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

April 5, 2023

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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Connecticut Op-Ed Warns of Hidden Costs of Litigation Funding

A new opinion piece out of Connecticut casts third-party litigation funding as an under-regulated market whose costs ultimately fall on the public, adding to the chorus of consumer- and insurance-side critics pressing for greater transparency.

As argued in a CT Insider op-ed by Lisa Lounsbury, president of Big I Connecticut, the growth of third-party litigation funding (TPLF) has turned lawsuits into an investable asset — with the resulting costs, she contends, showing up in higher insurance premiums borne by ordinary consumers.

Lounsbury acknowledges the access-to-justice case for funding, noting that it can help plaintiffs pursue legitimate claims they could not otherwise afford. But she argues that expanded access does not justify operating without meaningful transparency or consumer protections. In many states, including Connecticut, she writes, consumers who turn to litigation funders have little protection: the industry is largely unregulated, with no caps on fees, no clear disclosure of true costs, and inadequate safeguards against referral arrangements between lawyers and funders.

She reserves particular concern for disclosure in the courtroom, warning that funding deals often need not be revealed to judges — leaving courts unaware of who holds a financial stake, who may be influencing litigation decisions, and whether conflicts of interest exist. The piece adds a Connecticut voice to a national debate over how, and how much, the funding industry should be regulated.

Commercial

New Jersey Supreme Court Sets Five-Factor Test for Third-Party Funding in Criminal Cases

The New Jersey Supreme Court has established a framework for trial judges weighing the ethical implications of third-party funding in criminal matters, extending scrutiny of outside financing into a context that has drawn far less attention than its commercial counterpart.

As reported by Bloomberg Law, the unanimous court issued the framework in a ruling that upheld the conviction of a defendant whose legal bills had been paid by a witness the state called to testify — an arrangement that raised clear questions about divided loyalties. The opinion set out five factors judges should weigh in determining whether a third-party payment arrangement creates a conflict of interest for a defendant's counsel.

At the center of the decision is the principle that an attorney's duty "requires the attorney's exclusive loyalty to the client, without diversion of that loyalty in favor of another person." By articulating specific factors rather than a blanket rule, the court gave trial judges a structured way to assess when outside payment for a criminal defense threatens that loyalty.

The ruling adds a criminal-law dimension to an ongoing debate over transparency and control in third-party litigation funding, which has largely centered on commercial disputes. For courts confronting funded criminal defenses, the decision offers a template for surfacing potential conflicts before they compromise a defendant's representation.

Commercial

Counsel Financial Names David Le to Lead Product and Digital Transformation

Counsel Financial has expanded its technology leadership with the appointment of David Le as Director of Product and Digital Transformation, a newly created role aimed at modernizing the platforms that underpin its litigation finance operations.

According to a company announcement, the Buffalo-based firm — a provider of specialized financial solutions for plaintiff law firms and litigation finance stakeholders — said Le will lead its digital transformation strategy, overseeing the development and modernization of internal systems supporting underwriting, operations, reporting, and enterprise-wide workflow. The company framed the hire as a step toward strengthening operational efficiency, data integrity, and scalable technology as it continues to grow.

Le brings more than 15 years of experience leading product strategy and digital transformation across legal, financial, and operationally complex organizations. He most recently served as Senior Product Manager for Financial Operations at Urgently, where he led the modernization of internal payment and financial systems. Earlier roles included Head of Product at a consumer technology company and leadership positions at Anthroware and Garretson Resolution Group, where he directed platform initiatives supporting mass tort and personal injury settlement administration. He began his career in corporate strategy and engineering roles at Toyota.

The appointment reflects a broader trend across litigation finance, where funders are investing in technology to sharpen underwriting discipline, improve reporting, and manage increasingly complex portfolios at scale.