations, the entire claims may be invalidated. For the litigation funding industry, the outcome could severely curtail access to justice mechanisms in the UK—especially for collective actions in competition law, where third-party financing is often essential.

The UK’s Competition Appeal Tribunal previously stayed the proceedings pending clarity on the legal standing of such funding arrangements. With the dispute now heading back to court, all eyes will be on whether the judiciary draws a clear line around the enforceability of funder agreements under current law.

The decision could force funders to rework deal structures or risk losing enforceability altogether. As UK courts revisit the DBA implications for litigation finance, the sector faces heightened uncertainty over regulatory compliance, enforceability, and long-term viability in complex group litigation. Will this lead to a redefinition of permissible funding models—or to a call for legislative reform to protect access to collective redress?

Funder’s Interference in Texas Fee Dispute Rejected by Appeals Court

By Harry Moran |

A Texas appeals court has ruled that a litigation funder cannot block attorneys from pursuing a fee dispute following a remand order, reinforcing the limited standing of funders in fee-shifting battles. In a 2-1 decision, the First Court of Appeals found that the funder’s interest in the outcome, while financial, did not confer the legal authority necessary to participate in the dispute or enforce a side agreement aimed at halting the proceedings.

An article in Law360 details the underlying case, which stems from a contentious attorney fee battle following a remand to state court. The litigation funder, asserting contractual rights tied to a funding agreement, attempted to intervene and stop the fee litigation between plaintiffs' and defense counsel. But the appellate court sided with the trial court’s decision to proceed, emphasizing that only parties directly involved in the underlying legal work—and not third-party financiers—are entitled to challenge or control post-remand fee determinations. The majority opinion concluded that the funder’s contract could not supersede procedural law governing who may participate in such disputes.

In dissent, one justice argued that the funder’s financial interest merited consideration, suggesting that a more expansive view of standing could be warranted. But the majority held firm, stating that expanding standing would invite unwanted complexity and undermine judicial efficiency.

This decision sends a strong signal to funders operating in Texas: fee rights must be contractually precise and procedurally valid. As more funders build fee recovery provisions into their agreements, questions linger about how far those rights can extend—especially in jurisdictions hesitant to allow funders a seat at the litigation table.

Oklahoma Moves to Restrict Foreign Litigation Funding, Cap Damages

By John Freund |

In a significant policy shift, Oklahoma has enacted legislation targeting foreign influence in its judicial system through third-party litigation funding. Signed into law by Governor Kevin Stitt, the two-pronged legislation not only prohibits foreign entities from funding lawsuits in the state but also imposes a $500,000 cap on non-economic damages in civil cases—excluding exceptions such as wrongful death. The new laws take effect November 1, 2025.

An article in The Journal Record notes that proponents of the legislation, including the Oklahoma Civil Justice Council and key Republican lawmakers, argue these measures are necessary to preserve the integrity of the state's courts and protect domestic businesses from what they view as undue interference. The foreign funding restriction applies to entities from countries identified as foreign adversaries by federal standards, including China and Russia.

Critics, however, contend that the laws may undermine access to justice, especially in complex or high-cost litigation where third-party funding can serve as a vital resource. The cap on non-economic damages, in particular, has drawn concern from trial lawyers who argue it may disproportionately impact vulnerable plaintiffs without sufficient financial means.

Oklahoma’s move aligns with a broader national trend of state-level scrutiny over third-party litigation funding. Lawmakers in several states have introduced or passed legislation to increase transparency, impose registration requirements, or limit funding sources.

For the legal funding industry, the Oklahoma law raises pressing questions about how funders will adapt to an increasingly fragmented regulatory landscape. It also underscores the growing political sensitivity around foreign capital in civil litigation—a trend that could prompt further regulatory action across other jurisdictions.