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A Victorian law firm has been restrained from acting for a mortgage lender after the Supreme Court of Victoria discovered that allegations of fraudulent mortgage registration created a conflict of interest that threatened the proper administration of justice.
Gallande, trading as ERA Legal, was barred from representing mortgage lender GI 451 after Associate Justice Caroline Goulden of the Supreme Court of Victoria found the firm had a conflict of interest over allegations of fraudulent mortgage registration.
GI 451 faced a dispute over the enforceability of a mortgage after its solicitors, ERA Legal, replaced the front page of the mortgage signed by Toni Lee Collins before registering it, allegedly without her knowledge or consent.
GI 451 argued that it was authorised to replace the mortgage’s front page and that registering the mortgage gave it a legal interest in Collins’ property.
In response, Collins denied this, arguing that the mortgage was registered in a form that had never been executed by her and without her knowledge and consent.
Under consideration of the legal principles concerning the restraint, the court has a discretion to restrain a law firm from acting in a case if an informed member of the public believes it is necessary to protect the fairness and integrity of justice.
Justice Goulden said lawyers need to remain independent and focus on their clients’ interests, rather than protecting their own reputation.
If a law firm’s conduct is central to a case, it may have a conflict of interest because the firm is effectively defending its own actions as well as representing its client.
Collins argued that ERA Legal should be prevented from representing GI 451 because the firm had a conflict of interest under professional conduct rules, as it was defending allegations of fraud involving its own actions.
She also argued that key solicitors could be witnesses in the case, which could compromise the fairness of the proceedings.
Collins had accused Garth Andrews, a solicitor at ERA Legal at the time, of registering the mortgage with the altered front page, allegedly under the knowledge that she had never approved it.
ERA Legal’s principal, Darren Anderson, sought to challenge Collins’ allegations by hoping that an email sent to her would “disabuse you of your error”, attempting to convince her that the claim of an unauthorised mortgage alteration was mistaken.
The judge appreciated Anderson’s frustration and recognised the seriousness of the allegations made by Collins, noting that a fair-minded observer would acknowledge that as well.
It was decided that, despite the unlikelihood of Anderson being a witness, the firm still had a conflict because it was effectively defending its own professional conduct, raising issues around the firm’s independence and the fairness of the proceedings.
GI 451 submitted that it would give consent for ERA Legal to continue to act on their behalf, and should not be deprived as its preferred solicitor, and further highlighted that changing lawyers would cause unnecessary costs and delays, but the judge rejected this notion, as the case had not progressed far and the firm had been warned about the potential conflict.
The judge accepted Collins’ submission that this consent does not overcome any potential mischief and the potential to undermine the integrity of the judicial process.
The final order was for ERA Legal to stop acting for GI 451, finding that protecting the integrity of the justice system outweighed the inconvenient nature of changing solicitors.
