A lawyers duty to a liquidated company?

When a lawyer is instructed to set aside a company’s liquidation (under section 482 Corporations Act), who do they owe a duty of care to? The company, the instructing shareholder/director or both?

Don’t forget that because the company is in liquidation, it can’t be the client of the lawyer.

In a recent Tasmanian Supreme Court decision, the Full Court has decided on an interlocutory basis that it is arguable that the lawyer owes a duty to both the instructing shareholder and the company.

Here is a link to the case: https://jade.io/article/609362

The case involved a lawyer who allegedly failed (for some 9 months or so) to take steps to set aside the wind-up proceedings, causing the client increased costs and damage. The company brought suit against the lawyer and his firm for alleged professional negligence.

The company claimed that there was the requisite coincidence of interest between all of the shareholders and stakeholders “such that a competently prepared and prosecuted termination application would be in the interests of” all.

The lawyer on the other hand pointed to section 471A Corporations Act (now section 198G), in that during the liquidation the directors and shareholders were barred from bringing proceedings in the company’s name. Given that fact and a range of others, it can’t be said that the interests of the liquidated company are coincidental.

The Full Court recognised that, in a s482 application, there is no direct authority and it is a novel argument. But also found that the duty was arguably owed to both.

It was preferred that the matter go to trial, where the Court could hear the full range of submissions and evidence.

Interesting to see quite a broad interpretation to a lawyers duty of care to third parties. I will keep everyone updated on the final outcome.

What do you think – a duty to all or just the client?







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