Chinese walls knocked down in Australia

A landmark ruling in Australia is likely to spell the end for “Chinese walls” in law firms down under.

The decision by the Western Australia (WA) Supreme Court in Perth may also have serious implications for firms looking to merge because of ensuing conflicts of interest.

Top-10 Australian firm Philips Fox has been ordered to relinquish long standing client Fletcher Construction, which was involved in a dispute with another contractor.

The contractor had been represented by Hely Edgar for four years. The firm later dissolved and the senior partner and staff went to Philips Fox.

The judge ruled there could be conflict of interest, dismissing claims that the Chinese wall would hold up. It has prompted the WA Law Society to condemn the practice.

Robert Hanley, a partner at top-five Australian firm Minter Ellison, says: “It may well spell the end of Chinese walls. The problem in the [Australian] marketplace is that there are so few major players that these problems of conflict are bound to crop up.”

Tim Blue, a partner at potential Clifford Chance merger partner Mallesons Stephen Jaques, says: “We have been careful about our alignment of clients. I could imagine situations where [conflict of interest] could make the merger non-viable.”