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ETHICAL DILEMMAS: AUSTRALIA
Lawyers, Company Executives, Researchers and
Doctors
Andrew Alston*
Every profession has ethical duties that are usually documented in codes of conduct or government
regulation. This paper discusses two duties that are shared by all professions. The first is the duty of
confidence and exceptions to it. The second is the duty to avoid conflict of interest.
The discussion is conducted by way of examining a fact situation that involves lawyers, company
executives, researchers and doctors.1 It is substantially derived from widely publicised
events that have occurred in recent times and from common situations that occur in practice.
Discussions on entitlement to breach confidence and conflict of interest usually focus on the medical
profession.2 It is well established that doctors have duties to the community that sometimes override
duties to their patients. However, here the focus is on other professions, particularly the legal
profession and company executives.
The problem
Steve is a junior solicitor working for a large city firm. The firm’s biggest client is
Yummy-Drugs Ltd., a drug company that has recently withdrawn one of its drugs,
"Nopaine", from the market because it has discovered that people who have taken
the drug will probably suffer from a crippling arthritic condition in five to ten years
time.
The only people who know why "Nopaine" has been withdrawn are solicitors at
Steve’s firm, senior executives at Yummy-Drugs and a research scientist who
discovered the problem. Yummy-drugs has awarded the research scientist a grant of
two million dollars to leave the country and research the medical effects of quality
wines consumed in large qualities.
The firm has asked Steve to advise it on the following actions:
• Say nothing about the problem with the drug so that litigation against
Yummy-Drugs will be deferred;
• Vigorously defend all litigation
• Prolong litigation so as to d
iscourage parties from pursuing their
rightful claims;
• Transfer Yummy-Drugs assets to another jurisdiction so that the
company will not be able to compensate users of the drug who suffer
from the arthritic condition.
Steve’s aunt Clarissa has been a client of the firm for many years and she has asked
him to draft her will and to include in it a bequest of $50,000 to Yummy-Drugs Ltd so
that it may further its research into painkilling drugs. Clarissa had been taking
"Nopaine" regularly and believes that she has benefited from it.
(1) Assume that you are a trusted colleague of Steve’s and that he has asked for
your advice on problems that he may have. Advise Steve.
(2) Assume that you are a conscientious senior executive of Yummy-Drugs Ltd.
and that you want to best serve the interests of:
(a) yourself;
(b) the shareholders;
(c) the employees;
(d) the directors;
(e) the general public.
What are your options?
(3) Assume that you are the research scientist. You were the principal
investigator in the ethically approved trial, the findings of which led to the
marketing of "Nopaine" by Yummy-Drugs Ltd. You are a loyal employee of
Yummy-Drugs Ltd and a conscientious research scientist and you want to
serve the interests of the general public.
What are your options?
(4) Assume that you are Steve’s psychiatrist. In confidence, he tells you all his
problems including his ethical dilemma over "Nopaine". You form the view
that he will not tell anyone else about it.
Guidance for Steve: The Rules of Professional Conduct and Practice
These Rules were adopted by the Law Council of Australia in 2002. They are the
basis for the Professional Conduct Rules in every State and Territory in Australia
each of which has modified them to varying degrees. Unlike statutory provisions and
decisions of judges, the rules do not have the force of law.3 However, they provide
guidance for practitioners as to appropriate professional conduct. Failure to comply
with them may result in disciplinary proceedings.
The rules that apply to Steve and his predicaments are as follows:
• Introduction to RELATIONS WITH CLIENTS: “Practitioners should not, in the
service of their clients, engage in, or assist, conduct that is calculated to
defeat the ends of justice or is otherwise in breach of the law.”
• Rule I.1: A practitioner must act honestly and fairly, and with competence and
diligence, in the service of a client.
• Rule 3: Duty of confidentiality and exceptions to the duty.
o In rule 3.1.2, the words that are highlighted in this exception have
been added to the South Australian and New South Wales
versions:
“the practitioner is permitted or compelled by law to disclose.”
o The exception in rule 3.1.6 is only in the South Australian version:
“in the practitioner’s opinion the disclosure of the information is
required o prevent imminent serious physical harm to the client or
to a third party.”
• Rule 8: Acting for More than One Party (whose interests may conflict)
• Rule 9: Avoiding Conflict of Interest (where practitioner’s own interest
involved)
• Rule 10: Receiving a Benefit under a Will or other Instrument.
• Rule 30.1: A practitioner must not engage in conduct, whether in the course
of practice or otherwise, which is:
o Dishonest;
o Calculated, or likely to a material degree, to:
• Be prejudicial to the administration of justice;
Adversely prejudice a practitioner’s ability to practice
according to these rules
• Diminish public confidence in the administration of justice.
Should the firm say nothing?
• The consequence of saying nothing is that litigation either does not happen or
it is deferred. It is not the business of lawyers or their clients to promote
litigation against the clients.
• Saying nothing does not conflict with the introduction to RELATIONS WITH
CLIENTS, rule 1.1, rule 3 (including the expanded South Australian version)
or Rule 30.
Should litigation be vigorously defended?
• Yes! It has been discovered that some people will probably suffer from a
crippling arthritic condition. The word probably is a version of the word
possibly.
• It is also possible that p
eople will not suffer from a crippling arthritic condition
and that, if they do, there will not be a causal connection between their
suffering and the drug.
• If there is litigation, all parties are entitled to vigorously contest it.
Should litigation be prolonged so as to discourage parties from pursuing their
rightful claims?
No! Refer in particular to:
• Introduction to RELATIONS WITH CLIENTS (see above)
• Rule 30 (see above)
• White Industries (Qld) Pty Ltd v Flower & Hart (a firm)4
In White Industries (Qld) Pty Ltd v Flower & Hart (a firm), Flower & Hart were
solicitors who, on the advice of counsel, had commenced and continued proceedings
on behalf of their client knowing that there were no or substantially no prospects of
success.
