This is reflected in the publication by the Law Society of a revised practice note on identifying and managing situations where a conflict does arise.
Property transactions are, as we know, particularly prone to the risk of a potential conflict of interest. Earlier this year for instance, a law firm partner was fined £8,000 for regulatory breaches and ordered to pay £4,000 costs after a conflict arose.
Maxine Madderson was a partner at Maddersons Solicitors (as it was then). She had acted (or supervised a junior fee earner) where there was a conflict or significant risk of a conflict by acting for both parties in the same property transaction in which an elderly client’s home was sold at an undervalue. The buyer was 44 years her junior and had a previous conviction fraud.
It’s also worth noting that she had recognised the risk of a conflict and taken steps – a ‘Chinese wall’ – but they were insufficient in the circumstances.
The Solicitors Disciplinary Tribunal (SDT) found that Madderson had failed to take adequate steps to ensure independent advice was given to the parties. It said her level of culpability was “more serious” because of a number of factors, including the inherent risk of the property transaction being set aside.
And in a private client case (an appeal was dismissed this October), the managing partner at Cartmell & Co in Buckinghamshire was struck off after breaching the rules in a number of respects in relation to several matters. The breaches included continuing to act as a trustee in circumstances where a conflict arose between his duties as a trustee and the interests of his clients and/or the trust beneficiaries.
In his evidence, Robert Cartmell accepted aligning himself with the interest of his clients but denied that a point had been reached where conflict arose. However, the SDT ruled he had set himself against the interests of the trust. Fortunately, no harm had been caused to the individuals involved, but harm had clearly been caused to the profession’s reputation.
These cases illustrate the potential for conflict to arise, and the risk of there being a continuing conflict even where you have taken steps; or where you believe there is no conflict. If there is any doubt, it may be prudent to discuss the issue with the Law Society’s practice advice service to avoid regulatory action.
It is also worth familiarising yourself with the latest practice note on conflicts. The revised guidance is broadly the same at the last iteration of December 2019, with important additions including:
- In the context of limiting the retainer to avoid a conflict, the practice note cites SRA guidance which states both clients must understand the limits of the agreed retainer. This includes being clear with clients from the outset what issues you’re advising on; what the risk to them is; and ensuring they understand the meaning and importance of issues you are not advising on.
- A helpful section on relevant case law, demonstrating the court’s approach to conflict cases on issues such as the solicitor as a fiduciary; what amounts to a 'potential' conflict; and the relevance of whether a matter is a 'related' matter.
- In the context of confidentiality and disclosure, the guidance includes a section on acting in an adverse interest situation. Where this applies, the Society warns of the need to exercise caution before accepting instructions to act. Acting, it states, in reliance on the "effective measures" exception depends on whether you can comply with your common law obligations around safeguarding confidential information. Given the risks, only sophisticated clients may be able to give informed consent.
The new Practice Note can be found here.