The predominant, if not the only purpose of doing so was to delay and defer White
Industries (Qld) Pty Ltd in bringing to a conclusion its undoubted claim for moneys
due under a building contract. Goldberg J ordered Flower & Hart to pay the costs of
White Industries (Qld) Pty Ltd. His Honour said:
I do not consider that it is a legitimate or appropriate purpose for the
institution of a proceeding in this Court that the purpose of the
proceeding is to postpone, delay or put a barrier in front of a claim of
another party and the payment of an amount due in respect of that
claim. The purpose of proceedings in a court of law is to vindicate a
claimed right whether, for example, that right be a right to positive
relief such as a claim for money due or specific performance of an
agreement or whether the right be one to be free from unauthorised
governmental interference. It is not part of the legal process in this
Court that its process and procedure be used as an instrument of
oppression so as to frustrate the bringing, and expeditious disposition
of a legitimate claim.
Should lawyers advise that assets be transferred to another jurisdiction so that
the client cannot pay the compensation?
• No!
• Same reasons.
Steve’s Duty to Aunt Clarissa
• There is a clear conflict of interest between two clients: rule 8. It is in
Clarissa’s interest that Steve discloses information to her about Yummy-
Drugs Ltd. But this would be contrary to the interest of Yummy-Drugs Ltd.
• There may also be a personal conflict of interest: rule 9. Is the welfare of a
practitioner’s aunt “an interest of the practitioner”?
• There would also be a problem if Clarissa wanted to make provision for Steve
in her will: rule 10.
• The correct answer is that Steve should send Clarissa to another firm and tell
her nothing about Yummy-Drugs Ltd. and "Nopaine".
• But, she’s his aunt!!!!!
Does Yummy-Drugs Ltd. have a duty to disclose the information about
Nopaine?
The idea for this part of the problem comes from the events in September 2005 when
Phil Burgess, the regulatory chief of Telstra, stated publicly that he “wouldn’t
recommend” Telstra shares to his mother. This statement contributed to a sudden
and substantial downgrade in the value of Telstra’s shares. The Prime Minister
described the behaviour of Telstra executives as disgraceful. Why was it disgraceful?
It seems that the Prime Minister and others thought that it was wrong to have
disclosed that the shares were overvalued. However, it is submitted that what was
wrong was not the disclosure of this information but the way in which it was
disclosed.
• Listing rule 3.1 of the Australian Stock Exchange (ASX) requires that, once an
entity becomes aware of any information concerning it that a reasonable
person would expect to have a material effect on the price or value of the
entity’s securities, the entity must immediately tell the ASX that information.
Exceptions to Listing rule 3.1
• A reasonable person would not expect the information to be disclosed; and
• The information is confidential; and
• One or more of the following applies:
o It would be a breach of law to disclose;
o The information comprises matters of supposition or is insufficiently
definite to warrant disclosure;
Comments on the exceptions
• All three requirements must be met.
• As to the first one, Guidance Note 8 indicates that a reasonable person would
not expect information to be disclosed if the information would unreasonably
prejudice the company.
• As to the second, Guidance Note 8 indicates that “confidential” in this context
means secret.
• As to the third, it may be that, as it is not certain that people will be adversely
affected by Nopaine, the information is a matter of supposition.
Assuming the information should be disclosed and that Yummy-Drugs does
not do so, what can conscientious senior executive do?
• Protection from civil and criminal liability and from victimisation is given to
whistleblowers under Schedule 4 of the Corporate Law Economic Reform
Program [sic] (Audit Reform and Corporate Disclosure) Act 2004.
• Whistleblowers must comply with a number of requirements.
• It is not clear that whistleblowers will be protected if the company did not have
a duty of disclosure.
What should the Research Scientist do?
If the research scientist discloses the information, will she/he be protected as
a whistleblower or does she/he risk being sued in tort and/or contract?
• Some States have Whistleblower Protection Acts.5 However, the immunity
from civil or criminal liability offered by such legislation applies in only limited
circumstances. It certainly would not apply here where the information is not
about an illegal activity or conduct that causes a substantial risk to the public
health or safety or to the environment
• Failure to disclose could result in loss of credibility as a researcher.
• Disclosure would probably mean the end of the wine research project.
• Has the wine research project been approved by an accredited Human Ethics
Research Committee? Although the research is conducted in another country,
the researcher is from an Australian Institution and the project must be
approved in accordance with the National Statement on Ethical Conduct in
Human Research 2007.6
What should Steve’s Psychiatrist do?
• The Australian Medical Association’s Code of Ethics 20047 states:
Maintain your patient’s confidentiality. Exceptions to this must be
taken very seriously. They may include where there is a serious risk to
the patient or another person, where required by law, where part of
approved research, or where there are overwhelming societal
interests.
None of these exceptions apply here.8
Three Golden Rules
• Share your problems. Seek advice from someone you trust who has
appropriate expertise. This may include a senior colleague or a lawyer. If you
do this, you may be better able to make wise decisions and give good advice.
And, by sharing the decisions and advice with someone else, you may
effectively share or even deflect personal liability for your conduct.
• Take contemporaneous notes. They will be useful evidence of what you did
and why you did it. They will also provide guidance for others who have to
follow up on your work. Notes written sometime after the event are of little
evidentiary value;
• Talk to your clients/patients. They, not you, should decide what to do and, if
appropriate, they, not you should disclose information. But your
clients/patients may need your help in understanding what has to be done
and in having the courage to do it.9
* Legal Practitioner, South Australia; Adjunct Associate Professor, Flinders University, School
of Law.
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